As filed with the Securities and Exchange Commission on December 19, 2000
Registration Number _______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Salient Cybertech, Inc.
(Exact name of Registrant as specified in its charter)
Delaware ________________ 35-1990559
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Code Number)
Salient Cybertech, Inc. Paul A. Sloan, President
1999 Lincoln Drive c/o Salient Cybertech, Inc.
Suite 202 1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236 Sarasota, Florida 34236
(941) 953-6168 (941) 953-6168
(Address, including (Address, including zip code,
zip code, and telephone telephone number including area code,
number and including area executive principal or agent for
code, of Registrants service)
principal place of
business)
Copies of all communications to:
Bernabe B. Diaz, Esq.
Corporate Services Group, LLC.
71 Stony Hill Road, 2nd Floor
Bethel, CT 06801
Approximate date of commencement of the proposed sale to the
public: The business day after the date on which this Registration Statement
becomes effective. If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act of 1933, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. []
<PAGE>
CALCULATION OF REGISTRATION FEE
============================================================================
Proposed Maximum
Title of Each Class Amount Offering Aggregate Amount
of Securities to be to be Price Offering of Regis-
Registered Registered Per Unit Price tration Fee.
============================================================================
Common Stock, with
par value of $0.001 (1) 10,595,159 $0.4375 $4,635,383 $1,242.28
Common Stock, with
par value of $0.001 (2) 5,124,876 $0.4375 $2,242,134 $ 600.90
Common Stock, with
par value of $0.001 (2) 1,175,000 $0.4375 $ 514,060 $ 137.77
TOTAL 16,895,035 $0.4375 $7,391,577 $1,980.95
============================================================================
(1) Represents shares issuable to the holders of the 8% Convertible
Debenture, Vesting Warrant, and Closing Warrant issued by Salient
Cybertech, Inc. to Haines Avenue, LLC. (See, DEBENTURE, below at page 44
of the Prospectus). That number of shares is subject to adjustment under
anti-dilution provisions included in Debenture covering the additional
issuance of shares by us resulting from stock splits, stock dividends or
similar transactions.
(2) Represents the number of shares to be registered, based on the minimum
number of shares issuable pursuant to the terms of the Securities Purchase
Agreement and Vesting Warrant, both dated November 14, 2000, at a market
price of $0.4375 per share of the common stock of Salient Cybertech, Inc.
(See, Securities Purchase Agreement, below at page 47 of the Prospectus).
Pursuant to Rule 416, the shares of common stock offered hereby also
include such presently indeterminate number of shares of common stock as
shall be issued by us to the selling security-holder upon exercise of the
Vesting Warrants and pursuant to the terms of the Securities Purchase
Agreement. That number of shares is subject to adjustment under anti-
dilution provisions included in the Securities Purchase Agreement covering
the additional issuance of shares by us resulting from stock splits, stock
dividends or similar transactions.
(3) Represents the number of shares to be registered, based on the minimum
number of shares issuable pursuant to the terms of the Closing Warrant
issued pursuant to the Securities Purchase Agreement dated November 14,
2000, at a market price of $0.4375 per share of the common stock of Salient
Cybertech, Inc.(See, Securities Purchase Agreement, below at page 47 of the
Prospectus). Pursuant to Rule 416, the shares of common stock offered
hereby also include such presently indeterminate number of shares of
common stock as shall be issued by us to the selling security-holder upon
exercise of the warrants. That number of shares is subject to adjustment
under anti-dilution provisions included in Closing Warrant covering the
additional issuance of shares by us resulting from stock splits, stock
dividends or similar transactions.
This registration statement is comprised of 270 consecutively numbered
pages, including exhibits. The exhibit index called for by Item 601 of
Regulation SB is located at page 109.
<PAGE>
Pursuant to Item 601 of Regulation S-B, table showing location in
the Prospectus of information required by Items 101 through 510
of Regulation SB-2.
Registration Statement
Item Number and Caption Prospectus Caption
101. Description of Business THE COMPANY
102. Description of Property THE COMPANY - PROPERTY
103. Legal Proceedings LITIGATION
201. Market for Common Stock and CERTAIN MARKET INFORMATION
Related Stockholder Matters
202. Description of Securities to be
Registered DESCRIPTION OF SECURITIES
303. Management's Discussion and MANAGEMENTS DISCUSSION AND
Analysis or Plan of Operation ANALYSIS OF OPERATIONS &
CHANGES IN FINANCIAL
CONDITION
304. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure. NOT APPLICABLE
310. Financial Statements FINANCIAL STATEMENTS
401. Directors, Executive MANAGEMENT;TRANSACTIONS;
Control Persons
402. Executive Compensation MANAGEMENT
403. Security Ownership of PRINCIPAL STOCKHOLDERS;
Certain Beneficial Owners CERTAIN TRANSACTIONS
and Management
404. Certain Relationships and CERTAIN TRANSACTIONS;
Related Transactions
405. Compliance with Section
16(a) of the Exchange Act MANAGEMENT
501. Forepart of the Registration COVER PAGE
Front Cover Statement and
Outside Page of Prospectus
502. Inside Front Cover and COVER PAGE; INSIDE
Outside Back Cover Pages FRONT COVER AND
of Prospectus OUTSIDE BACK COVER
PAGES
<PAGE>
Pursuant to Item 601 of Regulation S-B, table showing location in
the Prospectus of information required by Items 101 through 510
of Regulation SB-2 (continued).
Registration Statement
Item Number and Caption Prospectus Caption
503. Summary Information SUMMARY OF THE PROSPECTUS;
& Risk Factors RISK FACTORS
504. Use of Proceeds USE OF PROCEEDS
505. Determination of Offering Price COVER PAGE; DILUTION;
CERTAIN MARKET
INFORMATION
506. Dilution DILUTION
507. Selling Securities Holders PLAN OF DISTRIBUTION
508. Plan of Distribution COVER PAGE; INSIDE FRONT
COVER;
PLAN OF DISTRIBUTION
509. Interests of Named Experts CERTAIN TRANSACTIONS
and Counsel
510. Disclosure of Commission INDEMNIFICATION
ARRANGEMENTS
<PAGE>
Prospectus
SALIENT CYBERTECH, Inc.
(a Florida Corporation)
16,859,035 Shares of Common Stock, with a Par Value of $0.001
This offering involves the re-sale of 7,085,715 shares in our common stock,
underlying the stock issuable pursuant to an 8% Debenture granted to
Haines Avenue, LLC. (Selling Stockholder), 423,729 shares in our common
stock issuable pursuant to a closing warrant and 3,085,715 additional
shares in our common stock issuable pursuant to a vesting warrant, both
warrants issued in conjunction with the Debenture. This offering also
involves the re-sale of 5,124,876 shares in our common stock issuable
pursuant to a Securities Purchase Agreement with Haines Avenue, LLC.,
1,175,000 shares of our common stock issuable pursuant to a Warrant, the
Warrants issued in conjunction with the Securities Purchase Agreement. We
will receive no proceeds from the resale of stock issued to the Selling
Shareholder.(see "DEBENTURE", and "SECURITIES PURCHASE AGREEMENT", "Selling
Stockholder", below, at pages 44,47 and 52).
Salient Cybertech, Inc. (Salient), our company (NASDAQ BB OTC: SLEL), is
primarily a holding company with two divisions, the HIGH TECHNOLOGY
DIVISION, and the INTERNET/TECHNOLOGY DIVISION. We currently have one
wholly owned subsidiary in each division. Futronix, Inc. (Futronix), is
an ISO 9002-certified consignment and turnkey contract electronic
manufacturer offering Surface Mount Technology capabilities, mixed
technology, mechanical assembly, in-circuit and functional testing, and
design and engineering services for customers. Futronix currently makes
up our HIGH TECHNOLOGY DIVISION. Gemini Learning Systems, Inc., which
currently makes up our INTERNET TECHNOLOGY DIVISION, developed and markets
SWIFT (tm) (SoftWare Intelligent Freeform Training) distance learning
software and courseware.
Our shares are traded on the NASDAQ OTC Bulletin Board. However,
the market for our shares is limited, and it is entirely possible that
there will be no market for our shares in the future, or, if a market
will exist, it will be a very restricted one.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
===========================================================================
Number of Price Per Aggregate Price Expenses & Proceeds to
Shares Share to Public Commissions Company
===========================================================================
16,895,035 $.4375 (1) 7,391,577 (1) Unknown (2) Unknown (3)
===========================================================================
(1) The actual price per Share to the public of the Selling Shareholder's
Shares will be based on the bid price for our Common Stock on the dates of
specific sales, unless shares are sold in private transactions. Consequently,
no determination can be made as to actual pricing matters. The price to the
Selling Shareholder was based upon an arbitrary market value of $0.4375 per
share agreed upon between the Selling Shareholder and Salient Cybertech,
Inc.
(2) We anticipate that normal brokerage commissions will be charged by
firms that sell any of the Selling Stockholder' Shares for the account of
the Selling Stockholder, and that such commissions will be tied to a
percentage of the sales price. However, we cannot provide specific
information pertaining to these commissions, as the details are unknown.
We do know, however, that the total costs to us will be about $50,000. These
costs will be made up of legal, accounting, printing, and registration fees.
(3) There will be no direct proceeds to us from the re-sale of shares by the
Selling Shareholder. However, we may receive proceeds from the exercise of
Warrants by the Selling Shareholder to obtain the shares which are being
resold in reliance of this Prospectus. The amount of such proceeds is
indeterminate, as the Warrants have a cashless feature. We would also
receive proceeds from the sale of shares to the Selling Shareholder pursuant
to the Share Purchase Agreement, although we would receive no proceeds from
their resale by the Selling Shareholder. (See, "DEBENTURE", Securities
Purchase Agreement, Use of Proceeds, and Selling Shareholder, below).
<PAGE>
Salient Cybertech, Inc.
(a Delaware Corporation)
Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
(941) 953-6168
The date of this Prospectus is ___________, 2000.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2
(adopted under authority of the Securities Act of 1933, as
amended) with respect to the securities offered in this
Prospectus, with the United States Securities and Exchange
Commission (S.E.C.). This Prospectus does not contain all the
information set forth in the Registration Statement and the
exhibits and schedules attached to it. For further information,
you are referred to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each
instance we refer you to the copy of such contract filed as an
exhibit to the Registration Statement. You may inspect The
Registration Statement and all of its exhibits without charge at
the Public Reference Section of the Commission in its Washington,
D.C. office. You may obtain copies of all or any part of the
Registration Statement from the Commission at prescribed rates,
and may view them at the S.E.C.'s Web Site, whose address is
http://www.sec.gov. We will provide you with Copies of the
Registration Statement and the attached Exhibits without charge
upon written or oral request addressed to Mr. Paul Sloan; Salient
Cybertech, Inc., 1999 Lincoln Drive, Suite 202 Sarasota, Florida
34236, or by calling (941) 953-6168.
We currently furnish our stockholders with annual reports
on Form 10-KSB containing financial statements certified by our
independent public accountants and quarterly reports on Form 10-
QSB containing unaudited financial information for the first
three quarters of each fiscal year. Our stock trades on NASDAQ
BB OTC under the trading symbol, SLEL.
We have not authorized any dealer, salesman or any other
person to give any information or to make any representations
other than those contained in this Prospectus. You must not rely
on any information or representation given or made to you as
having been authorized by us or by the Selling Stockholder.
You cannot rely on the delivery of this Prospectus, nor on
any sale made pursuant to this Prospectus as suggesting that
there has been no change in the affairs of Salient Cybertech, Inc.
since the date of this Prospectus. We are not making you an offer or
soliciting any offer to buy any securities offered in this Prospectus
in any jurisdiction or State where it is unlawful for us to make such an
offer or solicitation.
<PAGE>
GLOSSARY OF TERMS
When used in this Prospectus, the following words have the indicated
meanings:
Capital Stock. The generic term for our Common Stock.
Closing Warrant#1. The Closing Warrant issued pursuant to and in
conjunction with the Debenture Purchase Agreement.
Closing Warrant#2. The Closing Warrant issued pursuant to and in
conjunction with the Securities Purchase Agreement.
Common Stock. The shares of our Common Stock, with a par value
of $0.001, of which 80,000,000 shares are authorized and 7,496,000 are
issued and outstanding (see "DESCRIPTION OF SECURITIES").
Commission. Securities and Exchange Commission of the
United States
Debenture. The Convertible 8% Debenture issued to Haines
Pursuant to the Debenture Purchase Agreement entered into with the
Selling Stockholder on November 14, 2000.
Haines,
Selling Stockholder. Haines Avenue, LLC.
Haines' Agreements. The Debenture Purchase Agreement, Securities
Purchase Agreement, Vesting Warrant Agreements, and Closing Warrant
Agreements, collectively.
NASD. National Association of Securities Dealers, Inc.
The self-regulatory body registered under the Securities Exchange
Act of 1934, as amended, responsible for regulation of securities brokers
and dealers, and the operator of the NASDAQ inter-dealer automated quotation
system's bulletin board over which Company securities are traded.
Put Shares. Shares issuable to Salient pursuant to a Securities
Purchase Agreement entered into with Haines on November 14, 2000.
Registered Securities. The generic and collective term for the 16,859,035
Shares issuable to the Selling Stockholders being offered for sale in
this Prospectus.
<PAGE>
Registration Rights. The generic and collective name for the rights of
registration granted the Selling Stockholder pursuant to Securities
Purchase Agreement and the Debenture Purchase Agreement and fully
described in the Registration Rights Agreement executed on November 14, 2000.
Salient or
we or us. Salient Cybertech, Inc.
Selling Stockholder,
Haines. Haines Avenue, LLC.
Vesting Warrant#1. The Vesting Warrant issued pursuant to and in
conjunction with the Debenture Purchase Agreement.
Vesting Warrant#2. The Warrant issued pursuant to and in conjunction
with the Securities Purchase Agreement.
Warrants. The generic and collective name for all Warrants
issued or issuable (Closing Warrants #1 and #2, Vesting Warrants #1 and #2).
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus. It is qualified in its entirety by the more detailed information
and financial statements (including notes) appearing elsewhere in the
Prospectus.
THE COMPANY
We are a Delaware company formed in December, 1997, as the result of the
merger between MAS Acquisition I Corp., a Delaware Corporation formed in
1996 as an assetless holding company actively seeking acquisition candidates,
and Sloan Electronics, Inc., a Florida Corporation formed in 1993. The
company resulting from the merger was called Sloan Electronics, Inc., and
designed, manufactured and marketed electronic monitoring equipment for the
criminal justice industry and the long-term health care industry. It also
marketed house arrest monitoring equipment through its in-house marketing
department and distributed its products through national service providers.
We, while continuing to support existing clients through the Sloan
Electronics Division, have ceased to actively engage in these business
endeavors in favor of building our portfolio of acquisitions and building
the businesses of the acquired companies.
During the third quarter of 1999, we acquired, in exchange for stock,
Gemini Learning Systems, Inc., which operates as part of the Internet
Technology Division of the company. Gemini Learning Systems developed and
markets SWIFT (tm) (SoftWare Intelligent Freeform Training) distance learning
software and courseware. Utilizing SWIFT, Gemini delivers distance education
systems, to be utilized both in an intra-company setting (intranet) and by
students over the internet. The students may be individuals or complex
organizations, with diverse training and educational needs to be delivered
worldwide to their various locations.
During the second quarter of 2000, we executed an agreement whereby we
acquired Futronix, Inc. We accomplished the acquisition by forming a Delaware
subsidiary, known as Salient Acquisition Corporation, with that corporation
merging with Futronix. The surviving Corporation, continues to carry on
business as Futronix, Inc. (Futronix), a wholly owned subsidiary of the
Company. Futronix operates as part of the High Technology division of the
Company.
Futronix is an ISO 9002-certified consignment and turnkey contract
electronic manufacturer. Futronix offers advanced Surface Mount Technology
capabilities, mixed technology, mechanical assembly, in-circuit and
functional testing, and design and engineering services for customers.
To better reflect our current business, we changed our name from
Sloan Electronics, Inc. to Salient Cybertech, Inc. on May 22, 1999. We had
previously changed our name in 1997 from MAS Acquisition I, Inc. to Sloan
Electronics, Inc.
Our shares are currently traded over the NASDAQ Bulletin Board OTC, and
our trading symbol is SLEL.
Our current mailing address is: Salient Cybertech, Inc., 1999 Lincoln
Drive, Suite 202 Sarasota, Florida 34236, and our phone number is (941)
953-6168.
<PAGE>
SELECTED FINANCIAL INFORMATION
We have set forth below selected consolidated financial information.
The information is derived from the more detailed audited
consolidated financial statements as of December 31, 2000, Futronix,
Inc. audited financial statements as of December 31, 1999, pro forma
financial information and our unaudited financial statements as of September
30, 2000, and should be read in conjunction financial statements,
included elsewhere in this Prospectus. The annual information is presented in
a pro-forma format to better reflect our operations, including those
of Futronix, Inc., which accounts for most of our income. The
provided information is qualified in its entirety by reference to
this additional material (see "FINANCIAL STATEMENTS").
Three Qtrs. Annual Annual
Ended Ended Ended
September 30, December 31, December 31,
2000 1999 1998
(US $) (US $) (US $)
Operating Results
Revenue $3,281,909 $6,392,924 $7,020,705
Cost of Goods Sold 2,945,584 4,996,671 5,348,543
Gross Profit 336.325 1,396,253 1,672,162
Cost and Expenses
Selling
General and Administrative 3,025,353 3,131,410 2,111,127
Interest 117,919 48,114 39,481
Income (Loss) Before Taxes (2,806,947) (1,640,829) (179,646)
Net income (Loss) (2,600,705) (1,640,829) (179,646)
====== ====== ======
<PAGE>
Three Quarters Annual Annual
Ended Ended Ended
September 30 December 31, December 31,
2000 1999 1998
(US $) (US $) (US $)
ASSETS:
Current Assets:
Cash $ 161,043 356,240 226,045
Accounts Receivable
Net of allowances for Bad
Debt 470,052 243,169 117,230
Inventory 708,611 612,169 575,524
Total Current
Assets 1,531,729 2,055,711 1,196,195
Non-current
assets 5,185,260 5,262,838 1,316,066
TOTAL ASSETS $ 8,688,424 7,318,549 2,512,261
======= ======== ======
LIABILITIES AND
STOCKHOLDERS'EQUITY
Current
Liabilities $ 2,601,336 2,060,528 1,243,454
TOTAL LIABILITIES $ 3,324,873 707,589 877,018
STOCKHOLDERS'EQUITY
Common Stock, $0.001
par value-
authorized 80,000,000
shares; issued and
outstanding common
shares: 7,496,000,
and 3,249,900, as of
September 30, 2000 and
December 31, 1999,
respectively; issued and
outstanding Preferred
Shares, No Par Value 20 7,496 3,265 10,753
Additional Paid-In-
Capital 9,832,506 6,456,508 653,541
Accumulated Deficit (4,476,451) (1,875,746) (238,922)
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 8,688,424 7,318,549 2,512,261
======= ========= =======
<PAGE>
SECURITIES OUTSTANDING
As of the date of this Prospectus, approximately 7,496,000 shares
of Common Stock were issued and outstanding. There are also 20 shares of
Preferred Stock, convertible into 1,500,000 shares in our Common Stock,
issued and outstanding. (see "CAPITALIZATION", "PLAN OF DISTRIBUTION" and
"PRINCIPAL STOCKHOLDERS").
On November 14th, 2000, we issued an 8% Convertible Debenture in
the sum of $2,000,000 to Haines Avenue, LLC., with a three year term,
expiring on November 14, 2003. The Debenture is convertible at the will
of the holder into shares of our common stock at a conversion price of
the lower of $0.90 or 80% of the three day average lowest bid price for our
common stock over the 10 days preceding the date the holder of the
Debenture notifies us that it wishes to convert all or a portion of the
Debenture into common stock. Associated with the Debenture is a Vesting
Warrant, entitling the holder, in lieu of amounts owed at maturity, or
upon failure to register the shares issuable on conversion, to convert
such number of shares as are owing to the holder into a Warrant exercisable
on or before November 14, 2005, for shares in our common stock at a price
equal to the closing bid price for our common stock on the date preceding
the date of Notice of the exercise by the holder. Also associated with the
Debenture is a Closing Warrant entitling the holder to 423,729 shares in
our common stock at a price equal to 90% of the closing bid price for our
common stock on the date preceding the date the holder of the warrant
makes the election to convert the warrant or a part of it into shares of
our common stock. The Closing Warrant expires on November 14, 2005 (see,
"DEBENTURE", at page 44, below.).
On November 14th, 2000 we entered into a Securities Purchase
Agreement with Haines Avenue, LLC., whereby we agreed to sell to Haines a
minimum of $2,500,000 and a maximum of $10,000,000 in shares at a price
equal to 90% of the average market price of our shares over the 10 days
immediately following our election to purchase the shares, which election
must be on or before November 14, 2002, pursuant to the terms of the
Securities Purchase Agreement (See, "Securities Purchase Agreement", on
page 47 , below). In the event that we do not sell a minimum of $2,500,000
in shares, Haines shall be entitled to a Warrant (the "Vesting Warrant")
expiring on November 14, 2005, for such number of shares as are issuable
by us to fulfill our minimum obligation of selling $2,500,000 in shares to
Haines. The price on exercise of the Vesting Warrants is equal to the
lowest bid price for our common stock during the 90 days preceding November
14, 2002. On November 14, 2000 we also issued warrants for 425,000
shares in our common stock, with an expiry date of November 14, 2005 at an
exercise price equal to 125% of the closing price on the date preceding
the date the holder elects to convert the Warrants (Closing Warrant). We
shall also issue further Closing Warrants to Haines on a continuing basis
equal to Warrants for 150,000 shares in our common stock for every
$1,000,000 in shares sold by us pursuant to the Securities Purchase
Agreement.
CURRENT STOCKHOLDERS
Approximately 691 individuals own shares of our Common Stock, and
two shareholders, hold 20 Preferred Convertible Shares of our Preferred
Stock. (see "CERTAIN TRANSACTIONS" and "PRINCIPAL STOCKHOLDERS").
DEFINITION OF TERMS
Certain terms used in this Prospectus, usually identified by initial
capital letters, are defined in the section of this Prospectus captioned
"GLOSSARY OF TERMS."
<PAGE>
RISK FACTORS
THE SECURITIES WE ARE OFFERING ARE SPECULATIVE IN NATURE AND INVOLVE A
DEGREE OF RISK. YOU SHOULD PURCHASE THEM ONLY IF YOU CAN AFFORD TO LOSE
YOUR ENTIRE INVESTMENT IN US WITHOUT A MATERIALLY ADVERSE IMPACT ON YOUR
STANDARD OF LIVING OR FINANCIAL SECURITY. THEREFORE, BEFORE ANY PURCHASE
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS ALL OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS.
RISKS OF THE OFFERING
You May Lose Your Entire Investment.
You should be aware that if we are not successful in operating our
business, your entire investment in us could become worthless. Even if we
are successful in our programs there can be no assurances that you will
derive a profit from your investment.
Your Investment may be Diluted due to Potential Future Sales Pursuant To
Rule 144.
Generally, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, under certain
circumstances, sell within any three month period a number of shares which
does not exceed the greater of one percent (1%) of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain circumstances,
the sale of shares without any quantity limitation by a person who has not
been an affiliate of Salient for at least 90 days and who has satisfied a
one year holding period.
The holding period for all our currently outstanding restricted
shares required by Rule 144 will expire during August of 2001, and after
that, the holders may periodically sell their Company securities, subject
to applicable volume limitations, restrictions on the manner of sale and
applicable reporting requirements (see "CERTAIN TRANSACTIONS").
Limited Trading Market for our Shares.
Our shares currently trade on the NASDAQ BB OTC under the trading
symbol, SLEL. At present, there is a limited market for our securities,
and there can be no assurance that an established trading market will
develop in the future. In the event a market is developed, it may not be
able to be sustained, and it is entirely possible that you will not be able
to sell our securities at any price. In any event, any market we may
develop will, in all likelihood, be a substantially limited one.
You May Suffer Adverse Effects due to the Penny Stock Regulations.
Securities, generally, with a price $5.00 per share or less
are referred to as penny stock. These securities are unsuitable
for you if you have a low fixed incomes and limited net worth. As
well, they are not suitable if you are risk aversive or have
income as your sole investment objective. Investment
broker/dealers must satisfy special sales practice requirements,
including making written suitability determinations regarding any
persons wishing to invest in penny stock; written consent of the
purchaser prior to purchasing penny stock; delivery of a
disclosure statement outlining the risks associated with penny
stock prior to any transaction; a written current bid and ask
quotation and commissions to be earned by the broker/dealer in
the transaction; and monthly statements stating the market value
of any penny stock held in a portfolio. These requirements, will
likely limit you in any attempts you may make to sell our stock.
<PAGE>
Your Ability to Sell our Securities will be hampered by the
Absence of any Underwriter.
The Selling Stockholder's Shares will be sold directly by
the Selling Stockholder. This means that no underwriter is
expected to be involved in the sale. The absence of an
underwriter means that there will be less due diligence in
conjunction with this offering than would be performed in an
underwritten offering, and furthermore, that there are no brokers
committed to stabilizing the market for our securities. These
things will tend to make our stock volatile and may hamper any
efforts you may make to sell any of our stock.
You may Lose All or Part of Your Investment If We do not Operate
Profitably and Cannot Raise Additional Capital if it is required.
If we do not operate successfully, our business will likely
fail and you will lose your entire investment. We cannot give you
any assurances we will operate profitably in the future. We have
a history of operating losses, and lacking future profitable
operations, will need additional capital, which we have no
assurance whatsoever of being able to obtain. (See "Financial
Statements", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION, CHANGES IN FINANCIAL CONDITION AND RESULTS OF
OPERATIONS").
BUSINESS RISKS
You May never Receive any Dividends from Us.
We have never paid dividends on our Common Stock in the
past. We do not anticipate paying dividends in the foreseeable
future and intend to devote earnings, if any, to the development
of our business. The payment of dividends in the future rests
within the discretion of our Board of Directors and will depend
on the existence of substantial earnings, our financial
requirements, and other factors. Earnings, for the foreseeable
future, are expected to be retained to finance corporate business
expansion.
Your Investment will be at Risk if we Need Additional Capital And
It May Not Be Available On Acceptable Terms.
The development of our business may require additional
capital in the future to fund our operations, to finance the
substantial investments in equipment and corporate infrastructure
needed for our planned expansion, to enhance and expand the range
of services we offer and to respond to competitive pressures and
perceived opportunities, such as investment, acquisition and
international expansion activities. Cash flow from operations
may be insufficient to cover expenses and capital needs. There
can be no assurance that additional financing will be available
on terms favorable or acceptable to us, or at all. If adequate
funds are not available on acceptable terms, we may be forced to
curtail or cease some or all of our operations.
We May Not Be Able To Compete Successfully In The Very
Competitive Market.
We may face competition from competitors with significantly
greater financial, sales and marketing resources, larger customer
bases, longer operating histories, greater name recognition and
more established relationships with advertisers, content and
application providers and/or other strategic partners than we
have. There can be no assurance that we will be successful in
achieving widespread acceptance of our products and services
before competitors offer services similar to our planned current
offerings, which might preclude or delay purchasing decisions by
<PAGE>
potential customers. Widespread commercial acceptance of any of
competitors' products could significantly reduce the potential
customer base for our products and services, which could have a
material adverse effect on our business and financial results.
FOR ALL OF THE REASONS STATED ABOVE, AND OTHERS SET FORTH IN THIS
PROSPECTUS, OUR SECURITIES INVOLVE A HIGH DEGREE OF RISK. IF YOU
ARE CONSIDERING AN INVESTMENT IN THESE SECURITIES, YOU SHOULD BE
AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS.
YOU SHOULD ONLY PURCHASE THESE SECURITIES IF YOU CAN AFFORD A
TOTAL LOSS OF YOUR INVESTMENT.
USE OF PROCEEDS
Pursuant to the terms of the Debenture and the Securities Purchase
Agreement, all funds received by the company due to the exercise of Warrants
or the sale of shares to the Selling Shareholder will be used as working
capital by us. However, the re-sale of shares by the Selling Shareholder
will not result in any proceeds to us.
SELLING STOCKHOLDER
Haines Avenue, LLC. (HAINES), a Cayman Islands limited liability company,
is controlled by Navigator Management, which in turn has one Director,
David Sims.
The Agreements entered into with Haines carried with them demand
registration rights, pursuant to which we are registering the shares
mentioned in this prospectus for resale by the Selling Stockholder.
(See Debenture, Securities Purchase Agreement, below).
CERTAIN MARKET INFORMATION
MARKET FOR COMMON EQUITY
Our common stock is traded on the NASD over the counter
Bulletin Board, symbol SLEL. Trading began on June 18, 1998. The
range for each quarter quoted reflect inter-dealer prices and may
not represent actual transactions.
Quarter Year Low High Volume
June 1998 $0.8750 $3.0000 36,000
Third 1998 $2.6875 $5.0000 315,000
Fourth 1998 $2.2500 $4.5000 413,000
First 1999 $1.3125 $3.3125 1,505,900
Second 1999 $0.3125 $2.9375 2,530,000
Third 1999 $0.1875 $0.6250 1,566,200
Fourth 1999 $0.1875 $1.7500 194,600
First 2000 $0.9375 $9.8750 4,917,200
Second 2000 $2.0625 $6.1875 3,420,700
Third 2000 $3.3750 $5,2500 4,644,100
October 2000 $1.0100 $3.7500 1,589,900
November 2000 $0.3750 $1.1875 1,310,571
<PAGE>
SECURITY HOLDERS
As of November 30, 2000, the latest practicable date for
which information is available, we had approximately 691 Common
Stockholders and two Preferred Stockholders.
DIVIDENDS
We have not declared or paid any cash dividends since our
inception, and no dividends are contemplated to be paid in the
foreseeable future. No dividends were paid by our subsidiaries,
prior to their acquisition by us. We anticipate that, for the
foreseeable future, our profits (if any) will be reinvested in
our subsidiaries rather than distributed as dividends.
OFFERING PRICE
No offering price has been pre-established for the shares
registered by the Selling Stockholder. Rather, we anticipate
that the Selling Stockholder will sell them into the public
market at such times the price is deemed favorable, when
considered in light of the recipients' capital requirements. The
recipients will be the sole determiners of appropriate pricing,
on a case by case basis.
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2000.
Title of Class September
30, 2000
Stockholders' Equity $5,363,551
Debt:
Total Liabilities $3,324,873
THE COMPANY
BUSINESS (GENERAL)
We are primarily a holding Company with two operating
divisions, The High Tech Division and the Internet Technology
Division. Our main business is the development and growth of our
two divisions, both by managing the internal growth of our
operation subsidiaries, and, if deemed appropriate by our Board
of Directors, through acquisitions of companies that will enhance
and aid in the development of our current divisions and
subsidiaries.
We have no specific acquisition strategy, but rather
evaluate both the needs of our Subsidiaries and market
opportunities on an ongoing basis in deciding the direction we
will take with respect to any possible acquisition.
<PAGE>
Currently, as disclosed above (see "PROSPECTUS SUMMARY":
"THE COMPANY", above), we have two subsidiaries, one in each
division, namely, Gemini Learning Systems, Inc. (Internet
Technology Division) and Futronix, Inc. (High Technology
Division). We have phased out a third Division (Sloan
Electronics Division), and currently only service existing
clients. The income/expenses associated with this phased out
Division are not material, and will not be further discussed.
BUSINESS DEVELOPMENT
Background Information
MAS Acquisition I Corp. was our original name at the time
we were incorporated. We were incorporated on July 31, 1996 in the State
of Delaware, to engage in any lawful corporate undertaking, including,
but not limited to, selected mergers and acquisitions. We had no active
business until December 5, 1997, when Sloan Electronics, Inc. merged
with us, to form a Delaware corporation using the name, Sloan Electronics,
Inc., to better reflect our new identity and business.
Sloan Electronics, Inc. designed, manufactured and marketed electronic
monitoring equipment primarily for the criminal justice industry
and the long-term health care industry. At the meeting of Directors on
May 22, 1999, it was decided that we would actively seek an acquisition
candidate in an Internet related business to enhance our revenue
and growth potential. The Internet was chosen as our potential
area for growth because of the vast potential for growth in that
market. To better reflect our business, we changed our name in
May, 1999, to Salient Cybertech, Inc.
On September 24, 1999 we acquired Gemini Learning Systems,
Inc. (Gemini), a Canadian company based in Calgary, Alberta which
had developed a distance learning delivery technology utilizing
its proprietary SWIFT technology (see, Gemini Learning Systems,
Inc., below).
We restructured our company into two Divisions in December,
1999. The Sloan Electronics Division was formed to service
existing clients, and business in that Division was wound down
over the course of the first three quarters of 2000. The Internet
Technology Division was formed to provide for the growth and
development of Gemini and internet related business.
The High Technology Division was formed in May of 2000
after the purchase of Futronix, Inc., a manufacturer of turnkey
electronic systems for industrial clients and other manufacturers
(see, Futronix, Inc., below). The High Technology Division plans
and provides for the development and growth of Futronix, and
seeks High Technology market opportunities to enhance both the
Division's and Futronix' business potential.
BUSINESS
INTERNET TECHNOLOGY DIVISION
Gemini Learning Systems, Inc.
Gemini Learning Systems, Inc. ("Gemini") is a software
applications development company, specializing in distance
education and training solutions. Gemini created and markets
software technology called SWIFT(tm) (SoftWare Intelligent
Freeform Training). The company is emerging from its development
phase, having created an entire product line based on the
SWIFT(tm) technology. Gemini has already begun to establish
<PAGE>
clients and a distribution network in Canada, the United States,
the United Kingdom and Europe.
Management's primary objective is for Gemini to become a
leader in the emerging internet/intranet distance education and
training industry by establishing SWIFT(TM) as the de facto
standard delivery environment. Management believes that it can
obtain this objective through its strategic alliances and by
utilizing its staff of outside consultants, most of whom are the
top professionals in their field.
General Information
Gemini Learning Systems, Inc. began business in the
Canadian City of Calgary in 1990. The corporate aim was to
develop a delivery environment for the emerging internet/intranet
distance education and training industry.
Research and Development Expenditures Over the Past Two Years
The corporation expended over $3,000,000 in developing its
SWIFT(TM) technology, and a distribution network. During the past
two years Gemini spent approximately $300,000 on R&D, none of
which will be directly borne by Gemini's customers, but all of
which will be indirectly borne by the customer as reflected in
the price of the products of Gemini, a portion of which will be
allocated to the amortized cost of development.
Employees
Gemini has 15 full time employees, and no part time employees.
Facilities
Gemini currently rents approximately 6,000 square feet for
its staff, at 736-8th Avenue SW, 11th Floor, Calgary, Alberta,
Canada T2P 1H4. Management is of the opinion that its current
facilities are adequate for its immediate needs. As Gemini's
business increases, additional facilities may be required;
however, the current facilities are expected to suffice until
after December 31, 2001.
Fixed Assets and Equipment
The fixed assets of Gemini as valued for accounting
purposes have a depreciated book value of $21,208, and an non-
depreciated book value of $55,000. The assets are principally
comprised of computers, computer equipment, and software, along
with office furniture.
Business Development/Key Personnel
Ms. Kim Adolphe was the founding president of Gemini
Learning Systems, Inc., and will continue the day to day
operations of Gemini as President and CEO.
Patrick Brackett, Vice President Product Development,
currently oversees SWIFT(tm) software implementation and the
development of enhancements. Mr. Brackett has been with Gemini
since 1993 as a senior member of the SWIFT(tm) development team.
His role is to oversee new software design and implementation and
is responsible for all aspects of R&D. He is also responsible for
evaluating current and emerging technologies and ensuring that
Gemini continues to be well positioned as a distance education
<PAGE>
and training solution leader. He has co-authored an international
award-winning paper on the SWIFT(tm) methodology.
Ms. Pam Hirtle has been with Gemini since 1993 as a senior
member of he SWIFT(tm) development team. She is involved in
SWIFT(tm) development, particularly as it pertains to the
SWIFT(tm) Development Environment. Her responsibilities include
liaison with clients, particularly in the areas of training and
support. She works with various strategic partners in specific
projects related to the enhancement of the SWIFT Development
Environment and the SWIFT DTD.
Ms. Janet Werstroh has been with Gemini since 1991
overseeing office administration, and in more recent years has
become involved in beta testing SWIFT(tm) and SWIFT(tm) courses,
liaison with distributors and clients, web site maintenance, and
assisting the President in the coordination of all marketing
related activities.
SWIFT(tm) technology took eight years to develop and
utilized the talents of many professionals. The SWIFT(tm)
project leaders were Elliot Kimber, Sr. Consultant, ISOGEN Corp.,
and Dr. Marlene Jones. Elliot Kimber has over 10 years of
experience designing and building industrial strength publishing
systems based on the principles of generic markup and information
reuse. He has developed systems for customers in a variety of
industries including: IBM, Intel, Tandem Computers, Ameritech,
International Correspondence Schools (ICS), and Cisco Systems.
Dr. Jones was a Senior Scientist with Alberta Research Council's
(ARC) Advanced Computing and Engineering Department since 1987.
She had more than a decade of experience in applied research in
the field of Adaptive Learning Environments and is
internationally recognized as an expert in the field. Mr. Kimber
continues to provide input into the development of Gemini's
product line.
Day to day management of the project was by Terry Yasui,
Mr. Yasui brought with him over fifteen years experience in the
design, development, and management of high-technology projects.
He was responsible for the overall management of the SWIFT(tm)
project including the preparation, implementation, tracking and
updating of all project plan documents through weekly and monthly
progress reports following the IEEE standards.
