Exhibit 10.3
BESTNET COMMUNICATIONS CORP.
(A NEVADA CORPORATION)
UNIT PURCHASE AGREEMENT
The parties to this Agreement are BestNet Communications Corp, a Nevada
corporation having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇,
▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("the Company") and Katsinam Partners, LP,
an Arizona limited partnership whose address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Katsinam"). The parties have agreed as
follows:
1. TRANSACTION
The Company, by due action of its Board of Directors, has authorized the offer
and sale to Katsinam, under this Agreement, of 200,000 Units (collectively the
"Units", separately a "Unit") in the aggregate principal amount of $60,000, each
Unit consisting of (a) three (3) shares of the common stock of the Company,
$0.001 par value ("the Common Stock"), (b) one (1) share of the Series A
Preferred Stock ("Preferred Stock") of the Company and a Warrant for the
purchase of one share of Common Stock as provided therein. The Statement of
Rights and Privileges of the Preferred Stock and the Warrant shall be as
respectively shown in Exhibits 1A and 1B attached hereto.
2. PURCHASE AND SALE
2.1 Notes. Subject to all of the terms and conditions of this Agreement, the
Company will issue and sell the Units to Katsinam and Katsinam will purchase the
Units from the Company at the aggregate price of $60,000; provided that all such
terms and conditions are satisfied.
2.2 Closing. The purchase by and sale to Katsinam (the "Closing") shall take
place at 11:00 AM, local time, on March 12, 2004 at the offices of the Company
at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
time or place upon which the Company and Katsinam may agree (such date being
hereinafter called the "Closing Date"). At the Closing, the Company shall
deliver to Katsinam or its representative instruments evidencing the securities
comprising the Units and other items required to be delivered to Katsinam
pursuant to this Unit Purchase Agreement.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
As an inducement to Katsinam to enter into this Agreement and to purchase and
pay for the Units, the Company represents, warrants and agrees that:
3.1 Disclosure Documents. The Company has heretofore delivered to Katsinam a
copy of the Company's Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2003, as filed with the Securities and Exchange Commission, every
Report filed with the said Commission subsequent thereto pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act") together with all
exhibits annexed thereto, and each press release or other public announcement
including without limitation all shareholder communications (such Reports and
the exhibits annexed thereto, press releases, public announcements, shareholder
communications are called collectively herein the "Disclosure Documents", which
term shall include any additions or supplements thereto). The Company has
carefully prepared the Disclosure Documents or has caused them to be so
prepared. When read as one document, the Disclosure Documents are intended to
provide all of the information required to be contained in a registration
statement under the Securities Act of 1933, as amended (the "1933 Act")
including without limitation, a prospectus as that term is defined in Section
2(10) of the 1933 Act, except as such requirement is modified by Regulation D.
Except as disclosed in Schedule 3.1 attached hereto, the Disclosure Documents
are, and shall be on the Closing Date, true and correct and shall not omit to
state any material fact necessary to make the statements made in the Disclosure
Documents not misleading on and as of such date.
3.2 Valid Existence. The Company was duly organized and is validly existing as a
corporation under the laws of Nevada and is duly qualified to do business in
Michigan and in Ontario and in each other jurisdiction where qualification is
material to its business as presently conducted.
3.3 Authority for Agreement. This Agreement has been duly authorized by all
necessary corporate action of the Company and, when executed and delivered by
the Company, will be a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms except to the extent that the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally or by general
principles of equity, and except that the indemnification provisions of the
Agreement may be held to be violative of public policy under either federal or
state laws in the context of the offer or sale of securities.
3.4 Validity of Common Stock. The shares of Common Stock included in the Units
and the Common Stock issuable upon the due exercise of the Warrant and the due
conversion of the Preferred Stock will, when issued in accordance with the terms
of this Unit Purchase Agreement and the Warrants and the Preferred Stock, as the
case may be, constitute duly authorized, legally and validly issued shares of
Common Stock, fully paid and non-assessable.
3.6 Validity of Preferred Stock. The shares of Preferred Stock included in the
Units will, when issued in accordance with the terms of this Unit Purchase
Agreement, constitute duly authorized, legally and validly issued shares of the
Series A Preferred Stock of the Company, fully paid and non-assessable.
3.7 Validity of Warrants. Each Warrant, when issued upon the due conversion of
the Notes, will be duly authorized, validly existing obligations of the Company,
enforceable in accordance with its terms.
3.8 No Conflicting Rights. The holders of the outstanding Common Stock and
Preferred Stock of the Company are not entitled to pre-emptive or other rights
to subscribe for the Notes. This transaction does not give rise to any rights
relating to the registration of any shares of Common Stock.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF KATSINAM
Katsinam hereby represents and warrants to and agrees with the Company as
follows (provided that such representations, warranties and agreements do not
diminish or obviate the representations, warranties and agreements of the
Company set forth in this Agreement):
4.1 Authority. Katsinam, through its General Partner, by CNTG, LLC, has full
power and authority to enter into this Agreement, which, when executed and
delivered, will constitute its valid and legally binding obligation.
4.2 Purchase for Own Account. The Common Stock, the Preferred Stock and the
Warrants issuable pursuant to this Unit Purchase Agreement ("the Securities")
will be acquired for investment for the account of Katsinam and not with a view
to the resale or distribution of any part thereof, and Katsinam has no present
intention of selling, granting any participation in or otherwise distributing
the same; and has no contract, undertaking, agreement or arrangement with any
person to sell transfer or grant participations to such person or to any third
person, with respect to any of the Securities. Nothing in this paragraph 4.2,
however, limits the right of Katsinam to transfer the Securities to its members
in connection with a liquidation of Katsinam and concomitant distribution of its
assets or the right of Katsinam to have the Securities registered as provided in
Section 6 of this Agreement.
4.3 Accredited Investor. Katsinam is a limited partnership, each member of which
is an accredited investor whose net worth, or joint net worth together with his
spouse, exceeds $1,000,000. The term "net worth" as used in this paragraph means
the excess of the member's assets over his liabilities and, if included among
his assets, his principal residence is valued at fair market value. Katsinam is
familiar with the definition of Accredited Investor under the 1933 Act and the
regulations promulgated thereunder and is an Accredited Investor.
