SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Cybertel
Communications Corp., a Nevada corporation (the "Company") hereby agrees to
issue and to sell to the Subscriber, 8% Convertible Note convertible in
accordance with the terms thereof into shares of the Company's $.001 par value
common stock (the "Company Shares") and common stock purchase warrants
("Warrants") for the aggregate consideration as set forth on the signature
page hereof ("Purchase Price"). The form of Convertible Note is annexed
hereto as Exhibit A. (The Company Shares included in the Securities (as
hereinafter defined) are sometimes referred to herein as the "Shares", "Common
Shares" or "Common Stock"). (The Notes, the Company Shares, Warrants, and the
Common Stock issuable upon exercise of the Warrants are collectively referred
to herein as, the "Securities"). Upon acceptance of this Agreement by the
Subscriber, the Company shall issue and deliver the Note and Warrants against
payment, by federal funds wire transfer of the Purchase Price.
The following terms and conditions shall apply to this
subscription.
1. Subscriber's Representations and Warranties. The Subscriber
hereby represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been
furnished with the Company's Form 10-KSB for the year ended December 31, 2000
as filed with the Securities and Exchange Commission (the "Commission")
together with all subsequently filed forms 10-QSB, 8-K, and other publicly
available filings made with the Commission (hereinafter referred to as the
"Reports"). In addition, the Subscriber has received from the Company such
other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such information in
writing is collectively, the "Other Written Information"), and considered all
factors the Subscriber deems material in deciding on the advisability of
investing in the Securities.
(b) Information on Subscriber. The Subscriber is an
"accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the Securities Act of 1933, as amended (the "1933 Act"),
is experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-
owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof. The information set forth on the signature
page hereto regarding the Subscriber is accurate.
(c) Purchase of Note. On the Closing Date, the Subscriber
will purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act, by reason of their issuance in a transaction that does not require
registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of Subscriber contained herein), and that such
Securities must be held unless a subsequent disposition is registered under
the 1933 Act or is exempt from such registration.
(e) Company Shares Legend. The Company Shares, and the
shares of Common Stock issuable upon the exercise of the Warrants, shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO Cybertel Communications Corp. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Warrants shall bear the
following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO CYBERTEL COMMUNICATIONS CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND
THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
CYBERTEL COMMUNICATIONS CORP. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(h) Communication of Offer. The offer to sell the
Securities was directly communicated to the Subscriber. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless the Subscriber otherwise notifies
the Company prior to the Closing Date (as hereinafter defined), shall be true
and correct as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
2. Company Representations and Warranties. The Company
represents and warrants to and agrees with the Subscriber 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 has been
duly authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its 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 and to
perform its obligations hereunder and all other agreements entered into by the
Company relating hereto.
(d) Additional Issuances. Except as set forth on
Schedule 2(d), there are no outstanding agreements or preemptive or similar
rights affecting the Company's common stock or equity and no 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 or other
equity interest in any of the subsidiaries of the Company except as described
in the Reports or Other Written Information.
(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 NASD, NASDAQ or
the Company's Shareholders is required for execution of this Agreement, and
all other agreements entered into by the Company relating thereto, including,
without limitation issuance and sale of the Securities, and the performance of
the Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the
representations and warranties of the Subscriber in Paragraph 1 are true and
correct and the Subscriber complies with its obligations under this Agreement,
neither the issuance and sale of the Securities nor the performance of its
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 certificate 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 affiliates 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 is a party, by which the Company or
any of its affiliates is bound, or to which any of the properties of the
Company or any of its affiliates 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 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, or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance and on the Closing Date, as hereinafter
defined, and the date the Note is converted, and the Warrants are exercised,
the Securities will be duly and validly issued, fully paid and nonassessable
(and if registered pursuant to the 1933 Act, and resold pursuant to an
effective registration statement will be free trading and unrestricted,
provided that the Subscriber complies with the Prospectus delivery
requirements);
(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.
(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. Except as disclosed in the Reports or Other Written
Information, 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 a publicly-
held company subject to reporting obligations pursuant to Sections 15(d) and
13 of the Securities Exchange Act of 1934, as amended (the "1934 Act") and has
a class of common shares registered pursuant to Section 12(g) of the 1934 Act.
The Company's common stock is listed for trading on the OTC Bulletin Board
("Bulletin Board"). Pursuant to the provisions of the 1934 Act, the Company
has filed all reports and other materials required to be filed thereunder with
the Securities and Exchange Commission during the preceding twelve months
except as set forth in the Reports.
(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.
(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 Schedule 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 in light of the circumstances when made
required to be stated therein or necessary to make the statements therein not
misleading.
(l) Dilution. The number of Shares issuable upon
conversion of the Notes may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the
trading price of the Common Stock declines prior to conversion of the Note.
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. 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. The Company specifically acknowledges that
its obligation to issue the Shares upon conversion of the Note and exercise of
the Warrants is binding upon the Company and enforceable, except as otherwise
described in this Subscription Agreement or the Note, regardless of the
dilution such issuance may have on the ownership interests of other
shareholders of the Company.
(m) Stop Transfer. The Securities are restricted
securities as of the date of this Agreement. The Company will not issue any
stop transfer order or other order impeding the sale and delivery of the
Securities, except as may be required by federal securities laws.
(n) Defaults. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or ByLaws.
Neither the Company nor any of its subsidiaries is (i) 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) 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.
(o) No Integrated Offering. 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
offering of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the
rules and regulations of the Bulletin Board nor will the Company or any of its
affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings. The Company
has not conducted and will not conduct any offering other than the
transactions contemplated hereby that will be integrated with the issuance of
the Securities.
(p) 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 Act) in connection
with the offer or sale of the Securities.
(q) Listing. The Company's common stock is quoted
on, and listed for trading on the Bulletin Board. Except as disclosed in the
Other Written Information, the Company has not received any oral or written
notice that its Common Stock will be delisted from the Bulletin Board or that
the Common Stock does not meet all requirements for the continuation of such
listing.
(r) 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 September 30, 2001 and which, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the Company's financial condition.
(s) No Undisclosed Events or Circumstances. Since
September 30, 2001, 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.
(t) 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(t) hereto. Except as set forth in the
Reports and Other Written Information and Schedule 2(t), 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.
(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 Subscriber 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.
3. Regulation D Offering. This Offering is being made pursuant
to the exemption from the registration provisions of the Securities Act of
1933, as amended, afforded by Rule 506 of Regulation D promulgated thereunder.
On the Closing Date, the Company will provide an opinion reasonably acceptable
to Subscriber from the Company's legal counsel opining on the availability of
the Regulation D exemption as it relates to the offer and issuance of the
Securities. A form of the legal opinion is annexed hereto as Exhibit B. The
Company will provide, at the Company's expense, such other legal opinions in
the future as are reasonably necessary for the conversion of the Note and
exercise of the Warrants.
4. Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Sections 1(e) and 1(f) above at such time as (a) the holder thereof is
permitted to and disposes of such Securities pursuant to Rule 144(d) and/or
Rule 144(k) under the 1933 Act in the opinion of counsel reasonably
satisfactory to the Company, or (b) upon resale subject to an effective
registration statement after the Securities are registered under the 0000 Xxx.
