Contract
THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF
AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY
TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
AIRSHIP
LEASING CO., LLC
AND
TSI
HOLDING CO., LLC
due
February 21, 2008
|
No.
CN-01
|
$375,000
|
|
Dated:
August 24, 2007
|
For
value
received, through funds advanced to Xxxxxxx X. Xxxxxxxx, on behalf of Airship
Leasing Co., LLC, an Oklahoma limited liability company (“Airship”),
and
TSI Holding Co., LLC, a Georgia limited liability company (“TSI”,
and
together with Airship, “Maker”),
hereby, jointly and severally, promise to pay to the order of Ayuda Funding
Corp. (together with its successors, representatives, and permitted assigns,
the
“Holder”),
in
accordance with the terms hereinafter provided, the principal amount of Three
Hundred Seventy-Five Thousand Dollars ($375,000), together with interest
thereon.
All
payments under or pursuant to this Note shall be made in United States Dollars
in immediately available funds to the Holder at
the
address of the Holder set forth in Section 4.1 hereof or at such other place
as
the Holder may designate from time to time in writing to the Maker or by
wire
transfer of funds to the Holder's account, instructions for which are attached
hereto as Exhibit
A. The
outstanding principal balance of this Note shall be due and payable on February
21, 2008 (the “Maturity
Date”)
or at
such earlier time as provided herein.
ARTICLE
I
Section
1.1 Interest.
Beginning on the issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears,
at a
rate per annum equal to fifteen percent (15%). Interest shall be payable,
at the
option of the Holder, in cash or shares of common stock, par value $0.001
per
share (the “Common Stock”) of Cyber Defense Systems, Inc. (“Cyber”). Except as
otherwise provided herein, the interest on this Note shall be due and payable
on
the Maturity Date. The
number of shares of Common Stock to be issued as payment of accrued and unpaid
interest shall be determined by dividing the total amount of accrued and
unpaid
interest to be converted into Common Stock by the Conversion Price (as defined
in Section 3.2 hereof). Interest
shall be computed on the basis of a 360-day year of twelve (12) 30-day months
and shall accrue commencing on the Issuance Date. Furthermore,
upon the occurrence of an Event of Default (as defined in Section 2.1 hereof),
then to the extent permitted by law, the Maker will pay interest to the Holder,
payable on demand, on the outstanding principal balance of the Note from
the
date of the Event of Default until such Event of Default is cured at the
rate of
the lesser of twenty percent (20%) and the maximum applicable legal rate
per
annum.
Section
1.2 Pledge
and Security Agreement. The obligations of the Maker hereunder are secured
by a continuing security interest in certain assets of the Maker pursuant
to the
terms of a Pledge and Security Agreement dated as of August 21, 2007 by and
among the Maker and the Holder.
Section
1.3 Guaranty
Agreement. The obligations of the Maker hereunder are guaranteed pursuant to
the terms of a Guaranty Agreement dated as of August 21, 2007 by Xxxxxxx
X.
Xxxxxxxx and Proxity, Inc., as guarantors, to the Holder.
Section
1.4 Payment
on Non-Business Days. Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.
Section
1.5 Transfer.
This Note may be transferred or sold, subject to the provisions of Section
4.8
of this Note, or pledged, hypothecated or otherwise granted as security by
the
Holder.
Section
1.6 Replacement.
Upon receipt of a duly executed, notarized and unsecured written statement
from
the Holder with respect to the loss, theft or destruction of this Note (or
any
replacement hereof) and a standard indemnity, or, in the case of a mutilation
of
this Note, upon surrender and cancellation of such Note, the Maker shall
issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed
or
mutilated Note.
Section
1.7 Piggyback
Registration Rights. Whenever the Maker proposes to file a registration
statement (a “Registration Statement”) under the Securities Act of 1933,
as amended (the “Act”), relating to any of its securities, the Maker shall give
written notice thereof to the Holder as soon as practicable (but in any event
at
least thirty (30) days before such filing), offering the Holder the opportunity
to register on such Registration Statement such number of shares of Common
Stock
issuable upon conversion of this Note and any interest accrued and outstanding
on this Note (the “Conversion Shares”) as the Holder may request in
writing not later than twenty (20) days after the date of such notice. Upon
receipt by the Maker of any such request, the Maker shall use its best efforts
to include such Conversion Shares in such Registration Statement and to cause
such Registration Statement to become effective with respect to such Conversion
Shares.
-2-
ARTICLE
II
EVENTS
OF DEFAULT; REMEDIES
Section
2.1 Events
of Default.
The
occurrence of any of the following events shall be an “Event of Default” under
this Note:
(a) the
Maker
shall fail to make any principal or interest payments on the date such payments
are due and such default is not fully cured within one (1) business day after
the occurrence thereof; or
(b) the
suspension from listing, without subsequent listing of Cyber’s Common Stock, on
any one of, or the failure of the Common Stock to be listed on at least one
of
the OTC Bulletin Board, the American Stock Exchange, the Nasdaq National
Market,
the Nasdaq SmallCap Market or The New York Stock Exchange, Inc. for a period
of
five (5) consecutive Trading Days; or
(c) the
Maker's or Cyber’s notice (as the case may be) to the Holder, including by way
of public announcement, at any time, of its inability to comply (including
for
any of the reasons described in Section 3.6(a) hereof) or its intention not
to
comply with proper requests for conversion of this Note into shares of Common
Stock; or
(d) the
Maker
shall fail to (i) cause Cyber to timely deliver the shares of Cyber’s Common
Stock upon conversion of the Note or any interest accrued and unpaid or (ii)
make the payment of any fees and/or liquidated damages under this Note, which
failure in the case of this Section 2.1(d) is not remedied within three (3)
business days after the incurrence thereof; or
(e) default
shall be made in the performance or observance of (i) any material covenant,
condition or agreement contained in this Note and such default is not fully
cured within five (5) business days after the Holder delivers written notice
to
the Maker of the occurrence thereof or (ii) any material covenant, condition
or
agreement contained in the Pledge Agreement which is not covered by any other
provisions of this Section 2.1 and such default is not fully cured within
five
(5) business days after the Holder delivers written notice to the Maker of
the
occurrence thereof; or
(f) any
material representation or warranty made by the Maker herein or in the Pledge
Agreement or the Guaranty Agreement shall prove to have been false or incorrect
or breached in a material respect on the date as of which made; or
(g) the
Maker
shall (A) default in any payment of any amount or amounts of principal of
or
interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of
$100,000 or
(B)
default in the observance or performance of any other agreement or condition
relating to any Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur
or
condition exist, the effect of which default or other event or condition
is to
cause, or to permit the holder or holders or beneficiary or beneficiaries
of
such Indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
-3-
(h) the
Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or
of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against
it in
an involuntary case under United States Bankruptcy Code (as now or hereafter
in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue
a
press release regarding same, or (vii) take any action under the laws of
any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
(i) a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i)
the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part
of its
assets in connection with the liquidation or dissolution of the Maker or
(iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of thirty
(30) days or any order for relief shall be entered in an involuntary case
under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker
or
action under the laws of any jurisdiction (foreign or domestic) analogous
to any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) days;
or
(j) the
failure of Cyber to instruct its transfer agent to remove any legends from
shares of Common Stock eligible to be sold under Rule 144 of the Act and
issue
such unlegended certificates to the Holder within five (5) business days
of the
Holder’s request so long as the Holder has provided reasonable assurances to
Cyber that such shares of Common Stock can be resold pursuant to Rule
144.
