EX-4.6
FORM OF FINANCING AGREEMENT
FORM OF FINANCING AGREEMENT
THIS FINANCING AGREEMENT ("Financing Agreement") is dated as of
March 25, 2002, by and between FREESTAR TECHNOLOGIES, INC., a Nevada
corporation, with headquarters located at 1140 Avenue of the
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Company"), and
__________________, a _____________________ company (who, together
with permitted assigns, will be collectively referred to herein as
the "Lender").
W I T N E S S E T H
WHEREAS, the Company wishes to induce the Lender to loan to the
Company, and the Lender is willing to loan to the Company, subject to
the terms and conditions set forth herein, up to
________________________ ($__________) Dollars as a portion of a
total loan to the Company of two hundred seventy thousand dollars
($270,000) to be made on terms that are identical to the terms
granted to the Lender in this Financing Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreement contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Loan. (a) Subject to the terms and conditions set forth
herein, the Lender shall loan to the Company ____________________
($__________) Dollars (the "Loan"), by the delivery of $____________
to the Company in same day U.S. funds by wire transfer to an account
designated by the Company.
(b) In consideration of the Loan and to collateralize the
Company's obligations hereunder and under the Related Agreements (as
defined below in Paragraph 3(b)), the Company shall issue:
(1) a promissory note (the "Note") for the principal amount of
the Loan substantially in the form of Exhibit A, payable to the
order of the Lender; and
(2) five year Warrants to the Lender or its designee, granting
to the Lender or its designee the right to purchase a number of
shares of Common Stock equal to the number of shares of Common
Stock converted from the Note by the Lender. The Warrants shall
be substantially in the form annexed hereto as Exhibit B.
2. Reserved.
3. Mutual Deliveries.
(a) Upon the delivery by the Lender of the Loan as provided in
Section 1 above, the Company shall deliver to the Lender the Note.
(b) The Company shall also deliver, or cause to be delivered,
the original or execution copies of the following instruments and
agreements duly executed by all parties thereto other than the Lender
(together with the Note - the "Related Agreements"):
(1) this Financing Agreement
(2) Stock Pledge Agreement and Exhibits thereto (in the form
attached as Exhibit D), together with the Certificates and Stock
Powers;
(3) The Limited Recourse Guarantee of ▇▇▇▇ ▇▇▇▇ in the form
attached as Exhibit F;
(4) the Registration Rights Agreement in the form attached as
Exhibit C;
(5) the Warrants in the form attached as Exhibit B; and
(6) the opinions of counsel in the form attached as Exhibit E.
4. Representations and Warranties of the Company. The Company
represents and warrants to the Lender that except as described in the
Company's reports filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Reports"):
(a) The Company has the corporate power and authority to enter
into this Financing Agreement and the Related Agreements and to
perform its obligations hereunder and thereunder. The execution and
delivery by the Company of this Financing Agreement and the Related
Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company. This
Financing Agreement and the Related Agreements have been duly
executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable against it in
accordance with their respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or
equitable).
(b) The execution, delivery and performance by the Company of
this Financing Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby do
not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or
other instrument binding on the Company which breach or default could
reasonably by expected to have a material and adverse effect on the
Company.
(c) Except as set forth in Schedule 4(c) hereto, the Company is
in material compliance with all applicable laws, regulations,
judgments, decrees and orders material to the conduct of its business.
(d) Except as set forth in Schedule 4(d) hereto, there is no
pending, or to the knowledge of the Company, threatened, judicial,
administrative or arbitral action, claim, suit, proceeding or
investigation which might affect the validity or enforceability of
this Financing Agreement or the Related Agreements or which involves
the Company and which if adversely determined, could reasonably be
expected to have a material adverse effect on the Company.
(e) Except for filings that may be required under federal or
state securities laws, no consent or approval of, or exemption by, or
filing with, any party or governmental or public body or authority is
required in connection with the execution, delivery and performance
under this Financing Agreement or the Related Agreements or the
taking of any action contemplated hereunder or thereunder.
(f) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Nevada. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
current ownership or leasing of any properties or its ownership or
leasing of any properties or the character of its operations as
currently conducted requires such qualification or licensing, except
where the failure to be so qualified would not have a material
adverse effect on the Company. The Company has all corporate power
and authority, and has obtained all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of
and from all governmental or regulatory officials and bodies
necessary to own or lease its properties and conduct its business as
currently conducted other than those authorizations, approvals and
such other documents the lack of which could not reasonably be
expected to have a material and adverse effect on the Company.
(g) The execution, delivery and performance of this Financing
Agreement by the Company and the Related Agreements to be delivered
hereunder and the consummation of the transactions contemplated
hereby and thereby will not: (i) violate any provision of the
Company's articles of incorporation or bylaws, (ii) violate, conflict
with or result in the breach of any of the terms of, result in a
material modification of the effect of, otherwise, give any other
contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any
contract or other agreement to which the Company is a party or by or
to which the Company or any of the Company's assets or properties may
be bound or subject, (iii) violate any order, judgment, injunction,
award or decree of any court, arbitrator or governmental or
regulatory body by which the Company, or the assets or properties of
the Company are bound, (iv) to the Company's knowledge, violate any
statute, law or regulation.
(h) Except as set forth in Schedule 4(h) hereto, there has been
no material adverse change in the capitalization, assets, liabilities
or income of the Company since the issuance of the financial
statements, for the period ending January 31, 2002, delivered to Lender.
(i) The Company is not in possession of, nor has the Company or
its agents disclosed to Lender, any material non-public information
(not including the information relating to the negotiations for, and
the transaction contemplated by, this Financing Agreement and also
not including the information contained in Schedule 7(j), both of
which could be considered "material" and which have not yet been
publicly announced) that (a) if disclosed, would reasonably be
expected to have a materially adverse effect on the price of the
Common Stock, or (b) according to applicable law, rule or regulation,
should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
(j) To the Company's knowledge, none of the following has
occurred during the past ten (10) years with respect to the Company
(or any subsidiary or predecessor entity) or control person of the
Company (a "Person"):
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal
agent or similar officer was appointed by a court for the
business or property of such Person, or any partnership in which
he was a general partner at or within two years before the time
of such filing, or any corporation or business association of
which he was an executive officer at or within two years before
the time of such filing;
(2) Such Person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Such Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily
enjoining him from, or otherwise limiting, the following
activities:
(i) Acting, as an investment advisor, underwriter, broker
or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank,
savings and loan association or insurance company, as a
futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, any
other person regulated by the Commodity Futures Trading
Commission ("CFTC") or engaging in or continuing any conduct
or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
laws or federal commodities laws;
(4) Such person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise
limiting for more than 60 days the right of such person to engage
in any activity described in paragraph (3) of this item, or to be
associated with persons engaged in any such activity;
(5) Such person was found by a court of competent jurisdiction
in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
(k) Except for vFinance Investments, Inc. the Company
represents that it has had no dealings in connection with this
transaction with any finder or broker who will demand payment of any
fee or commission from the Lender. The Company agrees to indemnify
the Lender against and hold the Lender harmless from any and all
liabilities to any persons claiming brokerage commissions or finder's
fees on account of services purported to have been rendered in
connection with this Financing Agreement or the transactions
contemplated hereby.
(l) The Company intends to use the proceeds from the Loan for
the purpose of providing operating capital, and the Company
anticipates that it will be able to repay all borrowings from its
future cash flow or from further investment In addition, the Company
believes that it will be able to, and intends to, comply with all of
its obligations and covenants as set forth in the Related Agreements.
Consequently, the Company does not believe, and does not intend, that
the pledge of shares pursuant to the Related Agreements, will be
called. Consequently, and without limiting the generality of the
foregoing, the Company warrants that the pledge of the shares is for
security only and not in contemplation of a sale of such shares by
the Lender. The Company has not arranged for the pledge of the
shares as a part of any plan for the further distribution of the
pledged securities.
5. Representations and Warranties of the Lender. The Lender
hereby represents and warrants to the Company that:
(a) If the Lender is a corporation, the Lender has the
corporate power and authority to enter into this Financing Agreement
and the Related Agreements and to perform its obligations hereunder
and thereunder. The execution and delivery by the Lender of this
Financing Agreement and the Related Agreements and the consummation
by the Lender of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the
Lender. This Financing Agreement and the Related Agreements have
been duly executed and delivered by the Lender and constitute valid
and binding obligations of the Lender, enforceable against it in
accordance with their respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
(b) The execution, delivery and performance by the Lender of
this Financing Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby do
not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or
other instrument binding on the Lender.
(c) There is no pending, or to the knowledge of the Lender,
threatened, judicial, administrative or arbitral action, claim, suit,
proceeding or investigation that might affect the validity or
enforceability of this Financing Agreement or the Related Agreements.
(d) No consent or approval of, or exemption by, or filing with,
any party of governmental or public body or authority is required in
connection with the execution, delivery and performance under this
Financing Agreement or the Related Agreements or the taking of any
action contemplated hereunder or thereunder.
(e) The Lender qualifies as an accredited Lender for purposes
of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act") and Rules 501(a) and 215 thereunder. The Lender
acknowledges that it has made an independent due diligence
investigation of the Company and has reviewed each of the Reports and
that the Company has made available to the Lender at a reasonable
time prior to the execution of this Financing Agreement. The Lender
has had the opportunity to ask questions and receive answers
concerning the business and affairs of the Company and the terms and
conditions of the sale of securities contemplated by this Financing
Agreement and to obtain any additional information (which the Company
possesses or can acquire without unreasonable effort or expense) as
may be necessary to verify the accuracy of information furnished to
the Lender. The Lender is sophisticated, understands the
transactions described in this Financing Agreement and the Related
Documents, and has previous experience in making loans to
corporations in transactions similar to the Loan contemplated by this
Financing Agreement. The Lender has consulted with its legal,
financial, accounting, tax, and investment advisors with respect to
the advisability of the Lender making the Loan to the Company
contemplated by this Financing Agreement, to the extent the Lender
has deemed that such consultation is necessary or appropriate. The
Lender (a) is able to bear the loss of the entire principal amount of
the Loan without any material adverse effect on his, her or its
business, operations or prospects, (b) has such knowledge and
experience in financial and business matters that he, she or it is
capable of evaluating the merits and risks of making the Loan to the
Company pursuant to this Financing Agreement, (c) realizes that the
Company has a significant need for additional financing and without
such additional financing may be unable to repay the Notes when due
and may have to cease operations, (d) realizes that the advancement
of any funds by the Lender to the Company is highly speculative and
subject to significant risks including, without limitation, those
risks identified in the Reports, and (e) understands that the
documents provided to Lender in connection with the transactions
contemplated hereby may contain forward-looking information that
involve risk and uncertainties that could cause actual results to
differ materially from such statements, including, but not limited
to, those risks relating to product demand, pricing, market
acceptance, the effect of economic conditions, the validity and
enforceability of intellectual property rights, the outcome of
government regulatory proceedings, competitive products, risks in
product and technology development, the ability to complete
transactions, and other risks identified in the Reports.
(f) The Lender understands that the Note, Warrants, and the
shares issuable upon conversion of the Note and exercise of the
Warrants are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being or will be
acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities
Act of 1933 and applicable state law only in certain limited
circumstances. In this regard, the Lender represents that it is
familiar with Rule 144 under the Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
The Lender understands that it is accepting the Note and the
Warrants, and to the extent the Lender receives any shares upon
conversion or payment of the Note or exercise of the Warrant, the
Lender will accept such securities for investment purposes only and
without the view toward the further distribution of such securities
except pursuant to a registration statement that may be effective
permitting the public offer or sale of such securities, or pursuant
to an exemption from registration under federal and applicable state
laws. In the event the Lender does attempt to offer or sell the
Note, Warrants, or underlying securities in the circumstances
contemplated by the preceding sentence, the Lender will do so only in
accordance with the requirements of federal and applicable state laws
and interpretations thereof.
(g) If the Registration Statement is not effective, the Lender
understands that the certificates evidencing the Shares will bear a
legend substantially in the following form:
"The securities represented by this certificate have not
been registered with the Securities and Exchange Commission
or the securities commission of any state in reliance upon
an exemption from registration under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly,
may not be offered or sold except pursuant to an effective
registration statement under the securities act or pursuant
to an available exemption from, or in a transaction not
subject to, the registration requirements of the securities
act and in accordance with applicable state securities laws."
