EXHIBIT 10.19
SHARES AND WARRANT PURCHASE AGREEMENT
SHARES AND WARRANT PURCHASE AGREEMENT (this "Agreement") made as of
February ___, 2004 by and between Xfone, Inc a Nevada corporation having its
executive offices located at Xxxxxxxxx Xxxxx, 000 Xxxx Xxxx Xxxxxx X00 0XX,
Xxxxxx Xxxxxxx (the "Company"), and the purchasers identified on Exhibit 1
hereto (each a "Purchaser" and together, the "Purchasers").
WHEREAS, each of the Purchasers has agreed (severally and not in
connection with the purchase by the other Purchasers) to purchase from the
Company, and the Company has agreed to sell to each of the Purchasers, shares of
common stock of the Company (the "Shares") described herein; and
WHEREAS, the Company has agreed to issue to each of the Purchasers certain
warrants to purchase shares of common stock of the Company (the "Warrants")
described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Purchasers and the
Company agree as follows:
Section 1. Issuance of Shares and Warrants ("Securities"). Subject to the
terms and conditions of this Agreement, each Purchaser agrees, simultaneously
with the execution and delivery of this Agreement, to purchase from the Company
the amount of Shares (the Common Shares) set forth opposite to its name in
Exhibit 1 at a purchase price of U.S. $3.00 per share ("the purchase price").
Simultaneously with the execution and delivery of this Agreement (i) each
Purchaser is paying the Purchase Price set forth on Exhibit 1 opposite to the
name of such Purchaser by wire transfer of immediately available funds to the
Company in accordance with the wire transfer instructions set forth on Exhibit 2
hereto and is executing and delivering to the Company an Irrevocable Proxy in
favor of Xxx Xxxxxxxxx, the President and Chief Executive Officer of the Company
in the form attached hereto as Exhibit 3; (ii) the Company is delivering to each
Purchaser a stock certificate evidencing such Purchaser's ownership of the
number of shares set forth in Exhibit 1 opposite to the name of such Purchaser.
Simultaneously with the payment of the purchase price, the Company is issuing to
each Purchaser Warrants to purchase the amount of Shares of the Company set
forth on Exhibit 1 opposite to the name of such Purchaser, such Warrants to be
in the forms attached hereto as Exhibits 4 and 5 ALL OF THE WARRANTS SHOULD
CONTAIN THE LIMITATION THAT THEY CANNOT BE EXERCISED IF THE EXERCISE WOULD
CAUSSE THE HOLDER TO HOLD OVER 4.9% OF THE COMPANY'S COMMON STOCK, NOT JUST
PLATINUM. Each A Warrant shall be exercisable at a price of $5.50 per share and
Each B Warrant shall be exercisable at a price of $3.50 per share.
Simultaneously with the execution and delivery of this Agreement, the Company
and each Purchaser is executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit 6
hereto. As used herein the term "Transaction Documents" means this Agreement,
the Warrants and the Registration Rights Agreement, and execution of this
agreement and the Registration Rights Agreement by each Purchaser and the
Company and tender of the purchase price for the Securities by each Purchaser to
the Company is considered the "Closing Date". For purposes of this Agreement,
the term securities refers to the common shares, warrants and shares of common
stock underlying the warrants.
Section 2. Company Representations and Warranties. The Company represents
and warrants to each of the Purchasers severally that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement, the Warrants, the
Registration Agreement and any other agreements delivered together with this
Agreement or in connection herewith have been duly authorized, executed and
delivered by the Company and are valid and binding agreements enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement, the Warrants, the Registration Agreement and such
other agreements and to perform its obligations hereunder and under all other
agreements entered into by the Company relating hereto.
(d) Outstanding Rights to Equity. In Schedule 2(d) is a list of the
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates, the Amex, the National Association of
Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC Bulletin Board nor
the Company's Shareholders is required for the execution and compliance by the
Company of its obligations under this Agreement, except as stated herein this
Agreement, and all other agreements entered into by the Company relating hereto,
including, without limitation, the issuance and sale of the Securities, and the
performance of the Company's obligations hereunder and under all such other
agreements.
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(f) No Violation or Conflict. Assuming the representations and
warranties of the Purchasers herein this Agreement are true and correct, neither
the issuance and sale of the Shares and Warrants nor the performance of the
Company's obligations under this Agreement and all other agreements entered into
by the Company relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or over the properties or assets of the Company or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its affiliates, or subsidiaries is a party, by which the Company or any of
its affiliates or subsidiaries is bound, or to which any of the properties of
the Company or any of its affiliates or subsidiaries is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates or subsidiaries is a
party except the violation, conflict, breach, or default of which would not have
a material adverse effect on the Company; or
(ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company, its
subsidiaries or any of its affiliates.
(g) The Shares and Warrants. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, and will be subject to restrictions upon
transfer, disposition and resale under the Securities Act of 1933, as amended
("the Securities Act") and any applicable state securities laws; and
(ii) have been, or will be, duly and validly authorized and on
the date of issuance, and upon exercise of the Warrants, the Warrant Shares will
be duly and validly issued, fully paid and nonassessable (and if registered
pursuant to the Securities Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted, provided that each Purchaser
complies with state and federal securities laws including the prospectus
delivery requirements of the Securities Act and state securities laws); and
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
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(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto. There is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its affiliates which
litigation if adversely determined could have a material adverse effect on the
Company.
(i) Reporting Company. The Company is subject to the reporting
requirements of Section 15(d) of the Securities Exchange Act (the "1934 Act").
The Company has timely filed all reports ("Reports") and other materials
required to be filed there under with the Securities and Exchange Commission
during the preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued or resold.
(k) Information Concerning Company. The Reports contain all material
information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the other written information or in the Schedules hereto,
there has been no material adverse change in the Company's business, financial
condition or affairs not disclosed in the Reports. The Reports do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop Transfer. The Shares and Warrants, when issued, will be
restricted securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws.
The Company will not issue any stop transfer or other order impeding the sale,
resale or delivery of the Securities unless contemporaneous notice of such
instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a material adverse effect on the Company, (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(n) No Integrated Offering. Except as disclosed in the Company's
filings with the Securities and Exchange Commission, neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act. The Company will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities.
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(o) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 0000 Xxx) in connection with the offer or sale
of the Securities.
(p) Listing. The Company's common stock is quoted on the OTC
Bulletin Board. The Company has not received any oral or written notice that its
common stock will be delisted from the OTC Bulletin Board nor that its common
stock does not meet all requirements for the continuation of such quotation and
the Company satisfies the requirements for the continued listing of its common
stock on the Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since December 31,
2002 and which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the Company's financial condition.