The Company agrees to cooperate with the Subscriber in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
all reasonably requested written representations from the Subscriber and
selling broker, if any. Provided the Subscriber provides required
certifications and representation letters, if any, if the Company fails to
remove any legend as required by this Section 4 (a "Legend Removal Failure"),
then beginning on the tenth (10th) day following the date that the Subscriber
has requested the removal of the legend and delivered all items reasonably
required by the Company to be delivered by the Subscriber, the Company
continues to fail to remove such legend, the Company shall pay to each
Subscriber or assignee holding shares subject to a Legend Removal Failure an
amount equal to one percent (1%) of the Purchase Price of the shares subject
to a Legend Removal Failure per day that such failure continues. If during
any twelve (12) month period, the Company fails to remove any legend as
required by this Section 4 for an aggregate of thirty (30) days, each
Subscriber 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
Securities subject to a Legend Removal Failure held by such Subscriber or
assignee at a price per share equal to 120% of the applicable Purchase Price.
5. Warrants.
(a) The Company will also issue and deliver on the
Closing Date to the Subscriber one Warrant for each dollar of Purchase Price.
A form of Warrant is annexed hereto as Exhibit C. The per share "Purchase
Price" of Common Stock as defined in the Warrant shall be 110% of the closing
bid price of the Common Stock on the Bulletin Board on the trading day
immediately preceding the Closing Date. The Warrants shall be exercisable for
five years after the Issue Date (as defined in the Warrant).
(b) All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, rights in Section
9 hereof, and other rights including but not limited to registration rights
made or granted to or for the benefit of the Subscriber are hereby also made
and granted to the Subscribers in respect of the Warrants and Company Shares
issuable upon exercise of the Warrants.
6. Fees.
(a) The Company shall pay to counsel to the Subscriber its
fees of $15,000 for services rendered to Subscriber in connection with this
Agreement for aggregate subscription amounts of up to $200,000 of principal
amount of Notes (the "Offering") and acting as escrow agent for the Offering.
The Company will pay to Libra Finance, S.A. (the "Finder") a cash fee equal to
ten percent (10%) of the Purchase Price of the Notes ("Finder's Fee"). The
Finder's Fee in connection with the Offering must be paid on the Closing Date.
The legal fees and Finder's Fee will be payable out of funds held pursuant to
a Funds Escrow Agreement to be entered into by the Company, Subscriber and
Escrow Agent.
(b) The Company on the one hand, and the Subscriber
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any other persons claiming brokerage
commissions or finder's fees other than Libra Finance, S.A. on account of
services purported to have been rendered on behalf of the indemnifying party
in connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. The Company represents that there are no
other parties entitled to receive fees, commissions, or similar payments in
connection with the offering described in the Subscription Agreement.
7.1 Covenants of the Company. The Company covenants and agrees
with the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly
after it receives notice of issuance by the Securities and Exchange
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) The Company shall promptly secure the listing of
the Company Shares, and Common Stock issuable upon the exercise of the
Warrants upon each national securities exchange, or automated 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
Notes are outstanding. The Company will maintain the listing of its Common
Stock on the NASDAQ SmallCap Market, NASDAQ National Market System, NASD OTC
Bulletin Board, or New York 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
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company will provide the Subscriber copies of all notices it
receives notifying the Company of the threatened and actual delisting of the
Common Stock from any Principal Market.
(c) The Company shall notify the SEC, NASD, 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 Subscriber and promptly provide copies
thereof to Subscriber.
(d) From the Closing Date and until at least two (2)
years after the effectiveness of the Registration Statement on Form S-3 or
such other Registration Statement described in Section 10.1(iv) hereof, the
Company will (i) cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all respects with
its reporting and filing obligations under the Exchange Act, (iii) comply with
all reporting requirements that is applicable to an issuer with a class of
Shares registered pursuant to Section 12(g) of the Exchange Act, and (iv)
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 Act or the
Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Acts until the later of two (2) years after the actual effective
date of the Registration Statement on Form S-3 or such other Registration
Statement described in Section 10.1(iv) hereof. Until the earlier of the
resale of the Company Shares by the Subscriber or at least two (2) years after
the Warrants have been exercised, the Company will use its best efforts to
continue the listing of the Common Stock on the Bulletin Board and will comply
in all respects with the Company's reporting, filing and other obligations
under the bylaws or rules of Bulletin Board.
(e) The Company undertakes to use the proceeds of
the Subscriber's funds for the purposes set forth on Schedule 7(e) hereto. A
deviation from the use of proceeds set forth on Schedule 7(e) of more than 10%
per item or more than 20% in the aggregate shall be deemed a material breach
of the Company's obligations hereunder. Except as set forth on Schedule 7(e),
the Purchase Price may not and will not be used for accrued and unpaid officer
and director salaries, payment of financing related debt, redemption of
outstanding redeemable notes or equity instruments of the Company nor non-
trade obligations outstanding on the Closing Date.
(f) The Company undertakes to reserve, pro rata on
behalf of each holder of a Note or Warrant, from its authorized but unissued
Common Stock, at all times that Notes or Warrants remain outstanding, a number
of Common Shares equal to not less than 175% of the amount of Common Shares
necessary to allow each such holder to be able to convert all such outstanding
Notes, at the then applicable Conversion Price and one Common Share for each
Common Share issuable upon exercise of the Warrants.
8. Covenants of the Company and Subscriber Regarding
Indemnification.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend Subscriber, Subscriber's officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable
legal fees) of any nature, incurred by or imposed upon Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant
or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscribers relating hereto.
(b) Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered pursuant hereto; or
(ii) after any applicable notice and/or cure periods, any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall
apply to the indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or
its nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares
of common stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that the Shares will be
unlegended, free-trading, and freely transferable, and will not contain a
legend restricting the resale or transferability of the Company Shares
provided the Shares are being sold pursuant to an effective registration
statement covering the Shares to be sold or are otherwise exempt from
registration when sold and Subscriber complies with prospectus delivery
requirements.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note or part thereof by telecopying an
executed and completed Notice of Conversion (a form of which is annexed to
Exhibit A hereto) to the Company via confirmed telecopier transmission. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will or cause the transfer agent to
transmit the Company's Common Stock certificates representing the Shares
issuable upon conversion of the Note to the Subscriber via express courier for
receipt by such Subscriber within three (3) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). In the event the
Shares are electronically transferable, then delivery of the Shares must be
made by electronic transfer provided request for such electronic transfer has
been made by the Subscriber. A Note representing the balance of the Note not
so converted will be provided to the Subscriber, if requested by Subscriber
provided an original Note is delivered to the Company. To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment
or conversion, the Subscriber hereby indemnifies the Company against any and
all loss or damage attributable to a third-party claim in an amount in excess
of the actual amount then due under the Note.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 9 hereof, or
the Mandatory Redemption Amount described in Section 9.2 hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, the Company agrees to pay late payments to the
Subscriber for late issuance of Shares in the form required pursuant to
Section 9 hereof upon Conversion of the Note or late payment of the Mandatory
Redemption Amount, in the amount of $100 per business day after the Delivery
Date or Mandatory Redemption Payment Date, as the case may be, for each
$10,000 of Note principal amount being converted or redeemed. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand. Furthermore, in addition to any other remedies which may
be available to the Subscriber, in the event that the Company fails for any
reason to effect delivery of the Shares by the Delivery Date or make payment
by the Mandatory Redemption Payment Date, the Subscriber will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or part
of the notice of Mandatory Redemption by delivery of a notice to such effect
to the Company whereupon the Company and the Subscriber shall each be restored
to their respective positions immediately prior to the delivery of such
notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest or dividends required to be paid or other charges hereunder exceed
the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscriber and
thus refunded to the Company.