The Lender has no intention or right to obtain the shares of the
Company's common stock pledged by certain affiliates of the Company
to collateralize the repayment of the Note and the Company's
performance of its covenants in this Financing Agreement and the
Related Documents except pursuant to a foreclosure as permitted in
the Related Documents following a material default by the Company and
the guarantors, not cured in accordance with the terms of the Related
Documents. The Lender has no intention to sell the pledged shares
except after a foreclosure accomplished pursuant to the preceding
sentence. The Lender has not sought the pledge of the shares
pursuant to the Related Documents as a part of any plan or scheme to
distribute any securities in a manner not in compliance with the
requirements of federal and all applicable state laws.
In all matters related to this Financing Agreement and the
Related Documents, the Lender is acting strictly on his, her, or its
own behalf, and is not acting as a group with any other person in
connection with this Financing Agreement, the Loan, the Related
Documents, or any Loan made, pledge accepted, or Related Documents
executed and accepted by any other person, whether or not a part of
the $270,000 aggregate Loan being sought by the Company pursuant hereto.
The Lender is a legal resident of the country set forth beneath
his, her, or its signature to this Financing Agreement, and there is
no basis that the Lender can claim residence in any country other
than such country.
The Lender is not, and has never been, an "affiliate" of the
Company as the term "affiliate" is defined in Rule 405 of Regulation
C adopted under the Securities Act of 1933, as amended. If the
Lender becomes an affiliate of the Company at any time during the
period the Note is outstanding, the Lender will notify the Company in
writing.
6. [RESERVED]
7. Covenants of the Company The Company covenants and agrees
that, so long as the Note shall be outstanding, except as otherwise
required under the Related Agreements, the Company shall:
(a) Promptly pay and discharge all lawful taxes, assessments
and governmental charges or levies imposed upon it or upon its income
and profits, or upon any of its property, before the same shall
become in default as well as all lawful material claims for labor,
materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided, however,
that it shall not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and the
Company shall set aside on its books adequate reserves with respect
to any such tax, assessment, charge, levy or claim so contested.
(b) Pay, or cause to be paid, all material financing
obligations and perform, or cause to be performed, all material
obligations promptly and in accordance with the respective terms thereof.
(c) Implement and maintain a standard system of accounting in
accordance with generally accepted accounting principles ("GAAP").
(d) Provide or otherwise make available to the Lender as soon
as available after the end of each fiscal year of the Company, its
annual report on Form 10-KSB or similar reports.
(e) Do, or cause to be done, all things that may be necessary
to (i) maintain its due organization, valid existence and good
standing under the laws of its state of incorporation; (ii) preserve
and keep in full force and effect all qualifications, registrations
and licenses in those jurisdictions in which the failure to do so
could or would have a material adverse effect; (iii) maintain its
power or authority to carry on its business as now conducted; and
(iv) use its best efforts to keep available the services of its key
present employees and agents and maintain its current relations with
suppliers, customers, distributors and joint venture partners
(subject to the business judgment of executive management).
(f) At all times maintain, preserve, protect and keep material
property used and useful in the conduct of its business in a manner
not substantially different from the manner in which the Company
maintained, preserved, protected, and kept its material property
prior to the date of this Financing Agreement.
(g) Keep insurance on its property in a manner not
substantially different from the manner in which the Company
maintained insurance prior to the date of this Financing Agreement.
(h) Not assume, guaranty or otherwise, directly or indirectly,
become liable or responsible for the obligations of the any other
person or entity, except for 75% or greater owned subsidiaries, for
the purpose of paying or discharging the obligations of such person
or entity unless such guarantees relate to the business of the
Company, are incurred in the ordinary course of its business and do
not exceed in the aggregate $100,000.
(i) Not declare or pay any cash dividends or authorize or make
any other distribution on any class of equity securities of the
Company.
(j) Except as set forth in Schedule 7(j) hereto, not
consolidate with or merge with or into any entity or sell, lease,
transfer, exchange or otherwise dispose of any material part of its
properties and assets except in the ordinary course of business,
however, the Company may engage in any of the foregoing transactions
with a parent or subsidiary of the Company so long as such parent or
subsidiary assumes the obligations of the Company hereunder.
(k) Not enter into any agreement or understanding which may,
directly or indirectly, cause or effect a change in "control" as defined in
Rule 405 under the Securities Act of 1933, without the prior written
consent of the Lender.
(8) [RESERVED]
(9) Indemnification. (a) If
(1) the Lender becomes involved in any capacity in any action,
proceeding or investigation brought by any stockholder of the
Company, in connection with or as a result of the consummation
of the transactions contemplated by the Related Agreements, or
if such Lender is impleaded in any such action, proceeding or
investigation by any person, or
(2) the Lender becomes involved in any capacity in any action,
proceeding or investigation brought by the Securities and
Exchange Commission, any self-regulatory organization or other
body having jurisdiction in connection with or as a result of
the consummation of the transactions contemplated by the Related
Agreements, or
(3) if the Lender is impleaded in any such action, proceeding
or investigation by any person, then in any such case, the
Company hereby agrees to indemnify, defend and hold harmless the
Lender from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or
incurred by the Lender, directly or indirectly, and reimburse
such Lender for its reasonable legal and other expenses
(including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred.
The foregoing indemnification does not include any obligation to
reimburse the Lender for internal and overhead costs for the
time of any officers or employees of the Lender devoted to
appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of the Note and
Related Agreements. The indemnification and reimbursement
obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have
(other than matters specifically addressed in the Registration
Rights Agreement, which shall be governed solely by that
agreement), shall extend upon the same terms and conditions to
any affiliates of the Lender who are actually named in such
action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case
may be, of the Lender and any such affiliate, and shall be
binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the
Lender, any such affiliate and any such person. The Company also
agrees that neither the Lender nor any such affiliate, partner,
director, agent, employee or controlling person shall have any
liability to the Company or any person asserting claims on
behalf of or in right of the Company in connection with or as a
result of the consummation of the transactions hereunder, except
as provided in or contemplated by the Note or Related Agreements
unless such action by the Lender or any affiliate, partner,
director, agent, employee, or controlling person results from
the fraud, negligence, criminal act or omission, or other action
or omission by such person that violates any applicable law or
regulation
(b) Notwithstanding the above, the Company shall have no
obligation under this Section 9 if any such action, proceeding, or
investigation arises out of or relates to any fraudulent, negligent,
or criminal act or omission of the Lender or any affiliate, partner,
director, agent, employee, or controlling person of the Lender in
connection with the transactions contemplated by this Financing
Agreement or otherwise, or other action or omission by such person
that violates any applicable law or regulation.
10. Assignment. This Financing Agreement and the Related
Agreements may be assigned by the Lender to transferees or assignees
of the Note, provided that such assignment or transfer is
accomplished in accordance with all applicable laws and in a manner
that is reasonably satisfactory to the Company, and provided further
that the Company is, prior to or simultaneously with such transfer,
furnished with written notice of the name and address of such
transferee or assignee, and such assignee agrees in writing to be
bound by the terms hereof and provided further that, if the Note is
only assigned or transferred in part, then such assignment shall only
be made in part on an appropriate proportionate basis. If there is a
conflict between this provision and any provision of the Related
Agreements, this provision shall govern.
11. [RESERVED]
12. Notices Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be
deemed effectively given upon personal delivery or seven business
days after deposit in the United States Postal Service, by (a)
advance copy by fax, and (b) mailing by express courier or registered
or certified mail with postage and fees prepaid, addressed to each of
the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days advance
written notice to each of the other parties hereto.
COMPANY: FREESTAR TECHNOLOGIES, INC.
1140 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATT: ▇▇▇▇ ▇▇▇▇, President
with a copy to:
▇▇▇▇ ▇▇▇ & Associates
Attn: ▇▇▇▇ ▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER: to the address, telephone number, and facsimile number
set forth beneath his, her or its signature, below.
13. Severability. If a court of competent jurisdiction
determines that any provision of this Financing Agreement is invalid,
unenforceable or illegal for any reason, such determination shall not
affect or impair the validity, legality and enforceability of the
other provisions of this Financing Agreement. If any such
invalidity, unenforceability or illegality of a provision of this
Financing Agreement becomes known or apparent to any of the parties
hereto, the parties shall negotiate promptly and in good faith in an
attempt to make appropriate changes and adjustments to such provision
specifically and this Financing Agreement generally to achieve as
closely as possible, consistent with applicable law, the intent and
spirit of such provision specifically and this Financing Agreement
generally.
14. Execution in Counterparts. This Financing Agreement may
be signed in any number of counterparts with the same effect as if
the signatures upon any counterpart were upon the same instrument.
All signed counterparts shall be deemed to be one original. This
Financing Agreement, once executed by a party, may be delivered to
the other parties hereto by telephone line facsimile transmission of
a copy of this Financing Agreement bearing the signature of the
parties so delivering this Financing Agreement. A facsimile
transmission of this signed Agreement shall be legal and binding on
all parties hereto.
15. Expenses. Each party shall bear its own expenses in
connection with the preparation of this Financing Agreement and the
Related Agreements. In order to a portion of the expenses incurred
by the Lender and others involved in the transaction, the Company
will pay $10,000 to the law firm of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP on
behalf of the Lender and others, to be allocated as the Lender may
deem appropriate. The payment may be made at the Closing by the
Lender from the Closing proceeds.
16. Governing Law. This Financing Agreement and the Related
Agreements shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part
of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute
arising under this Financing Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any
objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions.
17. Survival of Representations and Warranties.
(a) The Lender has the right to rely fully upon the
representations, warranties, covenants and agreements of the Company
contained in this Agreement or in any documents delivered pursuant to
this Agreement. All such representations and warranties of the
Company shall survive the execution and delivery of this Agreement,
the Lender's advancement of the Loan, and the Company's delivery of
the Note and Warrants to the Lender hereunder. All such
representations and warranties of the Company shall continue in full
force and effect for three years from the date hereof with respect to
claims that may arise hereunder or under the Related Documents.
(b) The Company has the right to rely fully upon the
representations, warranties, covenants and agreements of the Lender
contained in this Agreement or in any documents delivered pursuant to
this Agreement. All such representations and warranties of the
Lender shall survive the execution and delivery of this Agreement,
the Lender's advancement of the Loan, and the Company's delivery of
the Note and Warrants to the Lender hereunder. All such
representations and warranties of the Lender shall continue in full
force and effect for three years from the date hereof with respect to
claims that may arise hereunder or under the Related Documents.
IN WITNESS WHEREOF, the parties have executed this Financing
Agreement as of the date first written above.
FREESTAR TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇, President
INVESTOR:
By: ________________________
Name: _____________________
Title: ______________________
Address: ___________________
EXHIBIT A
FORM OF CONVERTIBLE NOTE
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
No. ___ U.S. $______________ Original Issue Date: March 25, 2002
Holder: ___________________
___________________
Address: ___________________
___________________
___________________
SERIES 2002A 8% CONVERTIBLE NOTE DUE MARCH 1, 2003
THIS Note is one of a duly authorized issue of Notes of FREESTAR
TECHNOLOGIES, INC., a Nevada corporation, having a principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(the "Company"), designated as its Series 2002A 8% Convertible Notes,
due March 1, 2003 (the "Notes"), in an aggregate principal amount of
up to Two Hundred Seventy Thousand and 00/100 Dollars ($270,000.00).
This Note is acquired by the Holder (as defined herein) pursuant to
the terms of that certain Financing Agreement dated as of the
Original Issue Date (as defined herein), between the Company and the
Holder, as amended, modified or supplemented from time to time in
accordance with its terms ("Financing Agreement").