Section
2.2 Remedies
Upon An Event of Default.
If an
Event of Default shall have occurred and shall be continuing, the Holder
of this
Note may at any time at its option, (a) pursuant to Section 3.5(a) hereof,
declare the entire unpaid principal balance of this Note, together with
interest
payments in the amount set forth in Section 3.5(a),
due and
payable, and thereupon, the same shall be accelerated and so due and payable,
without presentment, demand, protest, or notice, all of which are hereby
expressly unconditionally and irrevocably waived by the Maker; provided,
however, that upon the occurrence of an Event of Default described in (i)
Sections 2.1 (h) or (i), the outstanding principal balance and accrued interest
hereunder shall be automatically due and payable and (ii) Sections 2.1 (b)-(g),
the Holder may demand the prepayment of this Note pursuant to Section 3.5
hereof, (b) demand that the principal amount of this Note then outstanding
and
interest
payments in the amount set forth in Section 3.5(a)
shall be
converted into shares of Common Stock at a Conversion Price per share calculated
pursuant to Section 3.1 hereof assuming that the date that the Event of Default
occurs is the Conversion Date (as defined in Section 3.1 hereof), or (c)
exercise or otherwise enforce any one or more of the Holder's rights, powers,
privileges, remedies and interests under this Note, the Pledge Agreement
or
applicable law. No course of delay on the part of the Holder shall operate
as a
waiver thereof or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein
or
now or hereafter available at law, in equity, by statute or
otherwise.
-4-
ARTICLE
III
-CONVERSION;
ANTIDILUTION; PREPAYMENT
Section
3.1 Conversion
Option.
(a) At
any
time on or after the Issuance Date, this Note shall be convertible (in whole
or
in part), at the option of the Holder, into such number of fully paid and
non-assessable shares of Common Stock (the “Conversion
Rate”)
as is
determined by dividing (x) that portion of the outstanding principal balance
plus any accrued but unpaid interest under this Note as of such date that
the
Holder elects to convert by (y) the Conversion Price (as defined in Section
3.2(a) hereof) then in effect on the date on which the Holder faxes a notice
of
conversion (the “Conversion
Notice”),
duly
executed, to Cyber (facsimile number ( ) ____-____, Attn.: Chief Executive
Officer) (the “Conversion
Date”),
provided, however, that the Conversion Price shall be subject to adjustment
as
described in Section 3.4 below. The Holder shall deliver this Note to Cyber
at
the address set forth in Section 4.1 at such time that this Note is fully
converted. With respect to partial conversions of this Note, the Maker shall
keep written records of the amount of this Note converted as of each Conversion
Date.
Section
3.2 Conversion
Price.
(a) The
term
“Conversion
Price”
shall
mean the lesser of $.10 per share of Cyber Common Stock or the average of
the
Closing Bid Price (as defined below) for the thirty (30) Trading Days preceding
the Conversion Date, subject to adjustment under Section 3.4 hereof.
(b) The
term
“Closing
Bid Price”
shall
mean, on any particular date (i) the last closing bid price per share of
the
Common Stock on such date on the OTC
Bulletin Board or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the last closing
bid
price on such exchange or quotation system on the date nearest preceding
such
date, or (ii) if the Common Stock is not listed then on the OTC Bulletin
Board
or any registered national stock exchange, the last trading price for a share
of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (iii) if the Common Stock is not then reported
by the
OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the relevant conversion period, as
determined in good faith by the Holder, or (iv) if the Common Stock is not
then
publicly traded the fair market value of a share of Common Stock as determined
by the Holder and reasonably acceptable to Cyber.
-5-
Section
3.3 Mechanics
of Conversion.
(a) Not
later
than three (3) Trading Days after any Conversion Date, Cyber or its designated
transfer agent, as applicable, shall issue and deliver to the Depository
Trust
Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
as
specified in the Conversion Notice, registered in the name of the Holder
or its
designee, for the number of shares of Common Stock to which the Holder shall
be
entitled. In the alternative, not later than three (3) Trading Days after
any
Conversion Date, Cyber shall deliver to the applicable Holder by express
courier
a certificate or certificates which shall be free of restrictive legends
and
trading restrictions representing the number of shares of Common Stock being
acquired upon the conversion of this Note (the “Delivery
Date”).
Notwithstanding the foregoing to the contrary, Cyber or its transfer agent
shall
only be obligated to issue and deliver the shares to the DTC on the Holder’s
behalf via DWAC (or certificates free of restrictive legends) if such conversion
is in connection with a sale and the Holder has complied with the applicable
prospectus delivery requirements (as evidenced by documentation furnished
to and
reasonably satisfactory to Cyber). If in the case of any Conversion Notice
such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the Delivery Date, the Holder shall be entitled by written
notice to the Maker at any time on or before its receipt of such certificate
or
certificates thereafter, to rescind such conversion, in which event the Maker
shall immediately return this Note tendered for conversion, whereupon the
Maker
and the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice
of
rescission is given to the Maker.
(b) Each
of
the Maker and Cyber understands that a delay in the delivery of the shares
of
Common Stock upon conversion of this Note beyond the Delivery Date could
result
in economic loss to the Holder. If Cyber fails to deliver to the Holder such
shares via DWAC or a certificate or certificates pursuant to this Section
hereunder by the Delivery Date, Maker and Cyber shall pay to such Holder,
in
cash, an amount per Trading Day for each Trading Day until such shares are
delivered via DWAC or certificates are delivered, together with interest
on such
amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to the greater of (A) (i) 1% of the
aggregate principal amount of the Notes requested to be converted for the
first
five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal amount of the Notes requested to be converted for each Trading
Day
thereafter and (B) $2,000 per day (which amount shall be paid as liquidated
damages and not as a penalty). Nothing herein shall limit a Holder's right
to
pursue actual damages for Cyber's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein
and
such Holder 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 contained
herein, the Holder shall be entitled to withdraw a Conversion Notice, and
upon
such withdrawal Cyber shall only be obligated to pay the liquidated damages
accrued in accordance with this Section 3.3(b) through the date the Conversion
Notice is withdrawn.