9.2. Mandatory Redemption at Subscriber's Election. In the event
the Company is prohibited from issuing Shares, or fails to timely deliver
Shares on a Delivery Date, or upon the occurrence of any other Event of
Default (as defined in the Note) or for any reason other than pursuant to the
limitations set forth in Section 9.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber or on the Delivery Date (if requested by the
Subscriber) a sum of money determined by (i) multiplying up to the outstanding
principal amount of the Note designated by the Subscriber by 130%, or (ii)
multiplying the number of Shares otherwise deliverable upon conversion of an
amount of Note principal and/or interest designated by the Subscriber (with
the date of giving of such designation being a Deemed Conversion Date) at the
then Conversion Price that would be in effect on the Deemed Conversion Date by
the highest closing price of the Common Stock on the principal market from the
Deemed Conversion Date until the day prior to the receipt of the Mandatory
Redemption Payment, whichever is greater, together with accrued but unpaid
interest thereon ("Mandatory Redemption Payment"). The Mandatory Redemption
Payment must be received by the Subscriber on the same date as the Company
Shares otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the
Mandatory Redemption Payment, the corresponding Note principal and interest
will be deemed paid and no longer outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i)
the number of shares of Common Stock beneficially owned by the Subscriber and
its affiliates on a Conversion Date, and (ii) the number of shares of Common
Stock issuable upon the conversion of the Note with respect to which the
determination of this provision is being made on a Conversion Date, which
would result in beneficial ownership by the Subscriber and its affiliates of
more than 4.99% of the outstanding shares of Common Stock of the Company on
such Conversion Date. For the purposes of the provision to the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall
not be limited to aggregate conversions of only 4.99% and aggregate conversion
by the Subscriber may exceed 4.99%. The Subscriber may void the conversion
limitation described in this Section 9.3 upon 75 days prior written notice to
the Company. The Subscriber may allocate which of the equity of the Company
deemed beneficially owned by the Subscriber shall be included in the 4.99%
amount described above and which shall be allocated to the excess above 4.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber
shall elect to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or
for any other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of said Note shall have
been sought and obtained and the Company posts a surety bond for the benefit
of such Subscriber in the amount of 130% of the amount of the Note, which is
subject to the injunction, 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 Subscriber to the extent Subscriber obtains judgment.
9.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if ten (10) days
after the Delivery Date the Subscriber purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by such Subscriber of the Common Stock which the Subscriber anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall pay in
cash to the Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the
Note for which such conversion was not timely honored, together with interest
thereon at a rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). For example, if the Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of $10,000 of note principal
and/or interest, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.
The delivery date by which Common Stock must be delivered pursuant to this
Section 9.5 shall be tolled for the amount of days that the Subscriber does
not deliver information reasonably requested by the Company's transfer agent.
9.6 Adjustments. The Conversion Price and amount of Shares
issuable upon conversion of the Notes shall be adjusted to offset the effect
of stock splits, stock dividends and pro rata distributions of property or
equity interests to the Company's shareholders.
9.7. Optional and Mandatory Redemption and Company's Election.
(a) In the event the Subscriber elects to convert the Note
at the conversion price set forth in Section 2.1(b)(ii) of the Note, the
Company will have the option of redeeming a portion of the outstanding Notes
("Optional Redemption") by paying to the Subscriber a sum of money equal to a
percentage of the principal amount of the Note ("Premium") together with
accrued but unpaid interest thereon and any and all other sums due, accrued or
payable to the Subscriber arising under this Subscription Agreement relating
to the Note, or any other document delivered herewith ("Redemption Amount")
outstanding on the day notice of redemption ("Notice of Redemption) is given
to a Subscriber ("Redemption Date"). A Notice of Redemption may be given only
in connection with portion of Note for which notice of conversion has been
given by the Subscriber employing the conversion price set forth in Section
2.1(b)(ii) of the Note. The Subscriber may elect within five (5) business
days after receipt of a Notice of Redemption to give the Company Notice of
Conversion in connection with some or all of the Note principal and interest
which was the subject of the Notice of Redemption provided the Conversion
Price elected by the Subscriber is the Maximum Base Price set forth in Section
2.1(b)(i) of the Note. A Notice of Redemption must be accompanied by a
certificate signed by the president or chief financial officer of the Company
stating that the Company has on deposit and segregated ready funds equal to
the Redemption Amount. The Redemption Amount must be paid in good funds to
the Subscriber no later than the seventh (7th) business day after the
Redemption Date ("Optional Redemption Payment Date"). In the event the
Company fails to pay the Redemption Amount by the Optional Redemption Payment
Date, then the Redemption Notice will be null and void and the Company will
thereafter have no further right to effect an Optional Redemption, and at the
Subscription's election, the Redemption Amount will be deemed a Mandatory
Redemption Payment and the Optional Redemption Payment Date will be deemed a
Mandatory Redemption Payment Date. Such failure will also be deemed an Event
of Default under the Notes. A Notice of Redemption may be given by the
Company pursuant to this Section 9.7(a), provided (i) no Event of Default, as
described in the Notes has occurred and (ii) the Company Shares issuable upon
conversion of the entire outstanding Note principal are included for
unrestricted resale in a registration statement effective as of the Redemption
Date. Purchase Price proceeds may not be used to effect an Optional
Redemption. The Premium shall be 125%.
(b) The Company may not effect an Optional
Redemption with respect to any Note principal or interest amount which would
or could result in the issuance of Company Shares in excess of the maximum
conversion amount set forth in Section 9.3 above.
9.8. Redemption. The Company may not redeem or call the Note
without the consent of the holder of the Securities except as otherwise
described herein.
10.1. Registration Rights. The Company hereby grants the
following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 121
days after the Closing Date, but not later than three years after the Closing
Date ("Request Date"), the Company, upon a written request therefor from any
record holder or holders of more than 50% of the aggregate of the Company's
Shares issued and issuable upon conversion of the Notes (the Common Stock
issued or issuable upon conversion of the Notes or issuable by virtue of
ownership of the Notes, and one share of Common Stock for each Share issuable
upon exercise of the Warrants, collectively the "Registrable Securities"),
shall prepare and file with the SEC a registration statement under the Act
covering the Registrable Securities which are the subject of such request,
unless such Registrable Securities are the subject of an effective
registration statement or included for registration in a pending registration
statement. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include
in such registration statement Registrable Securities for which it has
received written requests within 10 days after the Company gives such written
notice. Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section 10.1(i). As a
condition precedent to the inclusion of Registrable Securities, the holder
thereof shall provide the Company with such information as the Company
reasonably requests. The obligation of the Company under this Section 10.1(i)
shall be limited to one registration statement.
(ii) If the Company at any time proposes to register
any of its securities under the Act for sale to the public, whether for its
own account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscriber or Holder pursuant to an effective registration statement, each
such time it will give at least 25 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within 15 days after
the giving of any such notice by the Company, to register any of the
Registrable Securities, the Company will cause such Registrable Securities as
to which registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent required to permit the sale or other
disposition of the Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller"). In the event that any registration
pursuant to this Section 10.1(ii) shall be, in whole or in part, an
underwritten public offering of common stock of the Company, the number of
shares of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in
writing of any such reduction. Notwithstanding the foregoing provisions, or
Section 10.4 hereof, the Company may withdraw or delay or suffer a delay of
any registration statement referred to in this Section 10.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration
is received by the Company pursuant to Section 10.1(i), the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the 1933 Act in connection with the proposed offer and sale
for cash of any of its securities for the Company's own account, such written
request shall be deemed to have been given pursuant to Section 10.1(ii) rather
than Section 10.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 10.1(ii).