FOR VALUE RECEIVED, the Company promises to pay to the Holder or
registered assigns, the principal sum of _____________________
Dollars ($___________), on or before March 1, 2003 (the "Maturity
Date") and to pay interest to the Holder on the principal sum at the
rate of 8% per annum, which interest shall be due and payable on the
earlier of the Conversion Date (with respect to the principal amount
converted) or the Maturity Date. Interest shall accrue daily
commencing on the Original Issue Date (as defined in Section 6) until
payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts that may become due hereunder, has
been made. Interest shall be calculated on the basis of a 360-day
year and for the actual number of days elapsed. Interest hereunder
will be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered on the records of the Company
regarding registration and transfers of the Notes (the "Note
Register"). All overdue, accrued and unpaid interest and other
amounts due hereunder shall bear interest at the rate of 18% per
annum from the day such interest is due hereunder through and
including the date of payment. The principal of, and interest on,
this Note are payable in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of
public and private debts, at the address of the Holder last appearing
on the Note Register, except that the Company may, at the Company's
option and at any time, pay the principal amount due (but not the
interest due) in shares of the Company's Common Stock (as defined in
Section 6) calculated based upon the Conversion Price (as defined
below). The Company shall provide the Holder notice of its intention
to pay amounts hereunder in cash or shares not less than five (5)
Trading Days (as defined in Section 6) prior to the Maturity Date.
Except as otherwise provided herein, if at any time the Company pays
less than the total amount of interest then accrued on account of the
Note, such payment shall be distributed ratably among the Holders
based upon the aggregate principal amount of Notes held by each
Holder.
Notwithstanding anything to the contrary contained herein, the
Company may not prepay any portion of this Note by issuing shares of
its Common Stock unless (i) upon issuance such shares will be legally
and validly issued, fully-paid, and non-assessable; and (ii) such
shares are registered for resale pursuant to an effective
Registration Statement (as defined in Section 6) and (iii) such
shares are listed or quoted for trading on an "Authorized Market" (as
defined in Section 6). Notwithstanding anything to the contrary
contained herein, the Company may not prepay any portion of this Note
by issuing shares of its Common Stock if the issuance of such shares
would result in a violation of Section 4(a)(ii).
This Note is subject to the following additional provisions:
Section 1. The Notes are issuable in denominations of Fifty
Thousand Dollars ($50,000.00). The Notes are exchangeable for an
equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same but
shall not be issuable in denominations of less than integral
multiples of Fifty Thousand Dollars ($50,000) unless such amount
represents the full principal balance of Notes outstanding to such
Holder. No service charge will be made for such registration of
transfer or exchange.
Section 2.
(a) This Note may not be sold, transferred, assigned,
hypothecated or divided into two or more Notes of smaller
denominations, nor may any Underlying Shares be transferred, sold,
assigned or hypothecated except in accordance with this Section. The
Holder, by acceptance hereof, agrees to give written notice to the
Company before transferring this Note or transferring any Underlying
Shares; such notice will describe briefly the any proposed transfer
and will give the Company the name, address, and tax identification
number of the proposed transferee, and will further provide the
Company with an opinion of the Holder's counsel that such transfer
can be accomplished in accordance with federal and applicable state
securities laws (unless such transaction is permitted by the plan of
distribution in an effective Registration Statement). Promptly upon
receiving such written notice, the Company shall present copies
thereof to the Company's counsel.
(i) If in the opinion of such counsel the proposed transfer may
be effected without registration or qualification (under any
federal or state securities laws), the Company, as promptly as
practicable, shall notify the Holder of such opinion, whereupon
the Holder shall be entitled to transfer this Note or to dispose
of Underlying Shares received upon the previous conversion of
this Note, all in accordance with the terms of the notice
delivered by the Holder to the Company; provided that an
appropriate legend may be endorsed on this Note or the
certificates for such Underlying Shares respecting restrictions
upon transfer thereof necessary or advisable in the opinion of
counsel and satisfactory to the Company to prevent further
transfers which would be in violation of Section 5 of the
Securities Act and applicable state securities laws; and
provided further that the prospective transferee or purchaser
shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer
or disposition of the Note or Underlying Shares.
(ii) If in the opinion of the counsel referred to in this
Section 2, the proposed transfer or disposition of this Note or
such Underlying Shares described in the written notice given
pursuant to this Section 2 may not be effected without
registration or qualification of this Note or such Underlying
Shares the Company shall promptly give written notice thereof to
the Holder, and the Holder will limit its activities in respect
to such as, in the opinion of such counsel, are permitted by law.
(b) Prior to transfer of this Note in compliance with this
Section 2, the Company and any agent of the Company may treat the
person in whose name this Note is duly registered on the Note
Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Note
is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. Events of Default.
"Event of Default" wherever used herein, means any one of the
following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant
to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
(a) any default in the payment of the principal of, interest on
or liquidated damages, or other obligations on conversion in respect
of, this Note, free of any claim of subordination, as and when the
same shall become due and payable, (whether on an Interest Payment
Date, Conversion Date or the Maturity Date or by acceleration or
otherwise);
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Note, the Financing Agreement or the Registration
Rights Agreement (as defined in Section 6) and such failure or
breach shall not have been remedied within 10 days after the date on
which notice of such failure or breach shall have been given;
(c) the Company shall commence a voluntary case under the
United States Bankruptcy Code or insolvency laws as now or hereafter
in effect or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against the Company under the
Bankruptcy Code and the petition is not controverted within 30 days,
or is not dismissed within 60 days, after commencement of such
involuntary case; or a "custodian" (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or any substantial
part of the property of the Company or the Company commences any
other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or there is commenced against the Company any
such proceeding which remains undismissed for a period of 60 days; or
the Company is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is
entered; or the Company suffers any appointment of any custodian or
the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the
Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to
pay its debts generally as they become due; the Company shall call a
meeting of all of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company shall by any
act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other
action is taken by the Company for the purpose of effecting any of
the foregoing;
(d) the Company shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture,
agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced any indebtedness of the
Company in an amount exceeding ___________________ dollars
($___________), whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
(e) the Common Stock shall fail to be listed or authorized for
quotation on an Authorized Market, or trading in an Authorized
Market has been suspended without the Common Stock having been
relisted or having such suspension lifted, as the case may be, within
five (5) Trading Days, or the closing bid price of the Common Stock
on any Trading Day shall be $.10 or less;
(f) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose
of all or in excess of 49% of its assets (based on book value
calculation as reflected in the Company's most recent financial
statements) in one or more transactions (whether or not such sale
would constitute a Change of Control Transaction), or shall redeem
more than a de minimis number of shares of Common Stock or other
equity securities of the Company (other than redemptions of
Underlying Shares);
(g) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty
(30) days from the Event Date (as hereinafter defined) relating
thereto (other than as a result from a failure of a Registration
Statement to be declared effective by the Commission on or prior to
the Effective Date (as defined in the Registration Rights
Agreement)); or
(h) the Company shall fail for any reason to deliver Free
Trading Certificates (as defined in Section 6) to a Holder on or
prior to the third (3rd) Trading Day after a Conversion Date, or the
Company shall provide notice to the Holder, including by way of
public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms
hereof.
Section 4. Conversion.
(a) (i) This Note shall be convertible into shares of Common
Stock (subject to the limitation set forth in Section 4(a)(ii)) at
the option of the Holder in whole or in part at any time and from
time to time commencing sixty-one (61) days after the Original Issue
Date and prior to the close of business on the Maturity Date. The
number of shares of Common Stock issuable upon a conversion hereunder
shall be determined by dividing the outstanding principal amount of
this Note to be converted by the Conversion Price, each as subject to
adjustment as provided hereunder. The Holder shall effect
conversions by delivering to the Company a conversion notice in the
form of conversion notice attached hereto as Exhibit A (the
"Conversion Notice"), specifying the information on the Conversion
Notice form. Each Conversion Notice shall specify the principal
amount of Notes to be converted and the date on which such conversion
is to be effected, which date may not be prior to the date of such
Conversion Notice is deemed to have been delivered pursuant to
Section 4(h) (the "Conversion Date"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the
date that the Conversion Notice is deemed delivered pursuant to
Section 4(h). Subject to Section 4(b) hereof, each Conversion
Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the
Note(s) tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the
Company shall honor such conversion and shall promptly deliver to
such Holder (in the manner and within the time set forth in Section
4(b)) a new Note for such principal amount as has not been converted.
(ii) Certain Conversion Restrictions. The Holder agrees not to
convert Notes to the extent such conversion would result in the
Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of the
Notes held by such Holder after application of this Section.
The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section
applies and to the extent the Holder determines that the
restriction contained in this Section applies, the determination
of which portion of the principal amount of such Notes is
convertible shall be in the sole discretion of the Holder. The
provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 65
days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) (i) Not later than three (3) Trading Days after the
Conversion Date, the Company will deliver to the Holder a Free
Trading Certificate or certificates free of restrictive legends,
trading restrictions or stop transfer orders representing the number
of shares of the Common Stock being acquired upon the conversion of
Notes, and (ii) a corporate check in the amount of all accrued and
unpaid interest, together with all other amounts then due and payable
in accordance with the terms hereof, in respect of Notes tendered for
conversion. The Company shall keep a register and log each
conversion of the Notes by entering the amount of the Notes converted
and the principal balance of the Notes once the conversion has taken
place. There shall be no obligation on the part of the Holder to
deliver the Notes with each conversion. Upon a final conversion of
the Notes, or payment by the Company of all amounts due under the
Notes, as the case may be, the Holder will surrender the original
Notes to the Company. Nothing stated herein shall preclude the
Holder from requesting from the Company Notes reflecting the
principal balance thereunder which shall be provided to the Holder
simultaneously upon the surrender of any Notes in the Holder's
possession. The Company shall, upon request of the Holder, use its
best efforts to deliver any certificate or certificates required to
be delivered by the Company under this Section electronically through
the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any
Conversion Notice such Free Trading Certificate or certificates, are
not delivered to or as directed by the applicable Holder by the third
Trading Day after a Conversion Date, the Holder shall be entitled by
written notice to the Company at any time on or before its receipt of
such certificate or certificates thereafter, to rescind such conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to this Section prior to
the third Trading Day after a Conversion Date, then the Company
shall pay to the Holder $150 per day for each day late in
delivering the certificates up to and including the 10th late
day, and $500 per day for each day late in delivering the
Certificates after the 10th late day ("Liquidated Damages").
Any Liquidated Damages incurred by the Company shall be payable
immediately and in cash upon demand in writing made by the
Holder, or their agent, to the Company.
(iii). Intentionally omitted.
(iv) In the event a Holder shall elect to convert a Note or part
thereof, the Company 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, or notice,
restraining and or enjoining conversion of all or part of said
Note shall have been sought and obtained and the Company posts a
surety bond for the benefit of such Holder in the amount of 130%
of the amount of the Note, which is subject to the injunction,
which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be
payable to such Holder to the extent Holder obtains judgment.
(c) (i) The conversion price (the "Conversion Price") in
effect shall be 80% of the Market Price; and the term "Market Price"
means the lower of (i) the average closing bid price of a share of
Common Stock as reported by the National Association of Securities
Dealers Electronic Bulletin Board ("OTC Bulletin Board") for the 10
Trading Days prior to March 25, 2002, or (ii) the average closing bid
price of a share of Common Stock as reported by the OTC Bulletin
Board for the 5 Trading Days immediately preceding the date of
receipt by the Company of Notice of Conversion.
(ii) If the Company, at any time while any Notes are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in
shares of the Common Stock, (b) subdivide outstanding shares of
the Common Stock into a larger number of shares, (c) combine
outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common
Stock any shares of capital stock of the Company, the Initial
Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding before such
event and of which the denominator shall be the number of shares
of the Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 4(c)(ii) shall become
effective immediately after the record date for the
determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any Notes are
outstanding, shall issue rights or warrants to all holders of
the Common Stock (and not to Holders of Notes) entitling them to
subscribe for or purchase shares of the Common Stock at a price
per share less than the Conversion Price, the Conversion Price
shall be multiplied by a fraction, of which
the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the
number of additional shares of the Common Stock offered for
subscription or purchase, and
the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the
total number of shares so offered would purchase at the
Conversion Price.
Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such rights or warrants. However, upon the expiration
of any right or warrant to purchase shares of the Common Stock
the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 4(c)(iii), if any such
right or warrant shall expire and shall not have been exercised,
the Conversion Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to
the provisions of this Section 4 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that
number of shares of the Common Stock actually purchased upon the
exercise of such rights or warrants actually exercised.