-6-
(c) In
addition to any other rights available to the Holder, if Cyber fails to cause
its transfer agent to transmit to the Holder a certificate or certificates
representing the shares of Common Stock issuable upon conversion of this
Note on
or before the Delivery Date, and if after such date the Holder is required
by
its broker to purchase (in an open market transaction or otherwise) shares
of
Common Stock to deliver in satisfaction of a sale by the Holder of the shares
of
Common Stock issuable upon conversion of this Note which the Holder anticipated
receiving upon such exercise (a “Buy-In”),
then
Cyber shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares
of
Common Stock so purchased exceeds (y) the amount obtained by multiplying
(A) the
number of shares of Common Stock issuable upon conversion of this Note that
Cyber was required to deliver to the Holder in connection with the conversion
at
issue times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number
of
shares of Common Stock that would have been issued had Cyber timely complied
with its conversion and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to
cover
a Buy-In with respect to an attempted conversion of shares of Common Stock
with
an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence Cyber shall be required
to pay the Holder $1,000. The Holder shall provide Cyber written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by
Cyber.
Nothing herein shall limit a Xxxxxx’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to Cyber’s
failure to timely deliver certificates representing shares of Common Stock
upon
conversion of this Note as required pursuant to the terms hereof.
Section
3.4 Adjustment
of Conversion Price.
(a) The
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments
for Stock Splits and Combinations.
If
Cyber shall at any time or from time to time after the Issuance Date, effect
a
stock split of the outstanding Common Stock, the applicable Conversion Price
in
effect immediately prior to the stock split shall be proportionately decreased.
If Cyber shall at any time or from time to time after the Issuance Date,
combine
the outstanding shares of Common Stock, the applicable Conversion Price in
effect immediately prior to the combination shall be proportionately increased.
Any adjustments under this Section 3.4(a)(i) shall be effective at the close
of
business on the date the stock split or combination occurs.
(ii)
Adjustments
for Certain Dividends and Distributions.
If
Cyber shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of
Common
Stock, then, and in each event, the applicable Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, the applicable Conversion
Price then in effect by a fraction:
-7-
(1) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date; and
(2) the
denominator of which shall be the total number of shares of Common Stock
issued
and outstanding immediately prior to the time of such issuance or the close
of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.
(iii)
Adjustment
for Other Dividends and Distributions.
If
Cyber shall at any time or from time to time after the Issuance Date, make
or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in other than
shares of Common Stock, then, and in each event, an appropriate revision
to the
applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the holders of
this
Note shall receive upon conversions thereof, in addition to the number of
shares
of Common Stock receivable thereon, the number of securities of Cyber which
they
would have received had this Note been converted into Common Stock on the
date
of such event and had thereafter, during the period from the date of such
event
to and including the Conversion Date, retained such securities (together
with
any distributions payable thereon during such period), giving application
to all
adjustments called for during such period under this Section 3.4(a)(iii)
with
respect to the rights of the holders of this Note; provided,
however,
that if
such record date shall have been fixed and such dividend is not fully paid
or if
such distribution is not fully made on the date fixed therefor, the Conversion
Price shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.
(iv)
Adjustments
for Reclassification, Exchange or Substitution.
If the
Common Stock issuable upon conversion of this Note at any time or from time
to
time after the Issuance Date shall be changed to the same or different number
of
shares of any class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or combination
of
shares or stock dividends provided for in Sections 3.4(a)(i), (ii) and (iii),
or
a reorganization, merger, consolidation, or sale of assets provided for in
Section 3.4(a)(v)), then, and in each event, an appropriate revision to the
Conversion Price shall be made and provisions shall be made (by adjustments
of
the Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock
and
other securities receivable upon reclassification, exchange, substitution
or
other change, by holders of the number of shares of Common Stock into which
such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment
as
provided herein.
(v)
Adjustments
for Reorganization, Merger, Consolidation or Sales of Assets.
If at
any time or from time to time after the Issuance Date there shall be a capital
reorganization of the Maker (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 3.4(a)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 3.4(a)(iv)), or a merger or consolidation of the
Maker
or Cyber with or into another corporation where the holders of outstanding
voting securities prior to such merger or consolidation do not own over fifty
percent (50%) of the outstanding voting securities of the merged or consolidated
entity, immediately after such merger or consolidation, or the sale of all
or
substantially all of the Maker's or Cyber’s properties or assets to any other
person (an “Organic
Change”),
then
as a part of such Organic Change, (A) if the surviving entity in any such
Organic Change is a public company that is
registered pursuant to the Securities Exchange Act of 1934, as amended, and
its
common stock is listed or quoted on a national securities exchange, a national
automated quotation system or the OTC Bulletin Board, an
appropriate revision to the Conversion Price shall be made and provision
shall
be made (by adjustments of the Conversion Price or otherwise) so that the
Holder
shall have the right thereafter to convert such Note into the kind and amount
of
shares of stock and other securities or property of the Maker or Cyber or
any
successor corporation resulting from Organic Change, and (B) if the surviving
entity in any such Organic Change is not a public company that is
registered pursuant to the Securities Exchange Act of 1934, as amended, or
its
common stock is not listed or quoted on a national securities exchange, a
national automated quotation system or the OTC Bulletin Board,
the
Holder shall have the right to demand prepayment pursuant to Section 3.5(b)
hereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.4(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions
of
this Section 3.4(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note) shall be applied after that event
in
as nearly an equivalent manner as may be practicable.
-8-
(vi) Adjustments
for Issuance of Additional Shares of Common Stock.
In the
event Cyber, shall, at any time, from time to time, issue or sell any additional
shares of common stock (otherwise than as provided in the foregoing subsections
(i) through (v) of this Section 3.4(a) or pursuant to Common Stock Equivalents
(hereafter defined) granted or issued prior to the Issuance Date) (“Additional
Shares of Common Stock”),
at a
price per share less than the Conversion Price then in effect or without
consideration, then the Conversion Price upon each such issuance shall be
reduced to a price equal to the consideration per share paid for such Additional
Shares of Common Stock.
(vii) Issuance
of Common Stock Equivalents.