(r) No Undisclosed Events or Circumstances. Since December 31, 2002,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of
the Company as of the date of this Agreement and the Closing Date are set forth
on Schedule 2(s). Except as set forth in the Reports and Other Written
Information and Schedule 2(d), there are no options, warrants, or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.
(t) Dilution. The Company's executive officers and directors have
studied and fully understand the nature of the Securities being sold hereby and
recognize that they have a potential dilutive effect on the interests of other
holders of the Company's securities. The board of directors of the Company has
concluded, in its good faith business judgment that such issuance is in the best
interests of the Company.
(u) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date for a period of three years.
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Section 3. Representations by the Purchasers
Each of the Purchasers (severally and not jointly) represents and
warrants to the Company as follows:
(a) Investment Purposes. The Purchaser represents to the Company
that the Purchaser is acquiring the Shares and the Warrants for its own account,
for the purpose of investment, and not with a view to the distribution or resale
of any thereof, and the Purchaser has no present plans to enter into any
contract, undertaking, agreement or arrangement for any such distribution or
resale.
(b) Enforceability. This Agreement constitutes the Purchaser's valid
and legally binding obligation enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
relating to, or affecting the enforcement of, creditors' rights generally.
(c) Sophistication. Each Purchaser is a sophisticated investor, and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of investing in the Company's Shares
and receiving the Warrants. Without limiting the foregoing, the Purchaser
represents and warrants that it, he, or she is an "accredited investor," as that
term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"). The Purchaser has the financial ability to bear
the economic risk of such Purchaser's investment contemplated hereby and has
adequate net worth and means of providing for its current needs and
contingencies to sustain a complete loss of its investment and has no need for
liquidity in its investment in the Company. Each Purchaser represents that he
has previously invested in restricted securities.
(d) Restrictions on Transferability. The Purchaser understands and
agrees that (i) the Shares, the Warrants and the Shares issuable upon exercise
of the Warrants (the "Securities") have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act, (ii) the Securities must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Securities will
bear a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect. Any such transfer, sale, assignment or
hypothecation shall be conditioned upon receipt by the Company by an opinion of
counsel satisfactory to the Company and its counsel, stating that the transferee
is a permitted transferee under this Section and that such transfer does not
violate the Securities Act or any state securities laws.
(e) Access to Information. The Purchaser had access to information
filed with the SEC. The Purchaser and its advisers have been afforded the
opportunity to ask questions of the Company concerning the investment
contemplated hereby and to obtain any additional information they have deemed
necessary as a condition to making such investment.
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Section 4. Debt; Issuances of Securities. No provision of this Agreement
or of any other document executed and delivered by the Company in connection
with this Agreement restricts, or shall be construed to restrict, in any way the
ability of the Company to incur indebtedness or to issue capital stock or other
equity securities (or securities convertible into equity securities) of the
Company or to grant liens on its property and assets.
SECTION 5. REISSUANCE OF SECURITIES. (A)The Securities may only be
disposed of in compliance with state and federal securities laws. In
connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an
Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 5(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which
opinion and shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 5(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT 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 AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the
Securities to a financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and who agrees to be bound
by the provisions of this Agreement and the Registration Rights Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
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(c) Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 5(b)), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares or Warrant Shares pursuant
to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required by
the Company's transfer agent to effect the removal of the legend
hereunder. If all or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the resale of the
Warrant Shares, such Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 5(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing
Shares or Warrant Shares, as the case may be, issued with a restrictive
legend (such date, the "Legend Removal Date"), deliver or cause to be
delivered to such Purchaser a certificate representing such Securities
that is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to any transfer
agent of the Company that enlarge the restrictions on transfer set forth
in this Section.
In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares or Warrant Shares (based
on the Closing Price of the Common Stock on the Legend Removal Date)
subject to Section 5(c), $10 per Trading Day (increasing to $20 per
Trading Day five (5) Trading Days after such damages have begun to accrue)
for each Trading Day after the Legend Removal Date until such certificate
is delivered. Nothing herein shall limit such Purchaser's right to pursue
actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and
such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. In lieu of such daily liquidated
damages, each Purchaser or assignee holding Securities subject to a Legend
Removal Failure may, at its option, require the Company to purchase all or
any portion of the Shares and Warrant Shares subject to a Legend Removal
Failure held by each Purchaser or assignee at a price per share equal to
130% of the purchase price of such Shares and Warrant Shares within a
period of up to twelve months from the Closing Date.
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Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 5 is predicated upon the Company's
reliance that the Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
Section 6Blackout. The Company undertakes and covenants that until
the first to occur of (i) the registration statement having been effective for
one hundred and eighty (180) business days, or (ii) until all the Shares and
Warrant Shares have been resold pursuant to said registration statement, the
Company will not enter into any acquisition, merger, exchange or other
transaction that could have the effect of delaying the effectiveness of any
pending registration statement, causing an already effective registration
statement to no longer be effective or current.
Section 7. Purchasers' Rights of Participation in Additional Financings From the
date hereof until 12 months after the Closing Date, upon any financing by the
Company of its Capital Shares or Capital Shares Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to 20% of
such Subsequent Financing (the "Participation Maximum"). At least 5 Trading Days
prior to the closing of the Subsequent Financing, the Company shall deliver to
each Purchaser a written notice of its intention to effect a Subsequent
Financing ("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants
to review the details of such financing (such additional notice, a "Subsequent
Financing Notice"). Upon the request of a Purchaser, and only upon a request by
such Purchaser, for a Subsequent Financing Notice, the Company shall promptly,
but no later than 1 Trading Day after such request, deliver a Subsequent
Financing Notice to such Purchaser. The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto. If by 6:30 p.m. (New
York City time) on the second Trading Day after all of the Purchasers have
received the Pre-Notice, notifications by the Purchasers of their willingness to
participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent
Financing, then the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent Financing
Notice. If the Company receives no notice from a Purchaser as of such 2nd
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate. The Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of participation set forth above in this Section 7(a), if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial Subsequent Financing Notice. In
the event the Company receives responses to Subsequent Financing Notices from
Purchasers seeking to purchase more than the aggregate amount of the Subsequent
Financing, each such Purchaser shall have the right to purchase their Pro Rata
Portion (as defined below) of the Participation Maximum. "Pro Rata Portion" is
the ratio of (x) the Subscription Amount of Securities purchased by a
participating Purchaser and (y) the sum of the aggregate Subscription Amount of
all participating Purchasers. Notwithstanding the foregoing, this Section 7(a)
shall not apply in respect of the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose or (b) securities upon the
exercise of or conversion of any convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement.