John Moore, who holds a B.Sc., B.Ed., and an M.A. in
Educational Psychology specializing in "Instructional Design for
Higher Education", provided his expertise in the overall
development of the SWIFT(tm) interface and multimedia support
requirements.
Dr. Tom Keenan, was the leading consultant for the Post-
Secondary Interface Design Project for SWIFT(tm). Tom is a
Professor and Dean in the Faculty of Continuing Education at the
University of Calgary. He holds an Ed.D. in Higher and Adult
Education, an M.A. in Higher and Adult Education, a M.Sc. in
Mathematical Methods and Operations Research, and a B.A. in
Mathematics (Dean's Honor List).
Stuart Williams, who holds a B.Sc. in Physics, a B.Sc. in
Mathematics/ Computer Science, and a M.S. in Computer Science and
has several years of programming experience, including extensive
work in object-oriented language design and SGM, implemented the
SGML DTD (Document Type Definition) for SWIFT(tm). He led the
design and wrote most of the code for the unique SWIFT(tm) course
compiler. Stuart also provides valuable technical input and
feedback to the technical team.
Ruby Loo, was responsible for coordinating all human-
computer interactions aspects of the project including usability
studies, mock-ups, evaluations of mock-ups, and the design of the
Graphical User Interfaces. In addition to a M.Math Computer
Science she has ten years of technical experience, including
computer graphics, color usage, animation, human-computer
interaction, and graphical interface design.
<PAGE>
Jim Tubman, who holds a M. Math Computer Science degree and
has extensive experience in the area of software engineering,
object oriented design, and system development, was involved in
the High-Level and Low-Level Design of SWIFT(tm) and the
implementation of certain features.
Management feels that the technology assembled by this team
is, at present, unique, and that as the market is penetrated,
development costs and resistance to new products, once a
benchmark standard is set, will provide an almost monopolistic
arena in which to grow.
Current Clients Distribution Partners and Strategic Alliances
Management has always felt that a basic key to the success
of any venture is the development of a local distribution
network, sensitive to the needs of the local clientele and at the
same time providing a local presence for support and service.
As different companies have specific strengths and areas of
expertise, Gemini, in developing SWIFT(tm) and maintaining and
enhancing its product line, has, over the years, formed some
especially advantageous strategic alliances, some of which are
listed below:
BCS Learning Systems, based in the Netherlands; works
closely with Ideals, a consortium of 16 European Institutes
dedicated to advanced training linked to small and medium sized
enterprises and Institutes of higher education. They represent
SWIFT(tm) in Europe and were a valuable partner during the
implementation of international functionality.
CamAxys Limited is Europe's leading supplier of
environment, health, and safety software management systems.
They are developing courses independently and in partnership with
Excel (see below) for the environment, health, and safety
industry and have just launched the first course entitled
EnviroDiscovery in partnership with Excel for ISO 14001
compliance. The Corporation acts as a distribution agent for
Gemini's product line.
CCI Learning Solutions Inc. specializes in providing high
quality training services offering over 150 course titles to over
25,000 students per year; they are Microsoft Certified. They are
a SWIFT CCP. Gemini is currently converting many of CCI's
courses for delivery in SWIFT(tm). The courses will be offered in
the SWIFT(tm) Library some time in 2000.
Diskover Office Software Ltd. Diskover specializes in
content development using the SWIFT(tm) Kit. They have created
the entire Office 97 Suite, Level 1 and 2, Windows 95/98 in the
SWIFT(tm) format, and are continuing to produce courses in SWIFT,
which are sold through the SWIFT Library.
GST Technology Limited, a worldwide provider of Desktop
Publishing and Graphics Software Technology, has licensed
millions of copies of their software to well known publishers
worldwide, including Fuji and Canon. The company is launching a
new brand name called "getwise" which Gemini is currently
negotiating to include the Office 97 and 2000 suite, Windows 98,
and other courses created in SWIFT(tm).
Excel Partnership is an international leader in
environmental management and systems training and consulting,
and the first EARA (Environmental Auditors Registration
Association) approved trainers for Advanced Environmental
Management Systems Auditors. They are a CCP and have released
two environmental courses in conjunction with CamAxys utilizing
SWIFT(tm).
<PAGE>
Interactive Advantage Corporation, an Atlanta based company
has built a name and reputation for producing products for an
impressive client base including NCR, Home Depot, and Sterling
Software. Their expertise includes development of CBT, software
simulations, certification testing, online references, multimedia
presentations, and information kiosks. They are a CAR and
SWIFT(tm) Distributor.
JOT is a registered Trade School with registered
Engineering status. Over the past ten years, Jot has built a
solid reputation for developing high quality course content for a
wide range of training solutions. They have an extensive library
of courses with wide market potential and are a Course Content
Provider.
Open Learning Agency is a unique, fully accredited,
publicly funded educational leader providing a wide range of
formal and informal educational and training opportunities for
learners around the world. They use SWIFT(tm) for internal
development. They have also partnered with Gemini in an R&D
project (see R&D Projects) to enhance various components of SWIFT
specific to SGML Standards.
RAND Worldwide, the world's largest Value Added Reseller of
mechanical design automation tools and services, have launched
their first course in SWIFT(tm) for internal use and to resell to
their corporate clients.
Current clients also include HYPROTECH Ltd. of Calgary,
Canada and Albeda College (a consortium of 50 colleges in
Rotterdam). The following companies have purchased SWIFT(tm)
courseware:
AMEC Construction plc, UK
Amoco UK Exploration, UK
BPB Paperboard, UK
Bridgewater Paper Company, UK
British Biotech Pharmaceuticals, UK
BTR Automotive, UK
Burmah Castrol, UK
C&C Marshall Limited, UK
Caledonian Paper PLC, UK
Centre for Quality Assurance, Egypt
Devonport Royal Dockyard, UK
Engineering Employers Federation, UK
Geest Foods PLC, UK
Ivo Generation Services (UK) Ltd, UK
Kay-Metzeler Ltd, UK
Liverpool John Moores University, UK
Prestige Veneers Ltd., UK
Proctor and Gamble, UK
Solvay S.A., Belgium
South Staffordshire Water PLC, UK
The Marshall Group, UK
Thurrock Council, UK
Transco PLC, UK
Management feels that the current group of Strategic and
distribution partners will greatly enhance Gemini's ability to
penetrate its target markets, and grow at a far faster rate than
would be possible if Gemini had tried to develop its markets
without the said distributors and alliance partners. The
SWIFT(tm) interface can be readily branded for OEM and Corporate
<PAGE>
identities with little expense required on Gemini's part.
Principal Products and Services and their Markets
Currently, Gemini has over 400 course titles available to
convert into SWIFT(tm), and has, in the current fiscal year,
launched its own online SWIFT(tm) library of over 30 popular
course titles.
The SWIFT Kit provides a Development Environment (DE),
Adaptive Learning Environment (ALE), Adaptive Testing Algorithms,
Interface, extensive testing, tracking and certification
capabilities, and Enterprise Learning Manager (ELMer).
Additional SWIFT Kits can be purchased for as many sites as the
client wishes, with a price range of $1,995.00 for one license to
$1,595.00 each, for more than twenty licenses. Annual Support
Fees are $3,000.00. There is also a licensing fee per learner
for delivering courses in the ALE.
All course content can be developed externally to SWIFT(tm)
using word-processors and other software programs of the client's
choice. Existing traditional courses can also be a starting point
for conversion to SWIFT(tm) courseware. The course content is
"tagged" with computer instructions using the international
Standard Generalized Markup Language (SGML) in the SWIFT
Development Environment. After tagging it is compiled into the
Adaptive Learning Environment using the SWIFT(tm) compiler. The
DE includes a course structure known as a Document Type
Definition (DTD). The course structure is a three level hierarchy
that promotes courseware consistency and effective instructional
design.
SWIFT(tm) version 5.0, currently in development and
expected to be released in the next fiscal year, will provide the
capability to map the SWIFT DTD to other DTDs and vice versa.
SWIFT(tm) clients and SGML users alike will be able to easily
reuse course content for other applications, thus further
leveraging their investment in SWIFT and SGML.
SWIFT(tm) provides what management believes to be the only
Adaptive Learning Environment commercially available in the
world. The ALE adapts each course to each learner's individual
requirements, based on the chosen goals by completion of a
pretest. The pedagogical effectiveness of ALEs have been proven
by years of research conducted by educational institutions and
government organizations around the world.
One of the problems with traditional exams is that they are
of fixed length. A learner must complete a long series of
questions in order for the system to determine how well they know
a subject. This characteristic can cause frustration for both
novices and experts, who may know after a few questions that the
subject matter is either bewildering or trivial. Adaptive testing
uses statistical techniques to allow exams to be significantly
shorter than traditional tests, without losing any predictive
power about a learner's master of the material. SWIFT's unique
testing power allows for seven types of questions, including
"must ask, must know" questions, short answer questions, and
multiple-choice questions.
Another Gemini product is ELMer(tm), an advanced
Internet/Intranet delivery, management, and analysis system for
SWIFT(tm) courses. ELMer allows for the tracking and
documentation of students' progress and provides billing
information for fee structures based on per student charges.
ELMer is required for administering Intranet and Internet courses
and can be purchased separately for $7,000.00 per license. The
ELMer(tm) is an important feature for an organization that must
certify a student's having taken and mastered a course such as
diver safety, emergency procedures, human resources guidelines or
environmental issues.
<PAGE>
Course Delivery
Although SWIFT(tm) courses can be delivered on standard CD-
ROM disks, its real power is the ability to deliver courses on
demand over the Internet or corporate internal intranet using
existing server hardware. The SWIFT Server is a component of
ELMer that runs on Windows(TM) 95//98/NT or UNIX platforms. It
can deliver and manage large numbers of courses to large numbers
of learners simultaneously. Learners are able to access highly
interactive SWIFT(tm) courses over the Internet running a 28.8 or
greater modem, with full multimedia functionality. The SWIFT
Server is controlled either locally or remotely and manages
billing and accreditation. It adjust resource consumption,
determines average transmission rates and identifies fault
occurrences.
A wide variety of learner-based data is automatically
gathered and stored by the Server. The Server can provide grading
and progress reports, progress and content analysis, item
analysis, pathways and billing information. Data can be exported
to external applications and used, for example, in statistical
analysis.
E-commerce
Gemini has, in the current quarter, launched an E-commerce
solution and can offer server-hosting or connect to third party
E-commerce sites for SWIFT Library Distribution through portals,
ISP's and web sites.
The customer simply selects a course(s) from the SWIFT
Library list, then submits their credit card information once
they have placed an order. Approval takes about 26 to 36 seconds. Once
the customer has been approved they can access their course(s)
from the SWIFT LE.
Market For Products
Gemini's market opportunity is diversified across a number
of market segments, including multimedia CBT (computer bases
training) authoring tools, web authoring tools, IT (information
technology) education and training, courseware development
services, internet software, e-commerce, on-line training.
Gemini operates in a high growth environment. The IT
Education and Training market is a $3.1 Billion established
market experiencing moderate growth of approximately 15% annually
through the year 2000. The Multimedia CBT market is currently
growing at the rate of 31% per annum, while the Internet software
market is showing a growth rate of 50% per annum, and the
packaged internet software market is currently growing at the
rate of 127% per annum.
Gemini, management believes, is well positioned to take
advantage of the rapidly growing Internet/Intranet Software
market. Gartner Group research indicates that Interactive
Training will make up 20% of corporate Intranet applications.
The overall market for Internet/Intranet software projected to be
$12 billion by 2000. The market for Internet services is
projected to be $14 billion by 2000. In addition, the SWIFT SGML
Development Environment (with its multimedia extensions) will
enter the CBT Market Projections multimedia authoring tool
market, expected to exceed $165 million by 2000.
<PAGE>
In the following table are presented the expected market
size for the markets Gemini specifically targets with its
products and marketing efforts:
Market Segments YEAR
(All data is in Millions of dollars) 1999 2000 2001 2002
Multimedia Authoring Tools
CBT Tools 129.6 165.9 187.0 220.0
IT Education and Training
Network-delivered 1,566.0 1,695.0 1,830.0 1,960.0
Desktop-delivered 3,133.0 3,495.0 3,901.0 4,290.0
Total 4,699.0 5,189.0 5,731.0 6,251.0
Market Segments YEAR
(All data is in Millions of dollars) 1999 2000 2001 2002
Internet/Intranet
Internet Software 5,575.0 8,000.0 8,800.0 9,680.0
Packaged Internet Software 2,730.0 4,000.0 4,400.0 4,840.0
Internet Services 10,205.0 14,000.0 15,400.0 16,940.0
Total 18,509.0 26,000.0 28,600.0 31,460.0
Training segment (20%) 3,702.0 5,200.0 5,720.0 6,292.0
Sources: IDC, Dataquest, Gartner Group.
The table presented above, is a 4 year top-down revenue
model. What the model shows is that there is tremendous
potential for rapid revenue growth based on very modest
penetration into the various market segments. For example, in the
CBT Authoring Tools segment, where the SWIFT Kits will be
marketed, achieving a modest 4.0% share of this market would
result in $1.9 million in revenue.
As IDC has stated, the packaged Internet software market
should reach $4 billion by 2000. SWIFT(tm) courses delivered over
the Internet and corporate Intranets represent a distinct
opportunity for the company. This area will become the focus of
a great deal of the company's resources in the year 2000, and
will likely be the primary area to which investment capital from
any public offering or private placement is directed.
Competitive Advantage
SWIFT(tm) overcomes the two primary drawbacks of multimedia
training, the high cost and initial deployment/updates and lack
of interactivity, which were identified by Dataquest in the 1996
end-user survey (The Role of Digital Multimedia in Training in
Business, Dataquest, August 1996). In another Dataquest survey
(Education and Training: Market Analysis and Outlook 1996,
Dataquest, February 1997) respondents identify time and cost
experiences in producing conventional CBT and TBT multimedia
courseware using conventional tools or custom programming as the
key drawback. The table below summarizes these findings:
<PAGE>
Courseware Type Development Hours Cost per Hour of Development Time
per Hour of Instruction ($US) Per Instruction
Hour
------------------------------------------------------------------------
CBT
(Conventional) 150 to 300 hours $10,000 to 13 to 20 weeks
$45,000
TBT Multimedia 250 to 500 hours $14,000 to 10 to 26 weeks
$55,000
Management believes that Gemini addresses these concerns,
and delivers a solution that is both unique in the industry, and
provides a user/developer friendly environment that is, at the
same time, cost effective.
A key advantage of SWIFT(tm) is that it reduces development
time by upwards of 70% as compared to other technologies. Using
SWIFT(tm), an existing traditional three-day course can typically
be converted into an internet delivered course in two to three
weeks. SWIFT(tm) is easy for course developers to use. It
delivers consistent, highly interactive courses and requires the
course developer to provide only content, no computer programmers
or software teams are needed. In addition to internet delivery
the SWIFT System allows the same course to be delivered as a CD-
ROM or in an Intranet delivery environment, without additional
developmental costs.
Other competitive advantages are:
SWIFT(tm) is the only SGML technology-based training
solution that provides an efficient method for managing, updating
and re-purposing existing course content, resulting in leveraged
investment over time.
SWIFT(tm) has full multi-byte character functionality.
SWIFT(tm) incorporates an intelligent tutoring system (ITS)
and is, management believes, the only commercially available
Adaptive Learning Environment (ALE) in the world.
SWIFT(tm) has an included management system (ELMer), which
offers a competitive edge over other delivery systems in that the
management systems of other products start at $50,000 U.S. plus
licensing fees.
SWIFT(tm) features extensive testing capabilities including
adaptive testing, mandatory questions, and fixed-length testing
for online certification, as well as having the ability to set
seven different question types, including short answer, and
feedback specific to learner interaction.
SWIFT(tm) is upwardly compatible, ensuring that clients
benefit over time from Gemini's ongoing R&D. This last feature is
of the utmost significance as the technology is continually
undergoing development and upgrades.
<PAGE>
Planned Distribution Methods
Gemini distributes the SWIFT(tm) course library worldwide
by writing as many titles as possible for the SWIFT Library, and
marketing them directly from its web site and through
distribution and alliance partners. Management anticipates that
growth in this area will be accomplished by partnering with
Course Content Providers for building the SWIFT Library and
marketing the SWIFT Library through Portals (Specialized Web
Sites), Internet Service Providers (ISPs), ASPs, OEMs, and Retail
Distributors.
Large Corporate Accounts
SWIFT(tm) is, to the best of management's knowledge, the
only SGML aware distance education and training solution
currently available. SGML users are typically medium to large
corporations and government bodies with significant training
requirements. These organizations have made large investments
to transfer their training content and documents into SGML and
appear very interested in leveraging their investment further.
By concentrating on the SGML market, where we have a significant
competitive advantage, Gemini can qualify and target potential
clients through SGML trade shows, publications and conferences
that draw only interested SGML clients. Gemini has already made
several strategic alliances within the SGML industry (See above,
Distribution Partners and Strategic Alliances).
Course Content Partnering (CP) Program
Gemini launched the CP program in January, 1999 and now has
well over 400 courses available for conversion, with over 30
already converted. The programs entails Gemini (or a Gemini
Partner) converting course content for delivery in SWIFT (TM).
Product Positioning
The SWIFT(tm) product line is positioned to target the
Internet/Intranet market, as well as packaging internet software
for the retail market.
The SWIFT(tm) product line fits into the following growing
market segments:
- Turn-key Internet Distance Education and Training solution
- Online Library
- E-business
- Application Service Provider software
- Internet Software
- Packaged Internet Software
- IT Education and Training
Marketing Plan
Direct Sales
Gemini plans to hire a team of sales people to address the
target markets defined above that will consist of Distributor
Sales, Inside Sales and Large Account Sales.
Distributor Sales
<PAGE>
Gemini will hire sales people to build upon the
distribution channels already in place. The target market, as
defined above, includes Retail, OEM, ISPs, Portals and ASPs).
Marketing will be accomplished through investment in four
specific areas:
- Direct sales - Gemini plans to establish an inside sales
team to focus on the SGML market. This team will have a
telemarketing orientation and will consist of salespeople with 2
to 5 years experience. Gemini has created two new product and
service "packaging" of SWIFT(tm) to support a "try and buy"
selling model without compromising longer term revenue potential.
- Distribution recruitment - establishment of a
distribution sales team to recruit distributors and Courseware
Authorized Resellers. This team will consist of more senior
sales personnel who possess the skills and experience to work
with prospective distribution partners to develop their business
models around the SWIFT(tm) technology.
- Marketing - conduct direct mail, advertising, conference,
and industry partner marketing, as well as trade show activities,
to raise brand awareness and generate sales and distribution
leads. These efforts will be targeted towards the SGML market,
the content developer market and the training groups within
Fortune 1000 companies, government and educational institutions.
- R&D - expand the R&D staff to further develop the
technology, focusing on Internet/Intranet delivery. The
SWIFT(tm) technology will be enriched through additional
authoring functionality and the product line will be broadened
with new modules.
-In addition, executive business development resources will
be focused on industry partnerships, key distribution prospects
and large reference account opportunities.
SWIFT Library Distributors (SLD)
SLDs can re-sell SWIFT(tm) courses directly from their
Internet of Intranet web site. SLD's must install and the online
library on their server at minimal up front costs. Gemini can
provide the hosting services providing a turn key solution with
virtually no administration required, or set it up remotely. All
SLDs receive the same discount based on the suggested retail
price, ensuring a level playing field.
Gemini has designed the distribution program on a sliding
scale based on sales to further motivate marketing efforts by
SLDs. Courses are priced slightly below competitor pricing. We
have also provided a multi level marketing approach for third
party Gemini partners to receive royalties for establishing
SLD's. Gemini will hire a direct sales force to establish
distribution channels for the SWIFT(tm) library.
The marketing strategy outlined above, management believes,
should build a broader awareness of the SWIFT(tm) technology,
creating a pull strategy for the SWIFT Kit into the lucrative
corporate market. As well, Gemini's strategy should provide a
significant incentive for CPs to convert their courses into
SWIFT(tm), help build upon multiple recurring revenue streams,
create healthy cash flow, shorten sales cycles, and build more
strategic partners and alliances.
Gemini is emerging from its development stage, and as such
the products employing the SWIFT(tm) technology are new products.
However, as described above, both the products and the technology
have been available since 1998, have been thoroughly market
tested, and are ready for rollout into the general marketplace.
<PAGE>
FUNDING OF MARKETING PLAN
We have entered into a Debenture Purchasing Agreement and Securities
Purchase Agreement which has provided us with $1,000,000 in working capital
to date, and will provide up to $11,000,000 after the effective date of the
SB-2 of which this Prospectus forms a part. (See, "DEBENTURE" and
"SECURITIES PURCHASE AGREEMENT", below.) A portion of these funds will be
utilized, as required, to fund the growth of Gemini.
Competitive Business Conditions and Competitive Position in the
Industry and Methods of Competition
SWIFT(tm) uses an entirely different approach in design and
licensing than its closest competitors, products such as
Authorware, Toolbook, CBT Express and Icon Author. The primary
areas of divergence between the competitors and SWIFT(tm) is
outlined in the table below:
SWIFT Authoring tools
===== ===============
SGML-based, leverage investment HTML-based
over time
Designed for use by course content Development is from scratch
creators, requires content only
CBT interface (Learning Requires expertise in HCI,
Environment) is built-in - virtually no programming, project mgmt,
learning curve, no software teams or pedagogy
programmers required
Reduces development time and Averages 200 - 250 hours of
costs by about 70% development for every hour of
finished product
Provides delivery on CD-ROM, Requires development from
Intranet and Internet scratch for each delivery
format
Utilizes ELMer Expensive mgmt. systems
International utilization built in Limited internationalization
(if at all)
The primary areas of divergence between the competitors and
SWIFT LE is outlined in the table below:
SWIFT LE Other Learning
Environment
========================== ========
Adaptive learning environment and No adaptively
adaptive testing algorithms
Internationally awarded intelligent Virtually no pedagogy
tutoring system (Ed Media'95;
World Conference on Educational
Multi-Media and Hypermedia)
Effectiveness backed by years of Lead by the nose training
international R&D and usability
studies
<PAGE>
Management feels that the SWIFT(tm) technology effectively
gives Gemini a differentiable new technology that has no direct
competition. As can be seen from the table presented above, SWIFT
and SWIFT LE bear little resemblance to the competition in the
marketplace except for the fact that the end user product is
somewhat similar. What must be remembered is that Gemini is
primarily marketing a delivery system, not a particular product.
Indeed, most competitors in the industry could market their
products using the SWIFT(tm) system for product delivery. In
this respect one is drawn to the logical conclusion that Gemini,
with respect to its base technology, has no direct competitors.
Sources and Availability of Raw Materials and the Names of
Principal Suppliers
Gemini's services are not reliant on the availability of raw
materials, but, rather, involve the development of software
computer applications, and interactive data networks. Sources of
all materials, internet services, and equipment are readily
available from a large number of suppliers, none of which would be
difficult to replace.
Dependence on One or a Few Major Customers
No customer of Gemini accounts for more than 5% of its business.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts, Including Duration
Copyright and Trademarks
Gemini has registered the trademark "SWIFT" in Canada, and
uses the mark throughout the world. Gemini plans, in the next
quarter to register the said mark in the United States and in
Europe.
All of Gemini's software is believed subject to common law
but unregistered copyrights.
Licenses
Gemini grants its clients licenses for the non-exclusive use
of its products. No one licensee accounts for more than 5% of
Gemini's current business, and there are no outstanding or
impending claims under any current licenses, or to the best of
management's knowledge, are any such claims likely.
Other Intellectual Rights
No other patents, trademarks, licenses, franchises,
concessions, royalty agreements or labor contracts are used by
Gemini.
Need for Any Government Approval of Principal Products or Services
To the best of Gemini's management's knowledge, there are no
special requirements for government approval of its principal
products or services, not generally applicable to normal business
operations.
<PAGE>
Effect of Existing or Probable Governmental Regulations on the
Business
Gemini is unaware of any probable regulation of its
business, other than as will apply to businesses in general.
Costs and Effects of Compliance with Federal, State and Local
Environmental Laws
Gemini is not aware of any expenses directly attributable to
compliance with federal, state or local environment laws or
regulations.
Further Information with respect to Gemini and the Company:
Information about Gemini Learning Systems, Inc. (Gemini),
as well as product demos can be seen by visiting Gemini's site at
www.gemini.com.
HIGH TECHNOLOGY DIVISION
FUTRONIX, INC., a Florida Corporation incorporated in March
of 1988, made its entry into the electronic contract
manufacturing industry in March of 1988 providing assembly labor
to a consignment base. Consignment is an industry term where the
customers supplied the components and FUTRONIX provides the
equipment and labor to assemble and test the products. This
concept has relatively low capital risk because the raw
components typically make up about 70% of the cost of an
electronic assembly. This consignment work continued through
1996, with the exception of a few small "turn-key" jobs. Turnkey
is a concept that requires components and labor to be provided to
complete a finished Printed Circuit Assembly (PCA) for the
customers based on their drawings and specifications.
In 1997, a major transition to "turn-key" was accomplished,
resulting in 35% of sales in 1997 being "turn-key" as opposed to
less than 10% in 1996. In 1998 turnkey sales accounted for 75% of
sales. With turnkey work, Futronix sets the production schedules
based on longer term Purchase Orders. The transition to turn key
work required the development of a purchasing department,
Materials Requirement Planning and related materials tracking,
stocking, and issuing systems. An NT based SQL server with over
30 on line stations was installed supporting the following
control and tracking databases:
* Shop control that tracks the status of all work-in-
process (WIP)
* Purchase order system that verifies and controls all
purchases made, verifies receipt of ordered items and tracks
vendor quantity in three categories.
* Inventory control that logs receipt, and issuance of all
materials used in all value added services.
* Materials Requirement Planning (MRP) that can generate
forward looking reports for future material needs, based on
current schedules, orders, inventory, work-in process.
* Return stock (RTS) and scrap. The MRP system assures that
when a job is scheduled, the components to complete the job are
on hand when needed.
* Quality reporting that provides process status, process
yield, vendor status, and other quality reporting as required by
ISO9002 policy.
* Schedule control that allows for efficient workload and
leveling.
* Bill of material (BOM) control and verification that
ensures every component used in a customer's product is approved
and correct.
* Job cost module that utilizes the shop floor tracking
system, materials and labor utilization to feed back costing
information to management for quoting and resource allocation
purposes.
<PAGE>
The controls enumerated above were implemented to provide
full turn-key services and to meet the requirements for ISO9002
quality standard certification. The substantial costs to the
company to implement this system resulted in reduced earnings in
1997 and 1998. However, the company is now poised to facilitate
larger turn-key accounts. In the first quarter of 1998, FUTRONIX
received ISO9002 quality standard certification from Underwriters
Laboratories (UL), without a single nonconformance. As a result
of operating in a solid operable quality system, the Company
increased its first pass yield (FPY) from 70% to currently better
than 97% for any individual process.
Facilities
FUTRONIX, INC. is located in Suncoast Industrial Park,
Homosassa, Florida and presently occupies two main buildings, and
several support and storage buildings totaling 35,000 sq. ft. .
Approximately 40 acres of adjacent industrial property is owned
by Salient and is available for expansion as required. The
facilities are provided by Salient.
Management is of the opinion that Futronix' current
facilities are adequate for its immediate needs. As the Company's
business increases, additional facilities may be required. The
current facilities are expected to suffice until after December
31, 2001.
Products and Services
FUTRONIX INC is a high quality Electronic Contract
Manufacturer (ECM) providing manufacturing, test, prototyping,
and product development and support for a diverse set of market
segments. Printed circuit assemblies and box build products
manufactured in medium to high volume supplied to OEM's for
commercial, industrial, medical, and telecommunication
applications. As an ECM, Futronix reviews our customers product
specifications and develops and implements a plan to fabricate
and test the product (typically a Printed Circuit Assembly), that
meets or exceeds the functional and quality specifications. This
plan typically calls for continual improvement that will reduce
the costs while maintaining quality. A percentage of the
realized cost savings, typically 50%, are passed on to the
customer.
Product Description
Printed Circuit Assembly (PCA): Futronix utilizes
automated, high speed assembly equipment that can be used or
adapted for most any type of PCA manufacturing. PCA types
include Surface Mount Technology (SMT), conventional through
whole technology, mixed technology, and mechanical fabrication
and assembly. Turnkey, consignment or combinations of these
services are offered. The Company also provides design and
product development, along with design for test and
manufacturability services for customers who do not have the
personnel or expertise to fulfill this requirement.
Box build at multi levels from finished products bulk
shipped in retail dress box packing shipped direct to the
distribution center, retail outlet or even to the end user.
Stocking finished goods, warranty return service, invoicing
and payment processing are additional services Futronix can
offer.
<PAGE>
Competition
FUTRONIX is small to mid size in comparison to the top
ECM's with sales over $100 million. The Company is able to be
competitive in bidding for contracts based on its capability,
reputation and its location in a plentiful and favorable labor
market. The Company has had to turn down substantial contracts
in the past due to limitations in its ability to purchase
inventory of components in advance for large contracts. The
excess capacity of our production facility allows us to
immediately respond to increases of current customer needs as
well as the influx of new business. This surplus capacity allows
Futronix to be very competitive when responding to requests for
quotations. Since the fixed overhead is covered by current work,
any additional work will lower our burdened labor rate, thus
allowing aggressive quotations at the same time increasing
margins.
Technology
Technology is the basis of our business and it's growth.
Electronic circuits are becoming more and more prevalent in every
day life. Mechanical products of just a few years ago now have
electronic circuits that control, monitor, indicate, and make the
product easier to use. From toys to automobiles, appliances to
computers, consumer, commercial and industrial products have
included technology as a tool to gain a competitive edge. As
technology becomes more specialized Original Equipment
Manufacturers (OEM) are focusing more on leading edge design and
outsourcing the manufacturing to ECMs. In addition, as component
complexity grows, OEMs are finding the capital expense for the
specialized equipment and assembly techniques outweigh the cost
to outsource in many applications. Futronix has been, management
believes, a leader in technology advancement to meet these needs.
Futronix co-developed a process with AIM solderpastes for
intrusive reflow that cut 60% of the assembly costs for a
customer's computer product. The process called Step Soldering
Aids "Intrusive" Reflow was published in the September 1996
issue of SMT magazine.
Future Products
Futronix sees the mutual advantages of consolidating the
diversified needs of an OEM into a "one stop" contract
manufacturing enterprise where box build products are leading the
growth in our industry. Expansion plans to meet these growing
requirements include an injection molding facility and laminated
keypad fabrication. Both of these products/services fit well in
our industry and are used in the vast majority of Box build
products.
Market Analysis Summary
According to Manufacturing Market Insider (MMI) September
1997, the ECM market is estimated to be nearly $90 billion in
1998. The article sited the trend of OEM's to outsource
manufacturing to the ECM industry:
"Electronics contracting manufacturing should continue its
growth of nearly 20 percentage points more than the overall
electronic equipment industry growth". According to Contracting
Manufacturing from a Global Perspective, a recent report from
Technology Forecasters, based on a study of 149 electronic
contract manufacturers and their customers. "There's no holding
back in evidence - OEM's demand for manufacturing cost reduction,
new assembly techniques, global manufacturing, and outsourcing of
complete systems contributes to the 25 percent global compound
annual growth rate from 1996 through 2001," said Pamela J.
Gordon, management consultant and president of Technology
Forecasters.
<PAGE>
Strategy and Implementation Summary
Futronix Inc. strategy for growth consists these key elements:
* To maintain focus on key competencies such SMT and mixed
technology PCA assembly, and expand our involvement in box build
products, which represents the ECM markets fastest growing
segment.
* To build and maintain long term relationships with our
customers. To become a partner, not a vendor to OEM's by
providing not only a product delivered on time, but include a
service that will continually provide cost reduction actions and
product improvements.
* To continually improve our internal systems to provide
our customers the highest quality in the industry. Quality not
only in the products we manufacture, but also in communications,
information, and all other services offered.
Sales Strategy
The key to growth is an effective marketing plan utilizing
qualified, experienced marketing personnel. As a concurrent
effort, we are putting emphasis on key vendor relations to
provide quick response to Requests for Quotation (RFQ). This not
only takes coordination with vendors regarding component pricing,
but also our internal labor costing estimates based on acquiring
the new work. We have budgeted for several internal cost
tracking, forecasting and compilation programs and systems.
These will be continually upgraded to maintain the capability to
provide a "snapshot" of what operations would be if the quotation
were accepted.
Additionally, we will be directing our marketing efforts
towards a network of Futronix representatives throughout the US
and other regions. These Independent representatives are well
versed in the industry and have focused local knowledge of
prospective customers. We will be focusing on our core
competencies which are medium to high volume PCA's with an
emphasis on SMT.
Management
Nevin C. Jenkins (42), PRESIDENT: Mr. Jenkins, president of
Futronix, Inc., manages the company on a day to day basis. His
background gives him a wealth of experience to draw upon in
guiding Futronix in its future growth. In 1976, a Vice President
of Diversified Industries, Mr. Jenkins headed up the national
marketing effort that grew from less than a $1M in 1976 to over
$10M by 1978. He sold his interest in Diversified in 1979 to form
his own company, Med-E-Lert. Based on his knowledge of both
security system electronic capabilities and market demands, he
developed the Personal Emergency Response System (PERS) which
became nationally famous with the slogan "Help, I've fallen and
can't get up". In 1985 Mr. Jenkins sold the marketing rights for
the PERS to Life Call Systems. He retained the manufacturing
rights for the PERS and in 1986 moved the production facilities
from Clearwater, Florida to Homosassa, Florida, where he built a
manufacturing plant for high volume production of the PERS base
units and supporting devices.
In 1988 he partnered with Rande Newberry and formed the
electronic manufacturing company - FUTRONIX, INC. The PERS
manufacturing plant was sold and the company's operations were
moved to the larger facilities where FUTRONIX, INC. is today.
<PAGE>
Rande W. Newberry (43), VICE PRESIDENT: Mr. Newberry has
brought to Futronix the electronic knowledge needed for expansion
in the electronic contract manufacturing business. Mr. Newberry
holds a BSEE from the University of South Florida, as well as
associate degrees in Business Administration (ASBA) and
Electronic Engineering Technology (ASEET). From 1983 to 1987 he
worked from Senior Engineering Technician to Engineer at
Honeywell's Tampa, Florida operations. In 1988 he became an
independent contractor for Honeywell until joining with FUTRONIX,
INC.
Mark Nichols, General Manager: Mr. Nichols has 15 years
experience in electronic manufacturing with a unique common sense
approach to problem solving. Mr. Nichols was part of the founding
Principals of Futronix and is a graduate of the Franklyn (NY)
School of Engineering.
Jim Wilson, Quality Assurance Manager: Mr. Wilson has 25
years experience in quality systems auditing with private and
governmental agencies. Positions include Lead Assessor for the
DOD at the NASA facility in Florida.
Sources and Availability of Raw Materials and the
Names of Principal Suppliers
All of our supplies for manufacture are generic in nature,
making us independent of any major supplier or suppliers.
All raw materials utilized by us are always readily
available in the marketplace.
Dependence on One or a Few Major Customers
Currently we are not dependent on one or a few major customers.
It must be noted that approximately 60% of our sales over the current
year were to 5 customers. It is anticipated that this percentage
will drop to below 25% over the next fiscal year.
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts, Including Duration
Futronix owns no Patents in its own right, but does have the
exclusive right to the patent for the Personal Emergency
Response System developed and patented by Nevin Jenkins.
No other patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts are used by Futronix.
Need for Any Government Approval of Principal Products or Services
None.
Effect of Existing or Probable Governmental Regulations on the Business
Futronix is unaware of any probable regulation of its business,
other than as will apply to businesses in general.
<PAGE>
Estimate of the Amount Spent During Each of the Last Two Fiscal Years
on Research and Development Activities, and if Applicable the Extent to
Which the Cost of Such Activities are Borne Directly by Customers
During the past two years management believes Futronix spent
approximately $150,000 on R&D, none of which will be directly borne by
Futronix' customers, but all of which will be indirectly borne by the
customer as reflected in the price of the products of Futronix, a
portion of which will be allocated to the amortized cost of development.
Costs and Effects of Compliance with Federal, State and Local
Environmental Laws
Futronix is not aware of any expenses directly attributable to
compliance with federal, state or local environment laws or regulations.
Further Information with respect to Futronix:
Number of Total Employees and Number of Full Time Employee
Futronix has 76 full time employees, and 3 part time employees.
Equipment
The fixed assets of Futronix, as valued for accounting purposes
have a depreciated book value of $5,159,000, and an non-depreciated book
value of $5,176,000. The assets are principally comprised of
manufacturing equipment, computers, computer equipment, and software,
along with office furniture.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, CHANGES IN
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On May 23, 2000, we purchased 100% of all the outstanding
shares of Futronix, as fully described in Material Events, below. A
s a result of the aforementioned transaction, the Company gained
Futronix, whose activities are fully described herein.
Discussion of Financial Information
Futronix accounts, currently, for most of our revenue. To properly
reflect this, and the impact Futronix would have had on our financial
statements over the past 2 years, we have included the pro-forma Balance
Sheets and associated financial statements for the years ended December
31, 1999 and 1998.
<PAGE>
The discussion respecting our financial position utilizes the consolidated
statements for September 30, 2000, as compared to the pro-forma information
for the same period last year. The discussion with respect to the fiscal
years ended December 31, 1999 and 1998 utilize the pro-forma information.
In this manner the reader can compare operations of the company as a whole
over the past two years and the three quarters ended on September 30, 2000.
For disclosure as to how we, without Futronix, performed over the past two
fiscal years, you are referred to the Audited Financial Statements of
Salient Cybertech, Inc., included in this prospectus, beginning on page 55_.