4.4 Restricted Securities. Katsinam understands that none of the Securities may
be sold, transferred, or otherwise disposed of without registration under the
1933 Act or an exemption therefrom and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the 1933 Act, the Securities must be held indefinitely.
4.5 Legends. To the extent applicable, any certificate evidencing any of the
Securities will be endorsed with legends substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, OR OTHER EVIDENCE SATISFACTORY
TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
5. CONDITIONS TO THE OBLIGATIONS OF KATSINAM
Katsinam's obligations to purchase the Units under this Agreement are subject to
the fulfillment on or before each Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and warranties of the
Company contained in Section 3 shall be true as of and shall survive each
respective Closing.
5.2 No Deterioration. Except as described in Schedule 5.2 attached hereto,
nothing has occurred since the date of the Disclosure Documents that has or may
reasonably be expected to affect materially adversely the Company, its assets or
its business
5.3 No Security Interest. Except as described in Schedule 5.3 attached hereto,
there are no security interests in favor of any party in any material asset of
the Company.
5.4 Officer Certificates. The President and the Chief Financial Officer of the
Company shall have delivered at the Closing a certificate, substantially in the
form shown by Exhibit 5.4 attached hereto, to the effect that the Company has
complied with all agreements, obligations and conditions required of it pursuant
to this Agreement.
5.5 Satisfaction with Inquiries, etc. Katsinam shall be satisfied with the
results of their inquiries into the Company and its business and affairs,
including without limitation the status of all executive employment agreements
to which the Company is a party and the status, as outstanding or terminated, of
all rights, options and warrants for the purchase of any of the Company's
securities that were in the past awarded or purported to be awarded to any
executive employee of the Company.
6. REGISTRATION RIGHTS
The Company covenants and agrees as follows:
6.1 Definitions. For purposes of this Section 6:
(a) The term "Holder" means any person owning or having the right to
acquire Registrable Securities included in the Units or upon the
conversion or exercise of the other securities underlying the
Units.
(b) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act,
and such registration statement or document becoming effective.
(c) The term "Registrable Securities" means (i) the Common Stock
issuable or issued pursuant to this Agreement, (ii) the Common
Stock issuable or issued upon the conversion of the Preferred
Stock and/or the exercise of any Warrant and (ii) any Common
Stock issued as (or issuable) upon the conversion or exercise of
any warrant, right or other security which is issued as a
dividend or other distribution with respect to, or in exchange
for or in replacement of shares referenced in (i) and (ii) above,
but excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under this
Section 6 are not assigned.
(d) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities
which are, Registrable Securities.
(e) The term "SEC" means the United States Securities and Exchange
Commission.
All other capitalized terms used in this Section, which are not defined herein,
shall have the meaning otherwise given in this Agreement.
6.2 Request for Registration.
(a) If the Company shall receive at any time after the date of this agreement, a
written request from the Holders of forty-nine percent (49%) or greater of the
Registrable Securities then outstanding that the Company file a registration
statement under the 1933 Act covering the registration of any part of the
Registrable Securities then outstanding, then the Company shall:
(i) within ten (10) calendar days of the receipt thereof; give written
notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as practicable, and in any
event within sixty (60) calendar days of the receipt of such request, the filing
of a registration statement under the 1933 Act covering all Registrable
Securities which the Holders request to be registered, subject to the
limitations of subsection 6.2(b), within two hundred ten (210) business days of
the mailing of such notice by the Company.
(b) If the Holders initiating the registration request hereunder ("Initiating
Holders") intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part
of their request made pursuant to subsection 6.2(a) and the Company shall
include such information in the written notice referred to in sub section
6.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 6.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 6.2, a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than sixty (60) calendar
days after receipt of the request of the Initiating Holders; provided, however,
that the Company may not utilize this right more than once in any twelve-month
period.
(d) In addition, the Company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 6.2:
(i) After the Company has effected one registration pursuant to this
Section 6.2 and such registration has been declared or ordered effective; or
(ii) After the First Closing Date, if the Company has filed and had
declared effective a registration statement with respect to the exercise of the
Warrants and the sale of all of the Registrable Securities and has kept such
registration statement effective until the later of: (A) December 31, 2006, or
(B) two hundred ten (210) calendar days after the effective date of such
registration statement. Notwithstanding the foregoing, the above period for
maintenance of effectiveness of the 210-day period set forth in subsection
6.2(d)(ii)(B) above shall be extended for a period of time equal to the period a
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company.
6.3 Company ("Piggyback") Registration. If at any time commencing on the Closing
Date (but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the 1933 Act in connection with the public offering of such securities solely
for cash (other than a registration of securities to be offered by employees
pursuant on employee benefit plan on Form S-8, or a registration in connection
with an exchange offer or any acquisition or a registration on any form which
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company shall, each such time, give each Holder written notice
of such proposed registration at least thirty (30) days prior to filing the
registration statement respecting such proposed registration. Upon the written
request of any Holder given within twenty (20) days after mailing of such notice
by the Company in accordance with this Agreement, the Company shall cause to be
registered under the 1933 Act all of the Registrable Securities that each such
Holder has requested to be registered.
6.4 Obligations of the Company. Whenever required under this Section 6 to effect
the registration of any Registrable Securities, the Company shall use its best
efforts to, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, keep such registration
statement current and effective for a period of up to the earlier of two hundred
seventy (270) calendar days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that such period
shall be extended for a period of time equal to the period a Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Register and qualify the securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions as
shall be reasonably requested by the Holders; provided that in no event shall
the Company be required to qualify to do business in any state or to take any
action which would subject it to general or unlimited service of process in any
state where it is not now so subject.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with terms generally
satisfactory to the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included 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 the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 6, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 6, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated on such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
6.5 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 6, that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and on the intended method of disposition
of such securities as shall be required to effect the registration of their
Registrable Securities.
6.6 Expenses Of Registration. All expenses incurred in connection with any
registration, filing or qualification pursuant to this Section 6, including
without limitation all registration, filing and qualification fees, printers'
and accounting fees, and fees and disbursements of counsel for the Company, and
the reasonable fees and disbursements of one counsel for the selling Holders,
but excluding underwriter's commissions and fees and any fees of others employed
by a selling Holder other than the one counsel for the selling Holders
referenced above, shall be borne by the Company.