(iv) The Company shall file with the Commission not later
than forty-five (45) days after the Closing Date (the "Filing Date"), and use
its reasonable commercial efforts to cause to be declared effective within
ninety (90) days after the Closing Date, a Form S-3 registration statement (or
such other form that it is eligible to use) in order to register the
Registrable Securities for resale and distribution under the Act. The
registration statement described in this paragraph must be declared effective
by the Commission one hundred and twenty days (120) after the Closing Date
("Effective Date"). The Company will register not less than a number of
shares of Common Stock in the aforedescribed registration statement that is
equal to 200% of the Company Shares issuable at the Conversion Price that
would be in effect on the Closing Date or the date of filing of such
registration statement (employing the Conversion Price which would result in
the greater number of Shares), assuming the conversion of 100% of the Notes
and one share of Common Stock for each of the shares issuable upon exercise of
the Warrants. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of the Subscriber, and not issued, employed or
reserved for anyone other than the Subscriber. Such registration statement
will immediately be amended or additional registration statements will be
immediately filed by the Company as necessary to register additional Company
Shares to allow the public resale of all Common Stock included in and issuable
by virtue of the Registrable Securities. No securities of the Company other
than the Registrable Securities will be included in the registration statement
described in this Section 10.1(iv) except as described on Schedule 10.1.
10.2. Registration Procedures. If and whenever the Company is
required by the provisions hereof to effect the registration of any shares of
Registrable Securities under the Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for the period of the distribution contemplated thereby (determined as herein
provided), and promptly provide to the holders of Registrable Securities
("Sellers") copies of all filings and Commission letters of comment;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) twelve months after the latest
Maturity Date of a Note; (ii) until six months after all the Company Shares
are eligible for resale pursuant to Rule 144(k) of the 1933 Act; or (iii)
until such registration statement has been effective for a period of not less
than 365 days, and comply with the provisions of the Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the
Seller's Registrable Securities covered by such registration statement under
the securities or "blue sky" laws of such jurisdictions as the Seller,
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock
of the Company is then listed;
(f) immediately notify the Seller when a prospectus
relating thereto is required to be delivered under the Act, of the happening
of any event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) make available for inspection by the Seller,
and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.
10.3. Provision of Documents. At the request of the Seller,
provided a demand for registration has been made pursuant to Section 10.1(i)
or a request for registration has been made pursuant to Section 10.1(ii), the
Registrable Securities will be included in a registration statement filed
pursuant to this Section 10. In connection with each registration hereunder,
the Seller will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written agreement
with the managing underwriter in such form and containing such provisions as
are customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber
agree that the Seller will suffer damages if any registration statement
required under Section 10.1(i) or 10.1(ii) above is not filed within 30 days
after written request by the Holder and not declared effective by the
Commission within 90 days after such request [or the Filing Date and Effective
Date, respectively, in reference to the Registration Statement on Form S-3 or
such other form described in Section 10.1(iv)], and maintained in the manner
and within the time periods contemplated by Section 10 hereof, and it would
not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement described in Sections 10.1(i)
or 10.1(ii) is not filed within 30 days of such written request, or is not
declared effective by the Commission on or prior to the date that is 90 days
after such request, or (ii) the registration statement on Form S-3 or such
other form described in Section 10.1(iv) is not filed on or before the Filing
Date or not declared effective on or before the sooner of the Effective Date,
or within five business days of receipt by the Company of a written or oral
communication from the Commission that the registration statement described in
Section 10.1(iv) will not be reviewed, or (iii) any registration statement
described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate
per year but not more than 20 consecutive calendar days (defined as a period
of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i), (ii) and (iii) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then, for
so long as such Non-Registration Event shall continue, the Company shall pay,
at the Subscriber's option, in cash or stock at the applicable Conversion
Price, as Liquidated Damages to each holder of any Registrable Securities an
amount equal to two (2%) percent per month for each month or part thereof
during the pendency of such Non-Registration Event, of the principal of the
Notes issued in the Offering, whether or not converted, owned of record by
such holder or issuable as of or subsequent to the occurrence of such Non-
Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable within ten (10) business days after demand in immediately
available funds. In the event a Mandatory Redemption Payment is demanded from
the Company by the Holder pursuant to Section 9.2 of this Subscription
Agreement, then the Liquidated Damages described in this Section 10.4 shall no
longer accrue on the portion of the Purchase Price underlying the Mandatory
Redemption Payment, from and after the date the Holder receives the Mandatory
Redemption Payment. It shall also be deemed a Non-Registration Event if at
any time a Note is outstanding, there is less than 125% of the amount of
Common Shares necessary to allow full conversion of such Note at the then
applicable Conversion Price registered for unrestricted resale in an effective
registration statement.
10.5. Expenses. All expenses incurred by the Company in complying
with Section 10, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, and costs of insurance
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, including any
fees and disbursements of any special counsel to the Seller, are called
"Selling Expenses". The Seller shall pay the fees of its own additional
counsel, if any. The Company will pay all Registration Expenses in connection
with the registration statement under Section 10. All Selling Expenses in
connection with each registration statement under Section 10 shall be borne by
the Seller and may be apportioned among the Sellers in proportion to the
number of shares sold by the Seller relative to the number of shares sold
under such registration statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable
Securities under the Act pursuant to Section 10, the Company will indemnify
and hold harmless the Seller, each officer of the Seller, each director of the
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which the Seller, or such underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities was registered under the Act pursuant to Section 10,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances when made, and will subject to the provisions of
Section 10.1(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
to the Seller to the extent that any such damages arise out of or are based
upon an untrue statement or omission made in any preliminary prospectus if (i)
the Seller failed to send or deliver a copy of the final prospectus delivered
by the Company to the Seller with or prior to the delivery of written
confirmation of the sale by the Seller to the person asserting the claim from
which such damages arise, (ii) the final prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, or (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the Act pursuant to Section 10, the Seller will
indemnify and hold harmless the Company, and each person, if any, who controls
the Company within the meaning of the Act, each officer of the Company who
signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Act, against all losses, claims, damages or liabilities, joint or several,
to which the Company or such officer, director, underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the Act pursuant to Section 10,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable
hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with information pertaining to such Seller, as such,
furnished in writing to the Company by such Seller specifically for use in
such registration statement or prospectus, and provided, further, however,
that the liability of the Seller hereunder shall be limited to the gross
proceeds received by the Seller from the sale of Registrable Securities
covered by such registration statement.
(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 10.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 10.6(c), except and only if and
to the extent the indemnifying party is prejudiced by such omission. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified parties shall have the right to select one separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the Act in any case in
which either (i) the Seller, or any controlling person of the Seller, makes a
claim for indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.6 provides for indemnification
in such case, or (ii) contribution under the Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is provided under this Section 10.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Seller is responsible
only for the portion represented by the percentage that the public offering
price of its securities offered by the registration statement bears to the
public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (y) the Seller will not
be required to contribute any amount in excess of the public offering price of
all such securities offered by it pursuant to such registration statement; and
(z) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
11. Offering Restrictions. Except as disclosed in the Reports
or Other Written Information prior to the date of this Subscription Agreement
(these exceptions hereinafter referred to as the "Excepted Issuances"), the
Company will not issue any equity, convertible debt or other securities
convertible into common stock until the registration statement described in
Section 10.1(iv) hereof has been effective for 180 days after the later of the
Closing Date.