If
Cyber, at any time after the Issuance Date, shall issue any securities
convertible into or exchangeable for, directly or indirectly, Common Stock
(“Convertible
Securities”),
other
than the Notes, or any rights or warrants or options to purchase any such
Common
Stock or Convertible Securities, shall be issued or sold (collectively, the
“Common
Stock Equivalents”)
and
the aggregate of the price per share for which Additional Shares of Common
Stock
may be issuable thereafter pursuant to such Common Stock Equivalent, plus
the
consideration received by Cyber for issuance of such Common Stock Equivalent
divided by the number of shares of Common Stock issuable pursuant to such
Common
Stock Equivalent (the “Aggregate
Per Common Share Price”)
shall
be less than the applicable Conversion Price then in effect, or if, after
any
such issuance of Common Stock Equivalents, the price per share for which
Additional Shares of Common Stock may be issuable thereafter is amended or
adjusted, and such price as so amended shall make the Aggregate Per Share
Common
Price be less than the applicable Conversion Price in effect at the time
of such
amendment or adjustment, then the applicable Conversion Price upon each such
issuance or amendment shall be adjusted as provided in subsection (vi) of
this
Section 3.4(a) on the basis that (1) the maximum number of Additional Shares
of
Common Stock issuable pursuant to all such Common Stock Equivalents shall
be
deemed to have been issued (whether or not such Common Stock Equivalents
are
actually then exercisable, convertible or exchangeable in whole or in part)
as
of the earlier of (A) the date on which Cyber shall enter into a firm contract
for the issuance of such Common Stock Equivalent, or (B) the date of actual
issuance of such Common Stock Equivalent. No adjustment of the applicable
Conversion Price shall be made under this subsection (vii) upon the issuance
of
any Convertible Security which is issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any adjustment
shall previously have been made to the exercise price of such warrants then
in
effect upon the issuance of such warrants or other rights pursuant to this
subsection (vii). No adjustment shall be made to the Conversion Price upon
the
issuance of Common Stock pursuant to the exercise, conversion or exchange
of any
Convertible Security or Common Stock Equivalent where an adjustment to the
Conversion Price was made as a result of the issuance or purchase of any
Convertible Security or Common Stock Equivalent.
-9-
(viii) Consideration
for Stock.
In case
any shares of Common Stock or any Common Stock Equivalents shall be issued
or
sold:
(1) in
connection with any merger or consolidation in which Cyber is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding shares of Common Stock of Cyber shall be changed to or exchanged
for
the stock or other securities of another corporation), the amount of
consideration therefor shall be, deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of Cyber, of such
portion
of the assets and business of the nonsurviving corporation as such Board
may
determine to be attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be; or
(2) in
the
event of any consolidation or merger of the Maker in which Cyber is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of Cyber shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of Cyber for stock or other securities of
any
corporation, Cyber shall be deemed to have issued a number of shares of its
Common Stock for stock or securities or other property of the other corporation
computed on the basis of the actual exchange ratio on which the transaction
was
predicated, and for a consideration equal to the fair market value on the
date
of such transaction of all such stock or securities or other property of
the
other corporation. If any such calculation results in adjustment of the
applicable Conversion Price, or the number of shares of Common Stock issuable
upon conversion of the Notes, the determination of the applicable Conversion
Price or the number of shares of Common Stock issuable upon conversion of
the
Notes immediately prior to such merger, consolidation or sale, shall be made
after giving effect to such adjustment of the number of shares of Common
Stock
issuable upon conversion of the Notes. In the event Common Stock is issued
with
other shares or securities or other assets of Cyber for consideration which
covers both, the consideration computed as provided in this Section 3.4(viii)
shall be allocated among such securities and assets as determined in good
faith
by the Board of Directors of Cyber.
-10-
(b) Record
Date.
In case
Cyber shall take record of the holders of its Common Stock for the purpose
of
entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.
(c) Certain
Issues Excepted.
Anything herein to the contrary notwithstanding, Cyber shall not be required
to
make any adjustment to the Conversion Price in connection with (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to the conversion or exercise
of
convertible or exercisable securities issued or outstanding on or prior to
the
date hereof (so long as the conversion or exercise price in such securities
are
not amended to lower such price and/or adversely affect the Holders), (iii)
securities issued in connection with bona fide strategic license agreements
or
other partnering arrangements so long as such issuances are not for the purpose
of raising capital and (iv) Common Stock issued or the issuance or grants
of
options to purchase Common Stock pursuant to the Company’s stock option plans
and employee stock purchase plans outstanding as they exist on the date hereof
as set forth on Schedule 3.4(c) hereof.
(d) No
Impairment.
Cyber
shall not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other voluntary action, avoid or seek to avoid
the
observance or performance of any of the terms to be observed or performed
hereunder by Cyber, but will at all times in good faith, assist in the carrying
out of all the provisions of this Section 3.4 and in the taking of all such
action as may be necessary or appropriate in order to protect the Conversion
Rights of the Holder against impairment. In the event a Holder shall elect
to
convert any Notes as provided herein, Cyber cannot refuse conversion based
on
any claim that such Holder or any one associated or affiliated with such
Holder
has been engaged in any violation of law, violation of an agreement to which
such Holder is a party or for any reason whatsoever, unless, an injunction
from
a court, or notice, restraining and or adjoining conversion of all or of
said
Notes shall have issued and Cyber posts a surety bond for the benefit of
such
Holder in an amount equal to one hundred thirty percent (130%) of the amount
of
the Notes the Holder has elected to convert, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Holder (as liquidated damages) in the event
it
obtains judgment.
(e) Certificates
as to Adjustments.
Upon
occurrence of each adjustment or readjustment of the Conversion Price or
number
of shares of Common Stock issuable upon conversion of this Note pursuant
to this
Section 3.4, Cyber at its expense shall promptly compute such adjustment
or
readjustment in accordance with the terms hereof and furnish to the Holder
a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. Cyber shall,
upon
written request of the Holder, at any time, furnish or cause to be furnished
to
the Holder a like certificate setting forth such adjustments and readjustments,
the applicable Conversion Price in effect at the time, and the number of
shares
of Common Stock and the amount, if any, of other securities or property which
at
the time would be received upon the conversion of this Note. Notwithstanding
the
foregoing, Cyber shall not be obligated to deliver a certificate unless such
certificate would reflect an increase or decrease of at least one percent
(1%)
of such adjusted amount.
-11-
(f) Issue
Taxes.
Cyber
shall pay any and all issue and other taxes, excluding federal, state or
local
income taxes, that may be payable in respect of any issue or delivery of
shares
of Common Stock on conversion of this Note pursuant thereto; provided,
however,
that
Cyber shall not be obligated to pay any transfer taxes resulting from any
transfer requested by the Holder in connection with any such
conversion.
(g) Fractional
Shares.
No
fractional shares of Common Stock shall be issued upon conversion of this
Note.