6.7 Underwriting Requirements. In connection with any offering involving an
underwriting of securities being issued by the Company, the Company shall not be
required under paragraph 6.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it, and then only in such
quantity, if any, as will not, in the opinion of the underwriters, jeopardize or
in any way reduce the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling Shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders) but in no event shall the amount of
Registrable Securities of the selling Holders included in the offering be
reduced below twenty percent (20%) of the total amount of securities included in
such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder", and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined in
this sentence.
6.8 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 6:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the ▇▇▇▇ ▇▇▇) for such Holder and each person, if
any, who controls such Holder or underwriter within the meaning of the 1933 Act
or the 1934 Act against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
any state securities law or regulation, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) 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, or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law; and the Company will reimburse each such Holder, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in a connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subparagraph 6.8(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person or
his or their representative or agent.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors and officers, any
underwriter (as defined in the ▇▇▇▇ ▇▇▇) for the Company, each person, if any,
who controls the Company or any such underwriter within the meaning of the 1933
Act or the 1934 Act, and any other holder selling securities in such
registration statement or any of its directors or officers or any person who
controls such Holder, against any losses, claims, damages, or liabilities (or
actions in respect thereto) which arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished by such
Holder or his representative or agent expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, any person who
controls the Company, any underwriter or controlling person of any such
underwriter, any other such Holder, officer, director, or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subparagraph 6.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder (which consent shall not be unreasonably
withheld), and provided further that the obligations of each selling Holder
hereunder shall be limited to an amount equal to the proceeds of each such
selling Holder of the shares sold by such selling Holder pursuant to such
registration.
(c) Promptly after receipt by an indemnified party under this
paragraph 6.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this paragraph 5.7, notify
the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability that it may
have to any indemnified party otherwise than under this paragraph 6.8.
(d) If the indemnification provided for in this Section 6.8 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 6, or otherwise.
6.9 Reports Under the 1934 Act. With a view to making available to the Holders
the benefits of Rule 144 promulgated under the 1933 Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration
form which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC, the Company
agrees to for up to three (3) years:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the Company is a
Public Corporation.
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon reasonable request (i) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC permitting the selling of any such securities without registration or
pursuant to such form.
The utilization of Rule 144 by any Holder to sell any securities of the Company,
including without limitation any Registrable Securities, shall not affect the
Company's obligations to register any Registrable Securities pursuant to this
Agreement.
6.10 Delay of Registration. No holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 6.
6.11 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 6 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least ten
percent (10%) of the Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including without
limitation, the provisions of Section 6.13 below; and (c) such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 6.
6.12 Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
which would allow such holder or prospective holder (a) to include such
securities in any registration filed hereunder, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to or within one hundred
twenty (120) days of the effective date of any registration effected pursuant to
this Agreement.
6.13 Termination of Registration Rights. No Holder shall be entitled to exercise
any right provided for in this Section 6 after six (6) years following the date
after which Holders may request registration of the Registrable Securities
pursuant to Section 6.2(a) nor at any time when the Holder has the right to sell
all of his Registrable Securities pursuant to SEC Rule 144(k).
6.14 Amendments and Waivers. Any term or provision of the registration rights
stated in this Agreement may be amended and the observance of any term of such
rights may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of at least sixty-seven percent (67%) of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities, and the
Company.
7. FURTHER AGREEMENTS
7.1 Successors and Assigns. This Agreement shall be binding upon the successors
and assigns, if any, of each Lender, except as provided by certain state laws.
7.2 Indemnification. Each Lender shall indemnify, hold harmless and defend the
Company and its affiliates and agents with respect to any and all loss, damage,
expense, claim, action or liability any of them may incur as a result of the
breach or untruth of any representations or warranties made by such Lender
herein, and each Lender agrees that in the event of any breach or untruth of any
representations or warranties made by him herein, the Company may, at its
option, forthwith rescind the sale of the Notes and Common Stock to such Lender.
7.3 Operating Statements. For as long as any of the Preferred Stock or the
Warrants remain outstanding, the Company shall furnish to Katsinam, forthwith
upon the preparation thereof, correct copies of its monthly operating
statements, press releases and other public announcements, and its quarterly,
annual and other Reports filed with the Securities and Exchange Commission
7.4 Legal Fees and Expenses. At the Closing, the Company shall, in consideration
of this Agreement, reimburse Katsinam in the amount of $3,000 as and for its
legal fees and other expenses in connection with this transaction.
8. GENERAL AND MISCELLANEOUS
8.1 Survival Of Warranties. The warranties, representations and covenants of the
parties contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and any inquiries by
any party.
8.2 Entire Agreement. This Agreement constitutes the entire agreement among the
parties, and no party shall be liable or bound to any other party in any manner
by any warranties, representations, guarantees or covenants except as
specifically set forth in this Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed under the
internal laws of the State of Arizona without regard to conflicts of law.
8.4 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Note Purchase Agreement as of
this 12th day of March, 2004.
Katsinam Partners, LP, by CNTG, LLC, its General Partner by
By
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
A duly authorized Member
BESTNET COMMUNICATIONS CORP.
by , President
-------------------------------------------------
ATTEST: , Secretary
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Exhibit 1A - Statement of Rights, Preferences and Privileges of Series A
Preferred Stock
CERTIFICATE TO SET FORTH DESIGNATIONS, VOTING POWERS,
PREFERENCES, LIMITATIONS, RESTRICTIONS, AND RELATIVE
RIGHTS OF SERIES A CONVERTIBLE
PREFERRED STOCK, $.001 PAR VALUE PER SHARE
Pursuant to Title 7, Chapter 78, Section 78.1955 of the Nevada Revised Statutes
It is hereby certified that:
I. The name of the corporation is BestNet Communications Corp. (the
"Corporation"), a Nevada corporation.