For performance results of Futronix, Inc., you are directed to the Audited
Financial Statements of Futronix, included in this prospectus, beginning on
page 55.
Operating revenues decreased by $1.47 million (28%) for the nine months
ended September 30, 2000, as compared to the nine months ended September 30,
1999. Revenues for the period ending September 30, 2000 were $3,281,909 as
compared to $4,707,892 for the period ending September 30, 1999. The main
reason for the decrease was the restructuring of Futronix' core business to
a manufacturer of turnkey products (see, "Futronix", above), and the
unexpected loss, in May 2000, of a customer that had been taken over and
commenced in-house manufacture. In the fiscal year ended December 31, 1999
revenues were $6,392,924 as compared to $7,020,705 for the year ended
December 31, 1998.
Gross profit for the first three quarters of 2000 decreased to $336,325,
from $1,196,925 for nine months ended September 30, 1999. Gross profit for
the year ended December 31, 1999 was $1,396,253 as compared to $1,672,162.
General and administrative expenses were $3,024,353 for the nine months
ended September 30, 2000, compared to $2,456,668 for the same period in 1999.
This large increase in general and administrative expenses for the period in
2000 is mostly due expansion of Gemini and commencement of sales activity in
Gemini, and, in part, due to increased insurance costs, professional fees,
and contract services and expenses. Interest expenses increased, and are
expected to continue to increase as interest accrues and future debt is
incurred. For the fiscal year ended December 31, 1999, the general and
administrative expenses were 3,131,410 as compared to 2,111,127 for the
preceding fiscal year. Of this amount, $1,154,009 was, for professional
fees and consulting fees, as compared to $111,755 in 1998. The $1,154,009
was paid mainly through the issuance of 1,000,000 shares of the Company to
a law firm, and to outside consultants, in aid of the Company's efforts to
raise capital for expansion and acquisitions; reorganize into its current
divisions, and to pay for the purchase of Gemini. The Company feels that
over the ensuing years, its growth and expansion will largely be attributable
to the efforts and expenses incurred during the fiscal year ended December
31, 1999.
The net loss for the nine months ended September 30, 2000 was $2,600,705
or $0.668 per share based on 4,499,900 shares outstanding, as compared to a
net loss for the first nine months of 1999 of $1,354,900, or $0.1197 per
share. The net loss for the period is primarily attributed to insufficient
level of revenue generated by the Company. For the year ended December 31,
1999, the net losses were $1,640,829, as compared to $179,646 for the
previous year.
On September 30, 2000, the cash and investment certificate position of
the Company was $165,045. Current assets on September 30, 2000 were
$1,531,729. The cash and investment certificate position of the Company
was $356,240 on December 31, 1999 as compared to $246,045 on December 31,
1998. Current assets, as a whole, increased from $1,196,195 on December 31,
1998 to $2,055,711 on December 31, 1999.
<PAGE>
Material Events
On December 6, 1997, Sloan Electronics, Inc. merged with us to form a
Delaware corporation, continuing under the name Sloan Electronics, Inc.
On May 22, 1999, our Board of Directors, pursuant to a vote
of shareholders at the annual meeting on the same date,
authorized the issuance of 10 Preferred Convertible Shares to our
president, Paul Sloan, each convertible into 1,000,000 common
shares, as an anti-takeover measure and a measure to insure the
continuity of management.
On September 24, 1999, we acquired a 100% interest in
Gemini Learning Systems, Inc. from its sole shareholder, Kim
Adolphe, in exchange for 20,000,000 shares in our common stock.
Ms. Adolphe agreed to remain as president of Gemini, and was
voted to our Board of Directors.
In November of 1999, our shares were reverse split, with
one share being issued for every 10 shares currently held.
On May 23, 2000, we purchased all the outstanding shares in Futronix,
Inc. in exchange for 250,000 shares in our common stock to each of the
two shareholders in that company, Nevin Jenkins and Rande Newberry.
Mssrs. Jenkins and Newberry agreed to remain with the subsidiary as
president and vice president, respectively. The Agreement also provided
for the infusion of working capital, and additional shares to be
issued if certain revenue levels were attained. To date, $750,000 in
capital has been infused.
During the month of March, 2000, 675,000 shares of common stock
subject to Rule 144 as promulgated under the Securities Act of 1933
were sold via private placement at a price of $1.00 per share to
raise working capital for Salient. The transactions were with
non-affiliates of Salient, and exempt from registration through
reliance on Section 4(2) of the Securities Act of 1933.
Description of Real Estate and Operating Data
Neither the Company or our subsidiaries own any real estate holdings
except for the property on which stands Futronix' manufacturing facilities.
Property and Equipment
We own no property and equipment, except for some furniture, office
supplies and computers. Our Subsidiaries own significant property and
equipment, as more fully described above (see, "Futronix, Inc." and
"Gemini", above).
Investment Policies
We have no investment policies with respect to investments in
real estate or interests in real estate or investments in real estate
mortgages.
Litigation.
Senger vs Salient and Paul Sloan. This action involves the plaintiff's
claim to entitlement to securities within the company. The company
believes the claims are without merit, and will vigorously defend the
action.
The company resolved potential Section 16 violations of the
Securities and Exchange Act of 1934. An attorney has filed suit for the
<PAGE>
collection of approximately $7,000 in fees, based on letters written to the
Company giving it notice of a potential violation. The company believes
these assertions to be without merit, and will defend the action vigorously.
A civil action was commenced by AmSouth Bank of Florida, Inc.
against Futronix in the Circuit Court of Citrus County, Florida for
default in the terms of a Term Loan Agreement. The action is for
$652,285, together with interest, costs, and attorneys fees. Futronix
has always been current in its payments of principal and interest due
under the terms of the Loan, and vigorously disputes any default
under the note. It is believed by management that the claim is without
merit, and responsive papers will be filed shortly.
Operating Subsidiaries of Salient Cybertech, Inc.
We Have two wholly owned Subsidiaries, Futronix, Inc. and
Gemini Learning Systems, Inc. (See Futronix, Inc., above, and Gemini
Learning Systems, Inc., above).
Liquidity
We believe that we have the cash funds and necessary liquidity to meet
the needs of the company over the next year.
To insure adequate funds availability over the next year we entered
into a Debenture Agreement and a Share Purchase Agreement on November
14, 2000, providing a total of $4,500,000 to $12,000,000 to the company
as working capital. (See DEBENTURE and SECURITIES PURCHASE AGREEMENT,
below.)
Accounting Policies and Procedures
We follow generally accepted accounting principles (GAAP) in
preparing our financial statements, and has audited statements produced
annually, with our quarterly statements produced by our management and
accountants.
Revenue Recognition
Revenue is recognized using the accrual method of accounting.
Statements of Cash Flows
Statements of Cash Flow are prepared quarterly, on a consolidated
basis, using generally accepted accounting principles (GAAP) and
guidelines.
Inventory
Neither we nor Gemini keep any inventory at present. As Futronix
manufactures unique components when ordered by its clients, it keeps
inventory at minimum levels, but amasses parts prior to manufacture of
goods for its clients.
<PAGE>
Fixed Assets
Fixed assets are valued based on their depreciated value.
Depreciation is calculated using the straight line method.
Principles of Consolidation
All Financial Statements are produced on a consolidated basis.
Statement Re: Computation of Earnings Per Share
We have a simple capital structure as defined by APB Opinion
Number 15. Accordingly, earnings per share is calculated by dividing
net income by the weighted average shares outstanding.
Provision for Income Taxes
Provisions for income tax are computed quarterly using the
guidelines as defined in the Federal and State Statutes.
MANAGEMENT
Directors and Executive Officers
The following sets forth the names and ages of all the
Directors and Executive Officers of Salient Cybertech, Inc.,
positions held by such person, length of service, when first elected
or appointed and term of office.
First Elected
Name Age or Appointed/Term* Position
Paul A. Sloan 41 1997 President,
Chief Executive
Officer and Director.
Melanie Meer 40 2000 Secretary
James Vondra 58 1997 Director
Kim Adolphe 41 1999 Director, President
of Subsidiary
(Gemini Learning
Systems, Inc.)
Jim Marquis 57 1999 Director
___________________
* all Officers are appointed annually by the Board of Directors;
and, all Directors are elected at the Annual Meeting of
Shareholders, as provided in our by-laws.
<PAGE>
Biographies of Directors, Officers and Director Nominees
Mr. Paul A. Sloan is President, Chief Executive Officer and
a Director of the Company. Mr. Sloan was President of Sloan
Electronics, Inc., and had been since its inception in 1990. Mr.
Sloan co-founded Vorec Corporation in 1986 and served as design
team leader.
Mr. James Vondra is a Director of the Company. From 1991
to the present, Mr. Vondra has been a Senior Systems Analyst for
data based management systems (IMS development) produced by
Computer Science Corp., located in Texas. He received a BA in
Business Administration in 1963 from North Texas State
University. Mr. Vondra has 29 years experience in data processing
and system programming.
Mrs. Kim Adolphe is a Director. For the past 5 years, she
has been President and CEO of Gemini. Mrs. Adolphe runs Gemini on
a day to day basis. Her role is to oversee the strategic
direction of the company and to ensure that the people and
processes to accomplish Gemini's corporate objectives are in
place. She has held this position continuously, on a full time
basis, since 1990.
Mrs. Adolphe is a director and alumni member of Canadian
Advanced Technology Alliance (CATA). She was the founding
President of the Calgary UNIX User's Group (CUUG), spearheading
the first Internet service in Calgary. Mrs. Adolphe has published
papers in such journals as Canadian Artificial Intelligence and
co-authored an international award-winning paper on the SWIFT
(SoftWare Intelligent Freeform Training) methodology.
Jim Marquis, is a Director. He is currently Vice President
and a Board member of Kimchuk, Inc. and a Board member of
Smartcom, Inc., Thermal Waste Technologies, Smart Communications,
Inc., Investment Funding LLC, and Baron Express LLC and a partner
of Professional Properties. In March of 1971 he joined Kimchuk,
Inc. and formed their electronics equipment fabrication division,
and has been with the company since that time, rising through the
ranks to his current position. Mr. Marquis received a BSEE from
the University of Bridgeport in 1968 and a MBA from the
University of Connecticut in 1974.
Ms. Melanie Meer became interim Secretary of the Company on
March 20, 2000. Prior to this appointment Ms. Meer was, for the
last 12 years, a freelance consultant to businesses and non-
profit organizations in the areas of internal accounting and
finance. Ms. Meer has a Bachelor of Science Degree in marketing
from SUNY.
Nevin C. Jenkins (42), President of Futronix, Inc., our
wholly owned subsidiary, is a Nominee for Director at the next
annual meeting of shareholders, pursuant to the terms of the
Agreement pursuant to which Futronix was purchased on May 23,
2000. Mr. Jenkins, president of Futronix, Inc., manages the
company on a day to day basis. In 1976, a Vice President of
Diversified Industries, Mr. Jenkins headed up the national
marketing effort that grew from less than a $1M in 1976 to over
$10M by 1978. He sold his interest in Diversified in 1979 to form
his own company, Med-E-Lert, in which he developed the Personal
Emergency Response System (PERS) which became nationally famous
with the slogan "Help, I've fallen and can't get up". In 1985
Mr. Jenkins sold the marketing rights for the PERS to Life Call
Systems. He retained the manufacturing rights for the PERS and
in 1986 moved the production facilities from Clearwater, Florida
to Homosassa, Florida, where he built a manufacturing plant for
high volume production of the PERS base units and supporting
devices.
In 1988 he partnered with Rande Newberry and formed the
electronic manufacturing company - FUTRONIX, INC. The PERS
manufacturing plant was sold and the company's operations were
moved to the larger facilities where FUTRONIX, INC. is today.
<PAGE>
Biographies of Significant Employees
The reader is directed to the disclosures with respect to
Gemini and Futronix, above, for biographies of the significant
employees of each Subsidiary. We have only three employees, Paul
Sloan, Melanie Meer, and our office manager. Mr. Sloan's and
Ms. Meer's biographies are presented in the section immediately
preceding this one.
Family Relationships
None of our Officers or Directors, or the Officers or employees
of our subsidiaries are related parties.
Involvement in Certain Legal Proceedings
During the past five years no current director, person
nominated to become a director, executive officer, promoter or
control person of the Company has been a party to or the subject
of: (1) Any bankruptcy petition filed by or against any
business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years
prior to that time; (2) Any conviction in a criminal
proceeding or has been subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (3)
Any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoying, barring suspending or
otherwise limiting his involvement in any type of business,
securities or banking activities; and (4) Been found by a court
of competent jurisdiction (in a civil action), the Commission or
the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated.
COMPENSATION
COMPENSATION OF DIRECTORS
The Directors received no cash compensation in 2000, 1999 or
1998, but did receive the following stock options during 2000,
1999, and 1998:
Issue Exercise Amount
Name Amount Date Price Term Exercised(1)
Mr. Provost**(2)20,000 5/15/98 $0.32 5 yr 0
50,000 2/24/99 1.44 5 yr 0
Mr. Sloan (2) 20,000 5/15/98 $0.32 5 yr 0
50,000 2/24/99 1.44 5 yr 0
35,000 5/13/00 2.00 5 yr 0
Mr. Cohen* 10,000 5/15/98 $0.25 10 yr 0
10,000 2/24/99 1.12 10 yr 0
Mr. Solomon* 10,000 5/15/98 $0.25 10 yr 0
10,000 2/24/99 1.12 10 yr 0
Mr. Vondra 10,000 5/15/98 $0.25 10 yr 0
10,000 2/24/99 1.12 10 yr 0
10,000 5/13/00 2.00 10 yr 0
Mrs. Adolphe 25,000 5/13/00 2.00 5 yr 0
Mr. Marquis 10,000 5/13/00 2.00 10 yr 0
Ms. Meer 10,000 5/13/00 2.00 10 yr 0
____________
* Retired from the Board in 1999.
<PAGE>
** Retired from all positions in 2000.
(1) as of November 30, 2000.
(2) Mr. Sloan and Mr. Provost each also holds 10 preferred convertible
shares, each convertible into 1,500,000 common shares. These Shares
were issued to them following the annual meeting in 1999 as a means of
continuing current management and as an anti-dilutive measure.
The Stock options were issued pursuant to our Stock Option
Plan, details of which are described below.
The 1998 Stock Option Plan was approved by the Board of
Directors of the Company on April 10, 1998, and ratified by the
Shareholders on May 16, 1998.
The purpose of the 1998 Stock Option Plan is to attract and
retain and provide additional incentive to selected employees,
officers, directors, agents, consultants and independent
contractors of the Company, or of any parent or subsidiary of the
Company. Each option granted pursuant to the 1998 Stock Option
Plan is required to be designated at the time of grant as either
an "incentive stock option" or as a "non-qualified stock option."
The following description of the 1998 Stock Option Plan is
qualified in its entirety by reference to the 1998 Stock Option
Plan itself.
Administration of the Plan
The 1998 Stock Option Plan is administered under the
direction of the Board of Directors of the Company by the
committee appointed by the Board, which consists of the President
and Secretary/Treasurer of the Company, which determines who
among those eligible will be granted options, the time or times
at which options will be granted, the number of shares to be
subject to options, the duration's of options, any conditions to
the exercise of options and the manner in and price at which
options may be exercised. The Board is authorized to amend,
suspend or terminate the 1998 Stock Option Plan, except that it
is not authorized without stockholder approval (except with
regard to adjustments resulting from changes in capitalization)
to (i) increase the maximum number of shares that may be issued
pursuant to the exercise of options granted under the 1998 Stock
Option Plan; (ii) permit the grant of a stock option under the
1998 Stock Option Plan with an option price less than 85% of the
fair market value of the shares at the time such option is
granted (or 11O% for greater than 1O% stockholders); (iii) change
the eligibility requirements for participation in the 1998 Stock
Option Plan; (iv) extend the term of any option or the period
during which any option may be granted under the 1998 Stock
Option Plan; or (v) decrease an option exercise price (although
an option may be canceled and a new option granted at a lower
exercise price).
Shares Subject to the Plan
The 1998 Stock Option Plan provides that options may
be granted with respect to a total of 500,000 shares of Common
Stock, subject to adjustment upon certain changes in
capitalization without receipt of consideration by the Company.
In addition, if the Company is involved in a merger,
consolidation, dissolution or liquidation, the options granted
under the 1998 Stock Option Plan will be adjusted or, under
certain conditions, will terminate, subject to the right of the
option holder to exercise his option or a comparable option
substituted at the discretion of the Company prior to such event.
If any option expires or terminates for any reason, without
having been exercised in full, the unpurchased shares subject to
such option will be available again for the purposes of the 1998
Stock Option plan.
<PAGE>
Participation
Any employee, officer, director, agent, consultant or
independent contractor of the Company is eligible to receive
incentive stock options or non-qualified stock options granted
under the 1998 Stock Option Plan.
Option Price
The exercise price of each option will be determined by the
Board (or any committee appointed by the Board), but incentive
stock options may not be priced less than 85% of the fair market
value of the shares of Common Stock covered by the option on the
date the option is granted.
If an incentive stock option is to be granted to an
employee who owns over 10% of the total combined voting power of
all classes of the Company's stock, then the exercise price may
not be less than 110% of the fair market value of the Common
Stock covered by the option on the date the option is granted.
Terms of Options
The Board (or any committee appointed by the Board), in its
discretion, establishes the term of each option, provided that
the maximum term of each option is 1O years. Options granted to
an employee who owns over 1O% of the total combined voting power
of all classes of stock of the Company expires not more than five
years after the date of grant. The 1998 Stock Option Plan
provides for the earlier expiration of options of a participant
in the event of certain termination's of employment.
EXECUTIVE COMPENSATION
The primary objectives of the Company's executive compensation
structure are to maintain executive compensation at competitive
levels to retain qualified personnel and to reward individuals
for their respective contributions to the Company's success.
Bonuses may be granted in order to reward and acknowledge
employees for, among other things, individual initiative and
achievement. A number of factors are considered in determining
compensation of executives, such as historical financial
results, anticipated revenues and earnings for the next fiscal
year, individual contributions to, and length of service with,
the Company, compensation levels at other companies (both within
and outside the Company's industry), and equity and fairness
within the top levels of management. Decisions on executive
officer compensation are, however, primarily subjective. No
predetermined weight is generally assigned to any of the factors
mentioned above. A guideline in determining bonus compensation
for division presidents and other designated executive officers
has historically been the achievement of budgeted sales and
earnings levels, but no other specific corporate performance
related targets are otherwise used and the achievement of such
goals is not, in all cases, determinative of whether an executive
officer will receive bonus compensation or the amount of such
compensation.
<PAGE>
Summary Compensation Table
Name and Principle All Other Compensation
Position Year Salary Pecuniary Shares
Larry Provost*(a) 1999 $78,000(3) 50,000(4)
Chairman, Secretary 1998 $52,000(3) $18,000(1) 20,000(4)
Treasurer and Chief 1997 $18,000 196,350(2)
Financial Officer
Paul Sloan (a) 2000 $125,000(3) 25,000(4)
President, Chief 1999 $78,000(3) 50,000(4)
Executive Officer 1998 $60,000(5) 20,000(4)
and Director 1997 $60,000(6)
Lester Cohen** 1999 10,000(4)
VP Marketing, 1998 10,000(4)
Director
Name and Principle All Other Compensation
Position Year Salary Pecuniary Shares
Michael Solomon*** 1999 10,000(4)
Senior VP 1998 10,000(4)
Director
Jim Vondra 1999 10,000(4)
Director 1998 10,000(4)
Kim Adolphe 2000 $125,000(8) 25,000(4)
Director, and President 1999 $123,000(8) 2,000,000(9)
of Subsidiary 1998 70,000(8)
James Marquis 2000 10,000(4)
Director 1999 10,000(4)
Nevin Jenkins 2000 250,000(10)
President of
Subsidiary
Rande Newberry 2000 250,000(10)
Vice-President
of Subsidiary
_____________
* Retired from all positions in February, 2000.
** Retired from all positions in May, 1999.
*** Retired in May, 1999.
(a) Mr. Sloan and Mr. Provost also holds 10 preferred convertible
shares each, each convertible into 1,500,000 common shares. These Shares
were issued him following the annual meeting in 1999 as a means of
continuing current management and as an anti-dilutive measure.
(1) Mr. Provost received a $18,000 stipend to cover the costs of
maintaining an office.
(2) Mr. Provost received an aggregate of 196,350 shares as part of
total compensation during fiscal year 1997.
(3) Mr. Provost and Mr. Sloan received $0 as of December 31, 1999. This
amount is accrued and payable by the Company.
(4) Shares in stock option plan (unexercised, as of November 30, 2000).
(5) Mr. Sloan has received $25,000 as of December 31, 1998. The balance
of $35,000 is accrued and payable by the Company.
(6) Mr. Sloan has received $40,000 as of December 31, 1997. The balance
of $20,000 is accrued and payable by the Company.
<PAGE>
(7) This represents one month's salary.
(8) Salary and auto expenses received from Subsidiary. This is
consolidated and carried back two years, even though the Subsidiary was
only purchased in September, 1999.
(9) Shares received as compensation for the purchase of Gemini. The
original sale price was 20,000,000 shares, which were subject to the 1
for 10 reverse split in November, 1999,
(10) Shares received upon the purchase of Futronix by Salient.
In addition, the Company may award stock options to key
employees, members of management, directors and consultants under
stock option programs as bonuses based on service and
performance, although, to date, it has not done so.
Resignations of Officers and Directors
In February, 2000, Larry Provost resigned as Officer and
Director. In May, 2000, Todd Finch resigned as Director. Neither
resignation was the result of any dispute with the Company, but
rather, in each case, the decision of the Director or Officer
that his business pursuits did not allow for the time he felt
that he must devote to us to do a proper job.
CERTAIN TRANSACTIONS
The following information pertains to all transaction during
the last two year, or proposed transactions, to which the Company
was or is to be a party, in which any of the following persons had
or is to have a direct or indirect material interest: any director
or executive officer of the Company: any nominee for election as a
director; any principal security holder listed below; and, any
member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any of the foregoing persons.
Name and Principle All Other Compensation
Position Year Salary Pecuniary Shares
Larry Provost*(a) 1999 $78,000(3) 50,000(4)
Chairman, Secretary 1998 $52,000(3) $18,000(1) 20,000(4)
Treasurer and Chief 1997 $18,000 196,350(2)
Financial Officer
Paul Sloan (a) 2000 $125,000(3) 25,000(4)
President, Chief 1999 $78,000(3) 50,000(4)
Executive Officer 1998 $60,000(5) 20,000(4)
and Director 1997 $60,000(6)
Lester Cohen** 1999 10,000(4)
VP Marketing, 1998 10,000(4)
Director
Michael Solomon*** 1999 10,000(4)
Senior VP 1998 10,000(4)
Director
Jim Vondra 1999 10,000(4)
Director 1998 10,000(4)
Kim Adolphe 2000 $125,000(8) 25,000(4)
Director, and President 1999 $123,000(8) 2,000,000(9)
of Subsidiary 1998 70,000(8)
<PAGE>
James Marquis 2000 10,000(4)
Director 1999 10,000(4)
Nevin Jenkins 2000 250,000(10)
President of
Subsidiary
Rande Newberry 2000 250,000(10)
Vice-President
of Subsidiary
_____________
* Retired from all positions in February, 2000.
** Retired from all positions in May, 1999.
*** Retired in May, 1999.
(a) Mr. Sloan and Mr. Provost also holds 10 preferred convertible
shares each, each convertible into 1,500,000 common shares. These Shares
were issued him following the annual meeting in 1999 as a means of
continuing current management and as an anti-dilutive measure.
(1) Mr. Provost received a $18,000 stipend to cover the costs of
maintaining an office.
(2) Mr. Provost received an aggregate of 196,350 shares as part of
total compensation during fiscal year 1997.
(3) Mr. Provost and Mr. Sloan received $0 as of December 31, 1999. This
amount is accrued and payable by the Company.
(4) Shares in stock option plan (unexercised, as of November 30, 2000).
(5) Mr. Sloan has received $25,000 as of December 31, 1998. The balance
of $35,000 is accrued and payable by the Company.
(6) Mr. Sloan has received $40,000 as of December 31, 1997. The balance
of $20,000 is accrued and payable by the Company.
(7) This represents one month's salary.
(8) Salary and auto expenses received from Subsidiary. This is
consolidated and carried back two years, even though the Subsidiary was
only purchased in September, 1999.
(9) Shares received as compensation for the purchase of Gemini. The
original sale price was 20,000,000 shares, which were subject to the 1
for 10 reverse split in November, 1999.
(10) Shares received upon the purchase of Futronix by Salient.
Parents of Salient
The following table discloses all persons who are parent of
the Company (as such term is defined in Securities and Exchange
Commission Regulation C), showing the basis of control and as to
each parent, the percentage of voting securities owned or other
basis of control by its immediate parent if any.
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Stock Paul Sloan 207,504 2.7%
4266 Higel Ave. Record and Beneficial
Sarasota FL 34242 Owner
Common Stock Kim Adolphe 1,896,000 25.3%
Site 38 RR# 12 Record and Beneficial
Calgary Alta. Owner
T3E 6W5
<PAGE>
Transaction with Promoters, if Organized Within the Past Five Years
There have been no transactions with Promoters over the
past five years.
PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, the following persons
(including any "group" are, based on information available to us,
beneficial owners of more than five percent of Salient Cybertech, Inc.
Common Stock (its only class of voting securities):
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Stock Paul Sloan(a) 207,504 2.7%
4266 Higel Ave. Record and Beneficial
Sarasota FL 34242 Owner
Common Stock Kim Adolphe 2,000,000 25.3%
Site 38 RR# 12 Record and Beneficial
Calgary Alta. Owner
T3E 6W5
(a) Mr. Sloan also holds 10 preferred convertible shares, each
convertible into 1,000,000 common shares. These Shares were issued him
following the annual meeting in 1999 as a means of continuing current
management and as an anti-dilutive measure.
SECURITY OWNERSHIP OF MANAGEMENT
As of the date of this Prospectus, the following table
discloses, as to each class of our equity securities or any of
our parents or subsidiaries other than directors' qualifying
shares, beneficially owned by all directors and nominees, the
names of each executive officer (as defined in Item 402[a][2] of
Securities and Exchange Commission regulation S-B), and our
directors and executive officers as a group, the total number of
shares beneficially owned and the percent of class so owned. Of
the number of shares shown, the associated footnotes indicate the
amount of shares with respect to which such persons have the
right to acquire beneficial ownership as specified in Securities
and Exchange Commission Rule 13[d](1).
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Stock
Larry Provost(a)(b) 132,750 1.8%
116 Teatown Rd. Record and Beneficial
Croton, NY 10520 Owner
Common Stock Paul Sloan(b) 207,504 2.7%
4266 Higel Ave. Record and Beneficial
Sarasota FL 34242 Owner
Common Stock James Vondra 42,476 0.6%
216 Overcrest Dr. Record and Beneficial
Benbrook TX 76126 Owner
<PAGE>
Common Stock Kim Adolphe 1,896,000 25.3%
Site 38 RR# 12 Record and Beneficial
Calgary Alta. T3E 6W5 Owner
All Directors & Officers 2,278,730 30.4%
as a group (5 persons)
_______________________________________________________
(a) Mr. Provost retired from all positions in February, 2000.
He currently owns 40,000 shares.
(b) Mr. Sloan and Mr. Provost also holds 10 preferred convertible
shares each, each convertible into 1,500,000 common shares. These Shares
were issued him following the annual meeting in 1999 as a means of
continuing current management and as an anti-dilutive measure.
_________________________________________
SECURITIES OF SALIENT CYBERTECH, INC.
COMMON STOCK
We are authorized to issue 100,000,000 shares in our
capital stock, with a par value of $.001 per share, divided into
80,000,000 Common Shares and 20,000,000 Preferred Shares.
Immediately prior to this offering 7,424,904 shares of
Common Stock were outstanding and held of record by 691
persons as of November 30, 2000. The holders of Common Stock have
one vote per share on all matters (including election of
directors) without provision for cumulative voting. Thus,
holders of more than fifty percent (50%) of the shares voting for
the election of directors can elect all of the directors, if they
choose to do so. The Common Stock currently is not redeemable
and has no conversion or pre-emptive rights. The Common Stock
currently outstanding is (and the Shares being issued pursuant to
this prospectus will be) validly issued, fully paid and non-
assessable.
In the event of liquidation, holders of Common Stock will
share equally in any balance of our assets available for
distribution to them after satisfaction of creditors and the
holders of our senior securities. We may pay dividends, in cash
or in securities or other property when and as declared by the
board of directors from funds legally available therefor, but has
paid no cash dividends on its Common Stock.
PREFERRED STOCK
We are authorized to issue 20,000,000 Preferred Shares, with no par
value. Currently there are, issued and outstanding, 20 Preferred Convertible
Shares, each share convertible into 1,500,000 Common Shares. The 20
Preferred Convertible Shares are held by Paul Sloan, our President and CEO,
and Larry Provost.
DEBENTURE
On November 14, 2000 we issued a Convertible Debenture to Haines Avenue,
LLC., a Cayman Island Limited Liability Company, in the aggregate principal
sum of one million dollars at an annual interest rate of 8%, payable
quarterly. A second Debenture on the same terms will be issued upon the
effectiveness of the registration statement of which this prospectus forms
a part.
The terms of the Debenture, as delineated in the Debenture and the
Debenture Purchase Agreement are as follows:
THE DEBENTURE On November 14, 2000 a Convertible Debenture was issued to
Haines Avenue, LLC. in the aggregate principal amount of $1,000,000. An
additional Convertible Debenture in the aggregate principal amount of
$1,000,000 will be issued to Haines upon effectiveness of the registration
statement of which this prospectus forms a part.
The Debenture bears interest both before as well as after maturity at the
rate of 8% per anum, with interest payable quarterly, on March 31, June
30, September 30, and December 31 of each year to maturity, maturity being
defined as November 14, 2003, at which time all outstanding principal and
accrued and unpaid interest shall be due and payable. Interest was deemed
to commence on October 30, 2000.
The Debenture is fully assignable and divisible, and the holder of all or
part of the Debenture ("Holder"), is deemed to have all the rights and
obligations of the original Holder, Haines Avenue, LLC.
MATURITY DATE December 31, 2009.
INTEREST RATE;
PAYMENT DATES,
PAYMENT MODE Debenture bears interest at the rate of 8% per anum, with
interest payable quarterly, on March 31, June 30, September 30, and December
31 of each year to maturity, at which time all outstanding principal and
accrued and unpaid interest shall be due and payable. Interest was deemed
to commence on October 30, 2000.
Payment of interest may be by cash, or in shares of the common stock of
Salient. If the payment is in stock, the calculated price per share shall
be $0.90 or 80% of the average of the lowest price over any 3 of the last
10 trading days prior to the payment date, whichever is lower.
RANKING The Debenture is a Senior Security, and neither Salient nor any of
its subsidiaries is permitted to issue any debt security senior to the
Debenture.
OPTIONAL REDEMPTION Salient has the right at all times and any time,
upon seven trading days' notice to the Holders, to prepay all or a portion
of the Debentures then held by the Holders at a cash price equal to the
greater of (a) principal plus outstanding interest, and (b) a formula
utilizing the price of the shares in the marketplace. The prepayment price
shall also include all amounts due and outstanding pursuant to the terms of
the Debenture. Salient may only utilize this prepayment option if the
shares issued are freely tradable and not subject to the volume
restrictions of Rule 144(k); and the shares are quoted on the OTC or are
traded on a major exchange.
CONVERSION RIGHTS The Holder of a Debenture may at any time convert
the Debenture, or a portion of it to common shares of Salient. The
conversion price is equal to either $.90 or 80% of the average of the
lowest price over any 3 of the last 10 trading days prior to the payment
date, whichever is lower.
LIMITATIONS ON
<PAGE>
CONVERSION RIGHTS The Holder may not exercise his conversion rights
if in doing so he will be the beneficial owner of more than 4.999% of
Salient's common stock.
CERTAIN COVENANTS The Debenture contains certain covenants that
provide for monetary penalties in the event that registration, issuance
of shares, or payment of amounts due pursuant to the terms of the Debenture
are not carried out in a defined timely manner.
In the event of any dividend, stock dividend, or other distribution
or dilution of the common stock, or in the event shares or warrants are
offered to Salient's shareholders at a price lower than the conversion
price for Holders of the Debentures, the conversion price will be adjusted
to account for such event.
In the case of any reclassification or compulsory share exchange, the
Holders of the Debentures shall have the option of participation.
EVENTS OF DEFAULT
AND REMEDIES The Debenture provides that upon the occurrence of an event
of default thereunder (including, without limitation, upon the failure to
retire the Debenture when required), the Holder may declare all principal
and interest on the Debenture immediately due and payable.
Likewise, certain defaults under the Debenture (primarily those defaults
related to the failure to pay indebtedness under the Debenture or defaults
resulting in the acceleration of the maturity of indebtedness under the
Debenture) will result in an Event of Default.
In the event of a Default all sums due under the Debenture become due and
owing, and there is a penalty of 20% of the outstanding principal imposed.
USE OF PROCEEDS
OF DEBENTURE The proceeds are to be used for working capital, and may
not be used to pay off liens, judgments, mortgages,, or to retract common
shares.
VESTING WARRANT At the time of issue of the Debenture, the Holder received
a Vesting Warrant. This warrant, exercisable until November 14, 2005,
entitles the Holder to convert such amounts as are owing by Salient to the
Holder upon the happening of an event of default, or by virtue of any sums
due pursuant to any term or condition of the Debenture, including maturity,
into common shares. The exercise price is equal to the closing price of the
common shares on the day preceding the vesting of the warrants, adjustable
downward in the event shareholders of Salient are offered shares at a lower
price. Upon vesting, the Vesting Warrants are assignable and divisible.
CLOSING WARRANT At the time of issuance of the Debenture the Holder received
an assignable, divisible warrant exercisable until November 14, 2005, for
423,729 shares in the common stock of Salient. The exercise price is $0.90
<PAGE>
per share, adjustable downward in the event the shareholders of Salient are
offered shares at a lower price.
REGISTRATION RIGHTS Pursuant to the terms of the Registration Rights
Agreement executed between the Holder and Salient on November 14, 2000,
all shares issuable pursuant to the terms of the Debenture, Vesting Warrant
and Closing Warrant are to be registered with the S. E. C. as soon as
practicable after the issue of the Debenture. It is these registration
rights that give rise to the Registration Statement of which this Prospectus
forms a part.
SECURITIES PURCHASE AGREEMENT
The Securities Purchase Agreement (the "Agreement"), executed between
Salient and Haines Avenue, LLC. on November 14, 2000, entitles Salient
Cybertech, Inc., to sell on notice to Haines between $2,500,000 and
$10,000,000 in shares of common stock (the PUT Shares). In the event that
the aggregate of PUT Shares does not equal $2,500,000, Haines shall have
the difference between the value of the PUT Shares and $2,500,000 in Warrants
(See Vesting Warrants, Below). The Agreement terminates 24 months after the
effective date of the registration statement of which this Prospectus forms
a part, upon the purchase of $10,000,000 by Haines, or upon the earlier
termination pursuant to the terms of the Agreement.
The key terms of the Agreement are disclosed below:
PUT SHARES At any time prior to the termination of the Agreement,
Salient may, by notice to Haines, or its assign or assigns (the
"Investor"), require Haines, or its assign or assigns, to purchase
shares in the common stock of Salient (the PUT Shares). Each such notice
shall be for a minimum of $50,000 and a maximum equal to the lesser of
(x) $2,000,000 and (y) 150% of the weighted average daily price for the
twenty Trading Day period prior to the Date of Notice multiplied by the
weighted average trading volume for such twenty Trading Day period.
The Put Shares are fully assignable and divisible on issue.
TERMINATION 24 months after the effective date of the registration
statement of which this Prospectus forms a part, upon the purchase of
$10,000,000 by Haines, or upon the earlier termination pursuant to the
terms of the Agreement.
CALCULATION OF
THE PRICE OF THE
PUT SHARES The price per share of the PUT Shares is equal to 90% of
the average market price of the shares of Salient's common stock over the
10 days after the notice to Haines requiring the purchase of PUT Shares.
<PAGE>
CERTAIN CONDITIONS
PRECEDENT TO REQUEST
FOR PUT SHARES, AND
PUT SHARE PRICE
ADJUSTMENTS In the event shares of common stock or warrants for share
purchases provide for a price lower than the price to be paid by Haines for
the PUT Shares, the price will be adjusted downward.
The following are some of the major conditions that must be met before
Salient can require a purchase of PUT Shares:
(1) Representations and Warranties. The representations and warranties
of Salient, including representations respecting liquidity, no materially
adverse changes, properly prepared financial statements, all filings timely
made and complete, no stoppage in trading on any exchange or quotation
system, and a valid and effective registration statement for all PUT Shares
are true and correct as at the date the PUT Shares are paid for or purchase
of PUT Shares requested.
(2) Performance by Salient. Salient shall have performed, satisfied
and complied in all material respects with all covenants and agreements
required by the Transaction Documents (as defined in the Agreement).
(3) Opinion of Counsel. The Investor shall have received (or receipt
shall have been confirmed by its agent on its behalf) an opinion of counsel
to Salient, in the form specified in the Agreement.
(4) Certification. Salient's Chief Executive Officer must certify that
certain terms and conditions of the Agreement have been met and are
continuing to be met.
(5) Transfer Agent. The Investor shall have received satisfactory
evidence of Salient's delivery to its transfer agent for the Common Stock of
instructions and legal opinion meeting the requirements of the Agreement
and acceptable to such transfer agent.
(6) Registration Statement.