12. Miscellaneous.
(a) Notices. All notices or other communications given or
made hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy
is delivered by first class mail) to the party to receive the same at its
address set forth below or to such other address as either party shall
hereafter give to the other by notice duly made under this Section: (i) if to
the Company, to Cybertel Communications Corp., 0000 Xxxxxxxxx Xxxxxx, Xxxxx
000, Xx Xxxxx, XX 00000, telecopier number: (000) 000-0000, with a copy by
telecopier only to: Xxxxxxxxxx & Xxxxxxxxxx, Hermes Building, Suite 205, 000
Xxxx Xxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000-0000, Attn: Xxxxxxx X.
Xxxxxxxxxx, Esq., telecopier number: (000) 000-0000, and (ii) if to the
Subscriber, to the name, address and telecopy number set forth on the
signature page hereto, with a copy by telecopier only to Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier
number: (000) 000-0000. Any notice that may be given pursuant to this
Agreement, or any document delivered in connection with the foregoing may be
given by the Subscriber on the first business day after the observance dates
in the United States of America by Orthodox Jewry of Rosh Hashanah, Yom
Kippur, the first two days of the Feast of Tabernacles, Shemini Atzeret,
Simchat Torah, the first two and final two days of Passover and Pentecost,
with such notice to be deemed given and effective, at the election of the
Subscriber on a holiday date that precedes such notice, however the Company's
time to respond to such notice shall commence from the actual date such notice
is given. Any notice received by the Subscriber on any of the aforedescribed
holidays may be deemed by the Subscriber to be received and effective as if
such notice had been received on the first business day after the holiday.
(b) Closing. The consummation of the transactions
contemplated herein shall take place at the offices of Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the
satisfaction of all conditions to Closing set forth in this Agreement. The
closing date shall be the date that subscriber funds representing the net
amount due the Company from the Purchase Price of the Offering is transmitted
by wire transfer to the Company (the "Closing Date").
(c) Entire Agreement; Assignment. This Agreement
represents the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by a writing executed by both
parties. No right or obligation of either party shall be assigned by that
party without prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by
facsimile transmission, and in counterparts, each of which will be deemed an
original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by
either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs. In the event that any provision of
this Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other provision of
any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The
Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof or thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity. Subject to Section 12(e) hereof, each of the Company and
Subscriber 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.
Nothing in this Section shall affect or limit any right to serve process in
any other manner permitted by law.
(g) Confidentiality. The Company agrees that it will not
disclose publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber or only to the extent required by law.
(h) Automatic Termination. This Agreement shall
automatically terminate without any further action of either party hereto if
the Closing shall not have occurred by the tenth (10th) business day following
the date this Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it
shall become a binding agreement between us.
CYBERTEL COMMUNICATIONS CORP.
A Nevada Corporation
By:/s/Xxxxxxx Xxxxxxxxxxx
Name: Xxxxxxx Xxxxxxxxxxx
Title: President
Dated: Xxxxx 00, 0000
Xxxxxxxx Price and Note Principal: $200,000.00
Warrants to purchase 200,000 shares of Common Stock
ACCEPTED: Dated as of March 26, 2002
ALPHA CAPITAL AKTIENGESELLSCHAFT - Subscriber
A Lichtenstein corporation
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Vaduz, Lichtenstein
Fax: 000-000-000-0000
By:/s/
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Legal Opinion
Exhibit C Form of Common Stock Purchase Warrant
Schedule 2(d) Additional Issuances
Schedule 2(t) Capitalization
Schedule 7(e) Use of Proceeds
Schedule 10.1 Other Securities to be Registered
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND
THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO CYBERTEL COMMUNICATIONS CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, CYBERTEL COMMUNICATIONS CORP., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay to ALPHA
CAPITAL AKTIENGESELLSCHAFT, Xxxxxxxxx 0, 0000 Xxxxxxxxxxx, Vaduz,
Lichtenstein, Fax: 000-00-00000000 (the "Holder") or order, without demand,
the sum of Two Hundred Thousand Dollars ($200,000.00), with simple interest
accruing at the annual rate of 8%, on March 26, 2007 (the "Maturity Date").
This Note has been entered into pursuant to the terms of a
subscription agreement between the Borrower and the Holder, dated of even date
herewith (the "Subscription Agreement"), and shall be governed by the terms of
such Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set
forth in the Subscription Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10)
day grace period to pay any monetary amounts due under this Note, after which
grace period a default interest rate of fifteen percent (15%) per annum shall
apply to the amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth
in Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full. Except as set forth in Section 9.7
of the Subscription Agreement, the Borrower may not prepay the Note at any
time. To the extent prepayment is permitted under Section 9.7 of the
Subscription Agreement, the Borrower shall not pay any penalty or premium,
except as set forth in the Subscription Agreement. The Note shall be payable
in full on the Maturity Date, unless previously converted into Common Stock in
accordance with Article II hereof; provided, that if the Borrower violates or
breaches in any material respect any of its covenants or agreements to
register the Registrable Securities pursuant to Section 10 of the Subscription
Agreement, the Borrower may not pay this Note after the Maturity Date, without
the consent of the Holder.
1.3 Interest Rate. Interest payable on this Note shall accrue
at the annual rate of eight percent (8%) and be payable on each annual
anniversary of this Note or sooner, upon each Conversion, and on the Maturity
Date, accelerated or otherwise, when the principal and remaining accrued but
unpaid interest shall be due and payable, or sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal due under
this Note into Shares of the Borrower's Common Stock, $.001 par value per
share ("Common Stock") as set forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the issuance
of this Note and then at any time until this Note is fully paid, to convert
any outstanding and unpaid principal portion of this Note, and accrued
interest, at the election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and nonassessable shares
of common stock of Borrower as such stock exists on the date of issuance of
this Note, or any shares of capital stock of Borrower into which such stock
shall hereafter be changed or reclassified (the "Common Stock") at the
conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"),
determined as provided herein. Upon delivery to the Borrower of a Notice of
Conversion as described in Section 9 of the Subscription Agreement of the
Holder's written request for conversion, Borrower shall issue and deliver to
the Holder within three business days from the Conversion Date that number of
shares of Common Stock for the portion of the Note converted in accordance
with the foregoing. At the election of the Holder, the Borrower will deliver
accrued but unpaid interest on the Note in the manner provided in Section 1.3
through the Conversion Date directly to the Holder on or before the Delivery
Date (as defined in the Subscription Agreement). The number of shares of
Common Stock to be issued upon each conversion of this Note shall be
determined by dividing that portion of the principal of the Note and interest
to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof,
the Conversion Price per share shall be the lower of (i)$.216 ("Maximum Base
Price") or (ii) eighty percent (80%) of the three lowest closing bid prices
for the Common Stock on the OTC Pink Sheets, NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market System, American Stock Exchange, or
New York Stock Exchange, as applicable, or if not then trading on any of the
foregoing, such other principal market or exchange where the Common Stock is
listed or traded (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock, the "Principal Market") for
the thirty (30) trading days prior to but not including the Conversion Date.
Closing bid price shall mean the last closing bid price as reported by
Bloomberg Financial.