II. The certificate of incorporation of the Corporation, as amended, authorizes
the issuance of Ten Million (10,000,000) shares of Preferred Stock, $.001 par
value per share, and expressly vests in the Board of Directors of the
Corporation the authority provided therein to issue all of said shares in one or
more series and by resolution or resolutions to establish the designation and
number and to fix the relative rights and preferences of each series to be
issued.
III. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it, has adopted the following resolutions creating a class
of Series A Convertible Preferred Stock:
RESOLVED, that a portion of the Ten Million (10,000,000) authorized shares of
Preferred Stock of the Corporation shall be designated as a separate series
possessing the rights and preferences set forth below:
1. Designation: Number of Shares. The designation of said series of Preferred
Stock shall be Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). The number of shares of Series A Preferred Stock shall be 200,000. Each
share of Series A Preferred Stock shall have a stated value equal to $0.001 (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) (the "Stated Value"), and $.001 par value.
2. Ranking. The Series A Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share ("Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series A Preferred Stock
(which may be withheld in such holders' reasonable discretion), such class or
series of capital stock specifically, by its terms, ranks senior to or Pari
Passu with the Series A Preferred Stock); (iii) Pari Passu with any class or
series of capital stock of the Corporation hereafter created (with the consent
of the holders of the Series A Preferred Stock (which may be withheld in such
holders' reasonable discretion) specifically ranking, by its terms, on parity
with the Series A Preferred Stock ("Pari Passu Securities"); and (iv) junior to
any class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series A Preferred Stock (which may be withheld in
such holders' reasonable discretion) obtained in accordance with Section 8
hereof) specifically ranking, by its terms, senior to the Series A Preferred
Stock ("Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
3. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be entitled to
receive dividends payable out of funds legally available therefor. Such
dividends shall be payable only when, as, and if declared by the Board of
Directors and shall be noncumulative.
(b) No dividends shall be paid on any Common Stock of the Corporation unless a
dividend (including the amount of any dividends paid pursuant to the above
provisions of this section) is paid with respect to all outstanding shares of
Series A Preferred Stock in an amount for each such share of Series A Preferred
Stock equal to or greater than the aggregate amount of such dividends for all
shares of Common Stock into which each such share of Series A Preferred Stock
could then be converted.
(c) The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
4. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of the Corporation, whether
voluntary or involuntary, the Holders of the Series A Preferred Stock shall be
entitled to receive before any payment or distribution shall be made on the
Common Stock or any other capital stock hereafter authorized that ranks junior
to the Series A Preferred Stock (collectively, the "Junior Stock"), out of the
assets of the Corporation available for distribution to stockholders, the Stated
Value per share of Series A Preferred Stock and all accrued and unpaid
dividends, if any, to and including the date of payment thereof. Upon the
payment in full of all amounts due to Holders of the Series A Preferred Stock
the Holders of the Common Stock of the Corporation and any other class of Junior
Stock shall receive all remaining assets of the Corporation legally available
for distribution. If the assets of the Corporation available for distribution to
the Holders of the Series A Preferred Stock shall be insufficient to permit
payment in full of the amounts payable as aforesaid to the Holders of Series A
Preferred Stock upon such liquidation, dissolution or winding-up, whether
voluntary or involuntary, then all such assets of the Corporation shall be
distributed to the exclusion of the Holders of shares of Junior Stock ratably
among the Holders of the Series A Preferred Stock.
(b) Neither the purchase nor the redemption by the Corporation of shares of any
class of stock nor the merger or consolidation of the Corporation with or into
any other corporation or corporations nor the sale or transfer by the
Corporation of all or any part of its assets shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation for the purposes of
this paragraph 4.
5. Conversion into Common Stock. Shares of Series A Preferred Stock shall have
the following conversion rights and obligations:
(a) Subject to the further provisions and restrictions set forth in this
paragraph 5, each Holder of shares of Series A Preferred Stock shall have the
right at any time commencing after the issuance to the Holder of Series A
Preferred Stock and the Shareholder Approval (as defined below), to convert such
shares into fully paid and non-assessable shares of Common Stock of the
Corporation (as defined in paragraph 5(i) below) determined in accordance with
the Conversion Price provided in paragraph 5(b) below (the "Conversion Price")
by tendering to the Company the cash sum of $0.10 multiplied by the number of
shares of Common Stock into which such shares of Series A Preferred Stock are
then convertible. Such payment shall be made by certified check or wire transfer
of funds to an account designated by the Company. All issued or accrued but
unpaid dividends, if any, may be converted at the election of the Holder
simultaneously with the conversion of principal amount of Stated Value of Series
A Preferred Stock being converted.
Notwithstanding anything herein to the contrary, the Series A Preferred Stock
shall not be convertible into Common Stock until such time as there are
sufficient authorized but unissued shares of Common Stock of the Corporation for
such purpose. Promptly following the issuance of shares of Series A Preferred
Stock, the Corporation shall take such corporate action as may be reasonably
necessary to increase its authorized but unissued shares of Common Stock to such
number as shall be sufficient for such purpose, including engaging in
commercially reasonable efforts to obtain the requisite shareholder approval
(the "Shareholder Approval"); provided, however, that the rights contained in
this Certificate shall constitute the Series A Preferred Stock holders' sole
remedy in the event that the Corporation fails to obtain the requisite
shareholder approval to increase the number of authorized but unissued shares of
Common Stock in a manner sufficient to effect the conversion of all outstanding
shares of Series A Preferred Stock.
(b) The number of shares of Common Stock issuable upon conversion of each share
of Series A Preferred Stock shall be two (2). The Conversion Price per share
shall be $0.10.