(i) The Registration Statement shall have been declared effective by the
S. E. C. (the "Commission") and shall at all times since the Put Date
(as defined in the Agreement), and the prospectus thereunder shall be
available to the Investor to resell all of the Registrable Securities
thereunder (including the Put Shares, Warrant Shares issuable at such
Closing).
(ii) Neither Salient nor the Investor shall have received notice that
the Commission has issued or intends to issue a stop order with respect
to the Registration Statement or that the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration Statement,
either temporarily or permanently, or intends or has threatened to do so
(unless the Commission's concerns have been addressed and the Investor
is reasonably satisfied that the Commission no longer is considering or
<PAGE>
intends to take such action).
(iii) The Registration Statement (including the information or documents
incorporated by reference therein) and any amendments or supplements
thereto shall not contain any untrue statement of material fact or omit
to state any material fact required to be state d therein or necessary to
make the statements therein not misleading.
(iv) Salient shall have no knowledge of any event which is reasonably
likely to occur within 30 Trading Days of the Put Date that would
reasonably be expected to cause the Registration Statement to be
suspended or otherwise ineffective or inaccurate.
(6) Adverse Changes. Since the earlier to occur of (i) the date of
filing of Salient's most recent SEC Document and (ii) the last sale of
PUT Shares, no occurrence or event that could have or result in a
Material Adverse Effect shall have occurred.
(7) No Suspension of Trading In or Delisting of Common Stock.
(8) Principal Market Requirements; Compliance. Salient shall have
received all authorizations from and made all filings required in order
to issue to the Investor the PUT Shares and shall have caused the PUT
Shares and the Warrant Shares issuable upon the exercise of the Warrants
to be issued to be listed for trading on the Principal Market (as defined
in the Agreement.
(9) Timing. At least fifteen Trading Days shall have elapsed since
the immediately preceding sale of PUT Shares.
(10) Closing Threshold. For the ten Trading Days immediately preceding
the Put Date the weighted average daily trading volume of the Common Stock
on the Principal Exchange shall not be less than $50,000.
(11) The Debenture shall be in good standing and no default thereunder
shall have occurred.
(12) Other. The Investor shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Investor in order for the Investor to confirm
Salient's satisfaction of the conditions set forth herein.
CERTAIN COVENANTS The Agreement contains certain covenants that
provide for monetary penalties in the event that registration, issuance
of shares, or payment of amounts due pursuant to the terms of the Agreement
are not carried out in a defined timely manner.
In the event of any dividend, stock dividend, or other distribution
or dilution of the common stock, or in the event shares or warrants are
<PAGE>
offered to Salient's shareholders at a price lower than the price for
PUT Shares, the price will be adjusted to account for such event.
EVENTS OF DEFAULT
AND REMEDIES The Agreement provides that upon the occurrence of an event
of default thereunder, the Investor may declare all sums, including but not
limited to attorney fees, penalties, any amounts that arise because the
minimum PUT Shares were not purchased (See, "PUT Shares", above) due and
owing immediately.
In the event of a Default all sums due under the Agreement shall, at the
option of the Investor, may be converted, in whole or in part, to shares
issuable pursuant to the Vesting Warrant (see, "Vesting Warrant", below).
USE OF PROCEEDS The proceeds from the purchase of PUT Shares are to be used
for working capital, and may not be used to pay off liens, judgments,
mortgages,, or to retract common shares.
VESTING WARRANT At the time of the execution of the Agreement, the Investor
received a Vesting Warrant. This warrant, exercisable until November 14,
2005, entitles the Investor to convert such amounts as are owing by Salient
to the Investor pursuant to the terms of the Agreement, into common shares.
The exercise price is equal to the closing price of the common shares on the
day preceding the vesting of the warrant, adjustable downward in the event
shareholders of Salient are offered shares at a lower price. Upon vesting,
the Vesting Warrants are assignable and divisible. The number of shares
represented by the warrant equal the exercise price divided by sum or sums
owed.
CLOSING WARRANT At the time of closing the Investor received an assignable,
divisible warrant exerciseable until November 14, 2005, for 750,000 shares
in the common stock of Salient. The exercise price is 125% of the price
per PUT Share, adjustable downward in the event the shareholders of Salient
are offered shares at a lower price. The Investor will receive a warrant
for a further 150,000 shares upon the purchase of each $1,000,000 worth of
PUT Shares by the Investor.
REGISTRATION RIGHTS Pursuant to the terms of the Registration Rights
Agreement executed between the Investor and Salient on November 14, 2000,
all shares issuable pursuant to the terms of the Agreement, Vesting Warrant
and Closing Warrant are to be registered with the S. E. C. as soon as
practicable after the issue of the Debenture. It is these registration
rights that give rise to the Registration Statement of which this Prospectus
forms a part.
TRANSFER AGENT
Our transfer agent for our Capital Stock is Signature Stock
Transfer, Inc., Dallas, Texas.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Generally, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, under certain
circumstances, sell within any three month period a number of shares which
does not exceed the greater of one percent (1%) of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a
person who has not been an affiliate of ours for at least 90 days and
who has satisfied a one year holding period.
ADDITIONAL INFORMATION
The foregoing statement is a summary of the rights and privileges
of the holders of our Stock. It does not purport to be complete and is
subject to the provisions of the Florida General Corporation Act, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and, upon anticipated registration as an NASDAQ OTC BB issue,
the rules, regulations and bylaws of the National Association of Securities
Dealers, Inc. The foregoing statements are qualified in their entirely by
such references.
PLAN OF DISTRIBUTION
GENERAL
The Shares registered by the Registration Statement of which this
Prospectus is a part are being registered as a result of demand registration
rights granted by us to the Selling Stockholder, at the time that Selling
Stockholder subscribed for the subject securities.
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The Selling Stockholders may use
any one or more of the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per share;
<PAGE>
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in
connection with these trades. The Selling Stockholders may pledge their
shares to their brokers under the margin provisions of customer agreements.
If a Selling Stockholder defaults on a margin loan, the broker may, from
time to time, offer and sell the pledged shares. The Selling Stockholders
have advised the Company that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers
regarding the sale of their shares other than ordinary course brokerage
arrangements, nor is there an underwriter or coordinating broker acting
in connection with the proposed sale of shares by the Selling Stockholders.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-
dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Investor and any broker-dealers or agents that are involved in selling
the shares are considered "underwriters" by the Securities and Exchange
Commission within the meaning of the Securities Act in connection with
sales under this Registration Statement. Accordingly, any commissions
received by such broker-dealers or agents and any profit on the resale
of the shares purchased by them will be deemed underwriting commissions
or discounts under the Securities Act.
We undertake to file a post effective amendment to the Registration
Statement identifying any underwriter who may agree to sell any shares of
any Selling Stockholder, and to set forth the terms of any underwriting
agreement or arrangement. The said underwriter shall also deliver a market
making prospectus. As far as we are aware, there exists no past, present,
or future plans, proposals, or undertakings with respect to any underwriter
and any Selling Stockholder.
SELLING STOCKHOLDERS
The following table sets forth the selling stockholders, and the number of
shares of common stock owned beneficially by them as of December 1, 2000
which may be offered pursuant to this prospectus. This information is based
upon information provided to us by either the named selling stockholder or
our transfer agent. Because the selling stockholders may offer all, some or
none of their respective shares of common stock, no definitive estimate as
to the number of shares thereof that will be held by the selling stockholders
after such offering can be provided. The term "Selling stockholder" includes
the stockholders listed below and their transferees, pledgees, donees or
other successors. Except as set forth below, none of the selling stockholders
is currently an affiliate of Salient, and none of them has had a material
relationship with Salient during the past three years.
<PAGE>
Shares Beneficially Number of Shares Shares Beneficially
Selling Owned before Offering Being Offered (2) Owned After Offering
Stockholders (1) Number Percent(2) Number(4) Percent
Haines Avenue LLC 423,729(3) * [ ] (3) 0 *
* Less than 1%
(1) To our knowledge, the selling stockholders have sole voting and investment
power with respect to all common stock shown as beneficially owned by them,
subject to community property laws where applicable. Except as otherwise
set forth herein, the table includes shares of common stock that the selling
stockholders have the right to acquire pursuant to the exercise of warrants
and options exercisable within 60 days and shares of common stock issuable
to the selling stockholders upon the conversion of preferred stock held by
them.
(2) Includes warrants exercisable into shares of common stock.
(3) The Debenture and the Warrants issued to the stockholder each prohibit
the holder thereof from converting Debentures or exercising Warrants to the
extent that such conversion or exercise, as the case may be, would result in
the holder, together with any affiliate thereof, beneficially owning in
excess of 4.999% and 9.999% of the outstanding shares of common stock
following such conversion or exercise, as the case may be. Such restrictions
may be waived by the holder of Debentures and Warrant as to itself upon not
less than 61 days notice to us. However, the 4.999% and 9.999%,
respectively, limitation would not prevent the Selling Stockholder from
acquiring and selling in excess of 4.999% and 9.999%, respectively, of our
common stock through a series of acquisitions and sales under the debentures
and warrants.
(4) Assumes sale of all shares of common stock offered hereby.
INDEMNIFICATION ARRANGEMENTS
Our articles of incorporation and bylaws provide for
indemnification of our officers, directors and agents to the
fullest extent permitted by law.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers or persons controlling Salient pursuant to
the foregoing provisions, we have been informed that in the
opinion of the United States Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
<PAGE>
LEGAL OPINIONS
Bernabe Diaz, Esquire, attorney at law, has rendered his
opinion that the shares of Common Stock as described herein,
will, when issued, be validly issued, fully paid and non-
assessable, and that future purchasers thereof will not be
subject to personal liability as a result of their ownership
thereof.
EXPERTS
Our audited financial statements appearing in this
Prospectus and in the Registration Statement have been
examined by independent public accountants, as set forth in their
report appearing elsewhere herein, and are included in reliance
upon such report and upon the authority of such firm as expert in
auditing and accounting.
FINANCIAL STATEMENTS
(See following pages)
<PAGE>
Salient Cybertech, Inc.
Comparative Consolidated
Financial Statements and
Accountant's Audit Report
For the Years Ended
December 31, 1999 and 1998
<PAGE>
Salient Cybertech, Inc.
COMPARATIVE CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 and 1998
TABLE OF CONTENTS
_______________________________________________________________
Page
Accountant's Audit Report 3
Financial Statements:
Balance Sheet 4
Statements of Operations and Retained Earning 5
Statement of Stockholder's Equity 6
Statements of Cash Flows 7
Statement of Selling, General and Administrative 8
Notes to Financial Statements 9
_______________________________________________________________
<PAGE>
Stan J.H. Lee & Co., CPAs Direct) 201-681-7475
Princeton Corporate Center Tel) 609-514-5100
5 Independence Way, Suite 300 Fax) 609-514-5123
Princeton, NJ 08540 e-mail) [email protected]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Shareholders of Salient Cybertech, Inc.
Sarasota, FL
We have audited the accompanying comparative consolidated balance sheet
of Salient Cybertech, Inc. as of December 31, l999 and the pro-forma
consolidated balance sheet as of December 31, 1998 and the related
comparative and pro-forma statement of operations and retained earnings
(deficit), statement of stockholders' equity, comparative and pro-forma
consolidated statement of cash flows and the comparative and pro-forma
consolidated statements of selling, general and administrative expenses
for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Salient Cybertech, Inc. at December 31, l999 and 1998, and the results of
its operations and its cash flow for the years then ended in conformity
with generally accepted accounting principles.
/s/Stan J.H. Lee & Co. CPAs
_______________________
Stan J.H. Lee & Co., CPAs
March 25, 2000
Princeton, NJ
<PAGE>
Salient Cybertech, Inc.
Balance Sheet at December 31, 1999 and
December 31, 1998
Pro-Forma
1999 1998
ASSETS:
Cash 3,650 19,792
Accounts receivable 8,873 48,919
Inventory 19,566 27,171
Income taxes recoverable 63,416 -
Prepaid insurance - 26,422
Prepaid legal fees - current 562,500 -
Prepaid consulting fees 133,488 -
Prepaid expenses and sundry assets 2,285 2,218
Deferred syndication costs 100,000
TOTAL CURRENT ASSETS 893,778 224,522
Equipment - net 26,909 19,700
Research and development 486,769 408,435
Sundry assets and security deposit 2,285 -
Prepaid legal fees - long-term 46,875 -
1,456,616 652,657
LIABILITIES AND STOCKHOLDERS'S EQUITY:
Bank indebtedness 2,731 2,779
Accounts payable 103,360 122,539
Accrued expenses 250,587 120,056
Accrued interest 12,240 8,650
Accrued interest - related party 79,017 41,189
Notes payable 15,000 41,718
Notes payable - related party 300,053 210,000
TOTAL CURRENT LIABILITIES 762,988 546,931
Notes payable - related party, long term 35,577 33,224
Due to others 45,684 13,927
Due to shareholders 72,561 -
153,822 47,151
STOCKHOLDERS' EQUITY
Common stock - authorized 80,000,000 shares;
par value $0.001; issued and outstanding,
3,164,900 in 1999 and 10,635,249 in 1998 3,165 10,635
Additional paid-in capital 2,453,171 603,141
Due from officer (33,565) (33,565)
Accumulated deficit (1,882,965) (521,636)
TOTAL STOCKHOLDERS' EQUITY 539,806 58,575
1,456,616 652,657
The accompanying notes are integral part of these financial statements.
<PAGE>
Salient Cybertech, Inc.
Comparative Consolidated Statement of
Operations and Retained Earnings
For the Years Ending
December 31, 1999 and
December 31, 1998
Pro-Forma
For the year for the year
ended ended
12/31/99 12/31/98
SALES 112,554 119,782
COST OF SALES 11,386 67,959
GROSS PROFIT 101,168 51,823
EXPENSES
Selling 45,434 13,938
General and administrative 1,509,585 604,245
Interest 48,114 39,481
capitalization of research and - -
development expenditure (80,326) (150,798)
1,522,807 506,866
OPERATING LOSS (1,421,639) (455,043)
OTHER INCOME 25,000 -
RECOVERY OF SCIENTIFIC
RESEARCH TAX CREDIT 31,305 94,650
LOSS BEFORE INCOME TAXES (1,365,334) (360,393)
INCOME TAXES - -
EXTRAORDINARY GAIN - 50,185
NET LOSS (1,365,334) (310,208)
DEFICIT, BEGINNING (521,636) (151,998)
NET GAIN FROM FOREIGN
CONVERSION 4,005 (59,430)
DEFICIT, END (1,882,965) (521,636)
NET LOSS PER SHARE $.1979 per share $.0314 per share
The accompanying notes are integral part of these financial statements.
<PAGE>
Salient Cybertech, Inc.
Statement of Shareholders' Equity
at December 31, 1999 and
December 31, 1998
Others Retained Total
Common Stocks Issued Paid-in (Due from Earnings Shareholders'
Shares Amount ( $) capital officer) (Deficit) Equity
Beginning
balance
1/1/1998 9,189,699 9,190 226,645 (33,565) (151,998) 50,272
Common
stocks
issued 1,445,550 1,445 376,496 - 377,941
Loss from
currency
conversion (59,430) (59,430)
Loss for the
year 1998 (310,208) (310,208)
Ending
balance
12/31/1998 10,635,249 10,635 603,141 (33,565) (521,636) 58,575
Common
stocks
issued 1,012,500 1,013 1,850,030 1,851,043
Purchase of
Gemini
Learning
Systems,
Inc. 20,000,000
Gain from
currency
conversion 4,005 4,005
Others (8,483) (8,483)
Loss for
the year
1999 (1,365,334)(1,365,334)
Ending
balance
12/31/1999 3,164,900 3,165 2,453,171 (33,565)(1,882,965) 539,806
The accompanying notes are integral part of these financial statements.
<PAGE>
Salient Cybertech, Inc.
Comparative Consolidated Statement of Cash Flow
For the Years Ending December 31, 1999 and December 31, 1998
Pro-Forma
12/31/99 12/31/98
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (1,365,334) (310,208)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 47,533 75,089
Gain(Loss) from currency conversion 4,005 (59,430)
(Increase) decrease in operating assets:
Accounts receivable - net 40,046 64,303
Inventory 7,605
Income taxes recoverable (63,416) (17,020)
Prepaid insurance 26,422 52,523
Prepaid legal and consulting fees (842,911) 18,137
Other assets (2,352) 163
Deferred syndication costs 100,000 (100,000)
Accounts payable (19,179) (27,226)
Bank indebtedness 2,060
Accrued expenses 130,531 85,304
Accrued interest 3,590 25,963
Accrued interest - related parties 37,828 76,718
(1,895,632) (113,624)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of equipment (54,762) (82,945)
Expenditure for research and development (78,334) (14,422)
(133,096) (97,367)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 92,406
Loans from other 104,318 10,752
Repayments of debt (26,718) (15,770)
Proceeds from sale of common stock 1,842,560 228,083
2,012,566 223,065
NET (DECREASE) INCREASE IN CASH (16,162) 12,074
CASH, at beginning of period 19,792 7,721
CASH, at end of year 3,630 19,792
The accompanying notes are integral part of these financial statements.
<PAGE>
Salient Cybertech, Inc.
Comparative Consolidated Statement of
Operating Expenses For the Years Ending
December 31, 1999 and December 31, 1998
Pro-Forma
for the year for the year
ended ended
12/31/99 12/31/98
Selling expenses:
Trade show 197 61
Consulting 42,566 12,661
Advertising 450 20
Brochures and catalog 2,221 46
45,434 13,938
General and administrative
expenses:
Auto expense 1,404 3,492
Bank charge 6,360 11,118
Bad debt 1,671 75,089
Salary 159,569 127,072
Consulting and commission 54,707 53,550
Insurance 35,103 29,426
Other expenses 1,105 30,521
Office expense and supplies 14,524 31,115
Professional and consulting 1,154,009 111,755
Rent 18,143 12,100
Taxes 605 5,448
Other operating expense - 19,245
Amortization 47,553 75,089
Communication 7,044 9,385
Travel 7,788 9,840
1,509,585 604,245
The accompanying notes are integral part of these financial statements.
<PAGE>
SALIENT CYBERTECH, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Salient Cybertech, Inc. (formerly known as Sloan Electronics, Inc.)
(the "Company") was incorporated in the state of Florida in July, 1993.
The Company designs, manufacturers and markets electronics monitoring
equipment for the criminal justice industry and the long-term health care
industry.
The subsidiary company which was incorporated under the laws of the
Canadian Province of Alberta in June 1990 is a software applications
development company, specializing in distance education and training
solutions. The company created and markets software technology called
SWIFT (SoftWare Intelligent Freeform Training). The Company is emerging
from its development phase, having created an entire product line based on
the SWIFT technology.
The company has begun to establish clients and a distribution network in
Canada, the United States, the United Kingdom and Europe.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Equipment
Equipment is recorded at cost. The equipment is depreciated over its
estimated useful life, using the straight-line method of accounting.
Earnings per Share
Basic earnings per share (EPS) is computed by dividing income available
to common shareholder by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if dilutive securities and other contracts to issue
common stock were exercised or converted into common stock or resulted
in the issuance of common sock that then shared in the earnings of the
Company.
Statements of Cash Flows
For purposes of reporting cash flows, the Company considers cash and cash
equivalents as those amounts which are not subject to restrictions or
penalties and have an original maturity of three months or less.
Reclassifications
Certain reclassifications have been made to the 1998 financial statements
to conform with the 1999 financial statement presentation.
<PAGE>
SALIENT CYBERTECH, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Consolidated and Pro-Forma Comparative Data
The comparative financial statements for 1998 were prepared on a pro-forma
basis, as if the Purchase of Gemini had occurred on January 1, 1998.
This was done to provide a clear comparative picture for comparing the
statements for 1998 to those of 1999, which were prepared on a consolidated
basis.
Revenue and Expense Recognition
The Company prepares its financial statements on the accrual accounting basis.
Consequently, certain revenue and related assets are recognized when earned
rather than when received, and certain expenses are recognized when the
obligation is incurred or the asset consumed, rather than when paid.
Accounting Method
The Company recognizes income and expenses on accrual basis.
Depreciation
Depreciation is computed by using the straight-line method for financial
reporting purposes and the modified accelerated cost recovery method for
federal income tax purposes.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the bases of certain assets
and liabilities for financial and tax reporting.
The deferred taxes represent the future tax return consequences of those
differences, which will either be taxable when the assets and liabilities
are recovered or settled.
Net Operating Loss Carry-forward
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes for operating losses that are available to offset future taxable
income.
Intangible Assets
Intangible assets subject to amortization include organization costs, loan
closing costs, and in-force leasehold costs.
Reclassifications
Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation
in the current-year financial statements.
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and
equipment is provided using the straight-line method for financial reporting
purposes at rates based on the estimated useful lives.
Inventories
Inventories are stated at the lower of cost (determined on the first-in,
first-out basis) or market.
Deferred Syndication Costs
Deferred syndication costs represent legal and professional fees related to
the registration of a new issue of common stock. When the common stock is
issued, these costs will reduce proceeds received as reflected in
stockholder's equity.
NOTE B- NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES
Note payable to an individual, 15% annual
Interest rate, payable on demand $ 15,000
NOTES PAYABLE $ 15,000
Note payable to a stockholder, 20% annual
Interest rate, maturity date March 1, 1996. $ 10,000
Note payable to a stockholder, 18%
Compounded interest rate, payable on demand. 100,000
Note payable to a stockholder, 5% annual
Interest rate, maturity date of December 16,1998. 40,000
Notes payable to a stockholder, 10% annual
interest rate, maturity date of October 22, 1999. 20,000
Note payable to a stockholder, 10% annual
interest rate, maturity date December 7, 1999. 30,000
Note payable to a stockholder, 10% annual
interest rate, maturity date of January 5, 2000
for $20,000 and March 29, 2000 for $5000. 25,000
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE B- NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES - CONTINUED
Note payable to a stockholder, 10% annual
interest rate, maturity date of May 27, 2000. 10,000
Notes payable to the Company president, 10 %
annual interest rate, maturity date of June 30, l999. 6,000
Notes payable to the Company president, 10 %
annual interest rate, payable upon demand. 52,853
Note payable to the Company president, 10%
annual interest rate, maturity date of October 7,
1998. 7,000
NOTES PAYABLE TO RELATED PARTIES $300,053
The Company has not repaid loans whose maturity dates have passed since no
funds were available. Interest continues to accrue under the same terms.
The notes payable - related party, long term, represents amounts owed to
Wayne Adolphe, husband of the President of Gemini Learning Systems, Inc.
The loans have no fixed term, bear a simple interest rate of 4 % per annum
on outstanding principal, and are payable upon a change of ownership.
Accordingly, the notes are due on September 24, l999, effective date of
the change of ownership but the notes remain unpaid as of the date of the
statements and the management has no specific plan of retiring the same in
near future.
NOTE C - INCOME TAXES
At December 31, 1999, the Company has a net operating loss carry forward of
approximately $ 1,882,965 that will be available to offset future taxable
income through 2014. Based on historical operations, management has
elected to record a valuation allowance equal to the deferred tax benefit
of $696,697, calculated using an effective income tax rate of 37%.
The Company has no significant differences between book and taxable income.
NOTE D - NET LOSS PER SHARE
The following sets forth the computation of basic and diluted earnings per
share:
Numerator Year 1999 Year 1998
Operating loss $ ( 1,365,334) $ (360,393)
Denominator
Denominator for basic earnings
per share - weighted average
shares 6,900,075 9,888,219
Net loss per common share $ .1979 per share $ .0365 per share
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE E - STOCK - BASED COMPENSATION
In 1998, the Company established a stock option plan ("the Plan") to
provide a means whereby selected employees, officers, directors, agents,
consultants and independent contractors of the Company may be granted
incentive stock options and/or non-qualified stock options to purchase
common stock of the Company.
The Plan requires the exercise price shall not be less than the fair market
value per share of the common stock at the time the option is granted,
with respect to incentive stock options and not less than 85% of the fair
market value per share of the common stock at the time the option is
granted with respect to non-qualified stock options. Incentive stock
options to employees who own more than 10% of the total combined voting
power of all classes of stock require that the exercise price shall not
be less than 110% of the fair market value of the common stock at the
time the incentive stock option is granted.
The term of each incentive and non-qualified stock option is established
by the plan administrator but may not exceed ten years. Incentive stock
options to employees who own more the 10% of the total combined voting
power of all classes of stock of the Company may not exceed five years.
Non-qualified stock options granted under the Plan in 1999 total 220,000
shares, with an exercise price of $1.12 and an expiration date of
February 24, 2009. Compensation expense related to these options and
included in the income statement for the period ending June 30, 1999 is
$20,059.
The minimum fair value of options granted during 1999 estimated on the
date of grant was $.64 per share. The fair value of options granted is
estimated on the date of the grant using the following assumptions:
risk-free interest rate of 5.7% and an expected life of 10 years.
NOTE F - RELATED PARTY TRANSACTIONS
The company rents space from the president under a month to month lease,
for $1,000 per month. Rent expense related to this lease , paid or
accrued were $ 12,000 in 1999 and $ 12,100 in 1998.
NOTE G - FAIR VALUE OF FINANACIAL INSTRUMENTS IN ACCORDANCE WITH THE
REQUIREMENTS OF SFAS NO.107
The Company's financial instruments consist of all its assets and liabilities.
The Company's management has determined that the fair value of all of
its financial instruments is equivalent to the carrying cost.
NOTE H - STOCK TRANSACTIONS
In February 1999, the Company issued 500,000 shares to a law firm for
legal services to be provided over a two year period which is the
anticipated life of the services. The market price of the shares on the
day they were issued was $1.375. The prepaid consulting services were
valued using this market value and are being amortized over a one year
period.
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
In March 1999, the Company sold 12,500 shares to an investor for $ 10,000.
In April 1999, the Company issued 500,000 shares to a consulting firm for
public relations and other services to be provided to the Company. The term
of the agreement covers one year. The market price of the shares on the
day they were issued was $ 1.375. The prepaid consulting services were
valued using this market and are amortized over a one year period.
In May 1999, the board of directors approved changing the certificate of
incorporation to authorize the issuance of twenty shares of preferred stock.
Each share of preferred stock is convertible to 1,500,000 shares of common
stock at the will of the holder of the preferred stock.
NOTE I - COMMITMENTS AND CONTINGENCIES
In May 1999, the board of directors approved a reverse stock split of up to
10 to 1 which was carried out on November 1, 1999 at the discretion of
the chairman. The board of directors also approved the issuance of the
twenty shares of preferred stock to two key employees of the company
subsequent to the stock split As of the financial statement date neither
the reverse split nor the issuance of the preferred shares had occurred.
The Company provides a limited warranty on its products. The warranty
covers all defects in materials or workmanship in the product for one
year from the date of purchase. The Company will repair or replace
units covered by this warranty without charge to the consumer for
labor or materials. No amounts have been accrued in the financial
statements as the company does not believe that any warranty claims
would be material.
The Company has a general liability insurance policy that provides coverage
for liability claims arising out of the products it sells. The Company
has not been the subject of any material product claim. The sale of the
Company's products entails the risk of product liability claims. In
addition, many of the companies with which the Company does or may do
business may require financial assurances of product reliability. The
Company has product liability insurance, but may be required to pay
higher premiums associated with the new product development. Because
of the high cost of product liability insurance, there can be no assurance
that additional insurance will be available on acceptable terms, if at all,
or that it will provide adequate coverage against potential liabilities.
NOTE J - DEPENDENCE ON THE THIRD PARTY CONTRACT MANUFATURER
The Company subcontracts the manufacturing of all its products to one
contractor. The Company has an understanding but no agreement with the
contractor to manufacture its products. Although to date the
contractor has been able to manufacture the company's products on a timely
basis, there is no assurance that future manufacturing by the contractor
will not be delayed or interrupted due to shortage in components or
manufacturing capacity. The Company believes that there are alternative
contract manufacturers that could produce the Company's products,
but is not pursuing agreements or understandings with alternative sources.
The inability of the Company to develop alternative manufacturers,
if required in the future, could have a material adverse effect on the
Company's results of operations.
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
NOTE K - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred
accumulated deficit of $ 1,882,965 as of December 31, l999. The
ability of the Company to continue as a going concern is dependent
on obtaining additional capital and financing and operating at a
profitable level. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue
as a going concern.
NOTE L - BUSINESS COMBINATION
In September 24, 1999, the Company purchased a Canadian corporation
(Seller), Gemini Learning Systems, Inc. The purchase price is 20,000,000
shares of common stocks in the Company paid at closing. An additional
50,000 shares of stock, which shall not be subject to any stock split,
shall be made available to the Seller to reward key employees of the
business at the Seller's discretion so long as said shares are issued
in conformance with the purchaser's existing non-qualified stock option plan.
The agreement also entitles the Seller to an additional 9,230,000 sharesof
common stock in the event the business earns three million dollars in gross
sales for the fiscal year ended September 30, 2000. If the business has a
gross sales for the fiscal year ended September 30, 2000 which are at least
double the business' gross sales for the fiscal year ended September 30,
1999, but less than three million dollars, than the Seller shall be entitled
to a percentage of the 9,230,000 additional shares. In addition, if as of
September 30, 2000 the prior five trading days average closing price of the
Company's stock is greater than or equal to three dollars per share,
adjusted for any split, and the gross revenue of the business is at least
eighty percent of the total preceding calendar year revenues than the Seller
shall be entitled to the additional shares. In the event the business
earns ten million dollars in gross sales for the fiscal year ended September
30,2001, then the Seller is entitled to an additional 30,730,000 shares of
common stock in the Company. If the business has gross sales for
the fiscal year ended September 30, 2001 which are at least double the
business' gross sales for the fiscal year ended September 30, 2000 and at
least quadruple the business' gross sales for the fiscal year ended
September 30, 1999 but less than ten million dollars then the Seller shall
be entitled to a percentage of the 30,730,00 additional shares. In
addition, if as of September 30, 2001 the prior five trading days average
closing price of the Company's stock is greater than or equal to five
dollars per share, adjusted for any split, and the gross revenue of the
business is at least eighty percent of the total preceding calendar year
revenues of the Company the Seller shall be entitled to the additional
shares. These figures have not been adjusted to take into account the 1 for 10
stock split in November, 1999, and must be adjusted accordingly. The
agreement also provides for additional shares to be issued to the Seller if
the targeted projections or targeted share prices are exceeded.
In addition, the letter of intent calls for the Company to pay $750,000 to
the Seller for the purposes of funding the Company's future growth. These
monies are to be raised through a public offering.
<PAGE>
SALIENT CYBERTECH, INC.
NOTE TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE M - RESEARCH AND DEVELOPMENT
All research and development expenditures net of refundable income tax
credits (said refund issued by Revenue Canada, irrespective of the
existence of net taxable income) have been capitalized and are being
amortized on a ten year straight line basis. Costs incurred internally
have been historically charged as expenses, until technological feasibility
for the product line (the SWIFT technology) had been established, after
which they were capitalized over the expected life of the technology.
(SFAS 86).
The Canadian company has filed certain claims with Revenue Canada for
Scientific Research and Development Expenditures with respect to its
1999 and 1998 tax years. The refunds relating to these claims have been
recorded as receivable but are subject to audit. No provision has been
made in the financial statements for any reassessment which may results
from audits as management is of the opinion that the differences, if any,
will not be material. Any change will be accounted for in the year of
reassessment.
NOTE N - DESCRIPTION OF LEASING ARRANGEMENTS
Gemini currently rents approximately 2,104 square feet for its staff, at
Suite 605, 839 - 5th Avenue SW, Calgary, Alberta, Canada T2P 3C8 under
long term lease agreement which expires on December 31, 2001.
The annual rent for premises consists of a minimum rent plus realty taxes,
maintenance, heat and certain other expenses. Minimum rent payable for
premises for each of the next three years to maturity of the leases are
as follows;
1999 $ 15,220
2000 $ 16,500
2001 $ 16,500
NOTE O - FOREIGN CURRENCY CONVERSION
The Financial Statements are expressed in U. S. dollars.
Current assets and liabilities of Gemini Learning Systems, Inc.
denominated in Canadian dollars at the year end are translated
into U.S. dollars at the rate of exchange prevailing on that date.
Transactions in foreign currencies are recorded in U. S. dollars at
the rates of exchange prevailing on the date of the transactions.
Exchange gains and losses are reflected in income.
<PAGE>
Futronix, Inc.
Comparative Consolidated
Financial Statements and
Accountant's Audit Report
For the Years Ended
December 31, 1999 and 1998
<PAGE>
Futronix, Inc.
COMPARATIVE CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 and 1998
TABLE OF CONTENTS
______________________________________________________________________
Page
Accountant's Audit Report
3
Financial Statements:
Balance Sheet 4
Statements of Operations and Retained Earning 5
Statement of Stockholder's Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8
______________________________________________________________________
<PAGE>
Stan J.H. Lee & Co., CPAs Direct) 201-681-7475
Princeton Corporate Center Tel) 609-514-5100
5 Independence Way, Suite 300 Fax) 609-514-5123
Princeton, NJ 08540 e-mail) [email protected]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Shareholders of Futronix, Inc.
Sarasota, FL
We have audited the accompanying comparative consolidated balance sheet of
Futronix, Inc. as of December 31, l999 and the pro-forma consolidated balance
sheet as of December 31, 1998 and the related comparative and pro-forma
statement of operations and retained earnings (deficit), statement of
stockholders' equity, comparative and pro-forma consolidated statement of cash
flows and the comparative and pro-forma consolidated statements of selling,
general and administrative expenses for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Futronix, Inc. at December 31, l999 and 1998, and the results of its
operations and its cash flow for the years then ended in conformity
with generally accepted accounting principles.
/s/ Stan J.H. Lee & Co. CPAs
_______________________
Stan J.H. Lee & Co., CPAs
March 25, 2000
Princeton, NJ
<PAGE>
BALANCE SHEETS
FUTRONIX, INC.
As of December 31 1999 1998
ASSETS
Current Assets
Cash $ 352,590 $ 206,253
Restricted cash 75,358 83,702
Accounts receivable -
trade 234,296 68,311
Account receivable -
affiliated companies,
less allowance for
doubtful accounts of
$63,345 in 1999 6,487 64,243
Advances to employees 599 811
Inventory 592,603 548,353
Total Current Assets 1,261,933 971,673
Property and equipment,
net of depreciation
and amortization 647,063 887,931
Total Assets $1,908,996 $1,859,604
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities
of long-term debt $270,000 $ 283,500
Line of credit (credit card) 8,816 8,170
Accounts payable 581,285 347,425
Commissions payable - 2,741
Accrued payroll and related
taxes 38,463 19,407
Accrued vacation and sick pay 22,875 18,488
Credit cards and other 7,654 7,517
Loan payable - affiliated
company - 9,275
Advances from officers 368,447 -
Total Current Liabilities 1,297,540 696,523
Long-term debt, less
current maturities 553,737 829,867
Total Liabilities 1,851,277 1,526,390
Shareholders' Equity
Common stock, $1 par value,
100 shares authorized,
issued and outstanding 100 100
Additional paid-in
capital 50,400 50,400
Retained earnings 7,219 282,714
Total Shareholders'
Equity 57,719 333,214
Commitments and contingencies - -
Total Liabilities and
Shareholders' Equity $1,908,996 $1,859,604
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF OPERATIONS
FUTRONIX, INC.
Years ended December 31 1999 1998
REVENUES
Net sales $6,280,370 $ 6,900,923
Interest 5,811 3,247
6,286,181 6,904,170
COSTS AND EXPENSES
Cost of sales 4,985,285 5,280,584
Selling, general
and administrative
expenses 1,576,391 1,492,944
6,561,676 6,773,528
NET INCOME (LOSS) $ (275,495) $ 130,642
EARNINGS (LOSS) PER
SHARE
(100 common shares
used in
calculations) $ (2,755) $ 1,306
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
FUTRONIX, INC.
Years Ended December 31
Additional Total
Number Common Paid-in Retained Stockholders'
of Shares Stock Capital Earnings Equity
Balance -
December 31, 1997 100 $100 $50,400 $249,009 $299,509
Net Income 130,642 130,642
Distributions to
stockholders (96,937) (96,937)
Balance -
December 31, 1998 100 $100 $50,400 $282,714 $333,214
Net Loss (275,495) (275,495)
Balance -
December 31, 1999 100 $100 $50,400 $ 7,219 $ 57,719
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CASH FLOWS
FUTRONIX, INC.
Years Ended December 31 1999 1998
OPERATING ACTIVITIES
Net income (loss) $(275,495) $130,642
Adjustments to
reconcile net income
to net cash
provided by operating
activities:
Depreciation 251,752 289,631
Provision for
doubtful accounts 63,345 -
Changes in assets
and liabilities -
Accounts receivable (171,574) 402,997
Restricted cash 8,344 (83,702)
Inventory (44,250) (211,252)
Accounts payable 233,860 (54,116)
Commissions payable (2,741) (10,432)
Payroll taxes payable 602 (581)
Sales tax payable - 1,686
Accrued interest payable 5,067 5,485
Accrued payroll and
vacation pay 23,052 36,266
Other 784 1,220
Net cash provided by
operations 92,746 507,844
INVESTING ACTIVITIES
Purchases of property
and equipment (10,884) ( 35,265)
FINANCING ACTIVITIES
Loans from stockholders 368,447 -
Proceeds from long-
term debt - 1,200,000
Reduction in long-
term debt (281,197) (1,347,811)
Reduction in loan from
affiliated company (9,275) (25,610)
Distributions to
stockholders - (96,937)
Reduction in short-
term debt (13,500) (6,956)
Net cash provided
(used) in financing
activities 64,475 (277,314)
NET INCREASE IN CASH 146,337 195,265
CASH AT BEGINNING OF YEAR 206,253 10,988
CASH AT END OF YEAR $352,590 $206,253
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Interest paid $91,543 $ 98,721
Non cash item-
acquisition of equipment - $ 86,525
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FUTRONIX, INC.