(c) The Maximum Base Price described in Section 2.1(b)(i) and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1(a), shall be subject to adjustment from
time to time upon the happening of certain events while this conversion right
remains outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at any
time shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such number and kind of
shares or other securities and property as would have been issuable or
distributable on account of such consolidation, merger, sale or conveyance,
upon or with respect to the securities subject to the conversion or purchase
right immediately prior to such consolidation, merger, sale or conveyance.
The foregoing provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the anti-dilution provisions of this Section
shall apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the
result of such change with respect to the Common Stock immediately prior to
such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price shall be proportionately
reduced in case of subdivision of shares or stock dividend or proportionately
increased in the case of combination of shares, in each such case by the ratio
which the total number of shares of Common Stock outstanding immediately after
such event bears to the total number of shares of Common Stock outstanding
immediately prior to such event.
(d) During the period the conversion right exists, Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing
stock certificates to execute and issue the necessary certificates for shares
of Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Subscription Agreement. Upon partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event
of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, upon demand, without
presentment, or grace period, all of which hereby are expressly waived, except
as set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to
pay any installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after the due date. The ten (10) day
period described in this Section 3.1 is the same ten (10) day period described
in Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of ten (10) days after
written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement entered into by the Holder and Borrower in connection with this
Note, or in any agreement, statement or certificate given in writing pursuant
hereto or in connection therewith shall be false or misleading in any material
respect as of the date made and the Closing Date (as defined in the
Subscription Agreement).
3.4 Receiver or Trustee. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final
process shall be entered or filed against Borrower or any of its property or
other assets for more than $100,000, and shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the
Borrower and if instituted against Borrower are not dismissed within 45 days
of initiation.
3.7 Delisting. Delisting of the Common Stock from the OTC
Bulletin Board or such other principal exchange on which the Common Stock is
listed for trading; failure to comply with the requirements for continued
listing on the OTC Bulletin Board for a period of three consecutive trading
days; or notification from the OTC Bulletin Board or any Principal Market that
the Borrower is not in compliance with the conditions for such continued
listing on the OTC Bulletin Board or other Principal Market.
3.8 Concession. A concession by the Borrower, after applicable
notice and cure periods, under any one or more obligations in an aggregate
monetary amount in excess of $50,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
trading suspension that lasts for five or more consecutive trading days.
3.10 Failure to Deliver Common Stock or Replacement Note.
Borrower's failure to timely deliver Common Stock to the Holder pursuant to
and in the form required by this Note and Section 9 of the Subscription
Agreement, or if required a replacement Note.
3.11 Non-Registration Event. The occurrence of a Non-
Registration Event as described in Section 10.4 of the Subscription Agreement.
3.12 Cross Default. A default by the Borrower of a material
term, covenant, warranty or undertaking of any other agreement to which the
Borrower and Holder are parties, or the occurrence of a material event of
default under any such other agreement, in each case, which is not cured after
any required notice and/or cure period.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on
the part of Holder hereof 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. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
4.2 Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally served or sent by fax
transmission (with copy sent by regular, certified or registered mail or by
overnight courier). For the purposes hereof, the address and fax number of
the Holder is as set forth on the first page hereof. A Conversion Notice
shall be deemed delivered on (i) the business day it is received by facsimile
or otherwise by the Borrower if such notice is received prior to 11:00 A.M.
New York time, or (ii) the immediately succeeding business day if it is
received by facsimile or otherwise after 11:00 A.M. New York time on a
business day or at any time on a day which is not a business day. The address
and fax number of the Borrower shall be Cybertel Communications Corp., 0000
Xxxxxxxxx Xxxxxx, Xxxxx 000, Xx Xxxxx, XX 00000, telecopier number: (858) 646-
7414. Both Holder and Borrower may change the address and fax number for
service by service of notice to the other as herein provided. Notice of
Conversion shall be deemed given when made to the Borrower pursuant to the
Subscription Agreement.
4.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended
or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder
and its successors and assigns, and may be assigned by the Holder.
4.5 Cost of Collection. If default is made in the payment of
this Note, Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York. Any action brought by
either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individual signing this Agreement on behalf of the Borrower agree to submit to
the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed
to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded
to the Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by an authorized officer on this 26 day of March, 2002.
CYBERTEL COMMUNICATIONS CORP.
By:/s/Xxxxxxx Xxxxxxxxxx
Name: Xxxxxxx Xxxxxxxxxx
Title: President and CEO
WITNESS:
_______________________________
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by CYBERTEL COMMUNICATIONS
CORP. on March ____, 2002 into Shares of Common Stock of CYBERTEL
COMMUNICATIONS CORP. (the "Company") according to the conditions set forth in
such Note, as of the date written below.
Date of
Conversion:________________________________________________________________
Conversion
Price:_____________________________________________________________________
Shares To Be
Delivered:_________________________________________________________________
Signature:_________________________________________________________________
Print
Name:______________________________________________________________________
Address:___________________________________________________________________
___________________________________________________________________
[Xxxxxxx X. Xxxxxxxxxx letterhead]
March 24, 2002
ALPHA CAPITAL AKTIENGESELLSCHAFT - Subscriber
A Lichtenstein corporation
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Vaduz, Lichtenstein
Fax: 000-000-000-0000
Gentlemen:
I have acted as counsel to Cybertel Communications Corp., a Nevada
corporation (the "Company") in connection with the offer and sale by the
Company of $200,000 principal amount of a Convertible Note (the "Note") and
issuance of common stock purchase warrants ("Warrants") to the Subscriber
identified above, pursuant to the exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act) as set forth in
Regulation D ("Regulation D") promulgated thereunder. Capitalized terms used
herein and not otherwise defined shall have the meaning assigned to them in
the subscription agreement (the "Agreement") by and between the Company and
(Subscriber) (the "Purchaser") entered into at or about the date hereof. The
Agreement, and the agreements described below are sometimes hereinafter
referred to collectively as the "Documents".
In connection with the opinions expressed herein, I have made such
examination of law as I considered appropriate or advisable for purposes
hereof. As to matters of fact material to the opinions expressed herein, I
have relied, with your permission, upon the representations and warranties as
to factual matters contained in and made by the Company and the Purchaser
pursuant to the Documents and upon certificates and statements of certain
government officials and of officers of the Company as described below. I
have also examined originals or copies of certain corporate documents or
records of the Company as described below:
(a) Form of Subscription Agreement
(b) Form of Convertible Note to Alpha Capital Aktiengesellschaft
(c) Form of Common Stock Purchase Warrant (the "Warrants")
(d) Funds Escrow Agreement
(e) Certificate of Incorporation of the Company as amended
(f) Bylaws of the Company
(g) Unanimous Consent of the Company's Board of Directors, including
approval of the Board of Directors of the Documents, a copy of
which is annexed hereto.
In rendering this opinion, I have, with your permission, assumed: (a)
the authenticity of all documents submitted to us as originals; (b) the
conformity to the originals of all documents submitted to us as copies; (c)
the genuineness of all signatures; (d) the legal capacity of natural persons;
(e) the truth, accuracy and completeness of the information, factual matters,
representations and warranties contained in all of such documents; (f) the due
authorization, execution and delivery of all such documents by Subscriber, and
the legal, valid and binding effect thereof on Subscriber; and (g) that the
Company and the Purchasers will act in accordance with their respective
representations and warranties as set forth in the Documents.