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(b) From the date hereof until the earlier of (a) such time as a
Purchaser no longer holds any Shares or (b) 12 months after the Closing Date, if
in connection with a Subsequent Financing, the Company or any subsidiary thereof
shall issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire shares of Common Stock at a price per share less than the Per
Share Purchase Price (subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement), the Company
shall, within 3 Trading Days of such issuance, issue to such Purchaser that
number of additional shares of Common Stock equal to (a) the Subscription Amount
paid by such Purchaser at the Closing divided by the Discounted Purchase Price,
less (b) the Shares issued to such Purchaser at the Closing pursuant to this
Agreement and pursuant to this Section 7. The term "Discounted Purchase Price"
shall mean the amount actually paid by third parties for a share of Common
Stock. The sale of Common Stock Equivalents shall be deemed to have occurred at
the time of the issuance of the Common Stock Equivalents and the Discounted
Purchase Price covered thereby shall also include the actual exercise or
conversion price thereof at the time of the conversion or exercise (in addition
to the consideration per share of Common Stock underlying the Common Stock
Equivalents received by the Company upon such sale or issuance of the Common
Stock Equivalents). In the case of any Subsequent Financing involving a
"Variable Rate Transaction" or an "MFN Transaction" (each as defined below), the
Discounted Purchase Price shall be deemed to be the lowest actual conversion or
exercise price at which such securities are converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction. If shares are issued for a consideration other than cash, the
per share selling price shall be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company. The term
"Variable Rate Transaction" shall mean a transaction in which the Company issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (x) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (y) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock. The term "MFN Transaction" shall mean a transaction in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions which grants to an investor the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to the such investor in such offering. Nothing
herein shall limit a Purchaser's right to pursue actual damages for the
Company's failure to deliver Shares hereunder and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
Notwithstanding anything to the contrary herein, this Section 7 shall not apply
in respect of the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement, or (c)
securities in connection with acquisitions or strategic investments (including,
without limitation, any licensing or distribution arrangements), the primary
purpose of which is not to raise capital. Additionally, prior to any issuance
hereunder, a Purchaser shall have the right to continuously defer such issuances
to such Purchaser for up to periods of 75 days.
10
Section 8. Covenants of the Company. The Company covenants and agrees with
the Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
(b) Listing. The Company shall promptly secure the listing of the
shares of Common Stock to be purchased hereunder and the Warrant Shares upon
each securities exchange, or quotation system, if any, upon which shares of
common stock are then listed (subject to official notice of issuance) and shall
maintain such listing so long as any Securities are outstanding. The Company
will maintain the listing of its Common Stock on the American Stock Exchange,
Nasdaq SmallCap Market, Nasdaq National Market System, OTC Bulletin Board, or
New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the "Principal Market")), and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) Market Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, if any, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.
(d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the actual effective date of the Registration Statement, the
Company will (i) comply in all material respects with its reporting and filing
obligations under the 1934 Act, and (ii) comply with all requirements related to
any registration statement filed pursuant to this Agreement. The Company will
use its best efforts not to take any action or file any document (whether or not
permitted by the Securities Act or the 1934 Act or the rules there under) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said acts until the earlier of two (2) years after
the actual effective date of the Registration Statement or until the registrable
securities have been sold. Until the earlier of the resale of the Shares and the
Warrant Shares by each Purchaser or at least two (2) years after the Warrants
have been exercised, the Company will use its best efforts to continue the
quotation of its Common Stock on the OTC Bulletin Board, and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the OTC Bulletin Board.
11
(e) Use of Proceeds. The Purchase Price will be used by the Company
for working capital and/or investment in equipment and/or for acquisitions and
business development, and may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
redeemable notes or equity instruments of the Company nor non-trade obligations
outstanding on the Closing Date.
(f) Reservation of Common Stock. The Company undertakes to reserve
from its authorized but unissued common stock, at all times that Warrants remain
outstanding, a number of common shares equal to the amount of common shares
issuable upon exercise of the Warrants.
(g) Taxes. From the date of this Agreement until two (2) years after
the Closing Date, the Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance. From the date of this Agreement until two (2) years
after the Closing Date, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
(i) Books and Records. From the date of this Agreement until two (2)
years after the Closing Date, the Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
12
(j) Governmental Authorities. From the date of this Agreement until
two (2) years after the Closing Date, the Company shall duly observe and conform
in all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement until two
(2) years after the Closing Date, the Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use intellectual property owned or possessed by it and reasonably
deemed to be necessary to the conduct of its business.
(l) Properties. From the date of this Agreement until two (2) years
after the Closing Date, the Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
material adverse effect.
(m) Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or Purchasers agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such
Purchaser, its agents, or counsel shall have executed a written agreement
regarding the confidentiality and use of such information. The Purchaser
understands and confirms that the Company shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
(n) Securities Laws Disclosure; Publicity. The Company shall, by
8:30 a.m. Eastern time on the Trading Day following the Closing Date file a
Current Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby. Other than as set forth herein, neither the Company nor any
Purchaser shall issue any such press release or otherwise make any public
disclosure or statement with respect to this agreement unless such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (i) as required by federal securities laws or
upon request by the Securities and Exchange Commission and (ii) OTC Bulletin
Board Regulations. In connection therewith, the Purchasers agree to provide the
Company with articles of organization, minutes of meetings and shareholder lists
as requested by the Company and as required by federal securities laws or as the
Securities and Exchange Commission requests.
13
Section 9. Survival of covenants, agreement, representations and
warranties. All covenants, agreements, representations and warranties made
herein and in certificates delivered pursuant hereto shall survive the execution
and delivery of this Agreement and the Warrants and shall continue in full force
and effect in accordance with applicable statutes of limitations.
Section 10. Entire agreement; Preamble, Exhibits and Schedules; no oral
change. This Agreement, the Registration Rights Agreement and the Warrants
embody the entire agreement and understanding between the Company and each of
the Purchasers (severally) relating to the subject matter hereof, and supersede
all prior agreements and understandings relating to such subject matter. The
preamble to this Agreement, Exhibits and Schedules attached hereto shall
constitute an integral part of this Agreement. This Agreement may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, or discharge is sought.
Section 11. Notices. Any notice required by the provisions of this
Agreement will be writing and will be deemed effectively given: (a) upon
personal delivery to the party to be notified; (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day; (c) seven (7) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (d) three (3)
days after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. Notices shall be sent
to the addresses first set forth above or to such other address as a party
furnishes to other parties in writing.
Section 12. Law Governing. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York with respect to contracts
executed and performed in the State of New York.