Summary of Significant Accounting Policies and Related Matters
Organization and Business
FUTRONIX, Inc., was incorporated under the laws of the
State of Florida on March 25, 1988. The Company is
an ISO 9002-certified consignment and turnkey contract
electronic manufacturer.
Inventories
Inventories are stated at the lower of cost or market, with
cost being determined principally by the first-in, first-out
method.
Property and Equipment
Property and equipment are carried at cost or, in the case
of leased assets under capital leases, at the present value of
future lease payments. Depreciation is provided principally
on the accelerated methods, over the useful lives of the
assets. Leased assets under capital leases are amortized over
their useful lives using the straight-line method. In general,
the estimated lives used in computing depreciation and
amortization are from five to seven years for equipment and
thirty-one and one-half years for leasehold improvements.
Income Taxes
The Company, with the consent of its shareholders has
elected under the Internal Revenue Code to be an S
corporation. In lieu of corporation income taxes, the
shareholders will be taxed on their proportionate share of
the Company's taxable income.
Statement of Cash Flows
For purposes of cash flows, the Company considers all
highly liquid investments with a maturity of three months
or less at the time of purchase to be cash equivalents.
Impairment of Long-Lived Assets
The Company reviews property and equipment for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of property and equipment is
measured by comparison of its carrying amount to future
net cash flows the property and equipment are expected to
generate. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount
which the carrying amounts of the property and equipment
exceeds its fair market value. To date, no adjustments to the
carrying value of the Company's long-lived assets have
been required.
Use of Estimates
Management is required to make estimates and
assumptions during the preparation of the financial
statements in conformity with generally accepted
accounting principles. These estimates and assumptions
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of
the financial statements. They also affect the reported
amounts of net income or loss. Actual results could differ
materially from these estimates and assumptions.
Advertising
The Company expenses non-direct response advertising
costs as incurred. Costs of direct-response advertising that
results in a future benefit will be capitalized, and amortized
over the period during which the Company believes it will
obtain sales (or a benefit) as a result of each specific
advertisement.
<PAGE>
Property and equipment (pledged)
1999 1998
Plant equipment $1,566,815 $1,559,430
Office furniture and equipment 110,814 107,315
Leasehold improvements 185,168 185,168
Vehicles 18,319 18,319
1,881,116 1,870,232
Accumulated depreciation 1,234,053 982,301
Net $ 647,063 $887,931
Inventory (pledged)
1999 1998
Finished goods $ - $ 40,175
Work-in process 279,343 188,932
Raw materials 313,260 319,246
Total $592,603 $548,353
NOTES TO FINANCIAL STATEMENTS
FUTRONIX, INC.
Concentration of Risk and Geographic Data
Concentration of Risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally
of trade receivables. The Company performs ongoing credit
evaluations of its customers and generally does not require
collateral. In 1999 and 1998 the Company factored with
recourse substantially all of its receivables, with a
minimum holdback reserve of 10%. In management's
opinion this holdback reserve was sufficient and provision
for uncollectible accounts was not required. In 1999 a
provision for a receivable from an affiliated company was
recorded.
Sales of the Company's products are concentrated among
specific customers. In the year 1999, one customer
accounted for 34.8% of net revenues, and another
accounted for 36.7% of net revenues. In 1998 one customer
accounted for 52% of net revenues, and another accounted
for 25% of net revenues. All other customers individually
accounted for less than 10% of net revenues.
Geographic Data
The accounts receivable are due from customers located
through out the United States.
Long-term Debt
Equipment note, collateralized by equipment and
inventory. Total outstanding balance on December 31, 1999
was $760,250. This note is payable $20,000 monthly plus
an adjustable rate of interest. The interest rate on December
31, 1999 was 9.25%.
Florida Department of Revenue Assessment installment
obligation for sales and use tax. Balance on December
31, 1999 (including accrued interest), was $63,477 and is
payable $2,500 monthly including interest at 12%. A
balloon payment of $28,341 is due in April 2001.
<PAGE>
Scheduled maturities in each of the next four years:
2000 $270,000
2001 273,487
2002 240,000
2003 40,250
Total 823,737
Less current maturities 270,000
Long-term portion $553,737
Restatement of Beginning Retained Earnings
In 1998, the Florida Department of Revenue audited the
books and records of the Company for the periods 1991-
1998. As a result of this audit the Company was assessed
for sales and use tax on certain pieces of equipment that
were purchased out of state and in numerous cases were
intended for resale. The Company buys and rebuilds used
equipment for sale and uses this equipment in production
for demonstration purposes. The Department of Revenue
determined that since the equipment was used, even for a
short period of time, use taxes should have been paid and
assessed the Company for $61,543.70 plus accrued interest
of $24,876.27. In addition the Department assessed the
related parties to whom the rent was paid for tax on rental
payments for the year 1991-1998. The amount of this
assessment was $18,849.18 plus accrued interest of
$7,847.47. Since the Company should have paid the tax,
the Company has recorded this obligation on its books. The
use tax has been added to the cost of the equipment and
depreciation on this added cost has been recorded. Retained
Earnings at the beginning of 1998 have been restated for
the amount of the assessment related to years prior to 1998.
The effect on the prior year, 1997 was an overstatement of
income in the amount of approximately $26,000.
Factoring of Accounts Receivable
A discount of 2.65% of the amount of the receivable is
taken by the transferee. In 1999 the total amount of
$5,065,245 was transferred, with applicable discounts of
$134,229. In addition to the discount a minimum reserve of
10% is withheld as restricted cash. If any receivables
exceed the credit limit established, then an additional 15%
reserve is withheld. If any receivable becomes more than 90
days old, the reserve is used to buy back the receivable. If
the reserve drops below the required amount based on the
uncollected accounts receivable, then the Company's
operating account is charged. On December 31, 1999, the
Company was contingently liable to the transferee for
uncollected receivables in the amount of $633,789. The
balance in the Company's restricted cash account was
$75,358.
Interest Expense
Interest expense was $111,253 and $83,696 for 1998 and
1999 respectively.
NOTES TO FINANCIAL STATEMENTS
FUTRONIX, INC.
Commitments and Contingencies
Federal income tax returns and Florida sales and
use tax returns.
The Company's federal income tax returns have not been
audited since 1993 and are subject to adjustment by the
Internal Revenue Service. Also, the Company's sales and
use tax reports have not been audited by the Florida
Department of Revenue since 1998 and are subject to
adjustment.
Lease Agreements
The Company leases its manufacturing and office
facilities from its stockholders. The future minimum lease
payments of this operating lease outstanding on December
31, 1999 are as follows:
<PAGE>
2000 $183,660
2001 183,660
2002 183,660
2003 183,660
2004 183,660
Thereafter 1,836,600
Total minimum lease
payments $2,754,900
The above lease was renewed in December of 1999 for a
term of fifteen years at increased rental payments reflected
above. Total rent expense for this operating lease was
approximately $113,000 and $143,882 for the years ended
December 31, 1998 and 1999 respectively.
Helicopter
The Company and the Company's president jointly
purchased a 1978 Hughes helicopter in October of 1998.
The Company is the primary obligor on the amount
financed to purchase the helicopter and the title is in the
name of the Company. The president made the down
payment, is making the monthly payments of $4,964 and
pays the maintenance and insurance. Neither the purchase
or the obligation on the purchase has been reflected in the
accompanying financial statements. On December 31, 1999
the Company was liable on the obligation in the amount of
$273,584, which in management's opinion is less than the
fair market value of the helicopter. On December 31, 1999,
the president was making arrangements to assume the
liability and ownership of the helicopter.
Co Borrower Of Real Estate Loan
In December 1999 the Company and its stockholders
jointly borrowed $775,000 secured by a mortgage of real
estate property owned by its stockholders. The proceeds of
the loan were used to reduce the Company's trade accounts
payable and to provide working capital for the Company.
The note requires a monthly payment of $8,564 including a
variable rate of interest (prime plus 2%). Beginning in
January 2000 the Company will make this monthly
payment as part of its lease obligation for its leased
buildings.
Purchase Commitments
The Company routinely issues purchase orders for
purchase of materials used in manufacturing. These
purchase orders lock in a price for a stated term and a
commitment to purchase the materials. However, the
purchase commitments are waived if the customers for
whom the materials are purchased do not fulfill their
orders. Thus, the purchase order commitments do not
materially impact the financial statements.
New Accounting Pronouncement
The Financial Accounting Standards Board issued
Statement of Position (SOP) 98-5 effective for fiscal years
beginning after December 15, 1998. In 1999 the Company
adopted this SOP which requires costs of start-up activities
and organization costs to be expensed as incurred. As the
Company has historically made a practice of expensing
these costs the adoption does not have any impact of its
financial statements.
Related Party Transactions
The Company leases its manufacturing and
administrative offices from its shareholders. The rent for
1999 was $143,882 and for 1998 was $113,000. The
Company paid $227,003 and $179,067 respectively for
1998 and 1999 to its president for advertising and
promotion.
The Company paid royalties of $35,220 and $44,720
respectively for 1998 and 1999 to its president.
<PAGE>
Subsequent Event
In April of 2000, the Company signed a Letter of Intent
to be acquired by Salient Cybertech, Inc.
<PAGE>
PROFORMA
CONSOLIDATED FINANCIAL STATEMENTS
SALIENT CYBERTECH, INC.,
FOR THE PERIODS ENDED SEPTEMBER 30, 2000
AND DECEMBER 31, 1999
Bobbitt, Pittenger & Company, P.A.
<PAGE>
SALIENT CYBERTECH, INC.
CONTENTS
PAGE
FINANCIAL STATEMENTS
ACCOUNTANTS' REVIEW REPORT 1
PROFORMA CONSOLIDATED BALANCE SHEETS 2
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS 3
PROFORMA CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY 4
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO PROFORMA STATEMENTS 6
<PAGE>
November 10, 2000
TO THE BOARD OF DIRECTORS
Salient Cybertech, Inc.
Sarasota, Florida
ACCOUNTANTS' REVIEW REPORT
We have reviewed the accompanying consolidated balance sheets of Salient
Cybertech, Inc., as of September 30, 2000 and December 31, 1999, the related
proforma consolidated statements of changes in stockholders' equity for the
period then ended, and the proforma consolidated statements of operations for
the three and nine-month periods ending September 30, 2000 and 1999 and
proforma consolidated cash flows for the nine month periods ended
September 30, 2000 and 1999, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accountant principals.
Management has elected to omit substantially all of the disclosures required
by generally accepted accounting principles. If the omitted disclosure
were included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations,
and cash flows. Accordingly, these financial statements are not designed
for those who are not informed about such matters.
Generally accepted accounting principles require that all foreign currency
transactions be revalued in U.S. currency. Management has not valued all
foreign transactions as if they were originated in U.S. dollars.
Certified Public Accountants
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
ASSETS
Cash $ 161,043 $ 356,240
Short-term investments 4,002
Restricted cash 75,358
Accounts receivable - net 407,052 250,255
Inventory 708,614 612,169
Prepaid legal fees - current 187,500 562,500
Prepaid consulting fees 133,488
Deferred syndication costs 100,000
Prepaid expenses 63,416
Other assets 518 2,285
TOTAL CURRENT ASSETS 1,531,729 2,155,711
EQUIPMENT - NET 5,185,260 5,202,886
Research and development 366,769 486,769
Prepaid legal fees - long term 46,875
Goodwill - net 1,599,052 1,654,252
Other assets 5,614 2,285
$8,688,424 $9,548,778
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED BALANCE SHEETS,
Continued.
September 30, December 31,
2000 1999
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Current maturities
Of long-term debt $ 529,848 $ 272,731
Accounts payable 886,115 684,645
Accrued expenses 314,543 319,579
Accrued interest 18,096 12,240
Accrued interest -
related party 116,822 79,017
Notes payable 15,000 60,684
Notes payable -
related party 720,912 677,316
TOTAL CURRENT LIABILITIES 2,601,336 2,106,212
Long-term debt, less
current maturities 605,252 553,737
Due to shareholders/
related parties 118,285 108,138
TOTAL LIABILITIES 3,324,873 2,768,087
STOCKHOLDERS' EQUITY
Common stock - authorized
80,000,000 shares;
par value $.001; issued
and outstanding,
7,496,000 and 3,249,900
shares at September 30,
2000 and December 31, 1999,
respectively 7,496 3,250
Additional paid-in capital 9,832,506 8,686,752
Due from officer (33,565)
Accumulated deficit (4,476,451) (1,875,746)
TOTAL STOCKHOLDERS' EQUITY 5,363,551 6,780,691
$ 8,688,424 $9,548,778
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months Three months Nine months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2000 2000 1999 1999
SALES $ 3,281,909 $ 813,629 $ 4,707,892 $1,904,523
COST OF SALES 2,945,584 762,970 3,510,967 1,231,622
GROSS PROFIT 336,325 50,659 1,196,925 672,901
EXPENSES
Selling 40,694 1,723
General and
administrative 3,025,353 1,013,530 2,456,668 1,075,363
Interest 117,919 26,740 79,463 23,120
3,143,272 1,040,270 2,576,825 1,100,206
OPERATING LOSS (2,806,947) (989,611) (1,379,900) (427,305)
OTHER INCOME 206,242 41,044 25,000
LOSS BEFORE
INCOME TAXES (2,600,705) (948,567) (1,354,900) (427,305)
INCOME TAXES
NET LOSS $(2,600,705) $ (948,567) $(1,354,900) $ (427,305)
NET LOSS
PER SHARE $ (.668) $ (.224) $ (.119) $ (.036)
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Paid-in Due from Accumulated
Stock Capital Officer Deficit Total
BALANCE,
January 1,
1999 $10,720 $6,836,722 $(33,565) $(238,923) $6,574,954
Common stock
issued 1,013 1,850,030 1,851,043
Gain from
currency conversion 4,005 4,005
Other (8,483) (8,483)
Net loss (1,640,828) (1,640,828)
Balance,
December 31,
1999 3,250 8,686,752 (33,565) (1,875,746) 6,780,691
Common stock
issued 4,246 1,245,754 1,250,000
Reversal of due
from officer 33,565 33,565
Syndication costs (100,000) (100,000)
Net loss (2,600,705) (2,600,705)
BALANCE,
September 30,
2000 $ 7,496 $9,832,506 $ $(4,476,451) $ 5,363,551
See accountants' review report.
<PAGE>
SALIENT CYBERTECH, INC.
PROFORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
September 30,
2000 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(2,600,705) $(1,354,900)
Adjustments to reconcile
net loss to
net cash (used)
provided in
operating activities:
Depreciation 66,760 66,802
Amortization 175,200
Stock issued for compensation
for legal fees 20,060
Stock issued for services 375,000
(Increase) decrease in
operating assets:
Restricted cash 75,358 687,500
Accounts receivable - net (219,797) (309,469)
Inventory (96,445) (6,636)
Deferred tax asset 2,285
Prepaid expenses 555,363
Prepaid legal and
consulting fees 414,738 (633,334)
Other assets (1,562) 2,613
(Decrease) increase
in operating liabilities:
Accounts payable 201,470 507,512
Accrued expenses (5,036) 83,087
Accrued interest 43,661 33,710
NET CASH (USED)PROVIDED
IN OPERATING ACTIVITIES (1,742,217) 114,358
CASH FLOWS USED BY
INVESTING ACTIVITIES
Purchase of property
and equipment (49,234)
Purchase of short-term
investments (4,002)
NET CASH USED BY INVESTING
ACTIVITIES (53,236)
<PAGE>
SALIENT CYBERTECH, INC.
PRO-FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
(con't)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds of loans from
related parties 53,743 15,725
Proceeds of loans 475,071
Proceeds from sale of
common stock 1,250,000 10,000
Repayments from shareholders 33,565 33,565
Repayments of loans (212,123) (234,518)
Repayments to shareholders (47,151)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,600,256 (222,379)
NET DECREASE IN CASH (195,197) (108,021)
CASH, at beginning of period 356,240 226,045
CASH, at end period $ 161,043 $ 118,024
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 74,230 $ 45,160
Non-cash financing
activity- 500,000 shares
of common stock issued
for legal services $ (1,125,000)
Non-cash financing
activity- 500,000 shares
of common stock issued
for consulting services $ (687,500)
Non-cash financing
activity- 30,000 shares
of common stock granted
under stock option plan $ (20,060)
See accountants' review report.
<PAGE>
NOTE 1
Principles of Consolidation
The accompanying financial statements consolidate the accounts of the parent
company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
NOTE 2
The December 31, 1999 balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position as
of September 30, 2000 and the statements of operations for the three months
ended September 30, 2000 and 1999 and the statements of cash flows for the
three months ended September 30, 2000 and 1999.
The statements of operations for the three months ended September 30, 2000 and
1999 are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, these financial statements should be read in
conjunction with the financial statements and accompanying notes included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
NOTE 3
Earnings per share are based on the weighted average number of common shares
outstanding including common stock equivalents.
<PAGE>
Salient Cybertech, Inc., its subsidiary
and Futronix, Inc.
Combined Pro Forma Balance Sheet
and Combined Pro Forma
Statement of Operation and Retained Earnings (Deficit)
December 31, 1999
<PAGE>
Salient Cybertech, Inc., its subsidiary
and Futronix, Inc.
Combined Pro Forma Balance Sheet
and Combined Pro Forma
Statement of Operation and Retained Earnings (Deficit)
December 31, 1999
TABLE OF CONTENTS
______________________________________________________________________
Accountant's Compilation Report 3
Financial Statements:
Combined Pro Forma Balance Sheet 4
Combined Pro Forma Statements of
Operations and Retained Earnings (Deficit) 5
Combined Pro Forma Statements of
Shareholders Equity 6
Combined Pro Forma Statements of
Cash Flow 7
______________________________________________________________________
<PAGE>
Stan J.H. Lee & Co., CPAs email) [email protected]
Princeton Corporate Center Direct) 201-681-74755
Independence Way, Suite 300 Tel) 609-514-5100
Princeton, NJ 08540 Fax) 815-846-7550
June 15, 2000
The Board of Directors and
Management of Salient Cybertech,
Inc., its subsidiary and
Futronix, Inc.
To the Board of Directors
and Shareholders of Salient
Cybertech, Inc., Sarasota, FL.
We have audited the accompanying comparative pro-forma balance sheet of
Salient Cybertech, Inc., its subsidiary and Futronix, Inc. as of December
31, 1999 and the pro-forma balance sheet as of December 31, 1998 and the
related pro-forma statement of operations and retained earnings (deficit),
statement of stockholders' equity, and pro-forma consolidated statement
of cash for the years ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the pro-forma financial statements referred to above
present fairly, in all material respects, the pro-forma financial
position of Salient Cybertech, Inc. and Futronix, Inc. at December 31,
1999 and 1998, and the pro-forma results of their operations and cash
flow for the years then ended in conformity with generally accepted
accounting principles.
____________________
/s/Stan J.H. Lee/s/
Stan J.H. Lee & Co. CPAs
<PAGE>
PROFORMA COMBINED BALANCE SHEETS
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
AS OF DECEMBER 31, 1999 AND DECEMBER 31, 1998
1999 1998
ASSETS
Current Assets
Cash $ 356,240 $ 226,045
Restricted cash 75,358 83,702
Accounts receivable -
trade 243,169 117,230
Account receivable -
affiliated companies,
less allowance for
doubtful accounts of
$63,345 in 1999 6,487 64,243
Inventory 612,169 575,524
Income taxes-recoverable 63,416 0
Prepaid insurance 0 26,422
Pre-paid Laval fees-current 562,500 0
Pre-paid consulting fees 133,488 0
Pre-paid expenses and
sundry assets 2,285 2,218
Advances to employees 599 811
Deferred syndication costs 0 100,000
Total Current Assets 2,055,711 1,196,195
Property and equipment,
net of depreciation and
amortization (1) 4,726,909 907,631
Research and development 486,769 408,435
Sundry assets and security
deposit 2,285 0
Pre-paid legal fees-long-
term 46,875 0
Total Assets $7,318,549 $2,512,261
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 2,731 $ 2,779
Current maturities
of long-term debt 270,000 283,500
Line of credit (credit card) 16,470 15,687
Accounts payable 684,645 469,964
Commissions payable 0 2,741
Accrued expenses 311,925 157,951
Accrued interest 12,240 8,650
Accrued interest-
related party 79,017 41,189
Notes payable 15,000 41,718
Notes payable-
related party 300,053 210,000
<PAGE>
PROFORMA COMBINED BALANCE SHEETS
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
AS OF DECEMBER 31, 1999 AND DECEMBER 31, 1998
Continued
1999 1998
Loan payable - affiliated
company 0 9,275
Advances from officers 368,447 0
Total Current Liabilities 2,060,528 1,243,454
Long-term debt, less
current maturities 553,737 829,867
Notes payable-
related party 35,577 33,224
Due to others 45,684 13,927
Due to shareholders 72,561 0
Shareholders' Equity
Common stock, $1 par value,
100 shares authorized issued
and outstanding, and $0.001
par value, 80,000,000
authorized; 31,649,000 issued
and outstanding 3,265 10,735
Additional paid-in
capital 6,456,508 653,541
Due from officers (33,565) (33,565)
Accumulated deficit (1,875,746) (238,922)
Total Shareholders'
Equity 4,550,462 391,789
Total Liabilities and
Shareholders' Equity $7,318,549 $2,512,261
__________________
(1) Reflects purchase of $3,000,000 in equipment and $1,600,000 in property
at the time Futronix was purchased.
<PAGE>
PROFORMA COMBINED STATEMENTS OF OPERATIONS
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
FOR THE YEARS ENDING DECEMBER
31, 1999 AND DECEMBER 31, 1998
FOR THE YEAR FOR THE YEAR
ENDED ENDED
12/31/1999 12/31/1998
REVENUES
Sales $6,392,924 $ 7,020,705
Cost of sales 4,996,671 5,348,543
Gross Profit 1,396,253 1,672,162
EXPENSES
Selling, general
and administrative
expenses 3,131,410 2,111,127
Interest 48,114 39,481
Capitalization of
research and
development
expenditure (80,326) (150,798)
Total Expenses 3,099,198 1,999,810
Operating Loss (1,701,945) (327,648)
OTHER INCOME
Interest Income 5,811 3,247
Recovery of
scientific research
tax credit 31,305 94,650
Others 25,000 0
Loss before income
taxes (1,640,829) (229,751)
Income taxes 0 0
Extraordinary gain 50,105
Net Loss (1,640,829) (179,646)
Earning (Deficit),
beginning (238,922) 154
Net gain from
foreign conversion 4,005 (59,430)
Deficit, end (1,875,746) (238,922)
<PAGE>
PROFORMA COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
AT DECEMBER 31, 1999 AND DECEMBER 31, 1998
Stocks Paid- Others Retained Total
Par Common issued In (Due from Earnings Stockholders'
Value Shares Amount($) Capital officers) (Deficit) Earnings
Beginning
Balance - $0.001 9,189,699 9,190 226,645 (33,565) (151,998) 50,272
01/01/98 $1.00 100 100 50,400 249,089 299,589
Total 9,189,799 9,290 277,045 (33,565) 97,091 349,861
Common
Stock
Issued Par$0.001 1,445,550 1,445 376,496 377,941
Net Loss
for the
year (179,646) (179,646)
Loss from
Currency
Conversion (59,430) (59,430)
Distribution
to Stockholders (96,937) (96,937)
Balance
12/31/98 10,635,349 10,735 653,541 (33,565) (238,922) 391,789
Common
Stock
Issued Par$0.001 1,012,500 1,013 5,802,967 5,803,980
Purchase
of Gemini,
Inc. 20,000,000
Net Loss
for the
year (1,640,829)(1,640,829)
Gain from
Currency
Conversion 4,005 4,005
Others (8,483) (8,483)
Reverse
Split (28,482,849)
Ending
Balance
12/31/99 3,147,000 3,265 6,456,508 (33,565)(1,875,746) 4,550,462
<PAGE>
PROFORMA COMBINED STATEMENT OF CASH FLOW
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
FOR THE YEARS ENDING DECEMBER 31, 1999 AND DECEMBER 31, 1998
12/31/99 12/31/98
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss $(1,640,829) $(179,646)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization 299,285 364,720
Provision for
doubtful accounts 63,345
Gain (Loss) from
currency conversion 4,005 (59,430)
(Increase) decrease
in operating assets:
Accounts receivable (131,528) 467,300
Restricted cash 8,344 (83,702)
Inventory (36,645) (211,252)
Accounts payable 214,681 (81,342)
Commissions payable (2,741) (10,432)
Accrued expenses 154,205 122,752
Accrued interest 8,657 31,448
Accrued interest-
related party 37,828 76,718
Bank indebtedness 2,060
Income taxes
recoverable (63,416) (17,020)
Prepaid insurance 26,422 52,523
Prepaid legal and
consulting fees (842,911) 18,137
Deferred Syndication
costs 100,000 (100,000)
Other assets (1,568) 1,383
Net cash provided by
(used in) operating (1,802,866) 394,217
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchases of property
and equipment (65,646) (118,210)
Expenditure for
research and development (78,334) (14,422)
Net cash used in
Investing (143,980) (132,632)
<PAGE>
PROFORMA COMBINED STATEMENT OF CASH FLOW
OF SALIENT CYBERTECH, INC. AND FUTRONIX, INC.
FOR THE YEARS ENDING DECEMBER 31, 1999 AND DECEMBER 31, 1998
Continued
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from long-term debt 92,406 1,200,000
Loans from stockholders 368,447 0
Loans from others 104,318 10,752
Repayments of debt (330,690) (1,396,147)
Distributions to stockholders - (96,937)
Proceeds from sale
of common stock 1,842,560 228,083
Reduction in short-term debt (13,500) (6,956)
Net cash provided (used in)
financing 2,077,041 (54,249)
NET INCREASE IN CASH 130,195 207,336
CASH AT BEGINNING OF PERIOD 226,045 18,709
CASH AT END OF PERIOD $356,240 $226,045
<PAGE>
NOTE 1
Principles of Consolidation
The accompanying financial statements consolidate the accounts of the parent
company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
NOTE 2
Earnings per share are based on the weighted average number of common shares
outstanding including common stock equivalents.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
Prospectus Summary 5
Salient's Business 12
The Offering Front Cover
Stockholders 8,11
Securities Outstanding 8
Definition of Terms 3,7 Salient Cybertech, Inc.
Selected Financial Information 6 16,895,035
Risk Factors 9 Shares of Common
Use of Proceeds 11 Stock
Certain Market Information 11
Capitalization 12
Management's Discussion & Analysis 31
Management 35
Directors and Executive
Officers 35
Biographies of Salient's
Executive Officers and Directors 36
Certain Transactions 41
Principal Stockholders 43 =========================
Securities- Description(Common Stock) 44
Preferred Stock 44 PROSPECTUS
Debenture 45
Purchase (PUT) Shares 47
Dividend Policy 12
Transfer Agent 50 =========================
Shares Eligible for Future Sale 51
Additional Information 2,51
Plan of Distribution 51
Indemnification Arrangements 53
Litigation 33
Legal Opinions 54
Experts 54
Financial Statements 55
Selling Shareholders 11,52
Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
(941) 953-6168
<PAGE>
Part II, Page I
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF OFFICERS AND DIRECTORS
In accordance with the General Corporation Laws of the
State of Delaware which were in effect at the time wet were
incorporated, our Board of Directors adopted by resolution, as
further set forth in our by laws, provisions relative to
indemnification of our Officers and Directors against expenses,
judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the defense of any
proceeding or threatened proceeding to which such person was or
is a party, or is threatened to be made a party by reason of the
fact that such person was or is an officer or director, provided
that, (i) such director or officers acted in good faith or in a
manner reasonably believed by him to be in the best interests of
the corporation to procure a judgment in its favor. In the
latter case, the power to indemnify extends to expenses actually
or reasonably incurred in connection with the defense or
settlement of any proceeding if such person (i) acted in good
faith, and (ii) the manner such officer and director believed to
be in the best interest of the corporation and with such care,
including reasonable inquiry, as an ordinary prudent person would
use under similar circumstances. No indemnification will be made
in respect of any claim, issue or matter, as to which such person
shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation
unless, and only to the extent that the court in which such
action or suit was brought shall determine upon an application of
that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
court shall deem proper. Otherwise, indemnification for an
officer and director meeting the applicable standards of conduct
is determined by a majority of the disinterested directors or
shareholders or upon application by the corporation, such officer
or director or his attorney, to the court in which such
proceeding was pending.
The Securities & Exchange Commission is of the opinion that
indemnification of Company officers or directors for matters
involving violation of securities laws is against public policy
and that agreements therefor are consequently unenforceable.
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with distribution of the
securities of Salient Cybertech, Inc. being Registered hereby, other than
commissions and non-accountable expense allowances, will be borne
directly by Salient Cybertech, Inc. rather than by the Selling
Stockholder. Such expenses are estimated to be $50,000.
Item Amount
United States Securities
and Exchange Commission filing fee
$ 300
Printing expenses 4,000
Fees and expenses of counsel 22,000
Accounting fees and expenses 20,000
Transfer agent fees and expenses 3,000
Miscellaneous 700
TOTAL $50,000
<PAGE>
PART II, Page 2
ITEM 26 RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to a private placement memorandum 775,000 shares in our common
stock were sold at $1.00 per share to seven investors not related to the
company. The shares were exempt from registration in reliance on Regulation
506 (D) as promulgated under the Securities Act of 1933, in that all seven
investors were sophisticated investors as defined in the Act.
As described in the Prospectus Nevin Jenkins and Rande Newberry were each
issued 250,000 restricted shares in our common stock as payment for their
shares in Futronix, Inc. These shares were exempt from registration in
reliance on Section 4(2) of the Securities Act of 1933, in that both parties
are sophisticated purchasers.
ITEM 27: EXHIBITS
Exhibit
Number Description Page
1. Constituent Document:
.1 Original Article of Incorporation (a)
.11 Amended and Restated Articles of Incorporation,
Changing Registrant's Name From Mas Acquisition
I Corp. to Sloan Electronics, Inc. (b)
.13 Amendment to Articles of Incorporation, Changes in
Securities. The Shareholders' provision for the
Issue of 20 shares of Preferred Stock with nor par
value convertible at the will of the holder in to
1,500,000 Common Shares, as an anti-takeover
Provision *
.2 By-Laws of the Registrant **
.21 Current By-Laws of the Registrant ***
.3 Plan and Agreement of Merger between Registrant ****
and Sloan Electronics, Inc.
.31 Specimen Share Certificate **
.32 Specimen Share Certificate, replacing Original
Share Certificate ****
______________________
(a) Incorporated by Reference to the Registrant's registration
statement on Form 10-SB, SEC File Number 000-28772, Filed on
September 4, 1996.
(b) Incorporated by Reference to the Registrant's Report on Form
8-K/A, SEC File Number 000-28772, Filed on March 18, 1998.
*Incorporated by Reference to the Registrant's registration
statement on Form 10-QSB, SEC File Number 000-28772, Filed
August 13, 1999.
**Incorporated by Reference to the Registrant's statement on Form
10-SB, SEC File Number 000-28772, Filed September 4, 1996.
*** Incorporated by Reference to the Registrant's registration
Report on Form 10-QSB, SEC File Number 000-28772, Filed on
November 13, 1999.
**** Incorporated by Reference to the Registrant's Report on
Form 8-K/A, SEC File Number 000-28772, Filed on March 18, 1998.
***** Incorporated by Reference to the Registrant's Report on
Form 10-KSB/A, SEC File Number 000-28772, Filed on April 7, 1998.
Exhibit
Number Description Page
5.1 Opinion of Counsel 267
10. Material Contracts:
.1 Convertible Debenture Purchase Agreement 114
.2 Debenture 239
.3 Vesting Warrant #1 136
.4 Closing Warrant #1 150
.5 Registration Rights Agreement 164
.6 Securities Purchase Agreement 181
.7 Vesting Warrant #2 210
.8 Closing Warrant #2 225
22. Subsidiaries of Salient Cybertech, Inc. 265
24.6 Consent of Auditors 266
27 Financial Data Schedule 269
<PAGE>
Part II, Page 3
ITEM 28: UNDERTAKINGS
A. Certificates
We hereby undertake to provide our transfer agent with
certificates in such denominations and registered in such names
as required to permit delivery thereof to each purchaser of the
Selling Stockholder' stock offered hereby, from time to time, as
required, starting as of the close of business on the day
immediately following the date of this Registration Statement.
B. Liabilities
Insofar as indemnification of liabilities arising under the
securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of Salient pursuant
to the foregoing provisions or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed
in the Act and is therefore unenforceable. In the event that a
claim for indemnification against such liabilities (other than
payment by Salient of expenses incurred or paid by a director,
officer or controlling person of Salient in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, Salient will, unless in the opinion
of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C. Further Undertakings
Salient undertakes to file a post effective amendment to the
Registration Statement identifying any underwriter who may agree
to sell any shares of any Selling Stockholder, and to set forth
the terms of any underwriting agreement or arrangement. The said
underwriter shall also deliver a market making prospectus. As far
as we are aware, there exists no past, present, or future plans,
proposals, or undertakings with respect to any underwriter and
any Selling Stockholder.
Salient further undertakes to:
1. File during any period in which it offers or sells
securities, a post effective amendment to this Registration
Statement to:
a) Include any prospectus required by Section
10(a)(3) of the Securities Act;
<PAGE>
Part II, Page 4
b) Reflect in the prospectus any facts or events
which, individually or together represent a fundamental change in
the information in the registration statement; and,
c) Include any additional or changed material
information on the plan of distribution.
2. For determining liability under the Securities Act of 1933,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
3. File a post effective amendment to remove from registration
any securities that remain unsold at the end of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, Salient Cybertech, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned in the City of
Sarasota, State of Florida on December 25, 2000.
____________________
Paul Sloan, President, CEO, Chairman of the
Board of Directors
Pursuant to the requirements of the Exchange Act of 1934,
as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Date: December 15, 2000
SALIENT CYBERTECH, INC.
____________________
Paul Sloan, President, CEO, Chairman of the
Board of Directors
<PAGE>
BLANK PAGE
<PAGE>
Registration Number:______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SALIENT CYBERTECH, INC.
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = == = = = =
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = = = = = =
EXHIBITS Volume 1
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = = = == = =
Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
(941) 953-6168
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
SALIENT CYBERTECH, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of November 14, 2000
<PAGE>
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated
as of November 14, 2000, among Salient Cybertech, Inc., a Delaware
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement in
accordance with Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), the Company desires to issue and sell to the Purchasers
and the Purchasers, severally and not jointly, desire to purchase from the
Company (i) up to $2,000,000 of the Company's 8% Convertible Debentures,
due November 14, 2003, which shall be in the form of Exhibit A (the
"Debentures"), and which are convertible into shares of the Company's common
stock, $.001 par value per share (the "Common Stock"), and (ii) Warrants
(as defined below) as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing
(a) The Closing. Subject to the terms and conditions set forth in
this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally, and not jointly, purchase from the Company the
Debentures for an aggregate purchase price of $2,000,000. The closing of
the purchase and sale of the Debentures and the Warrants (the "Closing")
shall take place at the offices of Robinson Silverman Pearce Aronsohn &
Berman LLP ("Robinson Silverman"), 1290 Avenue of the Americas, New York,
New York 10104, immediately following the execution hereof or such later
date as the parties shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
(ii) On the Closing Date, the parties shall deliver or shall cause to be
delivered the following: (A) the Company shall deliver to each Purchaser:
(1) Debentures registered in the name of such Purchaser in the aggregate
principal equal to 50% of the total purchase price indicated below such
Purchaser's name on the signature page to this Agreement, (2) a Common Stock
purchase warrant, in the form of Exhibit C-1, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire
shares of Common Stock, upon the terms and conditions set forth therein
(collectively, the "Closing Warrants"), (3) a Common Stock purchase warrant,
in the form of Exhibit C-2, registered in the name of such Purchaser,
pursuant to which, such Purchaser shall have the right to acquire shares of
Common Stock pursuant to the terms thereof (collectively, the "Vesting
Warrants", and together with the Closing Warrants, the "Warrants"), (4) the
legal opinion of the Law Offices of Bernabe B. Diaz, outside counsel to the
Company, in the form of Exhibit D, (5) an executed Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit B (the "Registration Rights Agreement"), and (6) Transfer
Agent Instructions, in the form of Exhibit E, delivered to and acknowledged
<PAGE>
by the Company's transfer agent (the "Transfer Agent Instructions"), and (B)
each Purchaser will deliver to the Company: (1) 50% of the purchase price
indicated below such Purchaser's name on the signature page to this Agreement
in United States dollars in immediately available funds by wire transfer to
an account designated in writing by the Company for such purpose, and (2) an
executed Registration Rights Agreement.
(iii) Subject to the satisfaction or waiver by the Purchasers of the
conditions set forth in this Section 1.1(a)(iii), on the second Business Day
following the date on which an Underlying Shares Registration Statement (as
defined below) is first declared effective by the Securities and Exchange
Commission (the "Commission", and such date, the Effective Date"), (A) each
Purchaser shall deliver 50% of the purchase price indicated below such
Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose, and (B) the Company
shall deliver debentures registered in the name of such Purchaser in the
aggregate principal equal to 50% of the total purchase price indicated below
such Purchaser's name on the signature page to this Agreement to the
Purchasers. The obligation of the Purchasers to acquire the Debentures
contemplated by this Second 1.1(iii), shall be subject the accuracy of the
following: (1) there shall not have occurred and be continuing any event or
series of events which individually or in the aggregate have had or could
reasonably be expected to result in a Material Adverse Effect (as defined in
Section 2.1(a)), (2) the Company shall have complied in all material respects
with its obligations under the Transaction Documents (as defined in Section
2.1(a)), and (3) the representations and warranties of the Company set forth
herein shall be true and correct in all material respects as of the date
first given and on the date of the acquisition of the additional Debentures
under this Section1.1(iii).