In lieu of any fractional shares to which the Holder would otherwise be
entitled, Cyber shall pay cash equal to the product of such fraction multiplied
by the average of the Closing Bid Prices of the Common Stock for the five
(5)
consecutive Trading Days immediately preceding the Conversion Date.
(h) Reservation
of Common Stock.
Cyber
shall at all times when this Note shall be outstanding, reserve and keep
available out of its authorized but unissued Common Stock, such number of
shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of this Note and all interest accrued thereon; provided
that the
number of shares of Common Stock so reserved shall at no time be less than
one
hundred fifty percent (150%) of the number of shares of Common Stock for
which
this Note and all interest accrued thereon is at any time convertible. Cyber
shall, from time to time in accordance with Nevada law, increase the authorized
number of shares of Common Stock if at any time the unissued number of
authorized shares shall not be sufficient to satisfy Cyber’s obligations under
this Section 3.4(h).
(i) Regulatory
Compliance.
If any
shares of Common Stock to be reserved for the purpose of conversion of this
Note
or any interest accrued thereon require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory body under
any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, Cyber shall, at its sole cost
and
expense, in good faith and as expeditiously as possible, endeavor to secure
such
registration, listing or approval, as the case may be.
Section
3.5 Prepayment.
(a) Prepayment
Upon an Event of Default.
Notwithstanding anything to the contrary contained herein, upon the occurrence
of an Event of Default described in Section 2.1 hereof, the Holder shall
have
the right, at such Holder's option, to require the Maker to prepay in cash
all
or a portion of this Note at a price equal to one hundred twenty percent
(120%)
of the aggregate principal amount of this Note plus an amount equal
to
the
aggregate interest payments that would have been payable on this Note had
the
prepayment occurred on the Maturity Date. Nothing
in this Section 3.5(a) shall limit the Holder's rights under Section 2.2
hereof.
(b) Prepayment
Option Upon Major Transaction.
In
addition to all other rights of the Holder contained herein, simultaneous
with
the occurrence of a Major Transaction (as defined below), the Holder shall
have
the right, at the Holder's option, to require the Maker to prepay in cash
all or
a portion of the Holder's Notes at a price equal to one hundred twenty percent
(120%) of the aggregate principal amount of this Note plus an amount equal
to
the
aggregate interest payments that would have been payable on this Note had
the
prepayment occurred on the Maturity Date (the
“Major
Transaction Prepayment Price”);
provided that the Maker shall pay the Major Transaction Prepayment Price
in cash
or shares of Common Stock at the sole option of the Holder. If the Holder
elects
to receive payment of the Major Transaction Prepayment Price in shares of
Common
Stock, the price per share shall be based upon the Conversion Price then
in
effect on the day preceding the date of delivery of the Notice of Prepayment
at
Option of Holder Upon Major Transaction (as hereafter defined).
-12-
(c) Prepayment
Option Upon Triggering Event. In addition to all other rights of the Holder
contained herein, after a Triggering Event (as defined below), the Holder
shall
have the right, at the Holder's option, to require the Maker to prepay all
or a
portion of this Note in cash at a price equal to one hundred twenty percent
(120%) of the aggregate principal amount of this Note plus an amount equal
to
the
aggregate interest payments that would have been payable on this Note had
the
prepayment occurred on the Maturity Date (the
“Triggering Event Prepayment Price,” and, collectively with the Major
Transaction Prepayment Price, the “Prepayment Price”); provided that the Maker
shall pay the Triggering Event Prepayment Price in cash or shares of Common
Stock at the sole option of the Holder. If the Holder elects to receive payment
of the Triggering Event Prepayment Price in shares of Common Stock, the price
per share shall be based upon the Conversion Price then in effect on the
day
preceding the date of delivery of the Notice of Prepayment at Option of Holder
Upon Triggering Event (as hereafter defined).
(d) Major
Transaction. A “Major Transaction” shall be deemed to have occurred at such time
as any of the following events:
(i)
the
consolidation, merger or other business combination of the Maker or Cyber
with
or into another Person (as defined in Section 4.13 hereof) (other than (A)
pursuant to a migratory merger effected solely for the purpose of changing
the
jurisdiction of incorporation of the Maker or Cyber or (B) a consolidation,
merger or other business combination in which holders of the Maker's or Cyber’s
voting power immediately prior to the transaction continue after the transaction
to hold, directly or indirectly, the voting power of the surviving entity
or
entities necessary to elect a majority of the members of the board of directors
(or their equivalent if other than a corporation) of such entity or
entities).
(ii)
the
sale
or transfer of more than fifty percent (50%) of the Maker’s or Cyber’s assets
(based on the fair market value as determined in good faith by the Maker’s or
Cyber’s Board of Directors) other than inventory in the ordinary course of
business in one or a related series of transactions; or
(iii)
closing
of a purchase, tender or exchange offer made to the holders of more than
fifty
percent (50%) of the outstanding shares of Common Stock in which more than
fifty
percent (50%) of the outstanding shares of Common Stock were tendered and
accepted.
(e) Triggering
Event.
A
“Triggering
Event”
shall
be deemed to have occurred at such time as any of the following
events:
(i) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market or The New York Stock Exchange, Inc., for a period of five
(5)
consecutive Trading Days;
-13-
(ii) the
Maker's or Cyber’s notice (as the case may be) to any holder of the Notes,
including by way of public announcement, at any time, of its inability to
comply
(including for any of the reasons described in Section 3.6) or its intention
not
to comply with proper requests for conversion of any Notes into shares of
Common
Stock; or
(iii)
the
Maker's failure to cause Cyber to comply with a Conversion Notice tendered
in
accordance with the provisions of this Note within ten (10) business days
after
the receipt by Cyber of the Conversion Notice; or
(iv)
Cyber
deregisters its shares of Common Stock and as a result such shares of Common
Stock are no longer publicly traded; or
(v) Cyber
consummates a “going private” transaction and as a result the Common Stock is no
longer registered under Sections 12(b) or 12(g) of the Exchange Act;
or
(vi)
the
Maker
or Cyber consummates an underwritten public offering; or
(vii)
the
Maker
breaches any representation, warranty, covenant or other term or condition
this
Note or any other agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated thereby or hereby, except
to
the extent that such breach would not have a Material Adverse Effect and
except,
in the case of a breach of a covenant which is curable, only if such breach
continues for a period of a least ten (10) business days.
(f) Mechanics
of Prepayment at Option of Holder Upon Major Transaction.