Section 14. JURISDICTION. THE COMPANY AND EACH OF THE PURCHASERS
(SEVERALLY) CONSENT THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT OR THEM
UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT, OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, SHALL BE
BROUGHT EXCLUSIVELY IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX LOCATED IN NEW YORK
COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY), BY THEIR EXECUTION AND
DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY CONSENT AND SUBMIT TO THE
PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS.
THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY) AGREE THAT PERSONAL
JURISDICTION OVER THEM MAY BE OBTAINED BY THE DELIVERY OF A SUMMONS (POSTAGE
PREPAID) IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 OF THIS AGREEMENT.
ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11
OF THIS AGREEMENT, THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY) HEREBY
EXPRESSLY AND IRREVOCABLY WAIVE ANY ALLEGED LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OF FORUM NON CONVENIENS OR ANY SIMILAR BASIS. EACH PARTY HERETO
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
14
Section 15. Successors and Assigns. All the covenants and provisions of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns hereunder. No party may assign any
rights or obligations hereunder without the prior written consent of the other
parties and any purported assignment without such consent shall be null and
void.
Section 16. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waiver or consents to departure
from the provisions hereof may not be given without the consent of the party
against whom such waiver or consent is sought.
Section 17. Counterparts. This Agreement may be executed in any number of
counterparts, and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Section 18. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 19. Lockup. The Purchasers and the insiders of the Company will
not sell shares for a price that is lower than the minimum price required for
listing on NASDAQ Small Cap + US$1.00, until the Company is listed on NASDAQ
Small Cap or AMEX exchange, but for no longer than 120 days from the Effective
Date of the Registration Statement.
Section 20. Expenses; Attorney's Fees. Each party shall bear its own
expenses, including, without limitation, attorneys' fees, in connection with the
execution, delivery and performance of this Agreement.
Section 21. Agreement is Entire Contract. Except as specifically
referenced herein, this Agreement constitutes the entire contract between the
parties hereto concerning the subject matter hereof and no party shall be liable
or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided herein.
15
Section 22. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
---------------------------- ------------------------------
Xfone, Inc. Date
By:
----------------------------
Title:
-------------------------
CRESTVIEW CAPITAL MASTER LLC
By:
----------------------------
Name: Xxxxxxx Xxxx
Title: Managing Partner
Subscription Amount: $
Address for all notices:
Xxxxxxx Xxxx
Crestview Capital Funds
00 Xxxxxx Xxxxx,
Xxxxx X Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
16
Exhibit 1
Name and Address Name of Share Number of Purchase Number of Number of
of Purchaser Shares Purchased Price Shares Price Warrant A Warrant B
------------ ---------------- ----- ------ ----- --------- ---------
Crestview Capital Master LLC Xfone $3.00 500,000 $1,500,000 500,000 500,000
17
Exhibit 2
Wire Transfer Instructions
Barclays Bank U.K
Hampstead and Xxxxxxxxx Business Centre
XX Xxx 00000
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
Sort Code: 20-30-19
Account Number: 00000000
Account Name: Xfone, Inc.
18
Exhibit 3
IRREVOCABLE PROXY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned does hereby make,
constitute and appoint Xxx Xxxxxxxxx, its true and lawful attorney, for it and
in its name, place and stead, to act as its proxy in respect of all of the
Shares of Xfone, Inc. a Nevada based company (hereinafter referred to as the
"Company"), which it now or hereafter may own or hold, including, without
limitation, the right, on its behalf, to demand the call by any proper officer
of the Company pursuant to the provisions of its by-laws, articles of
association, memorandum of association or other organizational documents and as
permitted by law of a meeting of its shareholders and at any meeting of
shareholders, annual, general or special, to vote for the transaction of any and
all business that may come before such meeting, or at any adjournment thereof,
including, without limitation, the right to vote for the sale of all or any part
of the assets of the Company and/or the liquidation and dissolution of the
Company; giving and granting to his said attorney full power and authority to do
and perform each and every act and thing whether necessary or desirable to be
done in and about the premises, as fully as it might or could do if personally
present with full power of substitution, appointment and revocation, hereby
ratifying and confirming all that its said attorneys shall do or cause to be
done by virtue hereof.
This Proxy is given to Xxx Xxxxxxxxx in consideration of the performance
of the Shares and Warrant Purchase Agreement dated ____, by and between the
undersigned and other Purchasers and the Company, and this Proxy shall not be
revocable or revoked by the undersigned and shall be binding upon his successors
and assigns, provided, however, that this Proxy shall be null and void and shall
have no force and effect, in respect of such Shares (and no other securities) so
sold by the undersigned in an arm's length sale (in good faith) of the Shares to
a third party that is not an Affiliate (as defined below) or related party of
the Lender.
An "Affiliate" means (A) an entity in which the undersigned owns or has
the right to own directly or indirectly equity and voting share or any other
kind of interest or acts as an officer thereof, or has the right and power to
direct the policy and management of such company; or (B) a trust or living will
or trust in which the undersigned is a beneficiary thereof; or (C) the spouse,
children, parents, and any other family members up to a fourth degree of the
undersigned; or (D) any trustee of the undersigned; or (E) any other person or
entity which will be subject to the undersigned instructions in connection with
the ordinary shares so purchased by such person or entity.
THE UNDERSIGNED SHALL EXECUTE AND DELIVER SUCH ADDITIONAL DOCUMENTS AND
INSTRUMENTS AS THE CORPORATION OR XXX XXXXXXXXX MAY REQUIRE TO CONFIRM THE GRANT
HEREBY, INCLUDING, WITHOUT LIMITATION, SUCH INSTRUMENTS AS MAY BE NECESSARY OR
APPROPRIATE UNDER ISRAELI LAW.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this day of February ___, 2004.
Name:
--------------------------
By:
--------------------------
Name:
Title:
Exhibit 4
WARRANT A
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.
WARRANT TO PURCHASE COMMON STOCK
OF XFONE, INC.
NO. __
THIS CERTIFIES THAT, for value received, Crestview Capital Master LLC,
(the "HOLDER"), is entitled, subject to the terms and conditions of this
Warrant, to purchase from Xfone, Inc. a Nevada corporation (the "COMPANY"), at a
price per share as specified below up to 500,000 Shares, subject to the terms
and provisions of this Warrant (and subject to adjustment for stock splits,
recapitalization events and the like) (the "WARRANT SHARES").
Terms used herein and not otherwise defined shall have the meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated February 2,
2004 between the Holder and the Company attached hereto as Exhibit 1 (the
"AGREEMENT").