1.2 Certain Defined Terms. For purposes of this Agreement, "Conversion
Price," "Original Issue Date", "Business Day", "Person" and "Trading Day"
shall have the meanings set forth in the Debentures.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries
is an entity, duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, (x) adversely affect the legality,
<PAGE>
validity or enforceability of the Securities (as defined below) or any of
this Agreement, the Registration Rights Agreement, the Transfer Agent
Instructions, the Debentures or the Warrants (collectively, the "Transaction
Documents"), (y) have or result in a material adverse effect on the results
of operations, assets, prospects, or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (x), (y) or (z), a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as
disclosed in Schedule 2.1(c), the Company owns all of the capital stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the securities of the Company or any
Subsidiary entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company or any Subsidiary by virtue of
any of the Transaction Documents. Except as a result of the purchase and
sale of the Debentures and the Warrants and except as disclosed in Schedule
2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings, or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the
Debentures, Warrants or Underlying Shares (as hereinafter defined) will not
obligate the Company to issue shares of Common Stock or other securities to
any Person other than the Purchasers and will not result in a right of any
holder of Company securities to adjust the exercise or conversion or reset
price under such securities.
(d) Issuance of the Debentures and the Warrants. The Company will
have (and will, at all times while the Debentures and the Warrants are
outstanding, maintain) an adequate reserve of duly authorized shares of
Common Stock, reserved for issuance to the holders of such Debentures and
Warrants, to enable it to perform its conversion, exercise and other
obligations under this Agreement, the Debentures and the Warrants. Such
number of reserved and available shares of Common Stock shall not be less
than the sum of 200% of the number of shares of Common Stock which would be
issuable upon: (i) conversion in full of the Debentures assuming such
conversion occurred on the Original Issue Date of the Debentures remain
outstanding for three years and all interest is paid in shares of Common
<PAGE>
Stock and (ii) exercise in full of the Warrants (collectively, the "Initial
Minimum"). All such authorized shares of Common Stock shall be duly reserved
for issuance to the holders of the Debentures and the Warrants. The shares
of Common Stock issuable upon conversion of the Debentures and upon exercise
of the Warrants are collectively referred to herein as the "Underlying
Shares." The Debentures, the Warrants and the Underlying Shares are
collectively referred to herein as, the "Securities." When issued in
accordance with the Debentures and the Warrants, the Underlying Shares will
be duly authorized, validly issued, fully paid and nonassessable, free and
clear of all liens, encumbrances and rights of first refusal of any kind
(collectively, "Liens").
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required
Approvals (as defined below), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or any Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii)result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not have or result in a Material
Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than (i) the filings required
pursuant to Section 3.10, (ii) the filing with the Securities and Exchange
Commission (the "Commission") of a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale of the Shares and the Underlying Shares by the Purchasers (the
"Underlying Shares Registration Statement"), (iii) applicable Blue Sky
filings, and (iv) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (the items described in clauses
(i)-(iv) are collectively, the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit, inquiry, notice
of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which
(i) adversely affects or challenges the legality, validity or enforceability
<PAGE>
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, individually or in the aggregate, have
or result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject
of any Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty. The Company
does not have pending before the Commission any request for confidential
treatment of information and the Company has no knowledge of any expected
such request that would be made prior to the Effectiveness Date (as defined
in the Registration Rights Agreement). There has not been, and to the best
of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or
former director or officer of the Company.
(h) No Default or Violation. Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in
a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound, (ii) is in violation of any judgment or order
of any court, arbitrator or governmental body, or (iii) is in violation of
any statute, rule or regulation of any governmental authority, in each case
of clauses (i), (ii) or (iii) above, except as could not individually or in
the aggregate, have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby
are exempt from the registration requirements of the Securities Act. Neither
the Company nor any Person acting on its behalf has taken or is contemplating
taking any action which could subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act including
soliciting any offer to buy or sell the Securities by means of any form of
general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including, without limitation, all
filings required pursuant to Sections 13(a) and 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with
the Schedules to this Agreement, the "Disclosure Materials") on a timely
basis or has received a valid extension of such time of filing and has filed
any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or
assets of the Company are subject have been filed as exhibits to the SEC
Documents as required under the Exchange Act. The financial statements of
the Company included in the SEC Documents comply in all material respects
with applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of filing.
<PAGE>
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since March 31, 2000, except as specifically disclosed in the
SEC Documents, (a) there has been no event, occurrence or development that
has or that could result in a Material Adverse Effect, (b) the Company has
not incurred any liabilities (contingent or otherwise) other than (x)
liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to
its stockholders or officers or directors (other than in compliance with
existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem)
any shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Other than fees payable to [_________] by the
Company, no fees or commissions will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated
by this Agreement. The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by this Agreement. The Company shall
indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person acting
on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Exclusivity. The Company shall not issue and sell the Debentures to
any Person other than the Purchasers without the specific prior written
consent of the Purchasers.
(o) Seniority. No indebtedness of the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.
(p) Listing and Maintenance Requirements. The Company has not, in the
two years preceding the date hereof, received notice (written or oral)
from the OTC Bulletin Board ("OTC") or any stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it has
been quoted) to the effect that the Company is not in compliance with the
<PAGE>
listing or maintenance requirements of such exchange, market or trading
facility. The Company is, and has no reason to believe that it will not
in the foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(q) Patents and Trademarks. The Company and its Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
which are necessary or material for use in connection with their respective
businesses as described in the SEC Documents and which the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or
its Subsidiaries violates or infringes upon the rights of any Person. To
the best knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(r) Registration Rights; Rights of Participation. Except as disclosed
in Section 6(c) of the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with
the Commission or any other governmental authority which has not been
satisfied. Except as set forth on Schedule 6(b) to the Registration Rights
Agreement, no Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(s) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(t) Title. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them which is material to
the business of the Company and its Subsidiaries and good and marketable
title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for Liens as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and
its Subsidiaries are in compliance and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and
its Subsidiaries.
(v) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
<PAGE>
material non-public information. The Company understands and confirms that
the Purchasers shall be relying on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished
by or on behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(x) Solvency. Based on the financial condition of the Company as of the
Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities)
as they mature; (ii) the Company's assets do not constitute unreasonably
small capital to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business conducted by
the Company, and project capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond
its ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be payable on or in respect of its debt).
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with the requisite corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations
thereunder. The purchase by such Purchaser of the Securities hereunder has
been duly authorized by all necessary action on the part of such Purchaser.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants, at all times to sell or otherwise dispose of
all or any part of such Securities pursuant to an effective registration
statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty
by such Purchaser to hold the Securities for any period of time. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of
its business. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute the Securities.
<PAGE>
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of
the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii)
the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the Securities
as a result of or subsequent to any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
<PAGE>
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act,
to the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In
connection with any transfer of Securities other than pursuant to an
effective registration statement or to the Company, except as otherwise set
forth herein, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company, without requiring a legal opinion as described in
the immediately preceding sentence, hereby consents to and agrees to register
on the books of the Company and with any transfer agent for the securities
of the Company any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser or to one or more funds or managed accounts under common
management with such Purchaser, and any transfer among any such Affiliates
or one or more funds or managed accounts, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in
Rule 501(a) under the Securities Act and that it is acquiring the Securities
solely for investment purposes (subject to the qualifications hereof). Any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] 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,
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
Underlying Shares shall not contain the legend set forth above nor any other
legend if the conversion of the Debentures and exercise of the Warrants or
other issuances of Underlying Shares as contemplated hereby, by the
Debentures or the Warrants occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or the holder
of any such security is relying on Rule 144 promulgated under the Securities
Act ("Rule 144") in connection with the resale of such Underlying Shares or
<PAGE>
in the event there is not an effective Underlying Shares Registration
Statement at such time and Rule 144 is not then available if, in the opinion
of counsel to the Company, such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the day that the Underlying
Shares Registration Statement is declared effective by the Commission (the
"Effective Date"). The Company agrees that in the event any Underlying
Shares are issued with a legend in accordance with this Section 3.1(b), it
will, within three (3) Trading Days after request therefor by a Purchaser,
provide such Purchaser with a certificate or certificates representing such
Underlying Shares, free from such legend at such time as such legend would
not have been required under this Section 3.1(b) had such issuance occurred
on the date of such request. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon the (i) conversion of Debentures in
accordance with the terms of the Debentures, and (ii) exercise of the
Warrants in accordance with their terms, will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its
obligation to issue Underlying Shares upon the (x) conversion of the
Debentures in accordance with the terms of the Debentures, and (y) exercise
of the Warrants in accordance with their terms, is unconditional and
absolute, subject to the limitations set forth herein in the Debentures or
pursuant to the Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to
be filed by the Company after the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act such
information as is required for the Purchasers to sell the Securities under
Rule 144 promulgated under the Securities Act. The Company further covenants
that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable
such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including causing its attorneys to
render and deliver any legal opinion required in order to permit
a Purchaser to receive Underlying Shares free of all restrictive legends and
to subsequently sell Underlying Shares under Rule 144 upon receipt of a
notice of an intention to sell or other form of notice having a similar
effect. Upon the request of any such Person, the Company shall deliver to
such Person a written certification of a duly authorized officer as to
whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated
<PAGE>
with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from issuing (a) 200% of the number of
Underlying Shares as would then be issuable upon a conversion in full of the
Debentures and (b) the number of Underlying Shares issuable upon exercise in
full of the Warrants (the "Current Required Minimum"), in either case, due
to the unavailability of a sufficient number of authorized but unissued or
reserved shares of Common Stock, then the Board of Directors of the Company
shall promptly prepare and mail to the stockholders of the Company proxy
materials requesting authorization to amend the Company's certificate or
articles of incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue to at least such number of shares
as reasonably requested by the Purchasers in order to provide for such
number of authorized and unissued shares of Common Stock to enable the
Company to comply with its issuance, conversion exercise and reservation of
shares obligations as set forth in this Agreement, the Debentures and the
Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the
Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best
efforts to promptly and duly obtain stockholder approval to carry out such
resolutions (and hold a special meeting of the stockholders no later than
the earlier to occur of the sixtieth (60th) day after delivery of the proxy
materials relating to such meeting and the ninetieth (90th) day after
request by a holder of Securities to issue the number of Underlying Shares
in accordance with the terms hereof) and (c) within five (5) Business Days
of obtaining such stockholder authorization, file an appropriate amendment
to the Company's certificate or articles of incorporation to evidence such
increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company
shall (i) in the time and manner required by any national securities
exchange, market, trading or quotation facility on which the Common Stock
is then traded, prepare and file with such national securities exchange,
market, trading or quotation facility on which the Common Stock is then
traded an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum, (ii) take all
steps necessary to cause such shares of Common Stock to be approved for
listing on any such national securities exchange, market or trading or
quotation facility on which the Common Stock is then listed as soon as
possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock
thereon. If the number of Underlying Shares issuable upon (x) conversion in
full of the then outstanding Debentures and (y) exercise in full of the then
unexercised portion of the Warrants, exceeds eighty-five percent (85%) of
the number of Underlying Shares previously listed on account thereof with
any such required exchanges, then the Company shall take the necessary
actions to immediately list a number of Underlying Shares as equals no less
than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon conversion of the Debentures in full and upon exercise in full
of the Warrants, respectively in accordance with this Agreement, in such
amount as may be required to fulfill its obligations in full under the
<PAGE>
Transaction Documents, which reserve shall equal no less than the then
Current Required Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent Instructions,
the Conversion Notice (as defined in the Debentures) and the Form of
Election to Purchase (as defined in the Warrants) sets forth the totality
of the procedures with respect to the conversion of the Debentures and the
exercise of the Warrants, including the form of legal opinion, if necessary,
that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchasers to convert their Debentures and exercise their Warrants, as the
case may be.
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures.
3.9 Subsequent Financing; Limitation on Registrations.(a) From the date
of this Agreement through the 360th day following the Closing Date and the
180th day following the Effective Date, the Company will not offer, sell,
grant any option to purchase or any right to reprice securities, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or equity or equity
equivalent securities (including the issuance of any debt or other instrument
that is at any time over the life thereof convertible into or exchangeable
for Common Stock), and the Company will cause its Subsidiaries not to offer,
sell or issue during such period any of such Subsidiary's securities which
provide the holder thereof the right to receive any Common Stock
(collectively, "Common Stock Equivalents").
(b) From the date of this Agreement through the 360th day following
the Effective Date, the Company will not offer, sell, grant any option to
purchase or any right to reprice securities, or otherwise dispose of (or
announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents (collectively, a
"Subsequent Placement"), unless (A) the Company delivers to each Purchaser
a written notice (the "Subsequent Placement Notice") of its intention to
effect such Subsequent Placement, which Subsequent Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person with
whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) no
Purchaser notifies the Company by 6:30 p.m. (New York City time) on the
tenth Trading Day after its receipt of the Subsequent Placement Notice of
its willingness to provide (or to cause its sole designee to provide),
subject to completion of mutually acceptable documentation, financing to the
Company on the same terms set forth in the Subsequent Placement Notice. If
the Purchasers fail to notify the Company of its intention to enter into
such negotiations within such time period, then the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Placement Notice;
provided, that the Company shall provide the Purchaser with a second
Subsequent Placement Notice, and the Purchaser shall again have the right
of first refusal set forth above in this paragraph (b), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have
<PAGE>
been consummated for any reason on the terms set forth in such Subsequent
Placement Notice within 30 days after the date of the initial Subsequent
Placement Notice with the Person (or an Affiliate of such Person) identified
in the Subsequent Placement Notice.
(c) Except for (x) Registrable Securities, (y) securities of the Company
permitted pursuant to Section 6(c) of the Registration Rights Agreement to
be registered in the Registration Statement, and (z) Common Stock permitted
to be issued pursuant to Section 3.9(e), the Company may not until the 90th
day after the Effective Date file a registration statement to register any
of its securities.
(d) With respect to Section 3.9(a), (b) and (c), restrictive periods
shall be extended for the number of Trading Days during such period (A) in
which trading in the Common Stock is suspended by any securities exchange or
market or quotation system on which the Common Stock is then listed, or (B)
that the Registration Statement is not effective following the Effective
Date, or (C) that the prospectus included in the Registration Statement may
not be used by the holders thereof for the resale of Registrable Securities
following the Effective Date.
(e) The restrictions contained in Section 3.9(a) and (b) shall not apply
to the granting of options or warrants to employees, officers and directors
of the Company, and the issuance of Common Stock upon exercise of such
options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company. The restrictions contained in
Sections 3.9(a) and (b) shall also not apply to shares of Common Stock
issuable upon exercise of any currently outstanding warrants and other
outstanding convertible securities of the Company, in each case as and to
the extent disclosed in Schedule 2.1(c) (but not as to any amendments or
modifications of the terms of such securities after the date of this
Agreement, including "back-dated" agreements).
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Closing Date, issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated
hereby within ten Business Days after the Closing Date, and (iii) timely
file with the Commission a Form D promulgated under the Securities Act.
The Company shall, no less than two Business Days prior to the filing of
any disclosure required by clauses (ii) and (iii) above, provide a copy
thereof to the Purchasers for their review. The Company and the Purchasers
shall consult with each other in issuing any other press releases or
otherwise making public statements or filings and other communications
with the Commission or any regulatory agency or stock market or trading
facility with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement, filings or other communications without the prior written consent
of the other, except that if such disclosure is required by law or stock
market regulations, in which such case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing
or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission, or any regulatory agency,
trading facility or stock market without the prior written consent of the
Purchasers, except to the extent such disclosure (but not any disclosure as
to the controlling Persons thereof) is required by law or stock market
regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.
<PAGE>
3.11 Non-Disclosure of Non-Public Information.(a) The Company shall not
disclose non-public information to the Purchasers or their advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being non-public information and the
Purchasers enter into a non-disclosure agreement in form mutually acceptable
to the Company and the Purchasers.
(b) The Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts. Notwithstanding the
foregoing or anything herein to the contrary, the Company will immediately
notify the Purchasers of any event or the existence of any circumstance
(without any obligation to disclose the specific event or circumstance) of
which it becomes aware, (whether or not requested of the Company specifically
or generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements, therein in light of the circumstances in which they were made,
not misleading.
3.12 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business,
the Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers.
3.13 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than payment
of trade payables in the ordinary course of the Company's business and prior
practices), to redeem any Company equity or equity-equivalent securities or
to settle any outstanding litigation.
3.14 Reimbursement. If any Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser
for its reasonable legal and other expenses (including, but not limited to,
the cost of any investigation, preparation or travel) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and
conditions to any Affiliates of the Purchasers 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
Purchasers 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 Purchasers and any such Affiliate and any such Person.
The Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf of or in
<PAGE>
right of the Company solely as a result of acquiring the Securities under
this Agreement.
3.15 Shareholder Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in effect
or hereafter adopted by the Company, or that any Purchaser could be deemed
to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities or shares of Common Stock under the Transaction
Documents.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to
Robinson Silverman $50,000 for the preparation and negotiation of the
Transaction Documents. The amount contemplated by the immediately preceding
sentence shall be retained by the Purchasers and shall not be delivered to
the Company at the Closing. Other than the amount contemplated herein, and
except as otherwise set forth in the Registration Rights Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto and Transfer Agent Instructions,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral
or written, with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:
If to the Company: Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
Facsimile No.: (941) 953 4363
<PAGE>
Attn: Chief Financial Officer
With copies to: David J. Feingold, Esq.
3300 PGA Blvd.
Palm Beach Gardens, Florida 33410
Facsimile No.: (561) 630 8936
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of
a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any
right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
Except as set forth in Section 3.1(a), the Purchasers may not assign this
Agreement or any of the rights or obligations hereunder without the consent
of the Company. This provision shall not limit any Purchaser's right to
transfer securities or transfer or assign rights under the Registration
Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.
Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
<PAGE>
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its' attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise,
conversion and redemption of the Warrants or the Debentures, as the case
may be.
4.10 Execution. This Agreement may be executed in two or more counterparts
all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of
the Purchasers will be entitled to specific performance of the obligations
of the Company under the Transaction Documents. The parties hereto agree
that monetary damages may not be adequate compensation for any loss incurred
by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of any such obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
<PAGE>
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation the rights
arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
SALIENT CYBERTECH, INC.
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
HAINES AVENUE LLC
By:_____________________________________
Name:
Title:
Purchase Price: $2,000,000
Address for Notice: Haines Avenue LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to: Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Eric L. Cohen, Esq.
<PAGE>
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER 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 THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
SALIENT CYBERTECH, INC.
VESTING WARRANT
Warrant No.1 Dated: November 14, 2000
Salient Cybertech, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Haines Avenue, LLC or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company the total number of shares of common stock, $.001
par value per share (the "Common Stock"), of the Company calculated
pursuant to Section 3 of this Warrant (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at the exercise prices set forth
in Annex 1 hereto (as adjusted from time to time as provided in Section 8,
collectively, the "Exercise Price"). This Warrant may be exercised by the
Holder as to the Warrant Shares then vested at any time and from time to
time from and after the date such warrant shares have vested and through
and including November 14, 2005 (the "Expiration Date"), and subject to
the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in
Section 12. Upon any such registration or transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any
such new warrant, a "New Warrant"), evidencing the portion of this Warrant
so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of the
New Warrant by the transferee thereof shall be deemed the acceptance of
such transferee of all of the rights and obligations of a holder of a
Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at its address for notice set forth
in Section 12 for one or more New Warrants, evidencing in the aggregate
the right to purchase the number of Warrant Shares which may then be
purchased hereunder. Any such New Warrant will be dated the date of such
exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration
Date. At 6:30 P.M., New York City time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void and of
no value. Prior to the Expiration Date, the Company may not call or
otherwise redeem this Warrant.
(b) Upon delivery of a duly completed and signed Form of Election to
Purchase attached hereto (and the grid attached hereto as Annex A) duly
completed and signed, to the Company at its address for notice set forth
in Section 12 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder,
in the manner provided hereunder, all as specified by the Holder in the
Form of Election to Purchase, the Company shall promptly (but in no event
later than 3 business days after the Date of Exercise (as defined herein)
issue or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate,
a certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends except (i) either in the event that a registration
statement covering the resale of the Warrant Shares and naming the Holder
as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), or (ii) if this Warrant shall have
been issued pursuant to a written agreement between the original Holder
and the Company, as required by such agreement. Any person so designated
by the Holder to receive Warrant Shares shall be deemed to have become
holder of record of such Warrant Shares as of the Date of Exercise of this
Warrant. The Company shall, upon request of the Holder, if available, use
its best efforts to deliver Warrant Shares hereunder electronically through
<PAGE>
the Depository Trust Corporation or another established clearing corporation
performing similar functions. To effect an exercise hereunder, the Holder
shall not be required to physically surrender this Warrant to the Company
unless all the Warrant Shares have been exercised. Exercises hereunder
shall have the effect of lowering the number of Warrant Shares in an
amount equal to the applicable exercise, which shall be evidenced by
entries set forth in the Exercise Schedule. The Holder and the Company
shall maintain records showing the number of Warrant Shares exercised and
the date of such exercises . In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the
absence of manifest error. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of
this paragraph, following exercise of a portion of this Warrant, the number
of shares issuable upon exercise of this Warrant may be less than the amount
stated on the face hereof.
A "Date of Exercise" means the date on which the Company shall have
received (i) the Form of Election to Purchase (and the Warrant Shares
Exercise Log attached hereto) completed and duly signed, and (ii) payment
of the Exercise Price for the number of Warrant Shares so indicated by the
Holder to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares then vested.
The number of Warrant Shares that shall vest under this Warrant shall be
equal to the aggregate of (i) the amount of liquidated damages, if any,
calculated under Section 2(c) of the Registration Rights Agreement, dated
the date of issuance of this Warrant, between the Company and the original
Holder (the "Registration Rights Agreement") and (ii) any amounts payable
to the Holder of the Debenture under Section 3(b) of the Convertible
Debenture, due November 14, 2003 (the "Debenture"), issued pursuant to
the Convertible Debenture Purchase Agreement, dated the date of issuance of
this Warrant, between the Company and the original Holder. Such vesting
shall occur on the date on which the Holder shall indicate in writing that
such vesting has occurred in accordance with Section 2(c) of the Registration
Rights Agreement or Section 3(b) of the Debenture, as applicable, and such
indication shall be in the form of a writing from the Holder electing to
be paid the liquidated damages or the monies due under the Debenture, as
applicable, under such Section in shares of Common Stock. The Exercise
Price for a Warrant Share shall equal the closing sales price of the
Common Stock on the trading day immediately preceding the day on which
such Warrant Shares vested. The number of Warrant Shares vested hereunder
shall be measured cumulatively. Annex A shall set forth the number of
Warrant Shares then vested hereunder and the applicable Exercise Price.
4. Piggyback Registration Rights. This Warrant is subject to the
piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until
all of the Holder's Warrant Shares have been sold in accordance with
an effective registration statement or upon the Expiration Date. The
Company will pay all registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise
of this Warrant; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in
the registration of any certificates for Warrant Shares or Warrants in a
name other than that of the Holder. The Holder shall be responsible for
all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants
for a New Warrant under such circumstances shall also comply with such
other reasonable regulations and procedures and pay such other reasonable
charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling
it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and
deliverable upon the exercise of this entire Warrant, free from preemptive
rights or any other actual contingent purchase rights of persons other
than the Holder (taking into account the adjustments and restrictions of
Section 8). The Company covenants that all Warrant Shares that shall be
<PAGE>
so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 8.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other class of capital stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section 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 or
combination, and shall apply to successive subdivisions and combinations.
(b) 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, then the Holder shall have the
right thereafter to exercise this Warrant only into the shares of stock
and other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder
would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification or share exchange. 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
or property set forth in this Section 8(b) upon any exercise following any
such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of
this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise 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 Exercise Price determined as of the record date mentioned above,
and of which the numerator shall be such Exercise Price 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 Common Stock as determined by the Company's independent
certified public accountants that regularly examines the financial
statements of the Company (an "Appraiser").
<PAGE>
(d) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of
related transactions, the Holder shall have the right thereafter to (A)
exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and the Holder shall
be entitled upon such event or series of related events to receive such
amount of securities, cash and property as the Common Stock for which this
Warrant could have been exercised immediately prior to such merger,
consolidation or sales would have been entitled or (B) in the case of a
merger or consolidation, (x) require the surviving entity to issue common
stock purchase warrants equal to the number Warrant Shares to which this
Warrant then permits, which newly warrant shall be identical to this
Warrant, and (y) simultaneously with the issuance of such warrant, the
Holder of such warrant shall have the right to exercise such warrant only
into shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such merger
or consolidation or (C) require the surviving entity from such merger,
acquisition or business combination to pay to the Holder, in cash, the
Black Scholes value of this Warrant. In the case of clause (B), the
exercise price for such new warrant shall be based upon the amount of
securities, cash and property that each share of Common Stock would
receive in such transaction and the Exercise Price of this Warrant
immediately prior to the effectiveness or closing date for such transaction.
The terms of any such merger, sale or consolidation shall include such
terms so as continue to give the Holder the right to receive the securities,
cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(e) For the purposes of this Section 8, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall
be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
<PAGE>
(g) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the
Appraiser and such appraiser. The Holder shall promptly mail or cause
to be mailed to the Company, a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such adjustment shall become effective
immediately after the record date mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) 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
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock, 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, or any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 20
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 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 Common Stock of record
<PAGE>
shall be entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution,
liquidation or winding up; 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.
9. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available
funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined
as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant is
being exercised.
A = the average of the closing sale prices of the Common Stock (as reported
by Bloomberg L.P. or any successor to its function of reporting share prices
at 4:15 p.m. (New York time for the closing bid price for regular session
trading on such day)) for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to
have been commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
<PAGE>
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section
will limit any particular exercise hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies,
the determination of which portion of this Warrant is exercisable shall be
the responsibility and obligation of the Holder. If the Holder has
delivered a Form of Election to Purchase for a number of Warrant Shares
that, without regard to any other shares that the Holder or its affiliates
may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this
fact and shall honor the exercise for the maximum portion of this Warrant
permitted to be exercised on such Date of Exercise in accordance with the
periods described herein and, at the option of the Holder, either keep the
portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to 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 61 days prior notice to the Company. Other Holders shall be unaffected
by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of an
exercise hereunder, unless the exercise at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular exercise
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of
this Warrant is exercisable shall be the responsibility and obligation of
the Holder. If the Holder has delivered a Form of Election to Purchase for
a number of Warrant Shares that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance
in excess of the permitted amount hereunder, the Company shall notify the
Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in
accordance with the periods described herein and, at the option of the
Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return
such excess portion of the Warrant to 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 61 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
11. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this
<PAGE>
Warrant. The number of full Warrant Shares which shall be issuable upon
the exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable on the exercise of this Warrant,
the Company shall pay an amount in cash equal to the Exercise Price
multiplied by such fraction.
12. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:30 p.m. (New York City time) on a
business day, (ii) the business day 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 6:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the business day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given. The addresses
for such communications shall be: (i) if to the Company, to 1999 Lincoln
Drive, Suite 202, Sarasota, FL 34236, facsimile: (941) 953 4363, attention
Chief Financial Officer, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
13. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty days' notice to the Holder, the Company may appoint
a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent
transfers substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice
of its succession as warrant agent to be mailed (by first class mail,
postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company
and the Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
<PAGE>
interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. The Company
and the Holder hereby irrevocably submit to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives
service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to the
Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by
law. Each party irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence an action or proceeding
to enforce any provisions of this Warrant, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its'
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
SALIENT CYBERTECH, INC.
By:_____________________________________
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the Warrant, issued on November 14, 2000 by Salient
Cybertech, Inc.)
To Salient Cybertech, Inc.:
The undersigned hereby irrevocably elects to purchase _____________ shares
of common stock, $.001 par value per share, of Salient Cybertech, Inc.
(the "Common Stock") and, if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________
in cash, certified or official bank check or checks, which sum represents
the aggregate Exercise Price (as defined in the Warrant) for the number of
shares of Common Stock to which this Form of Election to Purchase relates,
together with any applicable taxes payable by the undersigned pursuant to
the Warrant.
Date of vesting of warrant: _______________.
Exercise Price: ________________.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
_______________________________________________________________________
(Please print name and address)
Dated: _______,____ Name of Holder:
(Print)________________
(By:)__________________
(Name:)
(Title:)
(Signature must conform in
all respects to name of
holder as specified on
the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Salient
Cybertech, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Salient
Cybertech, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
Signature must conform in all respects
to name of holder as specified on
the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
ANNEX A
Vesting/Exercise Date
Number of Warrant Shares Vested on Such Vesting Date/Exercised on such
Exercise Date.
Applicable Exercise Price
Number of Warrant Shares Not Previously Exercised
Number of Warrant Shares Remaining to be Exercised at Such Exercise Price.
<PAGE>
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER 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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
SALIENT CYBERTECH, INC.
WARRANT
Warrant No.1 Dated: November 14, 2000
Salient Cybertech, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Haines Avenue, LLC or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company up to a total of 423,729 shares of common stock,
$.001 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") at an
exercise price equal to $0.90 per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), at any time and from time to
time from and after the date hereof and through and including November 14,
2005 (the "Expiration Date"), and subject to the following terms and
conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in
Section 12. Upon any such registration or transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 6:30 P.M., New York City time, at any time and from time
to time on or after the date hereof to and including the Expiration Date.
At 6:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of
no value. Prior to the Expiration Date, the Company may not call or
otherwise redeem this Warrant.
(b) Upon delivery of a duly completed and signed Form of Election to
Purchase attached hereto (and the grid attached hereto as Annex A) duly
completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number
of Warrant Shares that the Holder intends to purchase hereunder, in the
manner provided hereunder, all as specified by the Holder in the Form of
Election to Purchase, the Company shall promptly (but in no event later
than 3 business days after the Date of Exercise (as defined herein) issue
or cause to be issued and cause to be delivered to or upon the written
order of the Holder and in such name or names as the Holder may designate,
a certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends except (i) either in the event that a registration
statement covering the resale of the Warrant Shares and naming the Holder
as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the
Holder to receive Warrant Shares shall be deemed to have become holder of
record of such Warrant Shares as of the Date of Exercise of this Warrant.
The Company shall, upon request of the Holder, if available, use its best
efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
<PAGE>
performing similar functions. To effect an exercise hereunder, the Holder
shall not be required to physically surrender this Warrant to the Company
unless all the Warrant Shares have been exercised. Exercises hereunder
shall have the effect of lowering the number of Warrant Shares in an amount
equal to the applicable exercise, which shall be evidenced by entries
set forth in the Exercise Schedule. The Holder and the Company shall
maintain records showing the number of Warrant Shares exercised and the date
of such exercises. In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following exercise of a portion of this Warrant, the number of shares
issuable upon exercise of this Warrant may be less than the amount stated
on the face hereof.
A "Date of Exercise" means the date on which the Company shall have received
(i) the Form of Election to Purchase completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares so indicated
by the Holder to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares.
4. Piggyback Registration Rights. This Warrant is subject to the
piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all
of the Holder's Warrant Shares have been sold in accordance with an
effective registration statement or upon the Expiration Date. The Company
will pay all registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring
this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for
<PAGE>
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling
it to issue Warrant Shares upon exercise of this Warrant as herein provided,
the number of Warrant Shares which are then issuable and deliverable upon
the exercise of this entire Warrant, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holder
(taking into account the adjustments and restrictions of Section 8). The
Company covenants that all Warrant Shares that shall be so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other class of capital stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section 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 or
combination, and shall apply to successive subdivisions and combinations.
(b) 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, then the Holder shall have the
right thereafter to exercise this Warrant only into the shares of stock
and other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder
would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification or share exchange. 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
or property set forth in this Section 8(b) upon any exercise following any
such reclassification or share exchange.
<PAGE>
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall
be determined by multiplying the Exercise 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 Exercise Price determined as of the record date mentioned above, and of
which the numerator shall be such Exercise Price 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 Common Stock as determined by the Company's independent certified
public accountants that regularly examines the financial statements of the
Company (an "Appraiser").
(d) If the Company or any subsidiary thereof, as applicable with respect
to Common Stock Equivalents (as defined below), at any time while this
Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants (including those issued under the Purchase Agreement), 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 Exercise Price
(if the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights issued in connection with such
issuance, be entitled to receive shares of Common Stock at a price less
than the Exercise Price, such issuance shall be deemed to have occurred for
less than the Exercise Price), then, at the option of the Holder for such
exercises as it shall indicate, the Exercise Price shall be adjusted to
mirror the conversion, exchange or purchase price for such Common Stock or
Common Stock Equivalents (including any reset provisions thereof) at issue.
Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. The Company shall notify the Holder in writing,
no later than the Trading Day following the issuance of any Common Stock or
Common Stock Equivalent subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section
shall be made as a result of (i) issuances of Common Stock or Common Stock
Equivalents to the extent disclosed in Schedule 2.1(c) to the Purchase
Agreement, (ii) issuances and exercises of options to purchase shares of
Common Stock issued for compensatory purposes pursuant to any of the
Company's stock option or stock purchase plans, or (iii) exercises under
the Warrants (as defined in the Purchase Agreement).
(e) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise
this Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following
such merger, consolidation or sale, and the Holder shall be entitled upon
such event or series of related events to receive such amount of securities,
cash and property as the Common Stock for which this Warrant could have been
exercised immediately prior to such merger, consolidation or sales would
have been entitled or (B) in the case of a merger or consolidation, (x)
require the surviving entity to issue common stock purchase warrants equal
<PAGE>
to the number Warrant Shares to which this Warrant then permits, which
newly warrant shall be identical to this Warrant and (y) simultaneously with
the issuance of such warrant, the Holder of such warrant shall have the
right to exercise such warrant only into shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders
of Common Stock following such merger or consolidation
or (C) require the surviving entity from such merger, acquisition or
business combination to pay to the Holder, in cash, the Black Scholes value
of this Warrant. In the case of clause (B), the exercise price for such
new warrant shall be based upon the amount of securities, cash and property
that each share of Common Stock would receive in such transaction and the
Exercise Price of this Warrant immediately prior to the effectiveness or
closing date for such transaction. The terms of any such merger, sale or
consolidation shall include such terms so as continue to give the Holder
the right to receive the securities, cash and property set forth in this
Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(f) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock or in securities convertible
or exchangeable into shares of Common Stock, or (B) to subscribe for or
purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered
an issue or sale of Common Stock.
(g) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the
Appraiser and such appraiser. The Holder shall promptly mail or cause to
be mailed to the Company, a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Such adjustment shall become effective immediately after
the record date mentioned above.
(i) If:
<PAGE>
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) 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
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common
Stock, 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, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the
Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least
20 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 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 Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution,
liquidation or winding up; 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.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price
in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds;
or
<PAGE>
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined
as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant
is being exercised.
A = the average of the closing sale prices of the Common Stock (as
reported by Bloomberg L.P. or any successor to its function of reporting
share prices at 4:15 p.m. (New York time for the closing bid price for
regular session trading on such day)) for the five (5) trading days
immediately prior to (but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to
have been commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority
and obligation to determine whether the restriction contained in this
Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies,
the determination of which portion of this Warrant is exercisable shall be
the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor
the exercise for the maximum portion of this Warrant permitted to be
<PAGE>
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the
Warrant tendered for exercise in excess of the permitted amount hereunder for
future exercises or return such excess portion of the Warrant to 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 61 days prior notice
to the Company. Other Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act
and the rules promulgated thereunder) in excess of 9.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section
will limit any particular exercise hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor
the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the
Warrant tendered for exercise in excess of the permitted amount hereunder
for future exercises or return such excess portion of the Warrant to 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 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
11. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon
the exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable on the exercise of this Warrant,
the Company shall pay an amount in cash equal to the Exercise Price
multiplied by such fraction.
12. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section prior to 6:30 p.m. (New York City time) on a business day, (ii)
the business day 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 6:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
<PAGE>
the business day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 1999 Lincoln Drive,
Suite 202, Sarasota, FL 34236, facsimile: (941) 953 4363, attention Chief
Financial Officer, or (ii) if to the Holder, to the Holder at the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.
13. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party
or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and
the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. The Company
and the Holder hereby irrevocably submit to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by receiving a copy thereof sent to the Company
at the address in effect for notices to it under this instrument and agrees
that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in
<PAGE>
any way any right to serve process in any manner permitted by law. Each
party irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any
provisions of this Warrant, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its' attorneys fees
and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
SALIENT CYBERTECH, INC.
By:_____________________________________
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the Warrant issued on November 14, 2000 by Salient
Cybertech, Inc.)
To Salient Cybertech, Inc.:
The undersigned hereby irrevocably elects to purchase _____________ shares
of common stock, $.001 par value per share, of Salient Cybertech, Inc. (the
"Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of
shares of Common Stock to which this Form of Election to Purchase relates,
together with any applicable taxes payable by the undersigned pursuant to
the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________________________________________________
(Please print name and address)
Dated: _________ , ________ Name of Holder:
(Print)_________________
(By:)___________________
(Name:)
(Title:)
(Signature must conform
in all respects to name
of holder as specified
on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Salient
Cybertech, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Salient
Cybertech, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_________________________
(Signature must conform
in all respects to name
of holder as specified
on the face of the Warrant)
__________________________
Address of Transferee
__________________________
__________________________
In the presence of:
__________________________
<PAGE>
Annex A
Date Number of Warrant Number of Warrant Number of Warrant
Shares Available Shares Exercised Shares Remaining
to be Exercised to be Exercised
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of November 14, 2000, among Salient Cybertech, Inc., a Delaware
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Convertible Debenture Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers
(the "Purchase Agreement"), and the Securities Purchase Agreement, dated the
date hereof, between the Company and the Investors signatory thereto (the
"Equity Line Agreement").