(iv) If the Company, as applicable with respect to Common Stock
Equivalents (as defined below), at any time while this Note is
outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock
("Common Stock Equivalents") entitling any Person to acquire
shares of Common Stock at a price per share less than the
Conversion Price, then the Conversion Price shall be multiplied
by a fraction,
the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance
of shares of Common Stock or such Common Stock Equivalents
plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Conversion Price,
and
the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to
such issuance plus the number of shares of Common Stock so
issued or issuable,
provided, that for purposes hereof, all shares of Common Stock
that are issuable upon exercise or exchange of Common Stock
Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock Equivalents. Such adjustment
shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued.
(v) If the Company, at any time while Notes are outstanding,
shall distribute to all holders of the Common Stock (and not to
Holders of Notes) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security,
then in each such case the Initial Conversion Price at which
Notes shall thereafter be convertible shall be determined by
multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which
the denominator shall be the Per Share Market Value of the
Common Stock determined as of the record date mentioned
above, and
the numerator shall be such Per Share Market Value of the
Common Stock on such record date less the then fair market
value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the
Board of Directors in good faith; provided, however, that
in the event of a distribution exceeding ten percent (10%)
of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent
certified public accountants of recognized standing (which
may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of
Notes then outstanding; and provided, further, that the
Company, after receipt of the determination by such
Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market
value shall be equal to the average of the determinations
by each such Appraiser.
In either case the adjustments shall be described in a statement
provided to the holders of Notes of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date
mentioned above.
(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder of
this Note shall have the right thereafter to, at its option,
convert the then outstanding principal amount only into the
shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the
Holders of the Notes shall be entitled upon such event to
receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which the then
outstanding principal amount could have been converted
immediately prior to such reclassification or share exchange
would have been entitled. The terms of any such
reclassification or share exchange shall include such terms so
as to continue to give to the Holder the right to receive the
securities, cash or property set forth in this Section 4(c)(vi)
upon any conversion following such event. This provision shall
similarly apply to successive reclassifications or share exchanges.
(vii) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock;
or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock
of the Company, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially
all of the assets of the Company, of any compulsory
share of exchange whereby the Common Stock is
converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or
agency maintained for the purpose of conversion of the Notes,
and shall cause to be mailed to the Holders of Notes at their
last addresses as they shall appear upon the stock books of the
Company, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which
it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided, however, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be
specified in such notice. Holders are entitled to convert Notes
during the 30-day period commencing the date of such notice to
the effective date of the event triggering such notice.
(viii) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case
may be.
(ix) Whenever the Conversion Price is adjusted pursuant to
Section 4(c)(i) - (v), the Company shall promptly mail to each
Holder of Notes, a notice setting forth the Initial Conversion
Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.
(x) Notwithstanding anything to the contrary herein, in no
event shall the Conversion Price be adjusted for (i) issuances
of shares upon exercise of any warrants, options or convertible
securities outstanding as of the date hereof; (ii) issuances of
shares upon conversion of any Notes or exercise of the Warrants
(as defined in the Financing Agreement); or (iii) issuances of
options (or shares upon the exercise thereof), stock bonuses, or
shares pursuant to the Company's 2001 Employee Stock Incentive Plan.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors
are not adequately covered by the other provisions hereof and which
might materially and adversely affect the rights of the Holders
(different than or distinguished from the effect generally on rights
of holders of any class of the Company's capital stock) or if at any
time any such conditions are expected to arise by reason of any
action contemplated by the Company, the Company shall mail a written
notice briefly describing the action contemplated and the material
adverse effects of such action on the rights of the Holders at least
30 calendar days prior to the effective date of such action, and an
Appraiser selected by the Holders of majority in interest of the
Notes shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 4), of
the Conversion Price (including, if necessary, any adjustment as to
the securities into which Notes may thereafter be convertible) and
any distribution which is or would be required to preserve without
diluting the rights of the Holders; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in good faith, in
which case the adjustment shall be equal to the average of the
adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the
receipt of such opinion or opinions or the taking of any such action
contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion
of the Appraiser(s) giving the aforesaid opinion or opinions would
result in an increase of the Conversion Price to more than the
Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of the
Common Stock solely for the purpose of issuance upon conversion of
the Notes and payment of interest on the Notes, each as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such
shares set forth in the Financing Agreement) be issuable (taking into
account the adjustments and restrictions of Section 4(c)) upon the
conversion of the outstanding principal amount of the Notes and
payment of interest hereunder. The Company covenants that all shares
of the Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable
and, if the Registration Statement has been declared effective under
the Securities Act, freely tradeable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Per
Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of
Common Stock.
(g) The issuance of certificates for shares of the Common Stock
on conversion of the Notes shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may
be payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Notes so converted and the Company
shall not be required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Notes hereunder, including,
without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (facsimile number: 212-869-7999),
attention ▇▇▇▇ ▇▇▇▇, President, or such other address or facsimile
number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service
or sent by certified or registered mail, postage prepaid, addressed
to the Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 5:00 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) four days after deposit in the United
States mails, (iv) the Business Day following the date of mailing, if
send by nationally recognized overnight courier service, or (v) upon
actual receipt by the party to whom such notice is required to be given.
Section 5. Prepayment.
(a) The Company shall have the right to prepay this Note and
all accrued but unpaid interest thereon prior to the Maturity Date
provided that, if the prepayment is accomplished in cash, the Company
shall issue to the Holder a warrant to purchase one (1) share of
Common Stock at an exercise price of $.10 for each $.10 principal
amount so prepaid, and the warrant will be in the form attached to
the Financing Agreement.
(b) (i) The Company shall give at least five (5) business
days, but not more than ten (10) business days, written notice of any
intention to prepay this Note prior to the Maturity Date to the
Holder which notice shall specify the "Prepayment Date.".
(ii) With respect to any Note for which a Notice of Conversion
is submitted to the Company prior to the Prepayment Date, the
Notice of Conversion shall take precedence and such Note shall
be converted in accordance with the terms hereof. Furthermore,
in the event such prepayment is not timely made, the Notice of
Prepayment shall be null and void, and any rights of the Company
to thereafter prepay this Note shall be subject to the deposit
of the amount to be paid in escrow, with an attorney designated
by the Holder, not later than two business days after delivery
of any Notice.
Section 6. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Authorized Market" means the OTC Bulletin Board, the Nasdaq
SmallCap Stock Market ("NASDAQ"), the American Stock Exchange, Nasdaq
National Market or The New York Stock Exchange.
"Business Day" means any day except Saturday, Sunday and any day
that shall be a legal holiday or a day on which banking institutions
in the State of New York are authorized or required by law or other
government action to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of in excess of 49% of the voting securities of the
Company coupled with a replacement of more than one-half of the
members of the Company's board of directors which is not approved by
those individuals who are members of the board of directors on the
date hereof in one or a series of related transactions, or (ii) the
merger of the Company with or into another entity, consolidation or
sale of all or substantially all of the assets of the Company in one
or a series of related transactions, unless following such
transaction, the holders of the Company's securities continue to hold
at least 40% of such securities following such transaction. The
execution by the Company of an agreement to which the Company is a
party or by which it is bound providing for any of the events set
forth above in (i) or (ii) does not constitute the occurrence of the
event until after the event in fact occurs.
"Common Stock" means the Company's common stock, no par value
per share, and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Free Trading Certificates" shall mean certificates representing
shares of Common Stock that are eligible for sale pursuant to an
effective Registration Statement.
"Original Issue Date" shall mean the date of the first issuance
of any Notes regardless of the number of transfers of any Note and
regardless of the number of instruments which may be issued to
evidence such Note.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated March 20, 2002, between the Company and the initial
Holders of the Notes.
"Registration Statement" means a registration statement meeting
the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
"Trading Day" means (a) a day on which the Common Stock is
traded on the NASDAQ, or (b) if the Common Stock is not listed on the
NASDAQ, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or
(c) if the Common Stock is not quoted on the OTC Bulletin Board, a
day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the
Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by
law or other government action to close.
"Underlying Shares" means the number of shares of Common Stock
into which the Notes are convertible and any shares of Common Stock
issuable in payment of interest as provided under and in accordance
with the terms hereof and the Financing Agreement.
Section 7. Except as expressly provided herein, no provision
of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of,
interest and liquidated damages (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed.
This Note is a direct obligation of the Company. This Note ranks
pari passu with all other Notes now or hereafter issued under the
terms set forth herein.
Section 8. This Note shall not entitle the Holder to any of
the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company, unless and to
the extent converted into shares of Common Stock in accordance with
the terms hereof. As long as there are Notes outstanding, the
Company shall not and shall cause it subsidiaries not to, without the
consent of the Holders, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any
rights of the Holders; or (ii) repay, repurchase or otherwise acquire
shares of its Common Stock or other equity securities other than as
to the Underlying Shares to the extent permitted or required under
the Related Agreements (as defined in the Purchase Agreement).
Section 9. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen or destroyed Note, a
new Note for the principal amount of this Note so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss,
theft or destruction of such Note, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Company.
Section 10. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Each of the
parties consents to the exclusive jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing
of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this Note.
Section 11. Any waiver by the Company or the Holder of a
breach of any provision of this Note shall not operate as or be
construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Note. The failure of the
Company or the Holder to insist upon strict adherence to any term of
this Note on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Note. Any waiver
must be in writing.
Section 12. If any provision of this Note is invalid,
illegal or unenforceable, the balance of this Note shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
Section 13. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day (or, if
such next succeeding Business Day falls in the next calendar month,
the preceding Business Day in the appropriate calendar month).
Section 14. Security The obligation of the Company for
payment of principal, interest and all other sums hereunder, in the
event of a default and failure of the Company to perform hereunder,
is secured solely by the pledge of certain shares of the Company's
Common Stock owned beneficially and of record by the Persons
specified on Schedule A hereto, (the "Collateral Shares") under the
terms and conditions of a Stock Pledge Agreement, by reference made a
part of the terms of this Note. The security interest of the Holder
as to the Collateral Shares is perfected by the delivery of such
shares to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, as escrow agent pursuant to
the terms of the Pledge Agreement.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer duly authorized for such purpose, as of
the date first above indicated.
FREESTAR TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇, President
Attest:
▇▇▇▇▇▇ ▇▇▇▇, Secretary
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby elects to convert Note No. [ ] into shares
of Common Stock, no par value (the "Common Stock"), of FREESTAR
TECHNOLOGIES, INC. (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith, and such transfer may only be
accomplished to the extent permitted in Section 2 of this Note No
fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Notes to be Converted:
Number of shares of Common Stock to be Issued:
Applicable Conversion Price:
Shares to be Issued in Name of:
Shares to be Delivered to:
Signature _____________________________
Name ________________________________
Address ______________________________
EXHIBIT B
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
FREESTAR TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and
valuable consideration, the receipt of which is hereby acknowledged
by FREESTAR TECHNOLOGIES, INC., a Nevada corporation (the "Company"),
__________________, a _________________ company or registered assigns
(the "Holder") is hereby granted the right to purchase at any time
until 5:00 P.M., New York City time, on March 20, 2005 (the
"Expiration Date"), a number of fully paid and nonassessable shares
of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), equal to ten percent (10%) of all shares of Common Stock
issued to the Holder, or any successor to or assign of the Holder,
under a certain Series 2002 A 8% Convertible Note Due March 1, 2003
(the "Note") upon all Notices of Conversion of the Note, at an
initial exercise price per share (the "Exercise Price") equal to the
Conversion Price as set forth in the Note, subject to further
adjustment as set forth herein. This Warrant is being issued
pursuant to the terms of that certain Financing Agreement, dated as
of March 25, 2002 (the "Agreement"), to which the Company and Holder
(or Holder's predecessor in interest) are parties. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them
in the Agreement.
2. Exercise of Warrants.
(a) This Warrant is exercisable in whole or in part at any time
and from time to time. Such exercise shall be effectuated by
submitting to the Company (either by delivery to the Company or by
facsimile transmission as provided in Section 8 hereof) a completed
and duly executed Notice of Exercise (substantially in the form
attached to this Warrant Certificate) as provided in this paragraph.
The date such Notice of Exercise is faxed to the Company shall be the
"Exercise Date," provided that the Holder of this Warrant tenders
full payment of the Exercise Price to the Company within five (5)
business days thereafter. The Notice of Exercise shall be executed
by the Holder of this Warrant and shall indicate the number of shares
then being purchased pursuant to such exercise. Upon payment of the
Exercise Price for the shares of Common Stock purchased, the Holder
shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased. The Company shall deliver the
shares of Common Stock to the Holder, or pursuant to the Holder's
directions, within three (3) business days of any such payment.