(c) Subject to the restrictions set forth in this Section 5, the Holder of any
certificate representing shares of Series A Preferred Stock desiring to convert
any of such shares may give notice of its decision to convert the shares into
Common Stock by delivering or telecopying an executed and completed notice of
conversion to the Corporation or the Corporation's Transfer Agent and delivering
within three business days thereafter, the original certificate for the
Preferred Stock properly endorsed for or accompanied by duly executed
instruments of transfer (and such other transfer papers as said Transfer Agent
may reasonably require) to the Corporation or the Corporation's Transfer Agent,
in addition to payment in full of the Conversion Price multiplied by the number
of shares of Common Stock to be issued upon conversion. Each date on which a
notice of conversion is delivered or telecopied to the Corporation or the
Corporation's Transfer Agent in accordance with the provisions hereof shall be
deemed a Conversion Date. A form of Notice of Conversion that may be employed by
a Holder is annexed hereto as Exhibit A. The Corporation will transmit the
certificates representing the shares of Common Stock issuable upon conversion of
any Series A Preferred Stock (together with the Series A Preferred Stock
representing the shares not converted) to the Holder via express courier, by
electronic transfer or otherwise, within four business days after receipt by the
Corporation of the original or telecopied notice of conversion and the Series A
Preferred Stock representing the shares to be converted ("Delivery Date"). The
Holder of the shares so surrendered for conversion shall be entitled to receive
on or before the Delivery Date a certificate or certificates that shall be
expressed to be fully paid and non-assessable for the number of shares of Common
Stock to which such Holder shall be entitled upon such conversion registered in
the name of such Holder. The Corporation is obligated to deliver to the Holder
simultaneously with the aforedescribed Common Stock, at the election of the
Holder, additional Common Stock representing the conversion at the Conversion
Price, of dividends accrued on the Series A Preferred Stock being converted. In
the case of any Series A Preferred Stock that is converted in part only the
Holder of shares of Series A Preferred Stock shall upon delivery of the
certificate or certificates representing Common Stock also receive a new share
certificate representing the unconverted portion of the shares of Series A
Preferred Stock. Nothing herein shall be construed to give any Holder of shares
of Series A Preferred Stock surrendering the same for conversion the right to
receive any additional shares of Common Stock or other property which results
from an adjustment in conversion rights under the provisions of paragraph (d) or
(e) of this paragraph 5 until Holders of Common Stock are entitled to receive
the shares or other property giving rise to the adjustment.
In the case of the exercise of the conversion rights set forth in paragraph 5(a)
the conversion privilege shall be deemed to have been exercised and the shares
of Common Stock issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Corporation or Transfer Agent of the
Notice of Conversion. The person or entity entitled to receive Common Stock
issuable upon such conversion shall, on the date such conversion privilege is
deemed to have been exercised and thereafter, be treated for all purposes as the
record Holder of such Common Stock and shall on the same date cease to be
treated for any purpose as the record Holder of such shares of Series A
Preferred Stock so converted.
Upon the conversion of any shares of Series A Preferred Stock no adjustment or
payment shall be made with respect to such converted shares on account of any
dividend on the Common Stock, except that the Holder of such converted shares
shall be entitled to be paid any dividends declared on shares of Common Stock
after conversion thereof.
The Corporation shall not be required, in connection with any conversion of
Series A Preferred Stock, and payment of dividends on Series A Preferred Stock
to issue a fraction of a share of its Series A Preferred Stock and shall instead
deliver a stock certificate representing the next whole number.
The Corporation and Holder may not convert that amount of the Series A Preferred
Stock on a Conversion Date in amounts inconsistent with the limitations set
forth in the Subscription Agreement 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 such
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Series A Preferred Stock with respect to which the
determination of this proviso is being made on such Conversion 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 Corporation. For the
purposes of the proviso 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. The Holder
may revoke the conversion limitation described in this Paragraph upon 75 days
prior notice to the Corporation or upon an Event of Default hereunder. The
Holder may allocate which of the equity of the Corporation deemed beneficially
owned by the Holder shall be included in the 4.99% amount described above and
which shall be allocated to the excess above 4.99%.
(d) The Conversion Price determined pursuant to 4(b) shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall at any time (A) declare any dividend or
distribution on its Common Stock or other securities of the Corporation other
than the Series A Preferred Stock, (B) split or subdivide the outstanding Common
Stock, (C) combine the outstanding Common Stock into a smaller number of shares,
or (D) issue by reclassification of its Common Stock any shares or other
securities of the Corporation, then in each such event the Conversion Price
shall be adjusted proportionately so that the Holders of Series A Preferred
Stock shall be entitled to receive the kind and number of shares or other
securities of the Corporation which such Holders would have owned or have been
entitled to receive after the happening of any of the events described above had
such shares of Series A Preferred Stock been converted immediately prior to the
happening of such event (or any record date with respect thereto). Such
adjustment shall be made whenever any of the events listed above shall occur. An
adjustment made to the Conversion pursuant to this paragraph 5(d)(i) shall
become effective immediately after the effective date of the event retroactive
to the record date, if any, for the event.
(e) (i) In case of any merger of the Corporation with or into any other
corporation (other than a merger in which the Corporation is the surviving or
continuing corporation and which does not result in any reclassification,
conversion, or change of the outstanding shares of Common Stock) then unless the
right to convert shares of Series A Preferred Stock shall have terminated, as
part of such merger lawful provision shall be made so that Holders of Series A
Preferred Stock shall thereafter have the right to convert each share of Series
A Preferred Stock into the kind and amount of shares of stock and/or other
securities or property receivable upon such merger by a Holder of the number of
shares of Common Stock into which such shares of Series A Preferred Stock might
have been converted immediately prior to such consolidation or merger. Such
provision shall also provide for adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in paragraph (d) of this
paragraph 5. The foregoing provisions of this paragraph 5(e) shall similarly
apply to successive mergers.
(ii) In case of any sale or conveyance to another person or entity of the
property of the Corporation as an entirety, or substantially as an entirety, in
connection with which shares or other securities or cash or other property shall
be issuable, distributable, payable, or deliverable for outstanding shares of
Common Stock, then, unless the right to convert such shares shall have
terminated, lawful provision shall be made so that the Holders of Series A
Preferred Stock shall thereafter have the right to convert each share of the
Series A Preferred Stock into the kind and amount of shares of stock or other
securities or property that shall be issuable, distributable, payable, or
deliverable upon such sale or conveyance with respect to each share of Common
Stock immediately prior to such conveyance.
(f) Whenever the number of shares to be issued upon conversion of the Series A
Preferred Stock is required to be adjusted as provided in this paragraph 5, the
Corporation shall forthwith compute the adjusted number of shares to be so
issued and prepare a certificate setting forth such adjusted conversion amount
and the facts upon which such adjustment is based, and such certificate shall
forthwith be filed with the Transfer Agent for the Series A Preferred Stock and
the Common Stock; and the Corporation shall mail to each Holder of record of
Series A Preferred Stock notice of such adjusted conversion price.