All herein is subject to the fulfillment of the terms and conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"REGISTERED HOLDER" means any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"WARRANT" as used herein, includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Due Authorization; Consents. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for issuance and delivery of all of the Warrant Shares, has been taken. This
Warrant is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles. All consents,
approvals and authorizations of, and registrations, qualifications and filings
with, any federal or state governmental agency, authority or body, or any third
party, required in connection with the execution, delivery and performance of
this Warrant and the consummation of the transactions contemplated hereby have
been obtained.
2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental authority on the part of Company required in connection with the
consummation of the transactions contemplated herein have been obtained.
2.3 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Warrant and the consummation of the
transactions contemplated hereby will not be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Memorandum of Association, Articles of Association, other
constitutive document, or any agreement or contract of the Company, or a
violation of any statutes, laws, regulations or orders, or an event which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.
3. EXERCISE OF WARRANT
3.1. Subject to compliance with the terms and conditions of this Warrant
and applicable securities laws, this Warrant may be exercised, in whole or in
part with respect to the applicable number of Warrant Shares, at an exercise
price (the "Exercise Price") of U.S. $5.50 per Warrant Share.
3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive Shares equal to the value of this Warrant if the registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder a number of Shares computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of the Shares to be issued to the
Holder.
Y = the number of the Shares purchasable under this
Warrant.
A = the fair market value of one Share on the date
of determination.
2
B = the per share Exercise Price (as adjusted to
the date of such calculation).
(c) Fair Market Value. For purposes of this Section 1,
the per share fair market value of the Shares shall
mean:
(i) If the Company's Common Stock is publicly
traded, the per share fair market value of the Shares
shall be the average of the closing prices of the
Common Stock as quoted on the Nasdaq National Market
or the principal exchange on which the Common Stock is
listed, or if not so listed then the fair market value
shall be the average of the closing bid prices of the
Common Stock as published in The Wall Street Journal,
in each case for the fifteen trading days ending five
trading days prior to the date of determination of
fair market value;
(ii) If the Company's Common Stock is not so
publicly traded, the per share fair market value of
the Shares shall be such fair market value as is
determined in good faith by the Board of Directors of
the Company after taking into consideration factors it
deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of
the Company in private transactions negotiated at
arm's length.
3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number of Warrant Shares, at any time or from time to time by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly executed
by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, of an
amount equal to the product obtained by multiplying the number of shares of
Warrant Shares being purchased upon such exercise by the then applicable
Exercise Price, (and the Warrant Shares shall be issued as soon as practicable
after five (5) days commencing the payment day), except that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below), the Exercise
Amount shall be paid to the Company within five (5) business days of the
termination of all HSR Act Restrictions (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).
Certificates for shares purchased hereunder shall be delivered to the Holder
within three (3) business days after the date on which this Warrant shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price. If the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.
3
(ii) Provided, however, that under no circumstances may the Holder
exercise, and in no event shall the Company be obligated to honor any exercise
of this Warrant to the extent the result of such exercise and issuance of
Warrant Shares pursuant thereto would result (after giving effect to such
issuance) in the Holder owning 4.9% or more of the then outstanding Ordinary
Shares of the Company. To the extent any such exercise is not honored pursuant
to the foregoing proviso, the shares withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.
3.4. Fractional Shares. The Company shall pay the Holder cash in lieu of
any fraction of a share equal to such fraction of the Exercise Price of one
whole share of Warrant Shares. No fractional shares or scrip representing
fractional shares shall be issued upon an exercise of this Warrant.
3.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").
3.6. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
3.7 Expiration of Warrant. This Warrant shall expire, with respect to the
applicable number of Warrant Shares only, on the earlier to occur of : (a) the
date that is five (5) years following the date of this Warrant; (b)
[intentionally omitted]; (c) The Company can call the Warrants before the end of
the 5 years, if the underlying shares are registered and the closing price of
the Share in the market is $12 or higher for 20 consecutive trading days,
subject to there being an effective registration statement and 10 days written
notice to the Holder.
4. VALID ISSUANCE; TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Warrant Shares in any name
other than that of the Registered Holder of this Warrant, and in such case the
Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. In addition to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's Articles of Association, the number of shares of Warrant Shares
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase Price are subject to adjustment upon occurrence of the following
events:
5.1. Adjustment for Share Splits, Share Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant Shares issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Warrant Shares or Ordinary Shares. The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.
5.2. Adjustment for Dividends or Distributions of Shares or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained earnings), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Warrant Shares (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section
5.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.
5
5.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Warrant Shares or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Articles of
Association to provide sufficient reserves of shares of Warrant Shares issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the necessary certificates for shares of Warrant Shares
upon the exercise of this Warrant.
6
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the SEC under the
Securities Act of 1933 (the "ACT"), covering the disposition or sale of this
Warrant or the Warrant Shares issued or issuable upon exercise hereof as the
case may be, and registration or qualification under applicable state securities
laws, such Holder will not sell, transfer, pledge, or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's Articles of Association and either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection with, any distribution thereof; that the
Holder has had such opportunity as such Holder has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
the Holder to evaluate the merits and risks of its investment in the Company;
that the Holder is able to bear the economic risk of holding such shares as may
be acquired pursuant to the exercise of this Warrant for an indefinite period;
that the Holder understands that the shares of stock acquired pursuant to the
exercise of this Warrant will not be registered under the Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the SEC
for exercise of this Warrant, and even then will not be available unless a
public market then exists for the stock, adequate information concerning the
Company is then available to the public, and other terms and conditions of Rule
144 are complied with; and that all stock certificates representing shares of
stock issued to the Holder upon exercise of this Warrant may have affixed
thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
7
11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company. In
the absence of affirmative action by the Holder to purchase Warrant Shares by
exercise of this Warrant no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.
12. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents and
warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof are
being acquired for its own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "Act"). Upon
exercise __________ of __________ this __________ Warrant, __________ the
__________ Holder shall, if so requested by the Company, confirm in writing, in
a form satisfactory to the Company, that the securities issuable upon exercise
of this Warrant are being acquired for investment and not with a view toward
distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
13. NOTICES. All notices and other communications hereunder shall be in writing
and shall be given in person, by registered mail (registered international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to evidence delivery, or by facsimile transmission (provided that
written confirmation of receipt is provided), addressed as set forth below:
If to the Company: XFONE, Inc.