(b) The Exercise Price per share of Common Stock for the shares
then being exercised shall be payable in cash or by certified or
official bank check or Fed wire transfer.
2.2 Limitation on Exercise. Notwithstanding the provisions of
this Warrant or the Agreement, in no event (except (i) as
specifically provided in this Warrant as an exception to this
provision, (ii) while there is outstanding a tender offer for any or
all of the shares of the Company's Common Stock, or (iii) at the
Holder's option, on at least sixty-five (65) days' advance written
notice from the Holder) shall the Holder be entitled to exercise this
Warrant, or shall the Company have the obligation to issue shares
upon such exercise of all or any portion of this Warrant to the
extent that, after such exercise the sum of
(1) the number of shares of Common Stock beneficially owned by
the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of
the unexercised portion of the Warrants or other rights to
purchase Common Stock or through the ownership of the
unconverted portion of the Notes or other convertible
securities), and
(2) the number of shares of Common Stock issuable upon the
exercise of the Warrants with respect to which the determination
of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates
of more than 4.99% of the outstanding shares of Common Stock (after
taking into account the shares to be issued to the Holder upon such
exercise). For 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 (the
"1934 Act"), except as otherwise provided in clause (1) of such
sentence. The Holder, by its acceptance of this Warrant, further
agrees that if the Holder transfers or assigns any of the Warrants to
a party who or which would not be considered such an affiliate, such
assignment shall be made subject to the transferee's or assignee's
specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for
issuance upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance upon exercise of this
Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or
destruction) receipt of reasonably satisfactory indemnification, and
(in the case of mutilation) upon surrender and cancellation of this
Warrant, the Company will execute and deliver a new Warrant of like
tenor and date and any such lost, stolen, destroyed or mutilated
Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company,
either at law or equity, and the rights of the Holder are limited to
those expressed in this Warrant and are not enforceable against the
Company except to the extent set forth herein.
6. Protection Against Dilution and Other Adjustments.
6.1 Adjustment Mechanism If an adjustment of the Exercise
Price is required pursuant to Section 6.2, the Holder shall be
entitled to purchase such number of additional shares of Common Stock
as will cause
(i) the total number of shares of Common Stock Holder is
entitled to purchase pursuant to this Warrant, multiplied by
(ii) the adjusted Exercise Price per share, to equal
(iii) the dollar amount of the total number of shares of Common
Stock Holder is entitled to purchase before adjustment
multiplied by the total Exercise Price before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment
affecting the Common Stock of the Company, the provisions of this
Section 6 shall be applied as if such capital adjustment event had
occurred immediately prior to the date of this Warrant and the
original Exercise Price had been fairly allocated to the stock
resulting from such capital adjustment; and in other respects the
provisions of this Section shall be applied in a fair, equitable and
reasonable manner so as to give effect, as nearly as may be, to the
purposes hereof. A rights offering to stockholders shall not be
deemed a stock dividend.
6.3 Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise
divests itself of a part of its business or operations or disposes
all or a part of its assets in a transaction (the "Spin Off") in
which the Company does not receive compensation for such business,
operations or assets, but causes securities of another entity (the
"Spin Off Securities") to be issued to security holders of the
Company, then
(a) the Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder's unexercised
Warrants outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be
issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the
trading day immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the
exercise of all or any of the Outstanding Warrants, such amount
of the Reserved Spin Off Shares equal to (x) the Reserved Spin
Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being
exercised, and (II) the denominator is the amount of the
Outstanding Warrants; and
(b) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by
multiplying the Exercise Price by a fraction (if, but only if,
such fraction is less than 1.0), the numerator of which is the
average Closing Bid Price of the Common Stock for the five (5)
trading days immediately following the fifth trading day after
the Record Date, and the denominator of which is the average
Closing Bid Price of the Common Stock on the five (5) trading
days immediately preceding the Record Date; and such adjusted
Exercise Price shall be deemed to be the Exercise Price with
respect to the Outstanding Warrants after the Record Date.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued
to the Holder for investment and not with a view to the distribution
of either the Warrant or the Warrant Shares. Neither this Warrant
nor any of the Warrant Shares or any other security issued or
issuable upon exercise of this Warrant may be sold, transferred,
pledged or hypothecated in the absence of an effective registration
statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required
under the Act. Each certificate for the Warrant, the Warrant Shares
and any other security issued or issuable upon exercise of this
Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
7.2 Registration Rights.
(a) Reference is made to the Registration Rights
Agreement. The Company's obligations under the Registration
Rights Agreement and the other terms and conditions thereof with
respect to the Warrant Shares, including, but not necessarily
limited to, the Company's commitment to file a registration
statement including the Warrant Shares, to have the registration
of the Warrant Shares completed and effective, and to maintain
such registration, are incorporated herein by reference.
(b) In addition to the registration rights referred to in
the preceding provisions of Section 7.2(a), effective after the
expiration of the effectiveness of the Registration Statement as
contemplated by the Registration Rights Agreement, the Holder
shall have piggy-back registration rights with respect to the
Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the
"Remaining Warrant Shares"), subject to the conditions set forth
below. If, at any time after the Registration Statement has
ceased to be effective, the Company participates (whether
voluntarily or by reason of an obligation to a third party) in
the registration of any shares of the Company's stock (other
than a registration on Form ▇-▇, ▇-▇ or successor form), the
Company shall give written notice thereof to the Holder and the
Holder shall have the right, exercisable within ten (10)
business days after receipt of such notice, to demand inclusion
of all or a portion of the Holder's Remaining Warrant Shares in
such registration statement. If the Holder exercises such
election, the Remaining Warrant Shares so designated shall be
included in the registration statement at no cost or expense to
the Holder (other than any costs or commissions which would be
borne by the Holder under the terms of the Registration Rights
Agreement). The Holder's rights under this Section 7 shall
expire at such time as the Holder can sell all of the Remaining
Warrant Shares under Rule 144(k) without volume or other
restrictions or limit.
8. Notices Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage pre-paid. Any
such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission, or, if
mailed, two days after the date of deposit in the United States
mails, as follows:
(i) if to the Company, to:
FreeStar Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATT: ▇▇▇▇ ▇▇▇▇, President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Holder, to its name, address, telephone, and
facsimile number set forth beneath its signature.
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Any party may be notice given in accordance with this Section to the
other parties designate another address or person for receipt of
notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant
may be amended or supplemented only by an instrument in writing
signed by the parties hereto. This Warrant contains the full
understanding of the parties hereto with respect to the subject
matter hereof and thereof and there are no representations,
warranties, agreements or understandings other than expressly
contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of New York for contracts
to be wholly performed in such state and without giving effect to the
principles thereof regarding the conflict of laws. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Buyer in
enforcement of or protection of any of its rights under any of the
Transaction Agreements.
11. Jury Trial Waiver. The Company and the Holder hereby waive
a trial by jury in any action, proceeding or counterclaim brought by
either of the Parties hereto against the other in respect of any
matter arising out or in connection with this Warrant.
12. Counterparts This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
13. Descriptive Headings Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
as of the 25th day of March, 2002.
FREESTAR TECHNOLOGIES, INC.
By:
▇▇▇▇ ▇▇▇▇, President
ATTEST:
▇▇▇▇▇▇ ▇▇▇▇, Secretary
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ,
, to purchase shares of the Common
Stock, no par value, of FREESTAR TECHNOLOGIES, INC. and tenders
herewith payment in accordance with Section 1 of said Common Stock
Purchase Warrant.
CASH:$ = (Exercise Price x Exercise Shares)
Payment is being made by:
enclosed check
wire transfer
other
CASHLESS EXERCISE
Net number of Warrant Shares to be issued to Holder :
_________*
* based on: Current Market Value - (Exercise Price x Exercise
Shares)
Market Price of Common Stock
where:
Market Price of Common Stock ["MP"] = $_______________
Current Market Value [MP x Exercise Shares] = $_______________
It is the intention of the Holder to comply with the provisions
of Section 2.2 of the Warrant regarding certain limits on the
Holder's right to exercise thereunder. Based on the analysis on the
attached Worksheet Schedule, the Holder believes this exercise
complies with the provisions of said Section 2.2. Nonetheless, to the
extent that, pursuant to the exercise effected hereby, the Holder
would have more shares than permitted under said Section, this notice
should be amended and revised, ab initio, to refer to the exercise
that would result in the issuance of shares consistent with such
provision. Any exercise above such amount is hereby deemed void and
revoked.
Please deliver the stock certificate to:
Dated:
[Name of Holder]
By:
NOTICE OF EXERCISE OF WARRANT
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates
2. Shares to be issued on current exercise
3. Other shares eligible to be acquired without restriction
4. Total [sum of Lines 1 through 3]
5. Outstanding shares of Common Stock
6. Adjustments to Outstanding
a. Shares from Line 1 not included in Line 5
b. Shares to be issued per Line 2
c. Total Adjustments [Lines 6a and 6b]
7. Total Adjusted Outstanding [Lines 5 plus 6c]
8. Holder's Percentage [Line 4 divided by Line 7]
%
[Note: Line 8 not to be above 4.99%]
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 25, 2002
(this "Agreement"), is made by and between FREESTAR TECHNOLOGIES,
INC., a Nevada corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company"), and each
entity named on a signature page hereto (each, an "Initial Investor")
(each agreement with an Initial Investor being deemed a separate and
independent agreement between the Company and such Initial Investor,
except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Financing Agreement, dated as of March 25, 2002, between the Initial
Investors and the Company (the "Financing Agreement;" capitalized
terms not otherwise defined herein shall have the meanings ascribed
to them in the Financing Agreement), the Company has agreed to issue
and sell to the Initial Investors the Notes; and
WHEREAS, the Notes are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu
of accrued interest as contemplated by the Notes) upon the terms and
subject to the conditions contained in the Notes; and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Lenders in connection with the issuance of the Debentures,
and the Warrants may be exercised for the purchase of shares of
Common Stock (the "Warrant Shares") upon the terms and conditions of
the Warrants; and
WHEREAS, to induce the Initial Investors to execute and deliver
the Financing Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor
statute (collectively, the "Securities Act"), with respect to the
Registrable Securities;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Company and the Initial Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Closing Date" means the date hereof.
(b) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and
otherwise meeting the conditions contemplated hereby to be effective.
(c) "Initial Investors" means Papell Holdings, Ltd., a
Turks & Caicos Islands company, and Boat Basin Investors,
L.L.C., a St. Kitts and Nevis limited liability company.
(d) "Investors" means the Initial Investors and any permitted
transferee or assignee who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof
and who holds Debentures, Warrants or Registrable Securities.
(e) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be
evidenced by a determination in good faith by the Board of
Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or
activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at
such time; in each case where such determination shall be
accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would
be materially misleading absent the inclusion of such information.
(e) "Principal Trading Market" means The NASDAQ/Over-the-
Counter Bulletin Board Market.
(f) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act
and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United
States Securities and Exchange Commission (the "SEC").
(g) "Registrable Securities" means the Conversion Shares and
the Warrant Shares.
(h) "Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities on
Form SB-2, if the Company is then eligible to file using such form,
and if not eligible, on Form S-1 or other appropriate form.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as
soon as possible after the Closing Date a Registration
Statement registering for resale by the Investor a
sufficient number of shares of Common Stock for the Initial
Investors to sell the Registrable Securities, but in no
event less than the number of shares equal to the aggregate
of (x) two hundred percent (200%) of the number of shares
into which the Notes and all interest thereon through the
Maturity Date (as defined in the Notes) would be
convertible at the time of filing of such Registration
Statement (assuming for such purposes that all Notes had
been issued, had been eligible to be converted, and had
been converted, into Conversion Shares in accordance with
their terms, whether or not such issuance, eligibility,
accrual of interest or conversion had in fact occurred as
of such date) and (y) the number of Warrant Shares which
would be issuable on exercise of the Warrants (assuming for
such purposes that Warrants for the twice the number of
shares as are covered by the Warrants actually issued on
the Closing Date had been issued, had been eligible for
exercise and had been exercised for Warrant Shares in
accordance with their terms, whether or not such issuance,
eligibility or exercise had in fact occurred as of such
date). The Registration Statement shall also state that,
in accordance with Rule 416 and 457 under the Securities
Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon
conversion of the Notes or exercise of the Warrants to
prevent dilution resulting from stock splits, or stock
dividends. The Company will use its reasonable best efforts
to cause such Registration Statement to be declared
effective on a date (the "Required Effective Date") which
is no later than the earlier of (Y) five (5) business days
after oral or written notice by the SEC that it may be
declared effective or (Z) sixty (60) days after the Closing Date.