No
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Major Transaction, but not prior to the public announcement
of
such Major Transaction, the Maker shall deliver written notice thereof via
facsimile and overnight courier (“Notice
of Major Transaction”)
to the
Holder of this Note. At any time after receipt of a Notice of Major Transaction
(or, in the event a Notice of Major Transaction is not delivered at least
ten
(10) days prior to a Major Transaction, at any time within ten (10) days
prior
to a Major Transaction), any holder of the Notes then outstanding may require
the Maker to prepay, effective immediately prior to the consummation of such
Major Transaction, all of the holder's Notes then outstanding by delivering
written notice thereof via facsimile and overnight courier (“Notice
of Prepayment at Option of Holder Upon Major Transaction”)
to the
Maker, which Notice of Prepayment at Option of Holder Upon Major Transaction
shall indicate (i) the principal amount of the Notes that such holder is
electing to have prepaid and (ii) the applicable Major Transaction Prepayment
Price, as calculated pursuant to Section 3.5(b) above.
(g) Mechanics
of Prepayment at Option of Holder Upon Triggering Event. Within one (1)
business day after the occurrence of a Triggering Event, the Maker shall
deliver
written notice thereof via facsimile and overnight courier (“Notice of
Triggering Event”) to each holder of the Notes. At any time after the earlier of
a holder's receipt of a Notice of Triggering Event and such holder becoming
aware of a Triggering Event, any holder of this Note then outstanding may
require the Maker to prepay all of the Notes on a pro rata basis by delivering
written notice thereof via facsimile and overnight courier (“Notice of
Prepayment at Option of Holder Upon Triggering Event”) to the Maker, which
Notice of Prepayment at Option of Holder Upon Triggering Event shall indicate
(i) the amount of the Note that such holder is electing to have prepaid and
(ii)
the applicable Triggering Event Prepayment Price, as calculated pursuant
to
Section 3.5(c) above. A holder shall only be permitted to require the Maker
to
prepay the Note pursuant to Section 3.5 hereof for the greater of a period
of
ten (10) days after receipt by such holder of a Notice of Triggering Event
or
for so long as such Triggering Event is continuing.
-14-
(h) Payment
of Prepayment Price.
Upon
the Maker's receipt of a Notice(s) of Prepayment at Option of Holder Upon
Triggering Event or a Notice(s) of Prepayment at Option of Holder Upon Major
Transaction from any holder of the Notes, the Maker shall immediately notify
each holder of the Notes by facsimile of the Maker's receipt of such Notice(s)
of Prepayment at Option of Holder Upon Triggering Event or Notice(s) of
Prepayment at Option of Holder Upon Major Transaction and each holder which
has
sent such a notice shall promptly submit to the Maker such holder's certificates
representing the Notes which such holder has elected to have prepaid. The
Maker
shall deliver the applicable Triggering Event Prepayment Price, in the case
of a
prepayment pursuant to Section 3.5(g), to such holder within five (5) business
days after the Maker's receipt of a Notice of Prepayment at Option of Holder
Upon Triggering Event and, in the case of a prepayment pursuant to Section
3.5(f), the Maker shall deliver the applicable Major Transaction Prepayment
Price immediately prior to the consummation of the Major Transaction; provided
that a holder's original Note shall have been so delivered to the Maker;
provided further that if the Maker is unable to prepay all of the Notes to
be
prepaid, the Maker shall prepay an amount from each holder of the Notes being
prepaid equal to such holder's pro-rata amount (based on the number of Notes
held by such holder relative to the number of Notes outstanding) of all Notes
being prepaid. If the Maker shall fail to prepay all of the Notes submitted
for
prepayment (other than pursuant to a dispute as to the arithmetic calculation
of
the Prepayment Price), in addition to any remedy such holder of the Notes
may
have under this Note, the applicable Prepayment Price payable in respect
of such
Notes not prepaid shall bear interest at the rate of two percent (2%) per
month
(prorated for partial months) until paid in full. Until the Maker pays such
unpaid applicable Prepayment Price in full to a holder of the Notes submitted
for prepayment, such holder shall have the option (the “Void
Optional Prepayment Option”)
to, in
lieu of prepayment, require the Maker to promptly return to such holder(s)
all
of the Notes that were submitted for prepayment by such holder(s) under this
Section 3.5 and for which the applicable Prepayment Price has not been paid,
by
sending written notice thereof to the Maker via facsimile (the “Void
Optional Prepayment Notice”).
Upon
the Maker's receipt of such Void Optional Prepayment Notice(s) and prior
to
payment of the full applicable Prepayment Price to such holder, (i) the
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the
Notice(s) of Prepayment at Option of Holder Upon Major Transaction, as the
case
may be, shall be null and void with respect to those Notes submitted for
prepayment and for which the applicable Prepayment Price has not been paid,
(ii)
the Maker shall immediately return any Notes submitted to the Maker by each
holder for prepayment under this Section 3.5(h) and for which the applicable
Prepayment Price has not been paid and (iii) the Conversion Price of such
returned Notes shall be adjusted to the lesser of (A) the Conversion Price
as in
effect on the date on which the Void Optional Prepayment Notice(s) is delivered
to the Maker and (B) the lowest Closing Bid Price during the period beginning
on
the date on which the Notice(s) of Prepayment of Option of Holder Upon Major
Transaction or the Notice(s) of Prepayment at Option of Holder Upon Triggering
Event, as the case may be, is delivered to the Maker and ending on the date
on
which the Void Optional Prepayment Notice(s) is delivered to the Maker; provided
that no adjustment shall be made if such adjustment would result in an increase
of the Conversion Price then in effect. A holder's delivery of a Void Optional
Prepayment Notice and exercise of its rights following such notice shall
not
effect the Maker's obligations to make any payments which have accrued prior
to
the date of such notice. Payments provided for in this Section 3.5 shall
have
priority to payments to other stockholders in connection with a Major
Transaction.
-15-
(i) Maker
Prepayment Option.
Commencing at any time following the effective date of the Registration
Statement, the Maker may prepay in cash all or any portion of the outstanding
principal amount of this Note together with all accrued and unpaid interest
thereon upon forty-five (45) days prior written notice to the Holder (the
“Maker's
Prepayment Notice”)
at a
price (the “Maker's
Prepayment Price”)
equal
to one hundred twenty percent (120%)
of the
aggregate principal amount of this Note plus
an
amount equal to
the
aggregate interest payments that would have been payable on this Note had
the
prepayment occurred on the Maturity Date.