Xxxxxxxxx House
000 Xxxx Xxxx
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
8
If to the Holder: Attn: Xxxxxxx Xxxx
Crestview Capital Funds
00 Xxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
-----------------------------------
Or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications delivered in
person or by courier service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given twenty-four hours following transmission, and all notices and
other communications sent by registered mail (or air mail if the posting in
international) shall be deemed given seven (7) days after posting.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
15. GOVERNING LAW; JURISDICTION. Any claim arising under or relating to this
Warrant, shall be governed by the laws of the State of New York, without regard
to principles of conflict of laws. Each party hereto consents that any legal
action or proceeding against it under, arising out of or in any manner relating
to this Warrant shall be brought exclusively in the courts of the State of New
York located in New York County or in the United States District Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding under this Warrant, and agrees that
any such action or proceeding shall be tried before a court and not before a
jury.
16. NO IMPAIRMENT. The Company will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant against impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
stock issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Warrant Shares upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the share capital of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
9
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Ordinary Shares
or Warrant Shares;
then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Warrant Shares, Ordinary
Shares or (such stock or securities as at the time are receivable upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares, Ordinary Shares (or such other stock or securities), for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be delivered at least ten (10) days prior to the date therein
specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and delivered by
facsimile, and each such executed counterpart shall be, and shall be deemed to
be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which
prohibits the rights granted to the Holders of this Warrant. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived or lapsed.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
____________, 2004.
HOLDER: CRESTVIEW CAPITAL MASTER LLC XFONE, INC
By: By:
-------------------------- --------------------------
------------------------------ ------------------------------
Printed Name Printed Name
-------------------------- ------------------------------
Title Title
11
EXHIBIT 1
AGREEMENT
12
EXHIBIT 2
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
XFONE, INC. WARRANT NO. __
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Xfone, Inc., as provided for therein, and (check the
applicable box):
|_| Tenders herewith payment of the exercise price in full in the form of cash
or (by check) or by wire transfer in same-day funds in the amount of $ for
such securities, pursuant to the Warrant.
|_| Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
----------------------------------------------
Address:
----------------------------------------------
Signature:
----------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
there under rounded up to the next higher whole number of shares.
13
Exhibit 5
WARRANT B
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.
WARRANT TO PURCHASE COMMON STOCK
OF XFONE, INC.
NO. __
THIS CERTIFIES THAT, for value received, Crestview Capital Master LLC,
(the "HOLDER"), is entitled, subject to the terms and conditions of this
Warrant, to purchase from Xfone, Inc. a Nevada corporation (the "COMPANY"), at a
price per share as specified below up to 500,000 Shares, subject to the terms
and provisions of this Warrant (and subject to adjustment for stock splits,
recapitalization events and the like) (the "WARRANT SHARES").
Terms used herein and not otherwise defined shall have the meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated February 2,
2004 between the Holder and the Company attached hereto as Exhibit 1 (the
"AGREEMENT").
All herein is subject to the fulfillment of the terms and conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"REGISTERED HOLDER" means any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"WARRANT" as used herein, includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Due Authorization; Consents. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for issuance and delivery of all of the Warrant Shares, has been taken. This
Warrant is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles. All consents,
approvals and authorizations of, and registrations, qualifications and filings
with, any federal or state governmental agency, authority or body, or any third
party, required in connection with the execution, delivery and performance of
this Warrant and the consummation of the transactions contemplated hereby have
been obtained.
2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental authority on the part of Company required in connection with the
consummation of the transactions contemplated herein have been obtained.
2.3 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Warrant and the consummation of the
transactions contemplated hereby will not be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Memorandum of Association, Articles of Association, other
constitutive document, or any agreement or contract of the Company, or a
violation of any statutes, laws, regulations or orders, or an event which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.
3. EXERCISE OF WARRANT
3.1. Subject to compliance with the terms and conditions of this Warrant
and applicable securities laws, this Warrant may be exercised, in whole or in
part with respect to the applicable number of Warrant Shares, at an exercise
price (the "Exercise Price") of U.S. $3.50 per Warrant Share.
3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive Shares equal to the value of this Warrant if the registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder a number of Shares computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of the Shares to be issued to the
Holder.
Y = the number of the Shares purchasable under this
Warrant.
A = the fair market value of one Share on the date
of determination.
2
B = the per share Exercise Price (as adjusted to
the date of such calculation).
(c) Fair Market Value. For purposes of this Section 1,
the per share fair market value of the Shares shall
mean:
(i) If the Company's Common Stock is publicly
traded, the per share fair market value of the Shares
shall be the average of the closing prices of the
Common Stock as quoted on the Nasdaq National Market
or the principal exchange on which the Common Stock is
listed, or if not so listed then the fair market value
shall be the average of the closing bid prices of the
Common Stock as published in The Wall Street Journal,
in each case for the fifteen trading days ending five
trading days prior to the date of determination of
fair market value;
(ii) If the Company's Common Stock is not so
publicly traded, the per share fair market value of
the Shares shall be such fair market value as is
determined in good faith by the Board of Directors of
the Company after taking into consideration factors it
deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of
the Company in private transactions negotiated at
arm's length.
3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number of Warrant Shares, at any time or from time to time by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly executed
by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, of an
amount equal to the product obtained by multiplying the number of shares of
Warrant Shares being purchased upon such exercise by the then applicable
Exercise Price, (and the Warrant Shares shall be issued as soon as practicable
after five (5) days commencing the payment day), except that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below), the Exercise
Amount shall be paid to the Company within five (5) business days of the
termination of all HSR Act Restrictions (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).
Certificates for shares purchased hereunder shall be delivered to the Holder
within three (3) business days after the date on which this Warrant shall have
been exercised as aforesaid. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company of the Exercise
Price. If the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 3.3(b) by
the close of business on the third business day after the date of exercise, then
the Holder will have the right to rescind such exercise.
3
(ii) Provided, however, that under no circumstances may the Holder
exercise, and in no event shall the Company be obligated to honor any exercise
of, this Warrant to the extent the result of such exercise and issuance of
Warrant Shares pursuant thereto would result (after giving effect to such
issuance) in the Holder owning 4.9% or more of the then outstanding Ordinary
Shares of the Company. To the extent any such exercise is not honored pursuant
to the foregoing proviso, the shares withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.
3.4 Fractional Shares. The Company shall pay the Holder cash in lieu of
any fraction of a share equal to such fraction of the Exercise Price of one
whole share of Warrant Shares. No fractional shares or scrip representing
fractional shares shall be issued upon an exercise of this Warrant.
3.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").
3.6. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
3.7 Expiration of Warrant. This Warrant shall expire, with respect to the
applicable number of Warrant Shares only, on the earlier to occur of: (a) 10
days after the Company provides notice to the Holder that the Company's common
stock has been approved for listing on NASDAQ Small Cap or the American Stock
Exchange or 10 days following effectiveness of the registration statement to be
filed by the company pursuant to the Registration Rights Agreement between the
Holder and the Company of even date hereof; (b) the date that is 375 days
following the date of this Warrant; (c) [intentionally omitted]; (d) The Company
can call the Warrants before the end of the180 days, if the closing price of the
Share in the market is $12 or higher for 20 consecutive trading days, subject to
there being an effective registration statement and 10 days written notice to
the Holder.