(ii) The aggregate number of shares registered for the
Investors in each Registration Statement or amendment
thereto shall be allocated among the Investors on a pro
rata basis among them according to their relative
Registrable Shares included in such Registration Statement.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable
Securities is not declared effective by the SEC by the
Required Effective Date, then (i) the Company will pay the
Initial Investor on such day an amount equal to 3% of the
outstanding principal amount of the Notes as of such date;
(ii) unless the Effective Date has previously occurred,
thirty (30) days after the Required Effective Date, the
Company will pay the Initial Investor on such day an
additional amount equal to 3% of the outstanding principal
amount of the Note as of such date; and (iii) unless the
Effective Date has previously occurred, sixty (60) days
after the Required Effective Date, the Company will pay the
Initial Investor on such day an additional amount equal to
3% of the outstanding principal amount of the Notes as of
such date. All amounts due pursuant to this Section
2(b)(i) shall be paid by the Company to the Initial
Investor in immediately available funds.
(ii) The parties acknowledge that the damages that may be
incurred by the Investor if the Registration Statement has
not been declared effective by the Required Effective Date
may be difficult to ascertain. The parties agree that the
amounts provided in Section 2(b)(i) represent a reasonable
estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages and, except for
any rights or remedies granted by one or more pledgors
under that certain Stock Pledge Agreement of event date
herewith or otherwise, shall be the Initial Investor's sole
remedy against the Company with respect to such damages.
(iii) Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not
be payable to the extent any delay in the effectiveness of
the Registration Statement occurs because of an act of, or
a failure to act or to act timely by the Initial Investor
or its counsel.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall do each
of the following:
(a) Prepare promptly, and file with the SEC a Registration
Statement with respect to not less than the number of
Registrable Securities provided in Section 2(a) above, and
thereafter use its reasonable best efforts to cause such
Registration Statement relating to Registrable Securities to
become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period
(the "Registration Period") continuing until the earlier of (i)
the date when the Investors may sell all Registrable Securities
under Rule 144 without volume or other restrictions or limits or
(ii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any
amendments or supplements thereto and Prospectuses, as defined
below, contained therein) shall not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration
Statement and the Prospectus used in connection with the
Registration Statement as may be necessary to keep the
Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply
with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, which firm has requested to receive
such notification; each, an "Investor's Counsel") to review the
Registration Statement and all amendments and supplements
thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects;
(d) Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A)
below, not less than three (3) business days prior to such
filing) and (if requested by any such person) confirm such
notice in writing no later than one (1) business day following
the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is
proposed to be filed; (B) whenever the SEC notifies the Company
whether there will be a "review" of such Registration Statement;
(C) whenever the Company receives (or a representative of the
Company receives on its behalf) any oral or written comments
from the SEC in respect of a Registration Statement (copies or,
in the case of oral comments, summaries of such comments shall
be promptly furnished by the Company to the Investors); and (D)
with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of
the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated
hereby ceases to be true and correct in all material respects;
(v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any
event that to the best knowledge of the Company makes any
statement made in the Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or
the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading. In addition, the Company
shall furnish the Investor's Counsel with copies of all intended
written responses to the comments contemplated in clause (C) of
this Section 3(d) not later than one (1) business day in advance
of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;
(e) Furnish to each Investor and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one (1) copy of
the Registration Statement, each preliminary Prospectus and
Prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a Prospectus, and all amendments and
supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the
Company has knowledge, as a result of which the Prospectus
included in the 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, in light of the circumstances
under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the
Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of a notice of
effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest
possible time;
(h) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration
Statement, the Company notifies the Investors in writing of the
existence of a Potential Material Event, the Investors shall not
offer or sell any Registrable Securities, or engage in any other
transaction involving or relating to the Registrable Securities,
from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written
notice from the Company that such Potential Material Event
either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however, that the Company
shall, if lawful to do so, provide the Investor with at least
two (2) business days' notice of the existence (but not the
substance of) a Potential Material Event;
(i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the
Registration Statement on the Principal Trading Market and the
quotation of the Registrable Securities on the Principal Trading Market.
(j) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not
later than the initial Effective Date.
(k) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to
be offered pursuant to the Registration Statement and enable
such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors
may reasonably request, and, within five (5) business days after
a Registration Statement which includes Registrable Securities
is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to
the Transfer Agent for the Registrable Securities (with copies
to the Investors whose Registrable Securities are included in
such Registration Statement) an appropriate instruction and
opinion of such counsel, which shall include, without
limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities(including certificates
for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities
previously issued) without legends or other restrictions; and
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have
the following obligations:
(a) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(b) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described
in Section 3(f) or 3(g), above, such Investor will immediately
discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 3(f) or 3(g) and,
if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies
in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration. All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred
in connection with registrations, filings or qualifications pursuant
to Section 3, but including, without limitation, all registration,
listing, and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by
the Company. In addition, a fee for a single counsel for the
Investors (as a group and not individually) equal to $2,500 for the
review of each Registration Statement and $1,500 for each post-
effective amendment to a Registration Statement, shall be borne by
the Company.
6. Indemnification. After Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless, the Investor, the directors, if any, of such
Investor, the officers, if any, of such Investor, and each
Person (each, an "Indemnified Party"), against any losses,
claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may
become subject under the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or otherwise,
insofar as such Claims (or actions or proceedings, whether
commenced in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any
post-effective amendment thereof or 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, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final Prospectus
(as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to
make the statements made therein, in the light of the
circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities
Act, the Exchange Act or any state securities law (the matters
in the foregoing clauses (i) through (iii) being collectively
referred to as "Violations"). The Company shall reimburse the
Investor, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (i) apply to any Claims
arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Indemnified Party
expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or
supplement thereto, if such Prospectus was timely made available
by the Company pursuant to Section 3(c) hereof; (ii) be
available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the Prospectus made
available by the Company; or (iii) apply to amounts paid in
settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall
not be unreasonably withheld. The Investor will indemnify the
Company, its officers, directors and agents (including legal
counsel) (each an "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor,
expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and
conditions set forth in this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Party, and shall survive
the offering and transfer of the Registrable Securities by the Investor.
(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including
any governmental action), such Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a
written notice 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 control of the
defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Party, as the case may
be; provided, however, that an Indemnified Party shall have the
right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified
Party and 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 deliver written notice to the
indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying
party agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that (a) no
contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such
fraudulent misrepresentation; and (c) except where the seller has
committed fraud (other than a fraud by reason of the information
included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof)
or intentional misconduct, contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. Reports under Securities Act and Exchange Act. With a view
to making available to Investor the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit Investor to sell securities of
the Company to the public without Registration ("Rule 144"), the
Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act;
(c) furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) if not available on the SEC's ▇▇▇▇▇ system, 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 to
permit the Investor to sell such securities pursuant to Rule 144
without Registration; and
(d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent irrevocable
instructions (supported by an opinion of Company counsel, if
required or requested by the Transfer Agent) to the effect that,
upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate")
certifying (A) that the Holder's holding period (as
determined in accordance with the provisions of Rule
144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being
Sold") is not less than (1) year and (B) as to such
other matters as may be appropriate in accordance with
Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company
(for which purposes it is agreed that the initial
Investor's Counsel shall be deemed acceptable) if not
given by ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. within three (3)
business days after request by the Investor that,
based on the Rule 144 Certificate, Securities Being
Sold may be sold pursuant to the provisions of Rule
144, even in the absence of an effective Registration
Statement,
the Transfer Agent is to effect the transfer of the Securities Being
Sold and issue to the buyer(s) or transferee(s) thereof one or more
stock certificates representing the transferred Securities Being Sold
without any restrictive legend and without recording any restrictions
on the transferability of such shares on the Transfer Agent's books
and records (except to the extent any such legend or restriction
results from facts other than the identity of the Holder, as the
seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold
while held by the Holder). If the Transfer Agent reasonably requires
any additional documentation at the time of the transfer, the Company
shall deliver or cause to be delivered all such reasonable additional
documentation as may be necessary to effectuate the issuance of an
unlegended certificate.
9. Assignment of the Registration Rights. The rights to have
the Company register Registrable Securities pursuant to this
Agreement shall be automatically assigned by the Investors to any
transferee of the Registrable Securities (or all or any portion of
any unconverted Debentures) only if the Company is, within a
reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such
registration rights are being transferred or assigned.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Company and Investors who hold a eighty (80%) percent interest of the
Registrable Securities (as calculated by the stated value of the
Notes). Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Financing Agreement,
(i) if to the Company or to the Initial Investor, to their
respective address contemplated by the Financing Agreement, and
(ii) if to any other Investor, at such address as such Investor
shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in
accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts
to be wholly performed in such state and without giving effect
to the principles thereof regarding the conflict of laws. Each
of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New
York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based
on forum non coveniens, to the bringing of any such proceeding
in such jurisdictions.
(e) The Company and the Investor hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of
the parties hereto against the other in respect of any matter
arising out of or in connection with this Agreement or any of
the other Transaction Agreements.
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the
context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the
meaning thereof.
(j) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto
by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(k) Neither party shall be liable to the other party hereunder
for any indirect, special, incidental or consequential damages.
(l) This Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized
as of the day and year first above written.
COMPANY:
FREESTAR TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇
Title: President
INITIAL INVESTORS:
PAPELL HOLDINGS, LTD.
By: /s/ International First Secretarial
Group Ltd.
International First Secretarial Group
Ltd., Director
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇
BOAT BASIN INVESTORS LLC
By: /s/ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, Manager
EXHIBIT D
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT ("Agreement") entered into as of the 25th
day of March, by and among the persons set forth on Schedule 1 (the
"Secured Parties," and each a "Secured Party"), FREESTAR
TECHNOLOGIES, INC., a Nevada corporation having its principal
executive offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ("Company") and ▇▇▇▇ ▇▇▇▇ ("Pledgor").
RECITALS
A. Pledgor has agreed to pledge certain Company shares as
security for: (i) the performance by the Company of its obligations
under its Series 2002A 8% Convertible Notes in an aggregate principal
amount of Two Hundred Seventy Thousand and 00/100 Dollars
($270,000.00) payable to the Secured Parties (the "Notes"); (ii) the
performance by the Company of its obligations, covenants, and
agreements under the Financing Agreements between the Company and
each Secured Party as well as the Related Agreements (as that term is
defined in the Financing Agreement), and (iii) the performance by the
Pledgor under the Unconditional Guaranty executed by the Pledgor
(the "Guaranty"). Capitalized terms in this Agreement that are not
identified herein will have the meanings given such terms in the Notes.
B. The Secured Parties are willing to accept the Notes from
the Company only upon receiving Pledgor's guarantee and pledge of
certain stock of the Company, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Grant of Security Interest. Pledgor hereby pledges to the
Secured Parties (and to each of them to the extent of the Note held
by each), as collateral and security for the Secured Obligations (as
defined in paragraph 2) all of the shares of Common Stock set forth
on the attached Schedule 2 of this Agreement (the "Pledged Shares").
Unless otherwise set forth on Schedule 2 of this Agreement, the
Pledgor is the beneficial and record owner of the Pledged Shares set
forth opposite Pledgor's name on such Schedule. Such Pledged Shares,
together with any substitutes therefor, or proceeds thereof, are
hereinafter referred to collectively as the "Collateral."
2. Obligations Secured. During the term hereof, the
Collateral shall secure the following:
(a) The performance by the Company of its obligations,
covenants, and agreements under the Notes, the Financing
Agreements, and the Related Agreements (the "Transaction
Documents"), and
(b) The performance by the Pledgors of their obligations,
covenants, and agreements under the Guaranty
The obligations, covenants and agreements described in clauses (a)
and (b) are the "Secured Obligations."