Notwithstanding
the foregoing to the contrary, if a holder has delivered a Conversion Notice
to
the Maker or delivers a Conversion Notice within such forty-five (45) day
period
following delivery of the Maker’s Prepayment Notice, the principal amount of
this Note plus any accrued but unpaid interest designated to be converted
may
not be prepaid by the Maker and shall be converted in accordance with Section
3.3 hereof, and provided further that if during the period between delivery
of
the Maker's Prepayment Notice and the Maker's Prepayment Date (as defined
below), a holder shall become entitled to deliver a Notice of Prepayment
at
Option of Holder Upon Major Transaction or Notice of Prepayment at Option
of
Holder upon Triggering Event, then the such rights of the holders shall take
precedence over the previously delivered Maker Prepayment Notice. The Maker's
Prepayment Notice shall state the date of prepayment which date shall be
the
forty-sixth (46th)
day
after the Maker has delivered the Maker's Prepayment Notice (the “Maker's
Prepayment Date”)
and
the Maker’s Prepayment Price. The Maker shall deliver the Maker's Prepayment
Price on the Maker’s Prepayment Date, provided,
that if
the holder(s) delivers a Conversion Notice before the Maker's Prepayment
Date,
then the portion of the Maker's Prepayment Price which would be paid to prepay
the Notes covered by such Conversion Notice shall be returned to the Maker
upon
delivery of the Common Stock issuable in connection with such Conversion
Notice
to the holder(s). On the Maker's Prepayment Date, the Maker shall pay the
Maker's Prepayment Price, subject to any adjustment pursuant to the immediately
preceding sentence, to the Holder on a pro rata basis. If the Maker fails
to pay
the Maker's Prepayment Price by the forty-sixth (46th)
day
after the Maker has delivered the Maker's Prepayment Notice, the prepayment
will
be declared null and void and the Maker shall lose its right to serve a Maker
's
Prepayment Notice pursuant to this Section 3.5(i) in the future. Notwithstanding
the foregoing to the contrary, the Maker may effect a prepayment pursuant
to
this Section 3.5(i) only if (A) a Registration Statement is effective and
has
been effective, without lapse or suspension of any kind, for a period thirty
(30) consecutive calendar days immediately preceding the Maker’s Prepayment
Notice through the Maker’s Prepayment Date, (B) trading
in the Common Stock shall not have been suspended by the Securities and Exchange
Commission or the OTC Bulletin Board (or other exchange or market on which
the
Common Stock is trading), (C) the Maker is in compliance with the terms and
conditions of this Note, and (D) the Maker is not in possession of any material
non-public information.
-16-
Section
3.6 Inability
to Fully Convert.
(a) Holder's
Option if Cyber Cannot Fully Convert.
If,
upon Cyber's receipt of a Conversion Notice, Cyber cannot issue shares of
Common
Stock registered for resale under the Registration Statement for any reason,
including, without limitation, because Cyber does not have a sufficient number
of shares of Common Stock authorized and available, then Cyber shall issue
as
many shares of Common Stock as it is able to issue in accordance with the
Holder's Conversion Notice and, with respect to the unconverted portion of
this
Note, the Holder, solely at Holder's option, can elect to:
(i) require
the Maker to prepay that portion of this Note for which Cyber is unable to
issue
Common Stock in accordance with the Holder's Conversion Notice (the
“Mandatory
Prepayment”)
at a
price per share equal to the Triggering Event Prepayment Price as of such
Conversion Date (the “Mandatory
Prepayment Price”);
(ii) exercise
its rights under the Pledge Agreement and/or the Guaranty Agreement and take
possession of the shares of Common Stock pledged to the Holder under the
Pledge
Agreement;
(iii) void
its
Conversion Notice and retain or have returned, as the case may be, this Note
that was to be converted pursuant to the Conversion Notice (provided that
the
Holder's voiding its Conversion Notice shall not effect the Maker's obligations
to make any payments which have accrued prior to the date of such
notice);
(iv) exercise
its Buy-In rights pursuant to and in accordance with the terms and provisions
of
Section 3.3(c) of this Note.
In
the
event a Holder shall elect to convert any portion of its Notes as provided
herein, the Maker cannot refuse conversion based on any claim that such Holder
or any one associated or affiliated with such Holder has been engaged in
any
violation of law, violation of an agreement to which such Holder is a party
or
for any reason whatsoever, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of said Notes shall have
been
issued and the Maker or Cyber posts a surety bond for the benefit of such
Holder
in an amount equal to 130% of the principal amount of the Notes the Holder
has
elected to convert, which bond shall remain in effect until the completion
of
arbitration/litigation of the dispute and the proceeds of which shall be
payable
to such Holder in the event it obtains judgment.
(b) Mechanics
of Fulfilling Holder's Election.
The
Maker shall cause Cyber to immediately send via facsimile to the Holder,
upon
receipt of a facsimile copy of a Conversion Notice from the Holder which
cannot
be fully satisfied as described in Section 3.6(a) above, a notice of Cyber's
inability to fully satisfy the Conversion Notice (the “Inability
to Fully Convert Notice”).
Such
Inability to Fully Convert Notice shall indicate (i) the reason why Cyber
is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount
of this
Note which cannot be converted and (iii) the applicable Mandatory Prepayment
Price. The Holder shall notify Cyber of its election pursuant to Section
3.6(a)
above by delivering written notice via facsimile to Cyber (“Notice
in Response to Inability to Convert”).
-17-
(c) Payment
of Prepayment Price.
If the
Holder shall elect to have this Notes prepaid pursuant to Section 3.6(a)(i)
above, the Maker shall pay the Mandatory Prepayment Price to the Holder within
thirty (30) days of the Maker's or Cyber’s receipt of the Holder's Notice in
Response to Inability to Convert, provided
that
prior to the Maker's receipt of the Holder's Notice in Response to Inability
to
Convert the Maker has not delivered a notice to the Holder stating, to the
satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares issuable to
the
Holder can and will be delivered to the Holder in accordance with the terms
of
this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
Price to the Holder on the date that is one (1) business day following the
Maker's or Cyber’s receipt of the Holder's Notice in Response to Inability to
Convert (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Prepayment Price), in addition to any remedy
the
Holder may have under this Note, such unpaid amount shall bear interest at
the
rate of two percent (2%) per month (prorated for partial months) until paid
in
full. Until the full Mandatory Prepayment Price is paid in full to the Holder,
the Holder may (i) void the Mandatory Prepayment with respect to that portion
of
the Note for which the full Mandatory Prepayment Price has not been paid,
(ii)
receive back such Note, and (iii) require that the Conversion Price of such
returned Note be adjusted to the lesser of (A) the Conversion Price as in
effect
on the date on which the Holder voided the Mandatory Prepayment and (B) the
lowest Closing Bid Price during the period beginning on the Conversion Date
and
ending on the date the Holder voided the Mandatory Prepayment.
(d) Intentionally
Omitted.