4. VALID ISSUANCE; TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Warrant Shares in any name
other than that of the Registered Holder of this Warrant, and in such case the
Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. In addition to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's Articles of Association, the number of shares of Warrant Shares
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase Price are subject to adjustment upon occurrence of the following
events:
5.1. Adjustment for Share Splits, Share Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant Shares issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Warrant Shares or Ordinary Shares. The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.
5.2. Adjustment for Dividends or Distributions of Shares or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained earnings), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Warrant Shares (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 5.
5.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.
5
5.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Warrant Shares or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Articles of
Association to provide sufficient reserves of shares of Warrant Shares issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the necessary certificates for shares of Warrant Shares
upon the exercise of this Warrant.
6
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the SEC under the
Securities Act of 1933 (the "ACT"), covering the disposition or sale of this
Warrant or the Warrant Shares issued or issuable upon exercise hereof as the
case may be, and registration or qualification under applicable state securities
laws, such Holder will not sell, transfer, pledge, or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's Articles of Association and either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection with, any distribution thereof; that the
Holder has had such opportunity as such Holder has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
the Holder to evaluate the merits and risks of its investment in the Company;
that the Holder is able to bear the economic risk of holding such shares as may
be acquired pursuant to the exercise of this Warrant for an indefinite period;
that the Holder understands that the shares of stock acquired pursuant to the
exercise of this Warrant will not be registered under the Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the SEC
for exercise of this Warrant, and even then will not be available unless a
public market then exists for the stock, adequate information concerning the
Company is then available to the public, and other terms and conditions of Rule
144 are complied with; and that all stock certificates representing shares of
stock issued to the Holder upon exercise of this Warrant may have affixed
thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
7
11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company. In
the absence of affirmative action by the Holder to purchase Warrant Shares by
exercise of this Warrant no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.
12. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents and
warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof are
being acquired for its own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "Act"). Upon
exercise ______ of ____________ this _____________ Warrant, _____________ the
____________ Holder shall, if so requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the securities issuable upon
exercise of this Warrant are being acquired for investment and not with a view
toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
13. NOTICES. All notices and other communications hereunder shall be in writing
and shall be given in person, by registered mail (registered international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to evidence delivery, or by facsimile transmission (provided that
written confirmation of receipt is provided), addressed as set forth below:
If to the Company: XFONE, Inc.
Xxxxxxxxx Xxxxx
000 Xxxx Xxxx
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
8
If to Holder:
Attn: Xxxxxxx Xxxx
Crestview Capital Funds
00 Xxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications delivered in
person or by courier service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given twenty-four hours following transmission, and all notices and
other communications sent by registered mail (or air mail if the posting in
international) shall be deemed given seven (7) days after posting.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
15. GOVERNING LAW; JURISDICTION. Any claim arising under or relating to this
Warrant, shall be governed by the laws of the State of New York, without regard
to principles of conflict of laws. Each party hereto consents that any legal
action or proceeding against it under, arising out of or in any manner relating
to this Warrant shall be brought exclusively in the courts of the State of New
York located in New York County or in the United States District Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding under this Warrant, and agrees that
any such action or proceeding shall be tried before a court and not before a
jury.
16. NO IMPAIRMENT. The Company will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant against impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
stock issuable upon the exercise of this Warrant above the amount payable
therefore upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Warrant Shares upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the share capital of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
9
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Ordinary Shares
or Warrant Shares;
then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Warrant Shares, Ordinary
Shares or (such stock or securities as at the time are receivable upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares, Ordinary Shares (or such other stock or securities), for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be delivered at least ten (10) days prior to the date therein
specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and delivered by
facsimile, and each such executed counterpart shall be, and shall be deemed to
be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which
prohibits the rights granted to the Holders of this Warrant. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived or lapsed.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
____, 2004.
HOLDER: CRESTVIEW CAPITAL MASTER LLC XFONE, INC
By: By:
-------------------------- --------------------------
------------------------------ ------------------------------
Printed Name Printed Name
-------------------------- ------------------------------
Title Title
11
EXHIBIT 1
AGREEMENT
12
EXHIBIT 2
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
XFONE, INC. WARRANT B NO. _
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Xfone, Inc., as provided for therein, and (check the
applicable box):
|_| Tenders herewith payment of the exercise price in full in the form of cash
or (by check) or by wire transfer in same-day funds in the amount of
$____________ for _________ such securities, pursuant to the Warrant.
|_| Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
----------------------------------------------
Address:
----------------------------------------------
Signature:
----------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
there under rounded up to the next higher whole number of shares.
13
EXHIBIT 6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February ___, 2004 by and between Xfone, Inc a Nevada corporation
having its executive offices located at Xxxxxxxxx Xxxxx, 000 Xxxx Xxxx Xxxxxx
X00 0XX, Xxxxxx Xxxxxxx (the "Company"), and the purchasers identified on
Exhibit 1 hereto (each a "Purchaser" and together, the "Purchasers").
This Agreement is made pursuant to the Shares and Warrants Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Effectiveness Date" means, with respect to the Registration
Statement required to be filed hereunder, the earlier of (a) the 120th
calendar day following the Closing Date as defined in the Purchase
Agreement. and (b) the tenth Trading Day following the date on which the
Company is notified by the Commission that the Registration Statement will
not be reviewed or is no longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the 45th calendar day following the
Closing Date as defined in the Purchase Agreement.
"Holder" or "Holders" means the holder or holders or Purchasers, as
the case may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means the Shares and the Warrant Shares,
together with any shares of Common Stock issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"Registration Statement" means the registration statements required
to be filed hereunder, including (in each case) the Prospectus, amendments
and supplements to the registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration.
(a) On or prior to the Filing Date, the Company shall use its best
efforts to prepare and file with the Commission the Registration Statement
covering the resale of all of the Registrable Securities for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement
required hereunder shall be on Form SB-2 and shall register the resale of the
Shares and the Warrant Shares. The Company shall use its best efforts to cause
the Registration Statement to become effective and remain effective as provided
herein. The Company shall use its commercially reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event not later than
the Effectiveness Date, and shall use its commercially reasonable efforts to
keep the Registration Statement continuously effective under the Securities Act
until the earlier of the date when all Registrable Securities covered by the
Registration Statement (a) have been sold, transferred or disposed of pursuant
to the Registration Statement or an exemption from the registration requirements
of the Securities Act or (b) may be sold by non-affiliates without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company's transfer agent (the "Effectiveness Period").