I am a member of the bar of the State of Utah. I express no opinion as
to the laws of any jurisdiction other than Utah, Nevada (the state of the
Company's organization) and the federal securities laws of the United States
of America. I express no opinion with respect to the effect or application of
any other laws. Special rulings of authorities administering any of such laws
or opinions of other counsel have not been sought or obtained by us in
connection with rendering the opinions expressed herein.
1. The Company (it has no subsidiaries) is duly incorporated, validly
existing and in good standing in its state of incorporation; has qualified to
do business in each state where required unless the failure to do so would not
have a material impact in the Company's operations; and has the requisite
corporate power and authority to conduct its business, and to own, lease and
operate its properties.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents. The
Documents, and the issuance of the Notes, and Warrants and the reservation and
issuance of Common Stock issuable upon conversion of the Notes and exercise of
the Warrants have been (a) duly approved by the Board of Directors of the
Company, and (b) all such Securities, when issued pursuant to the Agreement
and upon delivery, shall be validly issued and outstanding, fully paid and non
assessable.
3. The execution, delivery and performance of the Documents by the
Company and the consummation of the transactions contemplated thereby, will
not, with or without the giving of notice or the passage of time or both:
(a) Violate the provisions of the Certificate of Incorporation
or bylaws of the Company; or
(b) To the best of counsel's knowledge, violate any judgment,
decree, order or award of any court binding upon the Company.
4. The Documents constitute the valid and legally binding obligations
of the Company and are enforceable against the Company in accordance with
their respective terms.
5. Based upon the representations and warranties in the Documents,
the Notes, Warrants and the Common Stock issuable upon conversion of the
Notes, and exercise of the Warrants, have not been registered under the
Securities Act or under the laws of any state or other jurisdiction, and are
or will be issued pursuant to a valid exemption from registration.
6. The holders of the Common Stock issuable upon conversion of the
Notes and exercise of the Warrants will not be subject to the provisions of
the anti-takeover statutes of Nevada.
My opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. The effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting the relief of debtors or the
rights and remedies of creditors generally, including without limitation the
effect of statutory or other law regarding fraudulent conveyances and
preferential transfers.
B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants
or other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether
enforcement of any such agreement is considered in a proceeding in equity or
at law.
C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this
opinion letter should be read in conjunction therewith.
This opinion is rendered as of the date first written above, is solely
for your benefit in connection with the Agreement and may not be relief upon
or used by, circulated, quoted, or referred to nor may any copies hereof by
delivered to any other person without my prior written consent. I disclaim
any obligation to update this opinion letter or to advise you of facts,
circumstances, events or developments which hereafter may be brought to my
attention and which may alter, affect or modify the opinions expressed herein.
Yours very sincerely,
/s/Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxx
LWB
cc. Cybertel Communications Corp.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO CYBERTEL COMMUNICATIONS CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Right to Purchase 200,000 shares of Common
Stock of Cybertel Communications Corp. (subject
to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2002-1 Issue Date: March 26, 2002
CYBERTEL COMMUNICATIONS CORP., a corporation organized under the laws of
the State of Nevada (the "Company"), hereby certifies that, for value
received, ALPHA CAPITAL AKTIENGESELLSCHAFT (the "Holder"), or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
from and after the Issue Date of this Warrant and at any time or from time to
time before 5:00 p.m., New York time, through five (5) years after such date
(the "Expiration Date"), up to 200,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $.001 par value per share, of the
Company at a per share purchase price of $.33. The aforedescribed purchase
price per share, as adjusted from time to time as herein provided, are
referred to herein as the "Purchase Price". The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Cybertel Communications Corp. and
any corporation which shall succeed or assume the obligations of Cybertel
Communications Corp. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement referred to in Section 9 hereof, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after
such date, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in
the absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even if the right so to vote has been
suspended by the happening of such a contingency) and (c) any other securities
into which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such holder and surrender of the original Warrant within seven (7)
days of exercise, to the Company at its principal office or at the office of
its Warrant Agent (as provided hereinafter), accompanied by payment, in cash,
wire transfer or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase Price
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner
and at the place provided in subsection 1.2 except that the amount payable by
the holder on such partial exercise shall be the amount obtained by
multiplying (a) the number of shares of Common Stock designated by the holder
in the Subscription Form by (b) the Purchase Price then in effect. On any
such partial exercise, the Company, at its expense, will forthwith issue and
deliver to or upon the order of the holder hereof a new Warrant of like tenor,
in the name of the holder hereof or as such holder (upon payment by such
holder of any applicable transfer taxes) may request, the number of shares of
Common Stock for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean the Fair
Market Value of a share of the Company's Common Stock. Fair Market Value of a
share of Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange
or is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market
or the American Stock Exchange, Inc., but is traded in the over-the-counter
market, then the mean of the closing bid and asked prices reported for the
last business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by education
and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's charter, then
all amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up, plus
all other amounts to be payable per share in respect of the Common Stock in
liquidation under the charter, assuming for the purposes of this clause
(d) that all of the shares of Common Stock then issuable upon exercise of all
of the Warrants are outstanding at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon
as practicable after the exercise of this Warrant in full or in part, and in
any event within seven (7) days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash equal to such fraction multiplied by the
then Fair Market Value of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which such
holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2. Cashless Exercise.
(a) Payment may be made either in (i) cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Purchase Price, (ii) by delivery of Common Stock issuable
upon exercise of the Warrants in accordance with Section (b) below or (iii) by
a combination of any of the foregoing methods, for the number of Common Shares
specified in such form (as such exercise number shall be adjusted to reflect
any adjustment in the total number of shares of Common Stock issuable to the
holder per the terms of this Warrant) and the holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully-paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.
(b) Notwithstanding any provisions herein to the contrary, if
the Fair Market Value of one share of Common Stock is greater than the
Purchase Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, upon consent of the Company, the holder may
elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant
at the principal office of the Company together with the properly endorsed
Subscription Form in which event the Company shall issue to the holder a
number of shares of Common Stock computed using the following formula:
X=Y (A-B)
A
Where X= the number of shares of Common Stock to be issued to
the holder
Y= the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
A= the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B= Purchase Price (as adjusted to the date of such
calculation)
(c) The Holder may not employ the cashless exercise feature
described above at any time that the Warrant Stock to be issued upon exercise
is included for unrestricted resale in an effective registration statement.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition to the consummation of such a transaction,
proper and adequate provision shall be made by the Company whereby the holder
of this Warrant, on the exercise hereof as provided in Section 1, at any time
after the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or such effective date, the stock and other securities and
property (including cash) to which such holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 3 to a
bank or trust company having its principal office in New York, NY, as trustee
for the holder or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as provided
in Section 4. In the event this Warrant does not continue in full force and
effect after the consummation of the transaction described in this Section 3,
then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that
the Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b) subdivide its
outstanding shares of Common Stock or (c) combine its outstanding shares of
the Common Stock into a smaller number of shares of the Common Stock, then, in
each such event, the Purchase Price shall, simultaneously with the happening
of such event, be adjusted by multiplying the then Purchase Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Purchase Price then
in effect. The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein
in this Section 4. The number of shares of Common Stock that the holder of
this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive shall be increased to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction
of which (a) the numerator is the Purchase Price that would otherwise (but for
the provisions of this Section 4) be in effect, and (b) the denominator is the
Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on
the exercise of the Warrants, the Company at its expense will promptly cause
its Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable
by the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding
and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to
the holder of the Warrant and any Warrant Agent of the Company (appointed
pursuant to Section 12 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. From and after the Issue Date of this Warrant, the
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrant. This
Warrant entitles the holder hereof to receive copies of all financial and
other information distributed or required to be distributed to the holders of
the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") with respect
to any or all of the Shares. On the surrender for exchange of this Warrant,
with the Transferor's endorsement in the form of Exhibit B attached hereto
(the "Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, the Company at its expense, but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Warrant or Warrants of like tenor,
in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and Subscriber
of the Company's 8% Convertible Notes at or prior to the issue date of this
Warrant. The terms of the Subscription Agreement are incorporated herein by
this reference. Upon the occurrence of a Non-Registration Event, as defined
in the Subscription Agreement, in the event the Company is unable to issue
Common Stock upon exercise of this Warrant that has been registered in a
Registration Statement described in Section 10.1 of the Subscription
Agreement, within the time periods described in the Subscription Agreement,
which Registration Statement must be effective for the periods set forth in
the Subscription Agreement, then upon written demand made by the Holder, the
Company will pay to the Holder of this Warrant, in lieu of delivering Common
Stock, a sum equal to the closing price of the Company's Common Stock on the
Principal Market (as defined in the Subscription Agreement) or such other
principal trading market for the Company's Common Stock on the trading date
immediately preceding the date notice is given by the Holder, less the
Purchase Price, for each share of Common Stock designated in such notice from
the Holder.