(g) In case at any time the Corporation shall propose:
(i) to pay any dividend or distribution payable in shares upon its Common Stock
or make any distribution (other than cash dividends) to the Holders of its
Common Stock; or
(ii) to offer for subscription to the Holders of its Common Stock any additional
shares of any class or any other rights; or
(iii) any capital reorganization or reclassification of its shares or the merger
of the Corporation with another corporation (other than a merger in which the
Corporation is the surviving or continuing corporation and which does not result
in any reclassification, conversion, or change of the outstanding shares of
Common Stock); or
(iv) the voluntary dissolution, liquidation or winding-up of the Corporation;
then, and in any one or more of said cases, the Corporation shall cause at least
fifteen (15) days prior notice of the date on which (A) the books of the
Corporation shall close or a record be taken for such stock dividend,
distribution, or subscription rights, or (B) such capital reorganization,
reclassification, merger, dissolution, liquidation or winding-up shall take
place, as the case may be, to be mailed to the Transfer Agent for the Series A
Preferred Stock and for the Common Stock and to the Holders of record of the
Series A Preferred Stock.
(h) So long as any shares of Series A Preferred Stock shall remain outstanding
and the Holders thereof shall have the right to convert the same in accordance
with provisions of this paragraph 5 the Corporation shall at all times reserve
from the authorized and unissued shares of its Common Stock a sufficient number
of shares to provide for such conversions, subject to the Corporation's
obligation to seek shareholder approval to increase its authorized but unissued
Common Stock as set forth in paragraph 5(a).
(i) The term Common Stock as used in this paragraph 5 shall mean the $.001 par
value Common Stock of the Corporation as such stock is constituted at the date
of issuance thereof or as it may from time to time be changed or shares of stock
of any class of other securities and/or property into which the shares of Series
A Preferred Stock shall at any time become convertible pursuant to the
provisions of this paragraph 5.
(j) The Corporation shall pay the amount of any and all issue taxes (but not
income taxes) which may be imposed in respect of any issue or delivery of stock
upon the conversion of any shares of Series A Preferred Stock, but all transfer
taxes and income taxes that may be payable in respect of any change of ownership
of Series A Preferred Stock or any rights represented thereby or of stock
receivable upon conversion thereof shall be paid by the person or persons
surrendering such stock for conversion.
(k) In the event a Holder shall elect to convert any shares of Series A
Preferred Stock as provided herein, the Corporation may not refuse conversion
based on any claim that such Holder or any one associated or affiliated with
such Holder has been engaged in any violation of law, or for any other reason
unless, an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of said shares of Series A Preferred Stock shall have
been issued and the Corporation posts a surety bond for the benefit of such
Holder in the amount of 150% of the Stated Value of the Series A Preferred Stock
and dividends sought to be converted, 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 Holder in the
event it obtains judgment.
6. Mandatory Conversion. The shares of Series A Preferred Stock and dividends
may not be converted without the consent of the Holder.
7. Voting Rights. The shares of Series A Preferred Stock shall not have voting
rights.
8. Status of Converted or Redeemed Stock. In case any shares of Series A
Preferred Stock shall be redeemed or otherwise repurchased or reacquired, the
shares so redeemed, converted, or reacquired shall resume the status of
authorized but unissued shares of Preferred Stock and shall no longer be
designated as Series A Preferred Stock.
Dated: ___________ ___, 2003
BESTNET COMMUNICATIONS CORP.
By: _______________________________
EXHIBIT A
NOTICE OF CONVERSION
(To Be Executed By the Registered Holder in Order to Convert the Series A
Convertible Preferred Stock of BestNet Communications Corp.)
The undersigned hereby irrevocably elects to convert ______________
shares of the above Series A Convertible Preferred Stock into shares of Common
Stock of BestNet Communications Corp. (the "Corporation") according to the
conditions hereof, as of the date written below.
Date of Conversion:___________________________________________________________
Conversion Cost Per Share: $.10
Dollar Amount Paid to the Company for Conversion: ___________________
Number of Common Shares Issuable Upon This Conversion:_______________
Signature:__________________________________________________________________
Print Name:_________________________________________________________________
Address:____________________________________________________________________
Deliveries Pursuant to this Notice of Conversion Should Be Made to:
____________________________________________________________________________
____________________________________________________________________________
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▇▇▇▇▇▇▇ ▇▇ - ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
BESTNET COMMUNICATIONS CORP.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ______ Number of Shares: 200,000
Date of Issuance: March 12, 2004
BestNet Communications Corp., a Nevada corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Katsinam Partners, LP, the registered holder
hereof or his permitted assigns (a "holder"), is entitled, subject to the terms
set forth below, to purchase from the Company upon surrender of this Warrant, at
any time or times on or after the date hereof, but not after 11:59 p.m. Eastern
Time on the Expiration Date (as defined herein) 200,000 fully paid and
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares"), at the purchase price per share provided in Section 2(a)
below.
1. Definitions.
(a) Warrant Issuance. This Warrant ("Warrant") is being issued to the
holder by the Company pursuant to the Unit Purchase Agreement dated of even date
herewith, between the Company and holder.
(b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
(i) "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in the City of Grand Rapids, Michigan are
authorized or required by law to remain closed.
(ii) "Common Stock" means (A) the Company's common stock, par value
$.001 per share, and (B) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(iii) "Expiration Date" means the date three (3) years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day
on which banks are required or authorized to be closed in the City of New
York, New York or the State of New York or on which trading does not take
place on the principal exchange or automated quotation system on which the
Common Stock is traded (a "Holiday"), the next date that is not a Holiday.
(iv) "Issuance Date" means the date of issuance of this Warrant.
(v) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(vi) "Principal Market" means the Over-The-Counter Bulletin Board
operated by the NASD.
(vii) "Securities Act" means the Securities Act of 1933, as amended.
(viii) "Warrant" means this Warrant and all warrants issued in
exchange, transfer or replacement thereof.