Section
3.7 No
Rights
as Shareholder. Nothing contained in this Note shall be construed as conferring
upon the Holder, prior to the conversion of this Note, the right to vote
or to
receive dividends or to consent or to receive notice as a shareholder in
respect
of any meeting of shareholders for the election of directors of Cyber or
of any
other matter, or any other rights as a shareholder of Cyber.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 -Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address set forth below (if delivered
on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered
other
than on a business day during normal business hours where such notice is
to be
received) or (b) on the second business day following the date of mailing
by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
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If
to the Maker:
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00000
Xxxxxxxxx Xxxx. North
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Suite
187
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St.
Petersburg, FL 33716
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Attention:
Xxxxxxx X. Xxxxxxxx
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Tel.
No.: (___) ___-______
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Fax
No.: (___) ___-______
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-18-
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If
to the Holder:
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Ayuda
Funding Corp.
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000
Xxxxxxxx Xxxx, Xxxxx 000
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Kinnelon,
NJ 07405
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Attention:
Xxxxx Xxxxx
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Tel.
No.: (000) 000-0000
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Fax
No.: (000) 000-0000
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The
Maker
will give written notice to the Holder at least ten (10) days prior to the
date
on which the Maker takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata
subscription offer to holders of Common Stock or (z) for determining rights
to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Maker will also give written
notice to the Holder at least ten (10) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and
in no
event shall such notice be provided to the Holder prior to such information
being made known to the public. The Maker shall promptly notify the Holder
of
this Note of any notices sent or received.
Section
4.2 Governing
Law. This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to any of the
conflicts of law principles which would result in the application of the
substantive law of another jurisdiction. This Note shall not be interpreted
or
construed with any presumption against the party causing this Note to be
drafted.
Section
4.3 Headings.
Article and section headings in this Note are included herein for purposes
of
convenience of reference only and shall not constitute a part of this Note
for
any other purpose.
Section
4.4 Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition to all
other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief),
no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder's
right to pursue actual damages for any failure by the Maker to comply with
the
terms of this Note. Amounts set forth or provided for herein with respect
to
payments, conversion and the like (and the computation thereof) shall be
the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Maker (or the
performance thereof). The Maker acknowledges that a breach by it of its
obligations hereunder will cause irreparable and material harm to the Holder
and
that the remedy at law for any such breach may be inadequate. Therefore the
Maker agrees that, in the event of any such breach or threatened breach,
the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
-19-
Section
4.5 Enforcement
Expenses. The Maker agrees to pay all costs and expenses of enforcement of
this Note, including, without limitation, reasonable attorneys' fees and
expenses.
Section
4.6 Binding
Effect. The obligations of the Maker and the Holder set forth herein shall
be binding upon the successors and assigns of each such party, whether or
not
such successors or assigns are permitted by the terms hereof.
Section
4.7 Amendments.
This Note may not be modified or amended in any manner except in writing
executed by the Maker and the Holder.
Section
4.8 Compliance
with Securities Laws. The Holder of this Note acknowledges that this Note is
being acquired solely for the Holder's own account and not as a nominee for
any
other party, and for investment, and that the Holder shall not offer, sell
or
otherwise dispose of this Note. This Note and any Note issued in substitution
or
replacement therefor shall be stamped or imprinted with a legend in
substantially the following form:
“THIS
NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL
IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”
Section
4.9 Consent
to Jurisdiction.
Each of
the Maker and the Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New
York
county for the purposes of any suit, action or proceeding arising out of
or
relating to this Note and (ii) hereby waives, and agrees not to assert in
any
such suit, action or proceeding, any claim that it is not personally subject
to
the jurisdiction of such court, that the suit, action or proceeding is brought
in an inconvenient forum or that the venue of the suit, action or proceeding
is
improper. Each of the Maker and the Holder consents to process being served
in
any such suit, action or proceeding by mailing a copy thereof to such party
at
the address in effect for notices to it in Section 4.1 and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 4.9 shall affect or limit any right to serve
process in any other manner permitted by law. Each of the Maker and the Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Note shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party.
-20-
Section
4.10 -Parties
in Interest. This Note shall be binding upon, inure to the benefit of and
be
enforceable by the Maker, the Holder and their respective successors and
permitted assigns.
Section
4.11 -Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in
the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
Section
4.12 -Maker
Waivers. Except as otherwise specifically provided herein, the Maker and
all
others that may become liable for all or any part of the obligations evidenced
by this Note, hereby waive presentment, demand, notice of nonpayment, protest
and all other demands' and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, and do hereby consent to any number
of
renewals of extensions of the time or payment hereof and agree that any such
renewals or extensions may be made without notice to any such persons and
without affecting their liability herein and do further consent to the release
of any person liable hereon, all without affecting the liability of the other
persons, firms or Maker liable for the payment of this Note, AND DO HEREBY
WAIVE
TRIAL BY JURY.
(a) No
delay
or omission on the part of the Holder in exercising its rights under this
Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any
such
right or rights on any one occasion be deemed a waiver of the same right
or
rights on any future occasion.
(b) THE
MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
THE
HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section
4.13 Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
“Indebtedness”
means
(a) any liabilities for borrowed money or amounts (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness
of
others, whether or not the same are or should be reflected in the Maker’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions
in the
ordinary course of business; and (c) the present value of any lease payments
in
excess of $25,000 due under leases required to be capitalized in accordance
with
GAAP.
-21-
“Material
Adverse Effect”
means
any material adverse effect on the business, operations, properties, prospects,
or financial condition of the Maker and its Subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Maker to perform any of its obligations under this
Note
in any material respect.
“Person”
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof)
or
other entity of any kind.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
|
AIRSHIP
LEASING CO., LLC
and
TSI
HOLDING CO., LLC
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| |
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| Date: | By: | /s/ |
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Name: Xxxxxxx X. Xxxxxxxx |
||
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Title: President
of Cyber Defense Systems, Inc.,
Manager
of Airship Leasing Co., LLC and
TSI
Holdings Co., LLC
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||
-22-
EXHIBIT A
WIRE
INSTRUCTIONS
Payee:
________________________________________________________
Bank:
________________________________________________________
Address:
_____________________________________________________
______________________________________________________
Bank
No.:
_____________________________________________________
Account
No.: __________________________________________________
Account
Name: _________________________________________________
-23-
FORM
OF
NOTICE
OF
CONVERSION
(To
be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. CN-____ into shares of Common Stock
of
Cyber Defense Systems, Inc. (“Cyber”) according to the conditions hereof, as of
the date written below.
Date
of
Conversion
_____________________________________________________________________________
Applicable
Conversion Price
______________________________________________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the Date of Conversion: _________________________
Signature____________________________________________________________________________________
[Name]
Address:_____________________________________________________________________________________
_____________________________________________________________________________________
-24-