10. Maximum Exercise. The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock issuable upon the
exercise of this Warrant with respect to which the determination of this
limitation is being made on an exercise date, which would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Company on such date. For the
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing,
the Holder shall not be limited to aggregate exercises which would result in
the issuance of more than 4.99%. The restriction described in this
paragraph may be revoked upon seventy-five (75) days prior notice from the
Holder to the Company. The Holder may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
4.99% amount described above and which shall be allocated to the excess above
4.99%.
11. Warrant Agent. The Company may, by written notice to the each
holder of the Warrant, appoint an agent for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
12. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary.
13. Notices. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to
the Company an address, then to, and at the address of, the last holder of
this Warrant who has so furnished an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of New York. Any dispute relating to
this Warrant shall be adjudicated in New York County in the State of New York.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity
or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
CYBERTEL COMMUNICATIONS CORP.
By: /s/Xxxxxxx Xxxxxxxxxxx
Witness:
Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: CYBERTEL COMMUNICATIONS CORP.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a Fair Market
Value of $_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2, to exercise
this Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned requests that the certificates for such shares be issued in
the name of, and delivered to
_____________________________________________________ whose address is
______________________________________________________________________
______________________________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an
exemption from registration under the Securities Act.
Dated:___________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number
of shares of Common Stock of CYBERTEL COMMUNICATIONS CORP. to which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the
books of CYBERTEL COMMUNICATIONS CORP. with full power of substitution in the
premises.
Transferees Percentage Transferred Number Transferred
Dated: ______________, ___________
(Signature must conform to name of
holder as specified on the face of the
warrant)
Signed in the presence of:
(Name) (Address)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Address)
(Name)
SCHEDULE 2(d)
There are presently 2020 shares of Series A 6% Convertible
Preferred Stock of the 5,000 total number of shares so designated for this
class, with a $1,000 stated value, that are outstanding.
It is proposed that the present holder of the 2020 shares of
Cybertel Series A Convertible Preferred stock that are now outstanding and
described in Schedule 2(d) sells an amount of these shares that are
convertible (at the present "Conversion Price" outlined in the Certificate of
Designations for the 2020 shares of Cybertel Series A Convertible Preferred
stock) into 1,500,000 shares of Cybertel common stock to a third party
investor so that such investor can convert and receive up to an aggregate
total of 1,500,000 shares of Cybertel common stock that are resalable under
Rule 144(k). The third party investor, based upon 80% of the bid price of
Cybertel common stock for the five trading days immediately prior to
conversion, can convert and sell so much of the common stock as would repay
its advance to or for the benefit of Cybertel in the amount of $315,000
together with interest at the rate of two one-hundreds of one percent per day.
No conversion by the third party investor shall result in its ownership of
more than 4.99% of the outstanding Cybertel common stock at any time. The
Certificate of Designations of the 2020 shares of Cybertel Series A
Convertible Preferred stock would be amended to reflect these modifications
following the closing of the proposed Agreement and the completion of the
transactions described herein. Any shares remaining from the Series A
Convertible Preferred stock acquired by the third party investor or from
converted but unsold shares of common stock held by the third party investor
at the time of repayment of the principal and interest aforesaid shall be
delivered to Cybertel for cancellation. The entire amount of the advance,
together with interest, matures on December 31, 2002, and whatever balance is
then owning to the third party investor must be paid to have the remaining
unconverted and/or unsold shares of Cybertel common stock delivered to
Cybertel for cancellation. Cybertel will also be required to grant the third
party investor 1,000,000 warrants to purchase 1,000,000 shares at an exercise
price of $.35 per share, expiring on December 31, 2004, with registration
rights on exercise of the warrants.
It is further proposed that the present holder of the 2020 shares
of Cybertel Series A Convertible Preferred stock that are presently
outstanding and described in Schedule 2(d) would convert (at the present
"Conversion Price" outlined in the Certificate of Designations for the 2020
shares of Cybertel Series A Convertible Preferred stock) a sufficient number
of the remaining outstanding shares Cybertel Series A Convertible Preferred
stock to acquire 1,000,000 shares of Cybertel common stock that would also be
resalable under Rule 144(k). The present holder of the Cybertel Series A
Convertible Preferred stock would then exchange the remaining outstanding
shares of this class of preferred stock for 1,250,000 warrants to acquire
1,250,000 shares of Cybertel common stock at an exercise price of $.75 per
share, expiring in three years from the date of any proposed Agreement, with
registration rights on exercise of the warrants. If the proposed Agreement is
completed, the present holder of the 2020 shares of Cybertel Series A
Convertible Preferred stock has agreed to a lock-up prohibiting the resale of
any of the converted shares of Cybertel common stock for a period of six
months.
The 2020 shares of Cybertel Series A Convertible Preferred stock
are presently convertible at 80% of the average of the three lowest bid prices
of the Cybertel common stock on the OTC Bulletin Board for the past 25 trading
days.
Cybertel views the net effect of this proposed transaction,
exclusive of the aforesaid common stock issuance and warrants being granted as
having the effect of acquiring $2,020,000 in stated value preferred stock for
the sum of $315,000, plus the interest stated above.
SCHEDULE 2(t)
The authorized and outstanding capital stock of the Company as of
March 21, 2002, is as follows:
Common stock - par value $.001 per share;
Authorized - 20,000,000 shares; and
Outstanding-9,066,861 shares.
Preferred stock - par value $.001 per share;
Authorized - 5,000,000 shares; and
Outstanding- 2020 Series A 6% Convertible Preferred Stock of the
5,000 total number of shares so designated for this class, with a $1,000
stated value.
Schedule 7(e)
Use of Proceeds:
1) $15,000.00 - Grushko & Xxxxxxx, P.C. (Legal Fees)
2) $20,000.00 - Libra Finance, S. ( finder's fees)
3) $40,607.27 - Xxxxxxxxxx & Xxxxxxxxxx (Legal Fees)
4) $124,392.73 - Cybertel Communications Corp.
A) Accounts Payable to State Agencies $40,000.00
B) Marketing $34,000.00
C) Working Capital $50,392.73