(ix) "Warrant Exercise Price" shall mean $0.30 per share.
(x) Other Definitional Provisions. Except as otherwise specified
herein, all references herein (A) to the Company shall be deemed to include
the Company's successors and (B) to any applicable law defined or referred
to herein, shall be deemed references to such applicable law as the same
may have been or may be amended or supplemented from time to time. When
used in this Warrant, the words "herein," "hereof," and "hereunder," and
words of similar import, shall refer to this Warrant as a whole and not to
any provision of this Warrant, and the words "Section," "Schedule," and
"Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified. Whenever the context so requires, the
neuter gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date following the date the Company's shareholders adopt a
proposal authorizing an increase in the Company's authorized capital stock (as
set forth in the Unit Purchase Agreement) and prior to 11:59 P.M. Eastern Time
on the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased; (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised in cash, certified or bank
funds or wire transfer of immediately available funds and (iii) the surrender of
this Warrant (or a Lost Warrant Affidavit in substantially the form annexed
hereto as Exhibit C with respect to this Warrant in the case of its loss, theft
or destruction) to a common carrier for overnight delivery to the Company;
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 8 shall be applicable. In the event of
any exercise of the rights represented by this Warrant in compliance with this
Section 2(a), the Company shall on the second Business Day following the date of
receipt of the Exercise Notice, and this Warrant (or a Lost Warrant Affidavit in
substantially the form annexed hereto as Exhibit C with respect to this Warrant
in the case of its loss, theft or destruction) (the "Exercise Delivery
Documents"), credit such aggregate number of shares of Common Stock to which the
holder (or its designee) shall be entitled to the holder's (or its designee's)
balance account with The Depository Trust Company; provided, however, if the
holder who submitted the Exercise Notice requested physical delivery of any or
all of the Warrant Shares, then the Company shall, on or before the fifth
Business Day following receipt of the Exercise Delivery Documents issue and
surrender to a common carrier for overnight delivery to the address specified in
the Exercise Notice, a certificate, registered in the name of the holder (or its
designee), for the number of shares of Common Stock to which the holder (or its
designee) shall be entitled. Upon delivery of the Exercise Notice referred to
above, the holder of this Warrant (or its designee) shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of this Warrant as required by clause (iii) above or the
certificates evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the holder (or its designee)
the number of shares of Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the holder via facsimile
within five Business Days of receipt of the holder's Exercise Notice. If the
holder and the Company are unable to agree upon the determination of the Warrant
Exercise Price or the arithmetic calculation of the Warrant Shares within five
days of such disputed determination or arithmetic calculation being submitted to
the holder, then the Company shall immediately submit via facsimile (i) the
disputed determination of the Warrant Exercise Price to an independent,
reputable investment banking firm of nationally recognized standing, mutually
acceptable to both the Company and the holder or (ii) the disputed arithmetic
calculation of the Warrant Shares to an independent, outside accountant,
mutually acceptable to both the Company and the holder. The Company shall cause
the investment banking firm or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the holder of the
results no later than forty-eight (48) hours from the time it receives the
disputed determinations or calculations. Such investment banking firm's or
accountant's determination or calculation, as the case may be, shall be deemed
conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in no event later than five (5) Business Days after delivery of the Exercise
Delivery Documents and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant exercised, less the number of Warrant Shares with respect to
which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the exercise
of this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up to the nearest whole number. This
Warrant shall not be exercisable by cashless exercise.
3. (a) Adjustment for Dividends in Other Stock and Property;
Reclassifications. In case at any time or from time to time the holders of the
Common Stock (or any shares of stock or other securities at the time receivable
upon the exercise of this Warrant) shall have received, or, on or after the
record date fixed for the determination of eligible shareholders, shall have
become entitled to receive, without payment therefor,
(1) other or additional stock or other securities or
property (other than cash) by way of dividend,
(2) any cash or other property paid or payable out of any
source other than retained earnings (determined in accordance
with generally accepted accounting principles), or
(3) other or additional stock or other securities or
property (including cash) by way of stock-split, spin-off,
reclassification, combination of shares or similar corporate
rearrangement,
(other than (x) shares of Common Stock or any other stock or securities into
which such Common Stock shall have been exchanged, or (y) any other stock or
securities convertible into or exchangeable for such Common Stock or such other
stock or securities), then and in each such case a holder, upon the exercise
hereof as provided in Section 2, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred to
in clauses (2) and (3) above) which such holder would hold on the date of such
exercise if on the Issuance Date such holder had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant, and
had thereafter, during the period from the Issuance Date to and including the
date of such exercise, retained such shares and/or all other or additional stock
and other securities and property (including cash in the cases referred to in
clause (2) and (3) above) receivable by it as aforesaid during such period,
giving effect to all adjustments called for during such period by Sections 3(a)
and 3(b).
(b) Adjustment for Reorganization, Consolidation and Merger. In case of any
reorganization of the Company (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this Warrant)
or reclassification of its securities after the Issuance Date, or the Company
(or any such other corporation) shall consolidate with or merge into another
corporation or entity or convey or exchange all or substantially all its assets
to another corporation or entity, then and in each such case the holder of this
Warrant, upon the exercise hereof as provided in Section 2 at any time after the
consummation of such reorganization, reclassification, consolidation, merger,
conveyance or exchange, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon the exercise of this Warrant prior
to such consummation, the stock or other securities or property to which such
holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Sections 3(a), (b), (c) and (d); in each such case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities or property receivable upon the exercise of this Warrant after such
consummation.
(c) Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) entitled to
receive, a dividend or other distribution payable in additional shares of (x)
Common Stock or any other stock or securities into which such Common Stock shall
have been exchanged, or (y) any other stock or securities convertible into or
exchangeable for such Common Stock or such other stock or securities, then and
in each such event
(1) the Warrant Exercise Price then in effect shall be decreased as of
the time of the issuance of such additional shares or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Warrant Exercise Price then in effect by a fraction (A) the numerator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (B) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date as the case may be,
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Warrant Exercise Price shall be recomputed accordingly as of
the close of business on such record date, and thereafter the Warrant Exercise
Price shall be adjusted pursuant to this Section 3(c) as of the time of actual
payment of such dividends or distributions; and
(2) the number of shares of Common Stock theretofore receivable upon
the exercise of this Warrant shall be increased, as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, in inverse proportion to the decrease in the Warrant Exercise
Price.