The Parties hereto, for good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are defined in
the Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement and the Equity Line Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract
or otherwise; and the terms of "affiliated," "controlling" and "controlled"
have meanings correlative to the foregoing.
"Business Day" means 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 or State of Florida are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.001 par value, or such
securities in to which that such stock shall hereafter be reclassified.
"Debentures" means the Convertible Debentures issued to the Purchasers in
accordance with the Purchase Agreement.
<PAGE>
"Effectiveness Date" means with respect to the initial Registration
Statement required to be filed hereunder, the 105th day following the
Closing Date and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 105th day following the
date that notice of the requirement to file such additional Registration
Statement is provided.
"Effectiveness Period" shall have the meaning set forth in Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 30th day following the Closing Date and, with
respect to any additional Registration Statements which may be required
pursuant to Section 3(c), the 30th day following the date that notice of the
requirement to file such additional Registration Statement is provided.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such
as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issuable upon
conversion in full of the Debentures, (ii) the shares of Common Stock
issuable upon conversion in full of the Warrants, and (iii) the Put Shares.
"Registration Statement" means the registration statement and any additional
<PAGE>
registration statements contemplated by Section 3(c), including (in each
case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Special Counsel" means one special counsel to the Holders, for which the
Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" shall mean (i) the Warrants (as defined in each of the Purchase
Agreement and the Equity Line Agreement), (ii) the Common Stock purchase
warrant issued or issuable to Alliance Financial as compensation in
connection with the issuance and sale of the Debentures to the Purchasers,
and (iii) the Common Stock purchase warrant issued to Alliance Financial
under the Equity Line Agreement.
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-1
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-1, in which case such registration shall be
on another appropriate form and shall contain the "Plan of Distribution"
attached hereto as Annex A. The Company shall use its best efforts to
cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and shall use its best efforts to
keep such Registration Statement continuously effective under the Securities
Act until the date which is two years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when
all Registrable Securities covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k) (the
"Effectiveness Period"). The Company agrees that it will make such pre-and
post-effective filings with the Commission as are necessary in order to
convert the Registration Statement to a Registration Statement under Form
S-3 promulgated under the Securities Act as soon as possible following the
<PAGE>
date, if any, on which the Company is eligible to utilize such form to
register the resale of its securities as contemplated by this Agreement.
(b) The initial Registration Statement to be filed hereunder shall
include (but not be limited to) a number of shares of Common Stock equal to
no less than the sum of (i) 200% of the number of shares of Common Stock
issuable upon conversion in full of the principal amount of all issuable
Debentures, assuming no interest is paid thereon in cash and that such
Debentures remain outstanding for three years and that such conversion
occurred at a price equal to the Conversion Price (as defined in the
Debentures) on the Closing Date, Filing Date or day prior to the filing
of a request with the Commission that the Registration Statement be
accelerated (whichever has a lower Conversion Price), and (ii) the number
of shares of Common Stock issuable upon exercise in full of the Warrants
issued as of the Closing Date (assuming that the Maximum number of shares of
Common Stock are issued and sold under the Equity Line Agreement) issued as
of the Closing Date, and (iii) 17,250,000 shares of Common Stock for the
Put Shares and the Warrant Shares for sale by the Holders under the Equity
Line Agreement.
(c) If (a) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act, within five days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that
a Registration Statement will not be "reviewed," or not subject to further
review, or (c) a Registration Statement filed hereunder is not declared
effective by the Commission on or prior to its Effectiveness Date, or (d)
after a Registration Statement is filed with and declared effective by the
Commission, such Registration Statement ceases to be effective as to all
Registrable Securities to which it is required to relate at any time prior
to the expiration of the Effectiveness Period without being succeeded within
ten Business Days by an amendment to such Registration Statement or by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (e) the Common Stock shall not be quoted on the OTC Bulletin
Board ("OTC") or shall be delisted or suspended from trading on the New York
Stock Exchange, American Stock Exchange, the NASDAQ National Market or the
NASDAQ SmallCap Market (each, a "Subsequent Market") for more than three
Trading Days (which need not be consecutive Trading Days), or (f) the
conversion rights of the Holders pursuant to the Debentures are suspended
for any reason, or (g) an amendment to a Registration Statement is not filed
by the Company with the Commission within ten Business Days of the
Commission's notifying the Company that such amendment is required in order
for such Registration Statement to be declared effective (any such failure
or breach being referred to as an "Event," and for purposes of clauses
(a), (c) and (f) the date on which such Event occurs, or for purposes of
clause (b) the date on which such five day period is exceeded, or for
purposes of clauses (d) and (g) the date which such ten Business Day-period
is exceeded, or for purposes of clause (e) the date on which such three
Trading Day-period is exceeded, being referred to as "Event Date"), then, on
the first monthly anniversary of such Event Date, the Company shall pay to
each Holder an amount in cash, as liquidated damages and not as a penalty,
equal to 2.0% of the purchase price paid by such Holder pursuant to the
Purchase Agreement, and on each monthly anniversary thereafter of such
Event Date and every monthly anniversary thereof until the applicable Event
is cured, the Company shall pay to each Holder an amount in cash, as
liquidated damages and not as a penalty, equal to 3.0% of the purchase price
<PAGE>
paid by such Holder pursuant to the Purchase Agreement. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at
a rate of 15% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full and if not in cash by the tenth Business Day after
first accrued, at the option of the Holder, such liquidated damages be paid
in shares of Common Stock under the Vesting Warrant. The liquidated damages
pursuant to the terms hereof shall apply on a pro-rata basis for any portion
of a month prior to the cure of an Event.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than five Business Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall, (i)
furnish to the Holders and their Special Counsel copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to
the review of such Holders and their Special Counsel, and (ii) cause its
officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable
opinion of respective counsel to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities and their Special Counsel shall reasonably object, provided, the
Company is notified of such objection no later than 3 Business Days after
the Holders have been so furnished copies of such documents.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule
424; (iii) respond as promptly as reasonably possible, and in any event
within ten Business Days, to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and as
promptly as reasonably possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so amended or
in such Prospectus as so supplemented.
<PAGE>
(c) File additional Registration Statements if the number of Registrable
Securities at any time exceeds 85% of the number of shares of Common Stock
then registered in all their existing Registration Statements hereunder.
(d) Notify the Holders of Registrable Securities to be sold and their
Special Counsel as promptly as reasonably possible (and, in the case of (i)
(A) below, not less than five Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than
one 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) when the Commission notifies the Company whether
there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission 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 and warranties of the Company
contained in any 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 or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) Promptly deliver to each Holder and their Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons
may reasonably request. The Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
(f) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders and
their Special Counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other acts
or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, that the Company shall not be required to qualify
<PAGE>
generally to do business in any jurisdiction where it is not then so
qualified or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(g) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates
shall be free, to the extent permitted by the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request.
(h) Upon the occurrence of any event contemplated by Section 3(d)(vi),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither the Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(i) Comply with all applicable rules and regulations of the Commission.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with any Subsequent
Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as requested by the
Holders)), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses requested by the Holders), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company
and Special Counsel for the Holders and (v) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement.
5. Indemnification
<PAGE>
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, agents, brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys' fees)
and expenses (collectively, "Losses"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder expressly for
use therein, or to the extent that such information relates to such Holder
or such Holder's proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (2) in the case of
an occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated
or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading to the extent, but
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such Prospectus
or to the extent that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the
type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder
<PAGE>
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(e). In no
event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that
such failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding
and to employ counsel reasonably satisfactory to such Indemnified Party
in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense
of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten
Business Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
<PAGE>
or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations
set forth in Section 5(c), any reasonable attorneys' or other reasonable
fees or expenses incurred by such party in connection with any Proceeding
to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of at least two-thirds of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders
of at least a majority of the Registrable Securities to which such waiver
or consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter
into any agreement with respect to its securities that would have the
effect of impairing the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. Except as and to the
<PAGE>
extent specified in Schedule 6(b) hereto, neither the Company nor any of
its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person
that have not been satisfied in full.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other
than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right to any of its
security holders.
(d) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(e) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will
forthwith discontinue disposition of such Registrable Securities under
the Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(h), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may
be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this paragraph.
(f) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of
the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating
to equity securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in connection with
stock option or other employee benefit plans, then the Company shall send
to each Holder written notice of such determination and, if within fifteen
days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or
any part of such Registrable Securities such holder requests to be registered.
g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section prior to 6:30
p.m. (New York City time) on a Business Day, (ii) the Business Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Agreement
later than 6:30 p.m. (New York City time) on any date and earlier than 11:59
p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications
shall be as follows:
<PAGE>
If to the Company: Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
Facsimile No.: (941) 953 4363
Attn: Chief Financial Officer
With copies to: David J. Feingold, Esq.
3300 PGA Blvd.
Palm Beach Gardens, Florida 33410
Facsimile No.: (561) 630 8936
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it
appears in the stock transfer books
of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may
not assign its rights or obligations hereunder without the prior written
consent of each Holder. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the
original thereof.
(j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts
of law thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New
York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
in effect for notices to it under this Agreement and agrees that such
<PAGE>
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party
irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby.
If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its' attorneys fees
and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ
an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Holder, Purchaser and Investor hereunder are several
and not joint with the obligations of any other Holder, Purchaser and
Investor hereunder, and no such Person shall be responsible in any way
for the performance of the obligations of any other such Person hereunder.
Nothing contained herein or in any other agreement or document delivered
at any closing, and no action taken by any Holder, Purchaser or Investor
pursuant hereto or thereto, shall be deemed to constitute such Person as
a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that such Person is in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder, Purchaser and Investor shall be entitled to
protect and enforce its rights, including without limitation the rights
arising out of this Agreement, and it shall not be necessary for any
other Holder, Purchaser or Investor to be joined as an additional party
in any proceeding for such purpose.
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SIGNATURE PAGES TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
SALIENT CYBERTECH, INC.
By:_____________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASER TO FOLLOW]
<PAGE>
HAINES AVENUE LLC
By:_____________________________
Name:
Title:
Address for Notice: Haines Avenue LLC
c/o Citco Trustees (Cayman)
Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
and (212) 541-1432
Attn: Eric L. Cohen, Esq.
<PAGE>
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and successors-
in-interest may, from time to time, sell any or all of their shares of
Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in
connection with these trades. The Selling Stockholders may pledge their
shares to their brokers under the margin provisions of customer agreements.
If a Selling Stockholder defaults on a margin loan, the broker may, from
time to time, offer and sell the pledged shares. The Selling Stockholders
have advised the Company that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers
regarding the sale of their shares other than ordinary course brokerage
arrangements, nor is there an underwriter or coordinating broker acting
<PAGE>
in connection with the proposed sale of shares by the Selling Stockholders.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-
dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Investor and any broker-dealers or agents that are involved in
selling the shares are considered "underwriters" by the Securities and
Exchange Commission within the meaning of the Securities Act in connection
with sales under this Registration Statement. Accordingly, any commissions
received by such broker-dealers or agents and any profit on the resale of
the shares purchased by them will be deemed underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel
to the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
<PAGE>
SECURITIES PURCHASE AGREEMENT
Between
SALIENT CYBERTECH, INC.
and
HAINES AVENUE LLC
SECURITIES PURCHASE AGREEMENT dated as of November 14, 2000 (this
"Agreement"), between the Investor signatory hereto (the "Investor"), and
Salient Cybertech, Inc., a Delaware corporation (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall have the opportunity
to issue and sell to Investor from time to time as provided herein and
pursuant to Rule 506 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and Section 4(2) thereunder, up to
$10,000,000 of the Company's Common Stock (as defined below) and certain
Common Stock purchase warrants.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
agree as follows:
ARTICLE I
Certain Definitions
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York or State of Florida are
authorized or required by law or other government action to close.
"Capital Shares" means the Common Stock and any shares of any other class
of common stock whether now or hereafter authorized, having the right to
participate in the distribution of earnings and assets of the Company.
"Capital Shares Equivalents" means any securities, rights, or obligations
that are directly or indirectly convertible into or exchangeable for or
give any right to subscribe for or otherwise receive Capital Shares of the
Company or any warrants, options or other rights to subscribe for or
purchase Capital Shares.
<PAGE>
"Closing Warrant" means the Common Stock purchase warrant, in the form of
Exhibit C-1 hereto, to be delivered to the Investor concurrently with the
execution of this Agreement, entitling the Investor to purchase from time
to time in accordance with the terms thereof shares of Common Stock.
"Commission" means the Securities and Exchange Commission.
"Commitment Period" means the period commencing on the Effective Date and
expiring on the earliest to occur of (x) the date on which the Investor
shall have paid an aggregate of $10,000,000 in Purchase Price pursuant to
this Agreement, (y) the date this Agreement is terminated in accordance
with its terms, or (z) the date occurring 24 months from the Closing Date.
"Common Stock" means the Company's common stock, par value $.001 per share,
or such securities into which such stock shall hereafter be reclassified
or changed.
"Effective Date" means the date on which the Commission first declares
effective a Registration Statement meeting the requirements of the
Registration Statement and registering the sale by the Company and resale
by the Investor of the Registrable Securities.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Investment Amount" means the dollar amount to be invested by the Investor
to purchase Put Shares as specified in a Put Notice.
"Market Price" on any date means the average of the three lowest VWAPs
during the Valuation Period relating to such date, subject to equitable
adjustment in the event of a Valuation Event during such Valuation Period.
"Maximum Put Amount" means means the lesser of (x) $2,000,000 and (y)
150% of the weighted average daily price for the twenty Trading Day period
prior to the Put Date multiplied by the weighted average trading volume
for such twenty Trading Day period.
"Minimum Commitment Amount" means $2,500,000.
"Outstanding" when used with reference to shares of Common Stock or Capital
Shares, means, at any date as of which the number of such Shares is to be
determined, all issued and outstanding shares of Common Stock or Capital
Shares, and shall include all such shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such shares;
provided, that "Outstanding" shall not mean any shares of Common Stock or
Capital Shares directly or indirectly owned or held by or for the account
of the Company.
<PAGE>
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Principal Market" means whichever of the NASDAQ National Market, NASDAQ
SmallCap Market, American Stock Exchange, New York Stock Exchange or OTC
Bulletin Board, that is then the principal trading exchange, market or
quotation system for the Common Stock.
"Purchase Price" means with respect to Put Shares, an amount equal to 90%
of the Market Price for the Valuation Period for a Put (subject to certain
adjustments as set forth in Section 5.7).
"Put" means the exercise by the Company of its right to require the
Investor to purchase Put Shares pursuant to the terms of this Agreement.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Investor, dated the date hereof, in the form
of Exhibit B hereto.
"Registration Statement" shall have the meaning set forth in the Registration
Rights Agreement.
"Securities" means, collectively, the Put Shares, Warrants and Warrant
Shares.
"Trading Day" means (a) a day on which the Common Stock is traded on the
Principal Market on which the Common Stock is then listed or quoted, or
(b) if the Common Stock is not listed or quoted for trading on a Principal
Market, a day on which the Common Stock is traded 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, that in the event that the Common Stock is not listed
or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean
a Business Day.
"Undrawn Amount" means $2,500,000 less the aggregate Purchase Price paid
during the Commitment Period for Put Shares pursuant to this Agreement.
"Valuation Event" means an action by the Company during the Commitment
Period to:
(1) subdivide or combine the Common Stock;
(2) pay a dividend on its Capital Shares or make any other distribution
of its Capital Shares;
<PAGE>
(3) issue any additional Capital Shares ("Additional Capital Shares")
at a price per share less, or for other consideration lower, than the VWAP
in effect immediately prior to such issuance, or without consideration
(other than pursuant to this Agreement);
(4) issue any warrant, option, right or other security to subscribe for
or purchase Additional Capital Shares at a price per share at any time over
life of such security (whether by reset, adjustment or otherwise) that is
less than the VWAP in effect immediately prior to such issuance of such
warrant, option, right or other security;
(5) issue any securities convertible into or exchangeable for Capital
Shares at a price per Additional Capital Share that is at any time over
the life of such security (whether by reset, adjustment or otherwise) less
than the VWAP on the date of issuance of such convertible or exchangeable
security;
(6) make a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the circumstances
provided for in the foregoing subsections (a) through (e)); or
(7) take any other action affecting the number of Outstanding Capital
Shares, which in the opinion of the Company's Board of Directors, determined
in good faith, would have a Material Adverse Effect upon the rights of the
Investor at the time of a Put.
"Valuation Period" means the period of ten Trading Days commencing on the
Put Date.
"Vesting Warrant" means the Common Stock purchase warrant, in the form of
Exhibit C-2 hereto, to be delivered to the Investor concurrently with the
execution of this Agreement, entitling the Investor to purchase from time
to time in accordance with the terms thereof shares of Common Stock.
"VWAP" means the daily volume weighted average price (as reported by
Bloomberg Financial using AQR function) of the Common Stock on the Principal
Market on the date in question, or if there is no such price on such date,
then the closing bid price on the date nearest preceding such date.
"Warrants" means, collectively, (a) the Closing Warrant, (b) the Vesting
Warrant and (c) the Common Stock purchase warrant, in the form of Exhibit
C-3 hereto, to be delivered to the Broker (as defined herein) concurrently
with the execution of this Agreement, entitling the Broker to purchase
from time to time in accordance with the terms thereof shares of Common
Stock.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
<PAGE>
ARTICLE II
Purchase and Sale of Common Stock
Section II.1 Investments.
(1) Puts. Subject to the conditions and limitations set forth herein,
the Company may make a Put by the delivery of a duly completed written
notice to the Investor in the form attached hereto as Exhibit A (each, a
"Put Notice"), specifying therein the Investment Amount that the Company
intends to sell to the Investor. The number of shares of Common Stock that
the Investor shall receive pursuant to a Put ("Put Shares") shall be
determined by dividing the Investment Amount specified in the Put Notice
by the Purchase Price for the Valuation Period for such Put.
(2) Limitations on Puts and Common Stock Issuable.
(i) The Company may not deliver a Put Notice to the extent that,
following the purchase by the Investor of Put Shares thereunder, the
Investor and its affiliates would beneficially own (as determined in
accordance with Section 13(d) of the Exchange Act) in excess of 4.999%
of the then outstanding shares of Common Stock.
(ii) The maximum Purchase Price for all Puts is an aggregate of
$10,000,000.
(iii) The Investment Amount for each Put shall be neither less than
$50,000 nor more than the Maximum Put Amount.
(iv) The Company may not deliver a Put Notice during the continuation
of any of the events specified in Section 5.4.
Section II.2 Mechanics.
(1) Put Notice. Subject to the conditions and limitations herein,
at any time during the Commitment Period the Company may deliver a Put
Notice to the Investor.
(2) Date of Delivery of Put Notice or Notice to Acquire Investment
Shares. A Put Notice shall be deemed delivered on: (i) the Trading Day
it is received by facsimile or otherwise by the Investor if such notice
is received prior to 12:00 noon New York Time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after
12:00 noon New York Time on a Trading Day or at any time on a day which
is not a Trading Day. The Trading Day that a Put Notice is deemed delivered
pursuant to this Section is the "Put Date."
Section II.3 Closings.
<PAGE>
(a) Subject to the satisfaction of the conditions set forth in this
Agreement, the closing of the purchase by the Investor of Put Shares
following a Put (a "Closing") shall occur on the second Business Day
following the end of the Valuation Period for such Closing (or such other
date as is mutually agreed to by the Company and the Investor) (a "Closing
Date") at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP,
1290 Avenue of the Americas, New York, NY 10104 ("Robinson Silverman") or
such other place to which the parties may agree. At least one Business
Day prior to each Closing Date, the Company shall deliver (or cause to be
delivered) into escrow with Robinson Silverman (or such other escrow agent
to which the parties may agree): (1) the certificate contemplated by Section
6.1(c); (2) the legal opinion contemplated by Section 6.1(f); (3) a writing,
executed by the Investor and the Company concurring as to (x) the total
number of Put Shares that are to be issued and sold at such Closing, (y)
the Investment Amount for the Put Shares issuable at such Closing
and (z) the number of Warrant Shares that will vest on such Closing Date
under the Closing Warrant as a result of such Put (it being agreed that
750,000 shares of Common Stock shall vest under such Closing Warrant on the
first Closing Date and 150,000 shares of Common Stock shall vest for each
$1,000,000 of Purchase Price paid at additional Closings), and (4) all other
documents, instruments and writings required to be delivered by it pursuant
to the Transaction Documents (as defined herein) in order to effect a Closing
hereunder (the items contemplated by clauses (1) through (4) above are
collectively referred to as the "Company Required Items"). At least one
Business Day prior to each Closing Date, the Company shall deliver to the
Investor's account through the Depository Trust Company DWAC system, per
written account instructions delivered by the Investor to the Company (the
"DTC Account"), the Put Shares to be issued and sold to the Investor at such
Closing and meeting the requirements of Section 5.3 which Put Shares shall
be held in escrow pending delivery to the Company of the Investment Amount
for the Put Shares to be issued and sold at such Closing pursuant to the
terms hereof.
(b) Robinson Silverman (or such other escrow agent to which the parties
may agree) shall notify the Company, the Investor and Alliance Financial
(the "Broker") on the Business Day it receives all of the Company Required
Items relating to such Closing. If: (i) Robinson Silverman (or such other
escrow agent to which the parties may agree) shall have provided such notice
by the Closing, (ii) the DTC Account shall have been credited with the Put
Shares to be issued and sold to the Investor at such Closing and (iii) the
other conditions to the Investor's obligation to purchase Put Shares at such
Closing as provided hereunder shall have been satisfied or waived, the
Investor shall deliver (or cause to be delivered): (x) to the Company, the
Investment Amount for the Put Shares to be issued and sold at such Closing,
less the amounts contemplated by clause (y) following this clause (x), and
(y) (1) to Robinson Silverman (or such other escrow agent to which the
parties may agree), $2,000, (2) to the Investor, the amount of any Blackout
Payments (as defined below), together with all accrued interest thereon,
then owed and for which full payment shall not have previously been made,
(3) to the Broker, an amount equal to [ ] of the gross Investment Amount
to be paid at such Closing. In the event that: (i) any Company Required
Item shall not have been delivered, (ii) the DTC Account shall not have been
credited with the Put Shares to be issued and sold to the Investor at such
Closing or (iii) any condition set forth in Article VI shall not have been
fulfilled or waived by the Investor then, at the option of the Investor,
such Closing shall be canceled and any Company Required Items delivered to
Robinson Silverman (or such other escrow agent to which the parties may
agree) and any Put Shares credited to the DTC Account, in both cases, in
<PAGE>
connection with such Closing, shall be returned to or as directed by the
Company. The parties hereto understand and agree that Robinson Silverman
(or such other escrow agent to which the parties may agree) will not release
the Company Required Items to the Investor prior to its receipt of written
confirmation from the Company that the Company has received the net proceeds
from the sale of the Put Shares to have been sold at such Closing; provided,
if the Company does not confirm such receipt by 5:00 p.m. New York Time on
the Business Day following the Closing Date, the parties hereby direct
Robinson Silverman (or such other escrow agent to which the parties may
agree) to deliver the Company Required Items to the Investor at such time as
Robinson Silverman (or such other escrow agent to which the parties may
agree) receives written evidence from the institution from which the
Investment Amount was delivered on behalf of the Investor that funds equal
to the amount required hereunder to be delivered to the Company at such
Closing were delivered in accordance with the wire instructions provided
by the Company for such purpose (a federal wire number for the correct
amount and in accordance with the wire instructions provided by the Company
for such purpose shall be conclusive evidence of the Company's receipt).
(c) Each of the parties hereby agrees jointly and severally to indemnify
and hold harmless Robinson Silverman (or such other escrow agent to which
the parties may agree) and its members, employees, agents and representatives
from any and all claims, liabilities, costs or expenses in any way arising
from or relating to the performance of its duties hereunder and agrees that
Robinson Silverman (or such other escrow agent to which the parties may
agree) shall not have any liability hereunder other than as arising solely
from its willful misconduct in performing its duties hereunder. The
parties understand and agree that Robinson Silverman (or such other escrow
agent to which the parties may agree) may, at any time upon two Business
Days prior written notice to the parties, resign from its duties and
obligations hereunder without recourse to any party. The Company further
understands and agrees that Robinson Silverman acts as legal counsel to
the Investor in connection with the transactions contemplated hereby and may,
from time to time, represent the Investor in other matters,
including such matters as may directly or indirectly be adverse to the
interests of the Company. The Company consents to such representation and
waives any claim that such representation represents a conflict of interest
on the part of Robinson Silverman. The Investor understands that the
Company and Robinson Silverman are relying explicitly on the foregoing
provision in connection with the Investor entering into this Agreement.
Section II.4 Termination of Investment Obligation.
(1) The obligation of the Investor to purchase shares of Common Stock
shall, at the Investor's option, terminate permanently (including with
respect to a Closing Date that has not yet occurred) in the event that (i)
there shall occur any stop order or suspension of the effectiveness of the
Registration Statement (or the ability of the Investor to use the prospectus
thereunder to dispose of Registrable Securities) for an aggregate of thirty
days during the Commitment Period for any reason, (ii) the Company shall at
any time breach its obligations under the Transaction Documents or there
shall be an Event of Default under the Debentures issued in accordance with
the Convertible Debenture Purchase Agreement dated the date hereof among the
Company and the Purchasers signatory thereto, which breach shall not be
cured within 30 days after notice, (iii) the Registration Statement shall
not have become effective by the expiration of the 150th day following the
<PAGE>
date of this Agreement or (iv) if, after the Effective Date, the registration
statement ceases to be effective as to all Registrable Securities, or the
prospectus thereunder is not available for use by the Investor to sell
Registrable Securities, in either case, for an aggregate of 30 days.
(2) The obligation of the Company to sell Put Shares to the Investor
following delivery of a Put Notice shall terminate if the Investor fails to
honor such Put Notice within four Trading Days following the Closing Date
scheduled for such Put, and the Company notifies Investor of such
termination. Notwithstanding any such termination, the Company shall
maintain the Registration Statement in effect (and shall permit the Investor
to use the prospectus thereunder to sell Registrable Securities) for not
less than 45 Trading Days following the date of any such termination. Such
termination shall be the Company's sole remedy for the Investor's failure
to honor a Put.
Section II.5 Blackout Payments. If for any reason an Investor is not
permitted for more than an aggregate of ten Trading Days (which need not be
consecutive Trading Days) during the period commencing on the Effective
Date and ending on the 45th Trading Day following the expiration of the
Commitment Period to use the prospectus under the Registration Statement
to dispose of all Registrable Securities or if such Registration Statement
shall not be effective, then the Company shall pay to such Investor on the
following Business Day and on the Business Day following each additional
such ten Trading Day period in excess the initial ten Trading Day period,
as liquidated damages and not as a penalty, cash in an amount equal to 2%
of all Put Shares and Warrant Shares issued to and then held by such
Investor. The amounts that may become due and payable pursuant to this
Section are sometimes referred to herein as "Blackout Payments." Late
interest on any unpaid Blackout Payments shall accrue from and after the
date due at the rate of 15% per annum (or such lesser maximum amount as
shall be permitted under applicable law) until all Blackout Payments, plus
all accrued interest thereon, shall have been paid in full. At the option
of the Investors, any portion of Blackout Payments which are not paid in
full by the tenth Business Day following the date of incurrence of such
Blackout Payment shall be paid in shares of Common Stock through of the
Vesting Warrant.
Section II.6 Delisting; Suspension. If at any time prior to the 30th
Trading Day following the expiration of the Commitment Period the Common
Stock shall fail to be listed or quoted for trading on a Principal Market
or shall have been suspended from trading thereon (excluding suspensions of
not more than one Trading Day as a result of material announcements by the
Company) (a "Repurchase Event"), the Investor shall have the right,
exercisable within 30 days of a Repurchase Event, to put to the Company,
and the Company shall purchase, all or such portion of the Put Shares issued
to and then held by the Investor. The purchase price for such shares shall
equal the higher of (x) the Purchase Price paid for such shares and (y) the
product of (1) the number of such shares and (2) the higher of the closing
sales price of the Common Stock on the date of the demand by the Investor
of such put and the closing sales price of the Common Stock (as reported by
Bloomberg L.P. or any successor to its function of reporting share prices)
on the date of payment (if there shall no longer be a reported closing
sales price for the Common Stock, the amount under this clause (y) shall
equal the last reported closing sales price of the Common Stock on the
Principal Market). The purchase price under this Section shall be paid in
cash and shall be due in full by the 10th Business Day following the demand
<PAGE>
therefor. Late interest on any unpaid portion of the amounts that are due
from the Company under this Section shall accrue from and after the date due
at the rate of 15% per annum (or such lesser maximum amount as shall be
permitted under applicable law) until all such amounts, plus all accrued
interest thereon, shall have been paid in full. The Investor shall have
the right to rescind ab initio any demand for a put hereunder at any time
prior to the payment in full of the applicable purchase price by the Company.
Section II.7 Minimum Commitment Amount. If during the Commitment Period
the Company, for any reason (including a failure to cause a Registration
Statement to be declared effective under the Registration Rights Agreement),
fails to issue and deliver Put Shares equal to or exceeding the Minimum
Commitment Amount, then: (x) on the first Business Day following the
expiration of the Commitment Period, the Vesting Warrant shall vest in full
for such failure and (y) the Company shall, by the tenth Business Day
following the Commitment Period, pay to the Investors, in cash, an amount
equal to the product of (a) the Undrawn Amount and (b) the Market Price
less the Purchase Price, measured on the day of expiration of the Commitment
Period.
ARTICLE III
Representations and Warranties of Investor
The Investor represents and warrants to the Company as follows:
Section III.1 Intent. The Investor is entering into this Agreement for
its own account and the Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any
person or entity; provided, however, that by making the representations
herein, the Investor does not agree to hold Securities for any minimum or
other specific term and reserves the right to dispose of Securities at any
time in accordance with federal and state securities laws applicable to
such disposition and the terms and conditions, if any, relating thereto as
set forth in this Agreement.
Section III.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an
accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it has the
capacity to protect its own interests in connection with this transaction
and is capable of evaluating the merits and risks of an investment in the
Securities. The Investor acknowledges that an investment in the Securities
is speculative and involves a high degree of risk.
Section III.3 Authority. This Agreement and the Registration Rights
Agreement have been duly authorized and validly executed and delivered
by the Investor and are valid and binding agreements of the Investor
enforceable against it in accordance with their respective terms.
Section III.4 Organization and Standing. Investor is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
<PAGE>
Section III.5 Disclosure; Access to Information. The Investor acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate
its investment; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with respect to the investment and to verify the accuracy and completeness
of the information contained in the Disclosure Materials. Neither such
inquiries nor any other investigation conducted by or on behalf of the
Investor or its representatives or counsel shall modify, amend or affect
such Investor's right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
Section III.6 General Solicitation. Such Investor is not purchasing the
Securities as a result of or subsequent to any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
Section III.7 Underwriter Liability. Investor understands that it is
the position of the Commission that with respect to any disposition of Put
Shares through a Registration Statement the Investor is an underwriter
within the meaning of Section 2(11) of the Securities Act. The Investor
agrees to be identified as an underwriter of the Put Shares sold by it in
the Registration Statement.
The Company acknowledges and agrees that the Investor has not made and
does not make any representations or warranties with respect to the
transactions contemplated hereby other than as specifically set forth
in this Article III.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor as follows:
Section IV.1 Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
<PAGE>
business as currently conducted. The Company has no subsidiaries other
than as set forth in Schedule 4.1 (collectively the "Subsidiaries").
Each of the Subsidiaries is an entity, duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, would not reasonably be expected to,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Securities (as defined below) or any
of this Agreement, the Registration Rights Agreement or the Warrants
(collectively, the "Transaction Documents"), (y) have or result in a
material adverse effect on the results of operations, assets, prospects,
or condition (financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or (z) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "Material Adverse Effect").
Section IV.2 Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of the
Company. Each of the Transaction Documents has been duly executed by
the Company and, when delivered (or filed, as the case may be) in accordance
with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.
Section IV.3 Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 4.3.
Except as disclosed in the SEC Documents (as defined herein) the Company
owns all of the capital stock of each Subsidiary. No shares of Common
Stock are entitled to preemptive or similar rights, nor is any holder of
securities of the Company or any Subsidiary entitled to preemptive or
similar rights arising out of any agreement or understanding with the
Company or any Subsidiary by virtue of any of the Transaction Documents.
Except as a result of the purchase and sale of the Shares and except as
disclosed in the SEC Documents, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or
may become bound to issue additional shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common Stock. The issue
and sale of the Securities hereunder will not obligate the Company to issue
shares of Common Stock or other securities to any Person other than to the
Investors and the Broker and will not result in any right of any holder of
the Company's securities to adjust the exercise, conversion or reset price
under such securities.
Section IV.4 Issuance of the shares of Common Stock. When issued and
paid for in accordance with the terms hereof and the Warrants (as
applicable), the Put Shares and Warrant Shares will be duly and validly
issued, fully paid and nonassessable, free and clear of all liens,
<PAGE>
encumbrances and rights of first refusal of any kind (collectively,
"Liens"). The Company has on the date hereof and will, at all times
during the Commitment Period and while the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock,
reserved for issuance to the Investor and the holders of the Warrants,
to enable it to perform its exercise and other obligations under this
Agreement and the Warrants.
Section IV.5 Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance
by the Company of the Transaction Documents, other than (i) the filing of
the Registration Statement with the Commission), (ii) filings as may be
required under state securities laws, and (iii) in all other cases where
the failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration would not reasonably
be expected to have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "Required Approvals").
Section IV.6 No Default or Violation. Except as described in the SEC
Documents, neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred which has not been waived
which, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties
is bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, in each case of clauses (i),
(ii) or (iii) above, except as would not reasonably be expected to
individually or in the aggregate, have or result in a Material Adverse
Effect.
Section IV.7 SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Documents" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Documents
prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. All material agreements to which the
Company is a party or to which the property or assets of the Company are
subject have been filed as exhibits to the SEC Documents as required. The
financial statements of the Company included in the SEC Documents comply in
all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
<PAGE>
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Since March
31, 2000, except as specifically disclosed in the SEC Documents, (a) there
has been no event, occurrence or development that has resulted or that
could result in a Material Adverse Effect, (b) the Company has not incurred
any liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past practice
and (y) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or otherwise required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property
to its stockholders or officers or directors (other than in compliance
with existing compensation agreements or Company stock option plans) with
respect to its capital stock, or purchased, redeemed (or made any agreements
to purchase or redeem) any shares of its capital stock.
Section IV.8 Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
Section IV.9 Certain Fees. Other than fees payable to the Broker
pursuant to the terms hereof, no fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other similar Person with
respect to the transactions contemplated by this Agreement. The Investor
shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify
and hold harmless the Investor, its employees, officers, directors, agents,
and partners, and its respective Affiliates, from and against all claims,
losses, damages, costs (including the costs of preparation and attorney's
fees) and expenses suffered in respect of any such claimed or existing
fees, as such fees and expenses are incurred.
Section IV.10 Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell
the Securities by means of any form of general solicitation or advertising.
Section IV.11 Listing and Maintenance Requirements Compliance. The Company
has not, in the two years preceding the date hereof, received notice
(written or oral) from the OTC or any stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it
has been quoted) to the effect that the Company is not in compliance with
the listing or maintenance requirements of such exchange, market or
trading facility. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
<PAGE>
Section IV.12 Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and rights which are necessary or material for use in connection with
their respective business as described in the SEC Documents and which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used
by the Company or its Subsidiaries violates or infringes upon the rights of
any Person, to the best knowledge of the Company. All such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights.
Section IV.13 Registration Rights. Except as disclosed under Section
6(c) of the Registration Rights Agreement, the Company has not granted
or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered
with the Commission or any other governmental authority which have not been
satisfied.
Section IV.14 Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate Federal, state or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Documents,
except where the failure to possess such permits would not reasonably be
expected to, individually or in the aggregate, have or result in a Material
Adverse Effect ("Material Permits"), and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
Section IV.15 Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which
is material to the business of the Company and its Subsidiaries and good
and marketable title in all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company and its Subsidiaries.
Any real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
of which the Company and its Subsidiaries are in compliance and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
Section IV.16 Absence of Certain Proceedings. There is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or,
to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign)
(collectively, an "Action") which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. The Company does not have pending before
<PAGE>
the Commission any request for confidential treatment of information and the
Company has no knowledge of any expected such request that would be made
prior to the Effectiveness Date (as defined in the Registration Rights
Agreement). There has not been, and to the best of the Company's knowledge
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company.
Section IV.17 No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other charter documents
(each as amended through the date hereof), or (ii) subject to obtaining the
Required Approvals (as defined below), conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or
a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in the
aggregate, could not have or result in a Material Adverse Effect.
Section IV.18 Solvency. Based on the financial condition of the Company
as of each Closing Date, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the
business conducted by the Company, and project capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in respect
of its debt).