2
(b) If: a Registration Statement is (i) not filed on or prior to its
Filing Date the Company shall pay to each Holder an amount in shares, as
liquidated damages and not as a penalty, equal to 1% of the aggregate Shares
purchased by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder; and if (ii) the Registration Statement is
not declared effective by the Commission on or before the Effectiveness Date, or
(iii) after a Registration Statement is first declared effective by the
Commission, it ceases for any reason to remain continuously effective as to all
Registrable Securities not sold, disposed of or transferred for which it is
required to be effective, or the Holders are not permitted to utilize the
Prospectus therein to resell such Registrable Securities through no fault of
their own, for in any such cases twenty Trading Days (which need not be
consecutive days) in the aggregate during any 12-month period (any such failure
or breach being referred to as an "Event," and for purposes of clause (i) or
(ii) the date on which such Event occurs, or for purposes of clause (ii) the
date which such Trading Day period is exceeded, or for purposes of clause (iii)
the date on which such twenty Trading Day period is exceeded, being referred to
as "Event Date"), then in addition to any other rights the Holders may have
hereunder or under applicable law: on each monthly anniversary of each such
Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured or no more than a total of twelve months
from the Closing Date, the Company shall pay to each Holder an amount in shares,
as liquidated damages and not as a penalty, equal to 2% of the aggregate Shares
owned by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder no more than a total of twelve months from
the Closing date. In no way will the Company pay more than 2% per month if the
Company misses both the Filing Date and Effective Date. The liquidated damages
pursuant to the terms hereof shall apply on a pro-rata basis for any portion of
a month prior to the cure of an Event.
3. Registration Procedures
i. In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, and subject to the Purchase Agreement (i) furnish to the Holders copies
of all such documents proposed to be filed (including documents incorporated or
deemed incorporated by reference to the extent requested by such Person and not
available on the XXXXX system), which documents will be provided for the review
of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel of the Company to
conduct a reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith. Should Holders
object, all liquidated damages and/or penalties set forth herein shall be
waived. For purposes of this paragraph objection by Holders of any disclosure
required to be made under Federal Securities laws as determined by Company's
counsel shall not be deemed to be in good faith.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and attempt in good faith to respond within ten
Trading Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and, as promptly as reasonably
possible, upon request, provide its counsel true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the Registration Statement.
(c) Notify the Holders of Registrable Securities as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than five
trading Days prior to such filing) and (if requested by any such Person) confirm
such notice in writing promptly following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a "review" of the Registration Statement and whenever the
Commission comments in writing on the Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4
(d) Use its commercially reasonable efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder upon request, without charge, at least
one conformed copy of the Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent requested by such
Holder, and all exhibits to the extent requested by such Holder (including those
previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder may reasonably request in connection with
resales by the Holder of Registrable Securities. The Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto,
except after the giving of any notice pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction (i) where it is not then so qualified, (ii)
that would subject the Company to any material tax in any such jurisdiction
where it is not then so subject or (iii) that would require the Company to file
a general consent to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such Holders may request so long as such transfers are in
compliance with federal and state securities laws.
5
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (v) of Section 3(c) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use commercially
reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its right
under this Section 3(i) to suspend the availability of a Registration Statement
and Prospectus, subject to the payment of liquidated damages pursuant to Section
2(b), for a period not to exceed 60 days (which need not be consecutive days).
(j) Comply with all applicable rules and regulations of the
Commission.
(k) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, the Person thereof that has voting and
dispositive control over the Shares. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this agreement, that
each of the Holders shall furnish to the Company the information regarding them
specified immediately above, and as to the Registrable Securities of any
particular Holder, that such Holder respond to any specific written comments
from the SEC with respect to such Holder.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold, disposed of
or transferred pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the Trading Market on which
the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. All selling expenses relating to
securities registered by the Holders shall be borne by the Holders of such
securities.
6
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents and employees of
each of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and
the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, to the extent arising out of or
relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, except in the following
circumstances: The Company shall not indemnify or hold harmless each
Holder if (1) such untrue or alleged untrue statements or omissions are
based upon information regarding such Holder furnished in writing to the
Company by such Holder, or (2) in the case of an occurrence of an event of
the type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents, and employees, and each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, to the extent arising out of or
based upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading to the extent, but only to the extent, that such untrue or
alleged statement or omission is contained in any information so furnished
in writing by such Holder to the Company for inclusion in such Prospectus
or to the extent that in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated
or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(c). In no
event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
7
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in
writing, and the Indemnifying Party shall have the right to assume the
defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense
of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding affected without its written consent, which consent shall not
be unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and
expenses applicable to such actions for which such Indemnified Party is
not entitled to indemnification hereunder, determined based upon the
relative faults of the parties.
8
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys' or other reasonable fees
or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount of proceeds actually received by such Holder from the
sale of the Registrable Securities by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of
gross negligence or fraud by such Holder. The indemnity and contribution
agreements contained in this Section are in addition to any liability that
the Indemnifying Parties may have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law
would be adequate.
(b) Compliance. Each Holder covenants and agrees that it will comply
with federal and state securities laws including the prospectus delivery
requirements of the Securities Act as applicable to it in connection with
resales of Registrable Securities pursuant to the Registration Statement.
9
(c) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this
paragraph.
(d) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine
to prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or
Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice
of such determination and, if within fifteen days after the date of such
notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and each Holder of the then outstanding Registrable
Securities.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via
facsimile prior to 6:30 p.m. (New York City time) on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The
address or facsimile number for such notices and communications shall be
delivered and addressed as set forth in the Purchase Agreement.
10
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(h) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed
to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(i) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a
party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York, New York. Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, New York for
the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of this Agreement), 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 improper. Each party hereto
hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by delivering
a copy thereof via overnight delivery (with evidence of delivery) to such
party at the address in effect for 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. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of this Agreement, then the
prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorney's fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
(j) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
11
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(m) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way acting
in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to
protect and enforce its rights, including without limitation the rights
arising out of this Agreement, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
(n) Conflicting Instructions. A person or entity is deemed to be a
holder of Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons or entities
with respect to the same Registrable Securities, the Company will act upon
the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
----------------------------------- ----------------------------
Xfone, Inc. Date
By:
Title:
-----------------------------
CRESTVIEW CAPITAL MASTER LLC
By:
--------------------------------
Name: Xxxxxxx Xxxx
Title: Managing Partner
12
SCHEDULE 2 (d)
Outstanding Rights to Equity
SCHEDULE 2(s)
Capitalization