(d) Stock Split and Reverse Stock Split. If the Company at any time or from
time to time effects a stock split or subdivision of the outstanding Common
Stock, the Warrant Exercise Price then in effect immediately before that stock
split or subdivision shall be proportionately decreased and the number of shares
of Common Stock theretofore receivable upon the exercise of this Warrant shall
be proportionately increased. If the Company at any time or from time to time
effects a reverse stock split or combines the outstanding shares of Common Stock
into a smaller number of shares, the Warrant Exercise Price then in effect
immediately before that reverse stock split or combination shall be
proportionately increased and the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be proportionately decreased.
Each adjustment under this Section 3(d) shall become effective at the close of
business on the date the stock split, subdivision, reverse stock split or
combination becomes effective.
4. Covenants as to Common Stock. The Company hereby covenants and agrees as
follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, but subject to the receipt of the affirmative vote of
a majority of the Company's shareholders approving an amendment to the Company's
certificate of incorporation to increase the authorized capital stock of the
Company, at the next annual meeting of shareholders or special meeting of
shareholders, as the case may be, to be held as soon as practicable following
the date of issuance of this Warrant, the Company will at all times have
authorized and reserved at least 100% of the number of shares of Common Stock
needed to provide for the exercise of the rights then represented by this
Warrant and the par value of said shares will at all times be less than or equal
to the applicable Warrant Exercise Price.
(d) The Company shall secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed within the time required by such exchange or quotation system's rules and
regulations and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system within the time
required by such exchange or quotation system's rules and regulations, as the
case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets and any such successive mergers, consolidations or
acquisitions.
5. Taxes. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock or other securities or property in a name other than
that of the registered holders of this Warrant to be converted and such holder
shall pay such amount, if any, to cover any applicable transfer or similar tax.
6. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder of this Warrant, solely by virtue of
such holding, shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether a reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 6, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
7. Representations of Holder.
(a) The holder of this Warrant, by the acceptance hereof, represents
that it is acquiring this Warrant and the Warrant Shares for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution of this Warrant or the Warrant Shares, except
pursuant to sales registered or exempted under the Securities Act; provided,
however, that by making the representations herein, the holder does not agree to
hold this Warrant or any of the Warrant Shares for any minimum or other specific
term and reserves the right to dispose of this Warrant and the Warrant Shares at
any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor").
(b) The holder of this Warrant further acknowledges that if the
company's shareholders fail to adopt the proposal to increase the Company's
authorized capital stock, as described in Section 2(a) hereof, this Warrant will
not be exercisable by the holder and the Company shall have no liability to the
holder as a result thereof.
8. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, but in all events recognizing any transfers
made in accordance with the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall not be
assignable by the holder hereof without the consent of the Company.
9. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, on receipt of an executed
Lost Warrant Affidavit in substantially the form annexed hereto as Exhibit C
(or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of
like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed.
10. Notice. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Warrant must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
BestNet Communications Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer
With copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Two Renaissance Square
Suite 2700
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth in writing by the holder and delivered from time to time, or at such other
address and facsimile as shall be delivered to the Company by the holder at any
time. Each party shall provide five days' prior written notice to the other
party of any change in address or facsimile number. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a nationally
recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
11. Date. The date of this Warrant is March 12, 2004. This Warrant, in all
events, shall be wholly void and of no effect after the close of business on the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 7 shall continue in full force and effect after such date
as to any Warrant Shares or other securities issued upon the exercise of this
Warrant.
12. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holder of this
Warrant provided that no such action may increase the Warrant Exercise Price of
the Warrants, decrease the number of shares or class of stock obtainable upon
exercise of any Warrants, or otherwise materially adversely effect the rights of
the holder of this Warrant without the written consent of such holder.
13. Descriptive Headings; Governing Law; Jurisdiction. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Nevada shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of Nevada, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Nevada, or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of Nevada. Each of the parties hereto
irrevocably consents and submits to the nonexclusive jurisdiction of the Supreme
Court of the State of Arizona and the United States District Court for the
District of Arizona in connection with any proceeding arising out of or relating
to this Warrant, waives any objection to venue in the County of Maricopa, State
of Arizona, or such District, and agrees that service of any summons, complaint,
notice of other process relating to such proceeding may be effected in the
manner provided by Section 10 hereof.
BESTNET COMMUNICATIONS CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HOLDER
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
BESTNET COMMUNICATIONS CORP.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of BestNet
Communications Corp., a Nevada corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Warrant Exercise Price. The holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
________________________________
Name of Registered Holder
By:_____________________________
Name:
Title:
Exhibit 1B - Form of Warrant
Schedule 3.1 - Additional Disclosures
Schedule 3.1 - Additional Disclosures
2
Exhibit 5.4 Officer Certificate
The undersigned, _______________________, hereby certifies that he is the [Chief
Executive Officer] [Chief Financial Officer] of Best Net Communications Corp, a
Nevada corporation ("the Company") and further certifies as follows to Katsinam
Partners, LP as follows:
1. As such officer he is familiar with the business, affairs and assets
of the Company and with the provisions of a certain Unit Purchase
Agreement ("Agreement") between the Company on the one hand and
Katsinam Partners, LP, on the other and acknowledges that the making,
delivery and accuracy of this Certificate is a condition to the
performance of Katsinam Partners, LP under the Agreement.
2. To the best of his knowledge, after careful inquiry, the
representations and warranties of the Company contained in the
Agreement are true and correct on and all conditions required to be
fulfilled as a condition to the obligations of the Purchasers have
been fulfilled and as of the date of this Certificate.
3. Nothing in the Agreement or any attachment thereto or document
delivered in connection therewith contains any untrue statement of a
material fact or omits to make a statement necessary to make the
statements made therein not misleading.
Signed at Grand Rapids, Michigan on the _______ day of March 2004
By
_______________________________________________
[Name and Title]
Exhibit 5.4 Officer Certificate