3. Perfection of Security Interests. Upon execution of this
Agreement by each Pledgor, the Pledgor shall deliver and transfer
possession of the stock certificates identified opposite the
Pledgor's name on Schedule 2 of this Agreement (the "Certificates"),
together with stock transfer powers duly executed in blank by the
registered owner of the shares represented by such Certificates, with
appropriate Medallion signature guaranty ("Stock Powers"), to the
Secured Parties to be held by the Secured Parties until the earlier of
(a) the termination of this Agreement or
(b) foreclosure of Secured Party's security interests as
provided herein.
The Pledgor hereby appoints the Secured Parties, or either of them,
as attorney-in-fact to execute all documents and perform all acts as
Secured Parties, in order to perfect and maintain a valid security
interest for Secured Parties in the Collateral.
4. Assignment. Only in connection with the transfer of the
Notes in accordance with their terms, a Secured Party may assign or
transfer the whole or any part of its security interest granted
hereunder, and may transfer as collateral security the whole or any
part of Secured Party's security interest in the Collateral. Any
transferee of the Collateral shall be vested with all of the rights
and powers of Secured Party hereunder with respect to the Collateral.
5. Pledgors' Warranty. Each Pledgor represents and warrants
hereby to the Secured Parties as follows with respect to the Pledged
Shares set forth opposite such Pledgor's name on Schedule 2 to this
Agreement:
(a) Title: (i) that upon transfer by Pledgor of the
Pledgor's Certificates and Stock Powers to Secured Parties
pursuant to this Agreement at such time, if any, as the
occurrence of an Event of Default by the Company under the
Notes, the Secured Parties (and each of them to the extent of
the Notes held by such Secured Party) will have good title (both
record and beneficial) to the Pledged Shares;
(ii) that there are no restrictions upon transfer and
pledge of the Pledged Shares pursuant to the provisions of
this Agreement except the restrictions imposed by Rule 144
under the Securities Act of 1933, and that such
restrictions on resale shall not be applicable if an Event
of Default occurs under the Notes, and the Secured Parties
exercise their remedies under the Guaranty and foreclose on
the Pledged Shares;
(iii) that the Pledged Shares are free and clear of any
encumbrances of every nature whatsoever, the Pledgor is the
sole owner of the Pledged Shares, and such shares are duly
authorized, validly issued, fully paid and non-assessable,
(iv) the Pledgor has owned the Pledged Shares since the
date specified on Schedule 1 to this Agreement. The
Pledgor further agrees not to grant or create, any security
interest, claim, lien, pledge or other encumbrance with
respect to the Pledgor's Pledged Shares or attempt to sell,
transfer or otherwise dispose of any of such shares until
the Secured Obligations have been paid in full or this
Agreement terminates; and
(v) this Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with
its terms (except as the enforcement thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and similar laws, now or
hereafter in effect).
The Company represents and warrants that the Pledged Shares are duly
authorized, validly issued, fully paid and non-assessable and that it
will not permit the transfer of the Pledged Shares except in
accordance with this Agreement while the same is in effect.
(b) Other: (i) Pledgor has made necessary inquiries of the
Company and believes that the Company fully intends to fulfill
and has the capability of fulfilling the Secured Obligations to
be performed by the Company in accordance with the terms of the
Notes, the Financing Agreements, and the Related Agreements.
(ii) The Pledgors are not (and neither of them is ) acting,
and have not (and neither of them has) agreed to act, in
any plan to sell or dispose of the pledged shares in a
manner intended to circumvent the registration requirements
of the Securities Act of 1933, as amended, or any
applicable state law.
(iii) Pledgor has been advised by counsel of the
elements of a bona-fide pledge for purposes of Rule
144(d)(3)(iv) under the Securities Act of 1933, as amended,
including the relevant SEC interpretations and affirm the
pledge of shares by the Pledgor pursuant to this Pledge
Agreement will constitute a bona-fide pledge of such shares
for purposes of such Rule.
6. Collection of Dividends and Interest During the term of
this Agreement and so long as Pledgor is not in default under the
Notes, Pledgor is authorized to collect all dividends,
distributions, interest payments, and other amounts that may be, or
may become, due on any of the Collateral.
7. Voting Rights During the term of this Agreement and until
such time as this Agreement has terminated or Secured Party has
exercised its rights under this Agreement to foreclose its security
interest in the Collateral, Pledgor shall have the right to exercise
any voting rights evidenced by, or relating to, the Collateral.
8. Warrants and Options. In the event that, during the term
of this Agreement, subscription, warrants, dividends, or any other
rights or option shall be issued in connection with
the Collateral, such warrants, dividends, rights and options shall be
immediately delivered to Secured Party to be held under the terms
hereof in the same manner as the Collateral.
9. Preservation of the Value of the Collateral and
Reimbursement of Secured Party Pledgor shall pay all taxes, charges,
and assessments against the Collateral and do all acts necessary to
preserve and maintain the value thereof. On failure of Pledgor,
Secured Party may make such payments on account thereof as (in
Secured Party's discretion) is deemed desirable, and Pledgor shall
reimburse Secured Party immediately on demand for any and all such
payments expended by Secured Party in enforcing, collecting, and
exercising its remedies hereunder.
10. Default and Remedies.
(a) For purposes of this Agreement, "Event of Default" shall mean
(i) default in the performance by the Company or the
Pledgor of any of the Secured Obligations after the
expiration, without cure following the expiration of any
applicable cure period; and
(ii) a breach by the Pledgor of any of his representations,
warranties, covenants or agreements in this Agreement.
(b) During the term of this Agreement, the Secured Party shall
have the following rights after any Event of Default and for so
long as the Secured Obligations are not satisfied in full:
(i) the rights and remedies provided by the Uniform
Commercial Code as adopted by the State of New York (as
said law may at any time be amended), except that the
Secured Party waives any right to a deficiency pursuant to
Section 9-608 thereof or otherwise;
(ii) the right to receive and retain all dividends,
payments and other distributions of any kind upon any or
all of the Pledged Shares as additional Collateral;
(iii) the right to cause any or all of the Pledged
Shares and all additional Collateral to be transferred to
its own name and have such transfer recorded in any place
or places deemed appropriate by Secured Party; and
(iv) the right to sell, at a public or private sale, the
Collateral or any part thereof for cash, upon credit or for
future delivery, and at such price or prices in accordance
with the Uniform Commercial Code (as such law may be
amended from time to time). Upon any such sale, Secured
Party shall have the right to deliver, assign and transfer
to the purchaser thereof the Collateral so sold. Secured
Party shall give the Pledgor not less than ten (10) days
written notice of its intention to make any such sale. Any
such sale shall be held at such time or times during
ordinary business hours and at such place or places as
Secured Party may fix in the notice of such sale. Secured
Party may adjourn or cancel any sale or cause the same to
be adjourned from time to time by announcement at the time
and place fixed for the sale, and such sale may be made at
any time or place to which the same may be so adjourned.
In case of any sale of all or any part of the Collateral
upon terms calling for payments in the future, any
Collateral so sold may be retained by Secured Party until
the selling price is paid by the purchaser thereof, but
Secured Party shall incur no liability in the case of the
failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of such failure, such
Collateral may again be sold upon like notice. Secured
Party, however, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at
law or in equity to foreclose the security interest and
sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent
jurisdiction, the Pledgor having been given due notice of
all such action. Secured Party shall incur no liability as
a result of a sale of the Collateral or any part thereof.
(c) Notwithstanding anything in this Agreement to the contrary,
the Secured Party may only exercise the rights and remedies set
forth in this Section 10 with respect to up to the aggregate
number of shares of Common Stock into which the outstanding
Notes are then convertible, and simultaneously with such
exercise the amount owing by the Company under the Notes shall
be reduced by an amount equal to the then applicable Conversion
Price (as defined in the Note) multiplied by the number of
Pledged Shares with respect to which the Secured Party has
exercised its foregoing rights and remedies. For the purposes of
any such sale, the Conversion Price set forth in any Notice of
Conversion (as defined in the Note) issued in connection with
the sale of the Collateral shall be controlling, regardless of
the actual price received for the sale of the Collateral. There
shall be no obligation on the part of the Secured Parties to
sell the Collateral at one sale. The sale of Collateral may
take place on as many occasions as Secured Parties deem fit in
order to pay in full the Secured Obligations.
(d) Should the Secured Parties (or any of them) exercise the
rights set forth in clauses (b)(ii) or (b)(iii) of this Section
10, the Secured Party(ies) so acting shall assign to the Pledgor
all of the rights and benefits of such Secured Party(ies) under
the Notes, the Financing Agreements, and Related Agreements The
Secured Party(ies) shall make such assignment to the Pledgor
without recourse.
11. Waiver The Pledgor waives any right that it may have to
require Secured Party to proceed against any other person, or proceed
against or exhaust any other security, or pursue any other remedy
Secured Party may have.
12. Term of Agreement. This Agreement shall continue in full
force and effect until the Secured Obligations shall have been paid
in full and the security interests are thereby released or until
amounts owing under the Notes have been reduced to zero (-0-)
pursuant to Section 10(c) hereof. Upon termination of this
Agreement, the Collateral shall be returned within five (5) Business
Days to Pledgor or counsel for the Company.
13. General Provisions:
13.1 Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the successors and assigns of
the respective parties hereto.
13.2 Captions. The headings used in this Agreement are inserted
for reference purposes only and shall not be deemed to define,
limit, extend, describe, or affect in any way the meaning, scope
or interpretation of any of the terms or provisions of this
Agreement or the intent hereof.
13.3 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures upon
any counterpart were upon the same instrument. All signed
counterparts shall be deemed to be one original. This
Agreement, once executed by a party, may be delivered to the
other parties hereto by telephone line facsimile transmission of
a copy of this Agreement bearing the signature of the parties so
delivering this Agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
13.4 Further Assurances The parties hereto agree that, from
time to time upon the written request of any party hereto, they
will execute and deliver such further documents and do such
other acts and things as such party may reasonably request in
order fully to effect the purposes of this Agreement. The
Transfer Agent Instructions annexed hereto are deemed an
integral part of this Agreement.
13.5 Waiver of Breach. Any waiver by either party of any breach
of any kind or character whatsoever by the other, whether such
be direct or implied, shall not be construed as a continuing
waiver of or consent to any subsequent breach of this Agreement.
13.6 Cumulative Remedies. The rights and remedies of the
parties hereto shall be construed cumulatively, and none of such
rights and remedies shall be exclusive of, or in lieu or
limitation of any other right, remedy, or priority allowed by
applicable law.
13.7 Amendment. This Agreement may be modified only in a
written document that refers to this Agreement and is executed
by Secured Parties, the Pledgor and the Company.
13.8 Interpretation. This Agreement shall be interpreted,
construed, and enforced according to the substantive laws of the
State of New York.
13.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New
York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based
on forum non coveniens, to the bringing of any such proceeding
in such jurisdictions.
13.10 Notice Any notice or other communication required or
permitted to be given hereunder shall be effective upon receipt.
Such notices may be sent (i) in the United States mail, postage
prepaid and certified, (ii) by express courier with receipt,
(iii) by facsimile transmission, with a copy subsequently
delivered as in (i) or (ii) above. Any such notice shall be
addressed or transmitted as follows:
If to Pledgor:
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ #▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Secured Party, to the addresses set forth on Schedule 1.
or such other address as may be designated in writing hereafter,
in the same manner, by such Person.
13.11 Acknowledgement by Pledgors In the event that any
provision of the Notes or this Agreement as applied to any party
or circumstances shall be adjudged by a court to be invalid or
unenforceable, Pledgor acknowledges and agrees that this
Agreement shall remain valid and enforceable in all respects
against Pledgor.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the day, month and year first above written.
SECURED PARTIES:
PAPELL HOLDINGS, LTD.
By: /s/ International First
Secretarial Group Ltd.
International First Secretarial Group
Ltd., Director
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇, Director
BOAT BASIN INVESTORS LLC
By: /s/ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, Manager
FREESTAR TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, Chief Financial Officer
PLEDGOR:
/s/ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
SCHEDULE 1
Secured Parties
Name Address Dollar Value of Notes
Papell Holdings, Ltd. Duke Street, P.O. Box 65 $200,000
A Turks & Caicos Grand Turks
Islands Company Turks & Caicos Islands
British West Indies
Boat Basin Investors LLC Main Street $ 70,000
A St. Kitts & Nevis ▇▇▇▇▇▇▇ Plaza
Limited Liability ▇.▇. ▇▇▇ ▇▇▇
Company Charlestown
Nevis, West Indies
SCHEDULE 2
The following shares are pledged hereunder as the Pledged
Shares, each certificate in the name of:
Holders Name Certificate No. No. of Shares Date of Acquisition
▇▇▇▇ ▇▇▇▇ 01554 4,000,000
EXHIBIT E
FORM OF OPINION OF COUNSEL
___________, 2002
Re: FreeStar Technologies, Inc.
Ladies and Gentlemen:
We have acted as counsel to FreeStar Technologies, Inc., a
corporation incorporated under the laws of the State of Nevada (the
"Company"), in connection with the proposed loan of $270,000 that
certain accredited investors propose to make to the Company pursuant
to a Financing Agreement between the Company and Papell Holdings,
Ltd. and Boat Basin Investors, LLC (the "Lenders") dated March 25,
2002, including all schedules, exhibits and appendices attached
thereto and all documents and instruments executed and delivered as
contemplated thereby (collectively, the "Agreements"), and to ▇▇▇▇
▇▇▇▇, president of the Company, in connection with an Unconditional
Guaranty and Pledge Agreement ("▇▇▇▇ Transaction Documents") to be
given by him in connection with the Agreements. All capitalized
terms appearing in this Opinion Letter, unless defined herein, shall
have the meanings ascribed to them in the Agreements or in the ▇▇▇▇
Transaction Documents, as the case may be.
In connection with rendering the opinions set forth herein, we
have examined drafts of the Agreements, ▇▇▇▇ Transaction Documents,
the Company's Certificate of Incorporation, and its Bylaws, each as
amended to date, the proceedings of the Company's Board of Directors
taken in connection with entering into the Agreements, and such other
documents, agreements and records as we deemed necessary to render
the opinions set forth below.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA
Section of Business Law (1991). As a consequence, it is subject to a
number of qualifications, exceptions, definitions, limitations on
coverage and other limitations, all as more particularly described in
the Accord, and this Opinion Letter should be read in conjunction therewith.
In rendering the opinions included herein, we have relied upon
the factual representations and warranties made by the Company in the
Agreements, and upon other factual representations made to us by the
Company. Based upon and subject to the foregoing, we are of the
opinion that:
1. (a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Nevada, (b) is duly qualified to do business as a foreign
corporation and is in good standing in the states of Nevada and New
York, and (c) the Company has all requisite corporate power and
authority to own its properties and conduct its business.
2. The Company's common stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
3.(a) The Company has the requisite corporate power and
authority to enter into the Agreements and to perform the
transactions described therein; each of the Agreements has been duly
and validly authorized by all necessary corporate action by the
Company. ▇▇▇▇ ▇▇▇▇ has the requisite power and authority to enter
into and perform the ▇▇▇▇ Transaction Documents.
(b) No approval of any governmental or other body is
required for the execution and delivery of each of the Agreements by
the Company and the ▇▇▇▇ Transaction Documents by ▇▇▇▇ ▇▇▇▇ or the
consummation of the transactions contemplated thereby except to the
extent such approval is required by the securities (blue sky) laws of
any state.
(c) Each of the Agreements has been duly and validly
executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company, enforceable in accordance
with its terms, and each of the ▇▇▇▇ Transaction Documents has been
duly and validly executed and delivered by ▇▇▇▇ ▇▇▇▇ and is a valid
and binding obligation of ▇▇▇▇ ▇▇▇▇, enforceable in accordance with
its terms.
4. To our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the
▇▇▇▇ Transaction Documents by ▇▇▇▇ ▇▇▇▇, and the performance of its
and ▇▇▇▇ ▇▇▇▇'▇ obligations thereunder, respectively, do not and will
not constitute a breach or violation of any of the terms and
provisions of, or constitute a default under or conflict with or
violate any provision of (a) the Company's Articles of Incorporation
or Bylaws, each as currently in effect, (b) any indenture, mortgage,
deed of trust, agreement or other instrument to which the Company is
a party or by which it or any of its property is bound, (c) any
applicable statute or regulation, or (d) any judgment, decree or
order of any court or governmental body having jurisdiction over the
Company or any of its property.
The completion of the transactions contemplated in the
Agreements in accordance with the terms and conditions of the
Agreements and the ▇▇▇▇ Transaction Documents, will not violate the
applicable listing agreement between the Company and any securities
exchange or market on which the Company's securities are listed
provided the Company files its additional listing application as
required by the National Association of Securities Dealers in
connection with securities quoted on the Nasdaq SmallCap Marketplace.
Based on representations from the Company, the Lenders, and the
Pledgor that the proposed loan transaction contemplated by the
Agreements is secured by a bona fide pledge of securities, the
provisions of Rule 144(d)(3)(iv) are applicable. Upon an Event of
Default that occurs under the Agreements and the ▇▇▇▇ Transaction
Documents, any restrictive legend appearing on the Pledged Shares may
be removed by the transfer agent upon transfer of the shares to the
Secured Parties, and such Pledged Shares may thereafter be sold into
the market without restriction.
The phrase "Primary Lawyer Group," as used in the Accord, is
hereby modified and for the purposes of applying the Accord to this
Opinion Letter, the Primary Lawyer Group means ▇▇▇▇ ▇▇▇.
You have also requested that we make certain factual
representations to you, based upon our investigation. In that
connection:
Based on the articles of incorporation which the Company advises
us is complete and accurate, the authorized capital of the
Company consists of 80,000,000 shares of Common Stock, $.001 par value.
To our knowledge, there is no pending or threatened litigation,
investigation or other proceedings against the Company or ▇▇▇▇ ▇▇▇▇.
The Pledgor has each represented that he has acquired the
Pledged Shares pursuant to the Company's 2001 Employee Stock
Option Incentive Plan, which has been registered on Form S-8
with the Securities and Exchange Commission
To the extent any of the foregoing opinions or factual
representations is based on information or representations of one or
more specified individuals, organizations, agencies or entities or is
stated to be "to the best of our knowledge," we hereby confirm that
we are aware of no information inconsistent with such opinion there
expressed.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreements and
may not be relied upon by any other person or entity or for any other
purpose without our prior consent.
Very truly yours,
▇▇▇▇ ▇▇▇ & ASSOCIATES
EXHIBIT F
UNCONDITIONAL GUARANTEE
THIS UNCONDITIONAL GUARANTY ("Guaranty"), dated as of March 25,
2002, is made by ▇▇▇▇ ▇▇▇▇, with an address at Calle Fantino Falco
#24, Edificio ▇. ▇▇▇▇, Ensanche Naco, Santo ▇▇▇▇▇▇▇, Dominican
Republic ("Guarantor") in favor of persons named on Schedule 1
(together with its permitted assigns and successors, the "Holders").
Reference is made to the Series 2002A 8% Convertible Notes in
an aggregate amount of $270,000 dated of even date herewith, (the
"Notes") that FREESTAR TECHNOLOGIES, INC., a Nevada corporation (the
"Obligor") has issued to the Holders. Reference is also made to the
Stock Pledge Agreement, dated of even date herewith (the "Pledge
Agreement"), pursuant to which the Guarantor has pledged to the
Holders an aggregate of 4,000,000 shares of Common Stock owned of
record and beneficially by the Guarantor (the "Pledged Stock") as
partial collateral to secure payment and performance of the "Secured
Obligations" described below.
Unless otherwise defined herein, all capitalized terms, when
used herein shall have the same meaning as is defined in the Note. In
order to induce the Holders to provide an aggregate of $270,000 to
the Obligor, as evidenced by the Notes, the undersigned Guarantor has
agreed to execute and deliver this Guaranty to the Holders. The
Guarantor is the president and a director of the Obligor.
The Guarantor does hereby irrevocably and unconditionally
guaranty to the Holders, to the extent hereinafter set forth, the
full and timely performance by the Obligor of each of the Obligor's
covenants, agreements, and obligations under the Notes (which
obligation is hereafter referred to as the "Secured Obligations").
This is an absolute, irrevocable and unconditional guaranty of
payment and performance and not merely of collection and the
Guarantor shall be liable with the Obligor. In furtherance hereof,
the Guarantor does hereby acknowledge and confirm that the Secured
Obligations are intended to and will confer significant benefit upon
the Guarantor.
1. Notwithstanding any payment(s) made by the Guarantor
hereunder, but without prejudice to the Guarantor's rights as a
creditor of the Obligor, the Guarantor shall in no event be entitled
to be subrogated to any of the rights of the Holder against the
Obligor unless and until all Secured Obligations shall have been paid
in full; and the Guarantor shall in no event seek any contribution or
reimbursement from the Obligor in respect of any payment(s) made by
or received in respect of the Guarantor hereunder, unless and until
all of the Secured Obligations shall have been paid in full.
2. The Guarantor hereby acknowledges and agrees that the
validity of this Guaranty and the Guarantors' obligations hereunder
shall in no way be terminated, modified, affected, impaired or
diminished by reason of
(i) any failure by the Holders (or any of them) to insist in any
one or more instances upon strict performance or observance by
the Obligor of any of the terms, provisions or conditions of the
Note,
(ii) any assertion or non-assertion by the Holders (or any of
them) against the Obligor of any of the rights or remedies
reserved to the Holders in the Notes,
(iii) any forbearance by the Holders (or any of them) from
exercising any of its rights or remedies as aforesaid,
(iv) any bankruptcy, insolvency, receivership, reorganization,
liquidation or other similar proceeding relating to the Obligor,
(v) any relief of the Obligor and/or the Guarantor from any of
its obligations under any of the Notes, by operation of law, in
equity or otherwise,
(vi) any amendment, modification, extension, renewal,
termination, compromise or waiver under or in respect of any of
the Notes, or
(vii) any transfer, assignment or negotiation of any of the
Notes or this Guaranty.
Except for any required demand in respect of payment hereunder, the
Guarantor hereby waives any and all notice, demand, presentment,
protest and other such privilege or formality, and all notice in
respect of the creation, renewal, extension or accrual of any Secured
Obligations. The Guarantor represents and warrants to the Holders
that this Guaranty has been duly executed and delivered by the
Guarantor, constitutes the legal, valid and binding obligation of the
Guarantor, and is enforceable against the Guarantor in accordance
with its terms; the Guarantor has full capacity and power to execute
and deliver this Guaranty; and the execution and delivery by the
Guarantor of this Guaranty and the performance by the Guarantor of
his obligations hereunder, do not violate, or conflict with, any
agreement, instrument, note, judgment, order or decree binding on the
Guarantor or under any law, rule or regulation applicable to the
Guarantor, which violation or conflict would have a material and
adverse effect on the Guarantor's ability to perform his obligations
under this Guaranty.
3. This Guaranty shall inure to the benefit of the Holders and
their successors and assigns.
4. Subject to applicable statutes of limitations, no delay on
the part of any of the Holders in exercising any rights hereunder, or
any failure by any of the Holders to exercise any such rights, shall
operate as a waiver of any such rights for any purposes, it being
understood that, subject to applicable statutes of limitations, the
Holders may exercise any and all of his rights hereunder at any time
and from time to time pursuant to the terms hereof.
5. Except as otherwise provided herein, this Guaranty may not
be terminated, modified or amended except by a writing duly executed
by Holders of Notes representing a majority of the Secured
Obligations and the Guarantor.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing
of any such proceeding in such jurisdictions.
7. In the event that the Holders shall, after default by the
Guarantor of any of his obligations hereunder, place this Guaranty in
the hands of any attorney for enforcement and/or collection, the
Guarantor shall pay to the Holders reasonable attorneys' fees
together with all other reasonable costs and expenses of enforcement
and collection.
8. This Guaranty may be executed in any number of counterparts,
each of whom shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned Guarantor,
intending to be legally bound hereby, has executed this Guaranty as
of the date set forth above.
/s/ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
ACCEPTED AND AGREED TO:
PAPELL HOLDINGS, LTD.
By: /s/ International First
Secretarial Group Ltd.
International First Secretarial Group
Ltd., Director
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇
BOAT BASIN INVESTORS LLC
By: /s/ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, Manager