Section IV.19 Taxes. All Federal, state, local and foreign tax returns,
information returns, reports and estimated Tax returns have been timely
filed on behalf of the Company and all Taxes shown on any such return or
report have been paid on a timely basis. There is no action, suit,
proceeding, investigation, audit or claim now proposed or pending with
respect to any Tax of the Company and the Company is not aware of any
threatened claim for Tax deficiencies. There are no outstanding agreements
or waivers for the extension of time for assessment of any Tax payable by
<PAGE>
the Company, nor has any such waiver or agreement been requested by the
Internal Revenue Service or any other taxing authority. The Company has
not filed or been included in a consolidated, unitary or combined Tax return
with another person. The Company has collected or withheld all material
amounts required to be collected or withheld by it for any Taxes, and all
such material amounts have been paid to the appropriate governmental agencies
or set aside in appropriate accounts for future payment when due. The
Company is in material compliance with, and its records contain all material
information and documents necessary to comply with, all applicable
information reporting and Tax withholding requirements. As used herein,
the terms "Tax" and "Taxes" shall mean (i) any income, alternative or
add-on minimum tax, gross income, gross receipts, franchise, profits,
including estimated taxes relating to any of the foregoing, or other
similar tax or other like assessment or charge of similar kind whatsoever,
(ii) any sales, use, ad valorem, business license, withholding, payroll,
employment, excise, stamp, transfer, recording, occupation, premium,
property, value added, custom duty, severance, windfall profit tax,
license, or other tax, governmental fee or other similar assessment or
charge, and (iii) any interest and any penalty, addition to tax or
additional amount imposed by any federal, state, local or foreign
governmental authority responsible for the imposition of any such tax
(domestic or foreign).
Section IV.20 Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
Section IV.21 Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Investor or its agents
or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms
that the Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to the Investor regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct
in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
Other Agreements of the Parties
Section V.1 Listing of Common Stock. The Company shall maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period)
shall list the Put Shares and all potentially issuable Warrant Shares.
The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such
application the issued and issuable Put Shares and Warrant Shares. The
Company will take all action to continue the listing and trading of its
Common Stock on the Principal Market and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws
or rules of the Principal Market and shall provide Investor with copies of
any correspondence to or from such Principal Market which questions or
<PAGE>
threatens delisting of the Common Stock, within one Trading Day of the
Company's receipt thereof.
Section V.2 Exchange Act Registration; Rule 144 Compliance. The Company
will cause its Common Stock to continue to be registered under Section 12(g)
or 12(b) of the Exchange Act, will use its best efforts to timely comply in
all respects with its reporting and filing obligations under the Exchange
Act, and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations thereunder. During the Commitment Period, the Company will
notify the Investor immediately following each filing by the Company under
the Exchange Act. As long as the Investor owns Securities, if the Company
is not required to file reports pursuant to such sections, it will prepare
and furnish to the Investor and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act such information as is
required for the Investor to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all
to the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including causing its attorneys to render and deliver any
legal opinion required in order to permit such Person to sell its Securities
under Rule 144 upon notice of an intention to sell or other form of notice
having a similar effect. Upon the request of any such Person, the Company
shall deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with such requirements.
Section V.3 Legends. The certificates evidencing the Common Stock to be
sold or otherwise issued to the Investor hereunder (including the Warrant
Shares under the Warrants) at any time while a Registration Statement is
then effective shall be issued free of restrictive legends of any kind and
no instructions or "stop transfer orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto. Prior to the first Closing,
the Company will issue to the transfer agent for its Common Stock (and to
any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions to deliver the Put Shares and Warrant Shares without restrictive
legends as required by this Section and shall cause its counsel to deliver
a to such transfer agent any legal opinion required in order for the
transfer agent to deliver shares in such manner. Unless such instructions
cover Securities issuable at future Closings, the Company must deliver new
such instructions prior to each Closing.
Section V.4 Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Put. The Company will immediately notify the Investor
upon the occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional
information from the Commission or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement
<PAGE>
the response to which would require any amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the
Commission or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) receipt 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; (iv) the happening of any event that makes any statement
made in the Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the
case of the Registration Statement, 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 not misleading, and that
in the case of the related prospectus, 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 the
light of the circumstances under which they were made, not misleading;
and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the
Company will promptly make available to the Investor any such supplement or
amendment to the related prospectus.
Section V.5 Expectations Regarding Put Notices. Within ten days after
the commencement of each calendar quarter, the Company must notify the
Investor, in writing, as to its reasonable expectations as to the dollar
amount it intends to raise during such calendar quarter, if any, through
the issuance of Put Notices. Such notification shall constitute only the
Company's good faith estimate and shall in no way obligate the Company to
raise such amount, or any amount, or otherwise limit its ability to deliver
Put Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor, in writing, at any time
as to its reasonable expectations with respect to the current calendar
quarter.
Section V.6 Consolidation; Merger. During the Commitment Period and
for period of 30 days following the last Closing, the Company shall not
effect any merger or consolidation of the Company with or into, or a
transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity assumes
by written instrument or by operation of law the obligation to deliver to
the Investor such Securities as the Investor is entitled to receive pursuant
to this Agreement.
Section V.7 Purchase Price Adjustment. If at any time after the date
hereof and through the 360th day following the date hereof the Company or
any Subsidiary (with respect to Common Stock Equivalents) shall offer,
sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any
of shares of Common Stock or Common Stock Equivalents at a price that is,
at the issuance thereof, or at any later time due to adjustment, reset,
additional issuances or otherwise, less than the Purchase Price, then,
at the option of the Investor for such Closings as the Investor shall
indicate, the Purchase Price shall be adjusted to mirror the conversion,
exchange or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued. If
the holder of the Common Stock or Common Stock Equivalent so issued shall at
any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise,
<PAGE>
or due to warrants, options or rights issued in connection with such
issuance, be entitled to receive shares of Common Stock at a price less
than the Purchase Price, such issuance shall be deemed to have occurred
for less than the Purchase Price. The Company shall notify the Investor
in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalent subject to this section, indicating
therein the applicable issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms.
Section V.8 Integration. The Company shall not, and shall use its best
efforts to ensure that, no affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities hereunder to the Investor.
Section V.9 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date, issue a press release reasonably acceptable
to the Investors disclosing the transactions contemplated hereby, (ii) file
with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the
Securities Act. The Company shall, no less than two Business Days prior
to the filing of any disclosure required by clauses (ii) and (iii) above,
provide a copy thereof to the Investors for their review. The Company
and the Investors shall consult with each other in issuing any other press
releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise
make any such public statement, filings or other communications without
the prior written consent of the other, except that if such disclosure is
required by law or stock market regulation, in which such case the
disclosing party shall promptly provide the other party with prior notice
of such public statement, filing or other communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the names of the
Investors, or include the names of the Investors in any filing with the
Commission, or any regulatory agency, trading facility or stock market
without the prior written consent of the Investors, except to the extent
such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or stock market regulations, in which case
the Company shall provide the Investors with prior notice of such disclosure.
Section V.10 Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not
for the satisfaction of any portion of the Company's debt (other than
payment of trade payables in the ordinary course of the Company's business
and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.
Section V.11 Reimbursement. If the Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of the consummation
of the transactions contemplated by Transaction Documents, the Company will
reimburse the Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation and travel in
<PAGE>
connection therewith) incurred in connection therewith, as such expenses
are incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of the Investor 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 Investor 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 Investor
and any such affiliate and any such Person. The Company also agrees that
neither the Investor nor any such affiliates, partners, directors, agents,
employees or controlling persons 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 Transaction
Documents except to the extent that any losses, claims, damages, liabilities
or expenses incurred by the Company result from the gross negligence or
willful misconduct of the applicable Investor or entity in connection with
the transactions contemplated by this Agreement.
ARTICLE VI
Conditions Precedent to the Right of the Company to Deliver a Put Notice and
the Obligation of the Investor to Close
Section VI.1 Conditions Precedent to the Right of the Company to Deliver
a Put Notice and the Obligation of the Investor to Close. In addition to
the specific conditions contained elsewhere in this Agreement, the right of
the Company to deliver a Put Notice and the obligation of Investor hereunder
to perform its obligations at any Closing hereunder is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii)
the applicable Closing Date (each a "Condition Satisfaction Date"), of each
of the following conditions, or the waiver by the Investor of such
conditions:
(1) Representations and Warranties. The representations and warranties
of the Company in the Transaction Documents shall be true and correct as of
the date when made and as of the applicable Condition Satisfaction Date as
though first made at that time (except for representations and warranties
that speak of a specific date, which need only be true and correct as of
such date).
(2) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants and
agreements required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to each Condition Satisfaction
Date.
(3) Compliance Certificate. The Company shall have delivered to or as
directed by the Investor an Officer's Certificate signed by its Chief
Executive Officer, dated as of the applicable Closing Date, certifying
that the Company has satisfied the conditions set forth in paragraphs (a),
(b), (h)(ii) - (iv), and (l) of this Section.
<PAGE>
(4) Blue Sky. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the
Securities to the Investor and by the Investor of the Registrable
Securities as contemplated by in the Registration Rights Agreement or
shall have the availability of exemptions therefrom.
(5) Delivery of Shares. The Company shall have transmitted the Put
Shares pursuant to Section 2.3 and the other conditions to such Closing
as set forth in such Section shall have been satisfied.
(6) Opinion of Counsel. The Investor shall have received (or receipt
shall have been confirmed by its agent on its behalf) an opinion of counsel
to the Company, in the form of Exhibit D hereto.
(7) Transfer Agent. The Investor shall have received satisfactory
evidence of the Company's delivery to its transfer agent for the Common
Stock of instructions and legal opinion meeting the requirements of this
Agreement and acceptable to such transfer agent.
(8) Registration Statement.
(i) The Registration Statement shall have been declared effective by
the Commission and shall at all times since the Put Date, and the prospectus
thereunder shall be available to the Investor to resell all of the
Registrable Securities thereunder (including the Put Shares, Warrant
Shares issuable at such Closing).
(ii) Neither the Company nor the Investor shall have received notice
that the Commission has issued or intends to issue a stop order with respect
to the Registration Statement or that the Commission otherwise has suspended
or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless
the Commission's concerns have been addressed and the Investor is reasonably
satisfied that the Commission no longer is considering or intends to take
such action).
(iii) The Registration Statement (including the information or documents
incorporated by reference therein) and any amendments or supplements thereto
shall not contain any untrue statement of material fact or omit to state any
material fact required to be state d therein or necessary to make the
statements therein not misleading.
(iv) The Company shall have no knowledge of any event which is reasonably
likely to occur within 30 Trading Days of the Put Date that would reasonably
be expected to cause the Registration Statement to be suspended or otherwise
ineffective or inaccurate.
(9) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction
or by the Principal Market that prohibits, materially impairs or renders
<PAGE>
impractical the transactions contemplated by this Agreement, and no
proceeding or rule making process shall have been commenced that may
reasonably be expected to have such result if enacted.
(10) Adverse Changes. Since the earlier to occur of (i) the date of
filing of the Company's most recent SEC Document and (ii) the last Closing
hereunder, no occurrence or event that could have or result in a Material
Adverse Effect shall have occurred.
(11) No Suspension of Trading In or Delisting of Common Stock. The
Common Stock shall be authorized for trading or quotation on the Principal
Market and trading in the Common Stock shall not have been suspended by
the Commission or the Principal Market at any time from the Put Date
through the Closing Date. The Company shall not have received any notice
threatening to delist the Common Stock from the Principal Market.
(12) Principal Market Requirements; Compliance. The Company shall have
received all authorizations from and made all filings required in order to
issue to the Investor the Securities at such Closing and shall have caused
the Put Shares and the Warrant Shares issuable upon the exercise of the
Warrants to be issued at such Closing to be listed for trading on the
Principal Market. The issuance of shares of Common Stock with respect
to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market.
(13) Timing. At least fifteen Trading Days shall have elapsed since the
immediately preceding Closing Date.
(14) Closing Threshold. For the ten Trading Days immediately preceding
the Put Date the weighted average daily trading volume of the Common Stock
on the Principal Exchange (volume multiplied by VWAP) shall not be less
than $50,000.
(15) Other. The Investor shall have received and been reasonably
satisfied with such other certificates and documents as shall have been
reasonably requested by the Investor in order for the Investor to confirm
the Company's satisfaction of the conditions set forth herein.
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section VII.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, and its advisors and representatives
of the Investor, any underwriter participating in any disposition of the
Registrable Securities on behalf of the Investor all SEC Documents and other
filings with the Commission, and all other publicly available corporate
documents and properties of the Company as may be reasonably necessary
for the purpose of such review. In connection therewith, the Company
shall cause its officers, directors and employees to supply all such
publicly available information reasonably requested by the Investor or
any such Person (including, without limitation, in response to all questions
and other inquiries reasonably made or submitted by any of them), prior
to and from time to time after the filing and effectiveness of the
<PAGE>
Registration Statement. The review contemplated hereby is solely to
enable the Investor and such Persons to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section VII.2 Non-Disclosure of Non-Public Information.
(1) The Company shall not disclose non-public information to the
Investor or its advisors or representatives unless prior to disclosure
of such information the Company identifies such information as being non-
public information and the Investor enters into a non-disclosure agreement
in form mutually acceptable to the Company and the Investor.
(2) The Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts. Notwithstanding the
foregoing or anything herein to the contrary, the Company will immediately
notify the Investor of any event or the existence of any circumstance
(without any obligation to disclose the specific event or circumstance)
of which it becomes aware, (whether or not requested of the Company
specifically or generally during the course of due diligence by such persons
or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in
order to make the statements, therein in light of the circumstances in
which they were made, not misleading.
ARTICLE VIII
Miscellaneous
Section VIII.1 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents
shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles
of conflicts of law thereof. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of
the any of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of a Transaction Document, then the
<PAGE>
prevailing party in such action or proceeding shall be reimbursed by the
other party for its' attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
Section VIII.2 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior
to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day
after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Agreement
later than 6:30 p.m. (New York City time) on any date and earlier than 11:59
p.m. (New York City time) on such date, (iii) the Business Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications
shall be as follows:
If to the Company:
Salient Cybertech, Inc.
1999 Lincoln Drive, Suite 202
Sarasota, Florida 34236
Facsimile No.: (941) 953 4363
Attn: Chief Financial Officer
With copies to: David J. Feingold, Esq.
3300 PGA Blvd.
Palm Beach Gardens,
Florida 33410
Facsimile No.: (561) 630 8936
If to the Investor: To the address set forth under the Investor's
name on the signature page hereto.
A party may from time to time change its address or facsimile number for
notices under this Section by giving at least ten days' prior written
notice of such changed address or facsimile number to the other party
hereto.
Section VIII.3 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg, L.P. or any successor to its function of
reporting share prices. The written mutual consent of the Investor and the
Company shall be required to employ any other reporting entity.
<PAGE>
Section VIII.4 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any Securities and (ii) in the
case of any such loss, theft or destruction of such certificate, upon
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company (which shall not exceed that required by
the Company's transfer agent in the ordinary course) or (iii) in the case
of any such mutilation, on surrender and cancellation of such certificate,
the Company at its expense will execute and deliver, in lieu thereof, a new
certificate.
Section VIII.5 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect
as if such facsimile signature page were an original thereof.
Section VIII.6 Entire Agreement. The Transaction Documents, together
with the Exhibits and Schedules thereto contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules.
Section VIII.7 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Investor or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any
right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section VIII.8 Survival. The representations, warranties and agreements
contained herein shall survive each Closing and the delivery and exercise
of all Securities issuable hereunder.
Section VIII.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Investor.
Section VIII.10 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages,
each of the Investor will be entitled to specific performance of the
obligations of the Company under the Transaction Documents. The Company
and each of the Investor agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to
<PAGE>
waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
Section VIII.11 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
Section VIII.12 Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
Section VIII.13 Fees and Expenses. Other than the amount contemplated in
Section 2.3(c) and Section 8.1, and except as otherwise set forth in the
Registration Rights Agreement, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction
Documents. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the securities issuable
hereunder.
Section VIII.14 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.
[REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
SALIENT CYBERTECH, INC.
By: __________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR INVESTOR FOLLOWS]
<PAGE>
HAINES AVENUE LLC
By:_____________________________________
Name:
Title:
Address for Notice: Haines Avenue LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212)
541-1432
Attn: Eric L. Cohen, Esq.
<PAGE>
EXHIBIT A
PUT NOTICE
Salient Cybertech, Inc., a Delaware corporation (the "Company"), hereby
elects to exercise its right pursuant to the Securities Purchase Agreement
dated as of November 14, 2000 (the "Agreement") to require __________ to
purchase Put Shares pursuant to terms of the Agreement.
The Company hereby certifies that:
1. The Investment Amount is: $_______________ ("IA")
2. The Valuation Period runs from _________ to __________.
3. 90% of the average of the three lowest VWAPs (subject to adjustment)
during the Valuation Period is: $________ ("PP")*
4. The number of Put Shares (IA/PP) issuable hereunder is:_______________
The undersigned has executed this Put Notice as of this _____ day of ______,
_______.
SALIENT CYBERTECH, INC.
By: __________________________________
Name:
Title:
* Subject to adjustments in accordance with Section 5.7 of the Agreement.
<PAGE>
Schedule 4.3
1. Authorized shares of Common Stock - [ ]
2. Issued and outstanding shares of Common Stock - [ ]
<PAGE>
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER 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 THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS.
SALIENT CYBERTECH, INC.
WARRANT
Warrant No.1 Dated: November 14, 2000
Salient Cybertech, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Haines Avenue, LLC or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company the total number of shares of common stock, $.001
par value per share (the "Common Stock"), of the Company vested pursuant to
the terms hereof (each such share, a "Warrant Share" and all such shares the
"Warrant Shares"), at the exercise prices set forth in Annex A hereto (as
adjusted from time to time as provided in Section 8, the "Exercise Price"),
at any time and from time to time from and after the date hereof and through
and including November 14, 2005 (the "Expiration Date"), and subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in
Section 12. Upon any such registration or transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance of such transferee of
all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of the Company at its address for notice set forth in Section
12 for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 6:30 P.M., New York City time, at any time and from time
to time on or after the date hereof to and including the Expiration Date.
At 6:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem
this Warrant.
(b) Upon delivery of a duly completed and signed Form of Election to
Purchase attached hereto (and the Warrant Shares Exercise Log attached
hereto) duly completed and signed, to the Company at its address for notice
set forth in Section 12 and upon payment of the Exercise Price multiplied
by the number of Warrant Shares that the Holder intends to purchase hereunder,
in the manner provided hereunder, all as specified by the Holder in the Form
of Election to Purchase, the Company shall promptly (but in no event later
than 3 business days after the Date of Exercise (as defined herein)) issue
or cause to be issued and cause to be delivered to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends except (i) either in the event that a registration
statement covering the resale of the Warrant Shares and naming the Holder as
a selling stockholder thereunder is not then effective or the Warrant Shares
are not freely transferable without volume restriction pursuant to Rule 144(k)
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of
the Date of Exercise of this Warrant. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
<PAGE>
clearing corporation performing similar functions. To effect an exercise
hereunder, the Holder shall not be required to physically surrender this
Warrant to the Company unless all the Warrant Shares have been exercised.
Exercises hereunder shall have the effect of lowering the number of Warrant
Shares in an amount equal to the applicable exercise, which shall be evidenced
by entries set forth in the Exercise Schedule. The Holder and the Company
shall maintain records showing the number of Warrant Shares exercised and the
date of such exercises . In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence
of manifest error. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of this
paragraph, following exercise of a portion of this Warrant, the number of
shares issuable upon exercise of this Warrant may be less than the amount
stated on the face hereof.
A "Date of Exercise" means the date on which the Company shall have received
(i) the Form of Election to Purchase completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares so indicated
by the Holder to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares then vested. The
Warrant Shares shall vest as follows: 750,000 shares of Common Stock shall
vest under such Closing Warrant on the first Closing Date and 150,000 shares
of Common Stock shall vest for each $1,000,000 of Purchase Price paid at each
additional Closing. All vested Warrant Shares shall be cumulatively available
for purchase hereunder at an Exercise Price equal to 125% of the closing bid
price of the Common Stock on the trading day immediately prior to the
vesting date for such Warrant Shares. Each of the terms "Closing," "Closing
Date" and Investment Amount" shall have the meanings set forth in the
Purchase Agreement. The number of Warrant Shares vested hereunder shall be
measured cumulatively for all Closings. Annex A shall set forth the number
of Warrant Shares then vested hereunder for each Closing and the applicable
Exercise Price.
4. Piggyback Registration Rights. This Warrant is subject to the
piggyback registration rights granted under the Registration Rights Agreement
and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
<PAGE>
satisfactory to the Company of such loss, theft or destruction and indemnity,
if requested, satisfactory to it. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number
of Warrant Shares which are then issuable and deliverable upon the exercise
of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 8). The Company
covenants that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time
to time as set forth in this Section 8.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other class of capital stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger number
of shares, or (iii) combine outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant
to this Section 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 or combination, and shall apply to successive
subdivisions and combinations.
(b) 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, then the Holder shall have the right thereafter
to exercise this Warrant only into the shares of stock and other securities
and property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property
equal to the amount of Warrant Shares such Holder would have been entitled to
had such Holder exercised this Warrant immediately prior to such reclassifi-
cation or share exchange. 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 or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.
<PAGE>
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of this Warrant)
evidences of its indebtedness or assets or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Sections 8(a),
(b) and (d)), then in each such case the Exercise Price shall be determined
by multiplying the Exercise Price in effect immediately prior to the record
date fixed for determination of stockholders entitled to receive such distri-
bution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price 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 Common
Stock as determined by the Company's independent certified public accountants
that regularly examines the financial statements of the Company (an
"Appraiser").
(d) If the Company or any subsidiary thereof, as applicable with respect
to Common Stock Equivalents (as defined below), at any time while this
Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants (including those issued under the Purchase Agreement), 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 Exercise Price
(if the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights issued in connection with such issuance,
be entitled to receive shares of Common Stock at a price less than the
Exercise Price, such issuance shall be deemed to have occurred for less than
the Exercise Price), then, at the option of the Holder for such exercises as
it shall indicate, the Exercise Price shall be adjusted to mirror the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) at issue. Such
adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or
Common Stock Equivalent subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section
shall be made as a result of (i) issuances of Common Stock or Common Stock
Equivalents to the extent disclosed in Schedule 4.3 to the Purchase
Agreement, (ii) issuances and exercises of options to purchase shares of
Common Stock issued for compensatory purposes pursuant to any of the
Company's stock option or stock purchase plans, or (iii) exercises under the
Warrants (as defined in the Purchase Agreement).
(e) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise
this Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following
such merger, consolidation or sale, and the Holder shall be entitled upon
such event or series of related events to receive such amount of securities,
cash and property as the Common Stock for which this Warrant could have been
exercised immediately prior to such merger, consolidation or sales would have
been entitled or (B) in the case of a merger or consolidation, (x) require
<PAGE>
the surviving entity to issue common stock purchase warrants equal to the
number Warrant Shares to which this Warrant then permits, which newly warrant
shall be identical to this Warrant, and (y) simultaneously with the issuance
of such warrant, the Holder of such warrant shall have the right to
exercise such warrant only into shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such merger or consolidation or (C) require the surviving
entity from such merger, acquisition or business combination to pay to the
Holder, in cash, the Black Scholes value of this Warrant. In the case of
clause (B), the exercise price for such new warrant shall be based upon
the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Exercise Price of
this Warrant immediately prior to the effectiveness or closing date
for such transaction. The terms of any such merger, sale or consolidation
shall include such terms so as continue to give the Holder the right to
receive the securities, cash and property set forth in this Section upon
any conversion or redemption following such event. This provision shall
similarly apply to successive such events.
(f) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock or in securities convertible
or exchangeable into shares of Common Stock, or (B) to subscribe for or
purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered
an issue or sale of Common Stock.
(g) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the
Appraiser and such appraiser. The Holder shall promptly mail or cause to be
mailed to the Company, a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such adjustment shall become effective immediately after the
record date mentioned above.
(i) If:
<PAGE>
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) 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
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, 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, or any compulsory
share exchange whereby the Common Stock is converted into other securities,
cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the Company
shall cause to be mailed to each Holder at their last addresses as they
shall appear upon the Warrant Register, at least 20 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 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 Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up; 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.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price
in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds;
or
<PAGE>
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.
A = the average of the closing sale prices of the Common Stock (as reported
by Bloomberg L.P. or any successor to its function of reporting share prices
at 4:15 p.m. (New York time for the closing bid price for regular session
trading on such day)) for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to
have been commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section
will limit any particular exercise hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder
the Company shall notify the Holder of this fact and shall honor the exercise
<PAGE>
for the maximum portion of this Warrant permitted to be exercised on such
Date of Exercise in accordance with the periods described herein and, at the
option of the Holder, either keep the portion of the Warrant tendered for
exercise in excess of the permitted amount hereunder for future exercises or
return such excess portion of the Warrant to 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 61 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act
and the rules promulgated thereunder) in excess of 9.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section
will limit any particular exercise hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor
the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the
Warrant tendered for exercise in excess of the permitted amount hereunder
for future exercises or return such excess portion of the Warrant to 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 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
11. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise
of this Warrant shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section,
be issuable on the exercise of this Warrant, the Company shall pay an amount
in cash equal to the Exercise Price multiplied by such fraction.
12. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day 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 6:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the
<PAGE>
business day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. The addresses for such communications
shall be: (i) if to the Company, to 1999 Lincoln Drive, Suite 202,
Sarasota, Florida 34236 or facsimile number: (941) 953 4363, attention Chief
Financial Officer, or (ii) if to the Holder, to the Holder at the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.
13. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party
or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company
and the Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. The Company
and the Holder hereby irrevocably submit to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives
service of process and consents to process being served in any such
suit, action or proceeding by receiving a copy thereof sent to the Company
at the address in effect for notices to it under this instrument and agrees
that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in
<PAGE>
any way any right to serve process in any manner permitted by law. Each
party irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to enforce any provisions
of this Warrant, then the prevailing party in such action or proceeding s
hall be reimbursed by the other party for its' attorneys fees and other
costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
SALIENT CYBERTECH, INC.
By:___________________________
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the Warrant issued on November 14, 2000 by Salient
Cybertech, Inc.)
To Salient Cybertech, Inc.:
The undersigned hereby irrevocably elects to purchase _____________ shares
of common stock, $.001 par value per share, of Salient Cybertech, Inc. (the
"Common Stock") and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of
shares of Common Stock to which this Form of Election to Purchase relates,
together with any applicable taxes payable by the undersigned pursuant to
the Warrant.
Date of vesting of warrant: _______________.
Exercise Price: ________________.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_____________________________________________________________________
(Please print name and address)
Dated: ________ ,______ Name of Holder:
(Print)___________________
(By:) ___________________
(Name:)
(Title:)
(Signature must conform in
all respects to name of
holder as specified on
the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Salient
Cybertech, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Salient
Cybertech, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
ANNEX A
Exercise Date Number of Warrant Number of Warrant Number of Warrant
Shares Not Shares Exercised Shares Remaining
Previously on Date of to be Exercised
Exercised. Exercise
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER 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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE
WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
SALIENT CYBERTECH, INC.
VESTING WARRANT
Warrant No.1 Dated: November 14, 2000
Salient Cybertech, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Haines Avenue, LLC or its registered
assigns ("Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time and from time to time from and after
the business day following the expiration of the Commitment Period (as
defined in the Securities Purchase Agreement of even date herewith between
the Company and the original Holder (the "Purchase Agreement")), a number
of shares (each such share, as adjusted from time to time as provided in
Section 8, a "Warrant Share" and all such shares, the "Warrant Shares") of
common stock, $.001 par value per share, of the Company (the "Common Stock")
equal to the quotient obtained by dividing (x) the Undrawn Amount (as defined
in the Purchase Agreement) by (y) the lowest closing bid prices of the Common
Stock (as reported by Bloomberg L.P. or the successor to its function of
reporting stock prices) during the 90 days preceding the expiration of the
Commitment Period (subject to equitable adjustment upon the occurrence of
the events set forth in Section 8(a)), at an exercise price equal to $.001
(the "Exercise Price"), but only if, by the expiration of the Commitment
Period, the Company shall not have issued and sold Put Shares (as defined in
the Purchase Agreement) for an aggregate Investment Amount (as defined in
the Purchase Agreement) equal to $2,500,000. This Warrant is subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in
Section 12. Upon any such registration or transfer, a new warrant to
purchase Common Stock, in substantially the form of this Warrant (any such
new warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the fifth
anniversary of the expiration of the Commitment Period, (the "Expiration
Date"). At 6:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become
void and of no value. Prior to the Expiration Date, the Company may not
call or otherwise redeem this Warrant.
(b) Upon delivery of a duly completed and signed Form of Election to
Purchase attached hereto (and the grid attached hereto as Annex A) duly
completed and signed, to the Company at its address for notice set forth
in Section 12 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder, in
the manner provided hereunder, all as specified by the Holder in the Form
of Election to Purchase, the Company shall promptly (but in no event later
than 3 business days after the Date of Exercise (as defined herein)) issue
or cause to be issued and cause to be delivered to or upon the written order
of the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends except (i) either in the event that a registration
statement covering the resale of the Warrant Shares and naming the Holder
as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the
Holder to receive Warrant Shares shall be deemed to have become holder of
record of such Warrant Shares as of the Date of Exercise of this Warrant.
The Company shall, upon request of the Holder, if available, use its best
efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions. To effect an exercise hereunder, the Holder
shall not be required to physically surrender this Warrant to the Company
unless all the Warrant Shares have been exercised. Exercises hereunder
shall have the effect of lowering the number of Warrant Shares in an amount
equal to the applicable exercise, which shall be evidenced by entries set
forth in the Exercise Schedule. The Holder and the Company shall maintain
records showing the number of Warrant Shares exercised and the date of such
exercises . In the event of any dispute or discrepancy, the records of the
Holder shall be controlling and determinative in the absence of manifest
error. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following exercise of a portion of this Warrant, the number of shares
issuable upon exercise of this Warrant may be less than the amount stated
on the face hereof.
A "Date of Exercise" means the date on which the Company shall have received
(i) the Form of Election to Purchase (and the Warrant Shares Exercise Log
attached hereto) completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares so indicated by the Holder to be
purchased.
4. Piggyback Registration Rights. This Warrant is subject to the
piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until
all of the Holder's Warrant Shares have been sold in accordance with an
effective registration statement or upon the Expiration Date. The Company
will pay all registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring
this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction
and indemnity, if requested, satisfactory to it. Applicants for a New
Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling
it to issue Warrant Shares upon exercise of this Warrant as herein provided,
the number of Warrant Shares which are then issuable and deliverable upon
the exercise of this entire Warrant, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holder
(taking into account the adjustments and restrictions of Section 8). The
<PAGE>
Company covenants that all Warrant Shares that shall be so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 8.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other class of capital stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and
of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section 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 or combination, and
shall apply to successive subdivisions and combinations.
(b) 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, then the Holder shall have the
right thereafter to exercise this Warrant only into the shares of stock and
other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder
would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification or share exchange. 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
or property set forth in this Section 8(b) upon any exercise following any
such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall
be determined by multiplying the Exercise 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 Exercise Price determined as of the record date mentioned above, and
of which the numerator shall be such Exercise Price 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 Common Stock as determined by the Company's independent certified
public accountants that regularly examines the financial statements of the
Company (an "Appraiser").
<PAGE>
(d) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of
related transactions, the Holder shall have the right thereafter to (A)
exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be
entitled upon such event or series of related events to receive such amount
of securities, cash and property as the Common Stock for which this Warrant
could have been exercised immediately prior to such merger, consolidation or
sales would have been entitled or (B) in the case of a merger or
consolidation, (x) require the surviving entity to issue common stock
purchase warrants equal to the number Warrant Shares to which this Warrant
then permits, which newly warrant shall be identical to this Warrant, and (y)
simultaneously with the issuance of such warrant, the Holder of
such warrant shall have the right to exercise such warrant only into shares
of stock and other securities, cash and property receivable upon or deemed
to be held by holders of Common Stock following such merger or
consolidation or (C) require the surviving entity from such merger,
acquisition or business combination to pay to the Holder, in cash, the
Black Scholes value of this Warrant. In the case of clause (B), the
exercise price for such new warrant shall be based upon the amount of
securities, cash and property that each share of Common Stock would receive
in such transaction and the Exercise Price of this Warrant immediately prior
to the effectiveness or closing date for such transaction. The terms of any
such merger, sale or consolidation shall include such terms so as continue
to give the Holder the right to receive the securities, cash and property
set forth in this Section upon any conversion or redemption following such
event. This provision shall similarly apply to successive such events.
(e) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock or in securities convertible
or exchangeable into shares of Common Stock, or (B) to subscribe for or
purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered
an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
<PAGE>
(g) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the
Appraiser and such appraiser. The Holder shall promptly mail or cause to
be mailed to the Company, a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Such adjustment shall become effective immediately after
the record date mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) 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
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common
Stock, 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, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 20
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 Common Stock of record to be entitled to such dividend,
<PAGE>
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 Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding
up; 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.
9. Payment of Exercise Price. The Holder shall pay the Exercise Price
in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available funds;
or
(b) Cashless Exercise. The Holder may surrender this Warrant to the
Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined
as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the number of Warrant Shares with respect to which this Warrant is
being exercised.
A = the average of the closing sale prices of the Common Stock (as reported
by Bloomberg L.P. or any successor to its function of reporting share prices
at 4:15 p.m. (New York time for the closing bid price for regular session
trading on such day)) for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder,
and the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
<PAGE>
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by
the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section
will limit any particular exercise hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies,
the determination of which portion of this Warrant is exercisable shall be
the responsibility and obligation of the Holder. If the Holder has
delivered a Form of Election to Purchase for a number of Warrant Shares
that, without regard to any other shares that the Holder or its affiliates
may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this
fact and shall honor the exercise for the maximum portion of this Warrant
permitted to be exercised on such Date of Exercise in accordance with the
periods described herein and, at the option of the Holder, either keep the
portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to 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 61 days prior notice to the Company. Other Holders shall be unaffected
by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act
and the rules promulgated thereunder) in excess of 9.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder,
unless the exercise at issue would result in the issuance of shares of
Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned
by the Holder or an affiliate thereof, the Holder shall have the authority
and obligation to determine whether the restriction contained in this
Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies,
the determination of which portion of this Warrant is exercisable shall be
the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor
the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the
Warrant tendered for exercise in excess of the permitted amount hereunder
for future exercises or return such excess portion of the Warrant to 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 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
11. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise
<PAGE>
of this Warrant shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section,
be issuable on the exercise of this Warrant, the Company shall pay an amount
in cash equal to the Exercise Price multiplied by such fraction.
12. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day 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 6:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the
business day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. The addresses for such communications
shall be: (i) if to the Company, to 1999 Lincoln Drive, Suite 202, Sarasota,
Florida 34236 or facsimile number: (941) 953 4363, Attention: Chief
Financial Officer, or (ii) if to the Holder, to the Holder at the address
or facsimile number appearing on the Warrant Register or such other address
or facsimile number as the Holder may provide to the Company in accordance
with this Section.
13. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent
transfers substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice
of its succession as warrant agent to be mailed (by first class mail,
postage prepaid) to the Holder at the Holder's last address as shown on the
Warrant Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and
the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company
and the Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
<PAGE>
interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. The Company
and the Holder hereby irrevocably submit to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives
service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to the
Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by
law. Each party irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce
any provisions of this Warrant, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its' attorneys fees
and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
SALIENT CYBERTECH, INC.
By:_____________________________________
Name:
Title:
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the Warrant, issued on November 14, 2000 by Salient
Cybertech, Inc.)
To Salient Cybertech, Inc.:
The undersigned hereby irrevocably elects to purchase _____________ shares
of common stock, $.001 par value per share, of Salient Cybertech, Inc. (the
"Common Stock") and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of
shares of Common Stock to which this Form of Election to Purchase relates,
together with any applicable taxes payable by the undersigned pursuant to
the Warrant.
Date of vesting of warrant: _______________.
Exercise Price: ________________.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________________________________________
(Please print name and address)
Dated:________ ,______ Name of Holder:
(Print)____________________
(By:)______________________
(Name:)
(Title:)
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Salient
Cybertech, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Salient
Cybertech, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
ANNEX A
Vesting/Exercise Date Number of Applicable Number of Number of
Warrant Exercise Price Warrant Warrant
Shares Vested Shares Not Shares
on Such Vesting Previously Remaining
Date/Exercised Exercised to be
on such Exercise Exercised
Date. at Such
Exercise
Price.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS
DEBENTURE 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, AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
No. 1 $1,000,000
SALIENT CYBERTECH, INC.
8% CONVERTIBLE DEBENTURE
DUE NOVEMBER 14, 2003
THIS DEBENTURE is one of a series of duly authorized and
issued debentures of Salient Cybertech, Inc., a Delaware
corporation, having a principal place of business at 1999
Lincoln Drive, Suite 202, Sarasota, FL 34236 (the "Company"),
designated as its 8% Convertible Debentures, due November 14,
2003, in the aggregate principal amount of Two Million Dollars
($2,000,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Haines
Avenue, LLC or its registered assigns (the "Holder"), the
principal sum of One Million Dollars ($1,000,000), on November
14, 2003 or such earlier date as the Debentures are required
or permitted to be repaid as provided hereunder (the "Maturity
Date") and to pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this
Debenture at the rate of 8% per annum, payable on a quarterly
basis on March 31, June 30, October 30 and December 31 of each
year while such Debentures are outstanding commencing on
October 30, 2000 and on each Conversion Date (as defined
herein) for such principal amount, commencing on the earlier
to occur of a Conversion Date for such principal amount and
December 31, 2000 (each an "Interest Payment Date"), in cash
or shares of Common Stock (as defined in Section 6). Subject
to the terms and conditions herein, the decision whether to
pay interest hereunder in shares of Common Stock or cash shall
be at the discretion of the Company. Not less than five
Trading Days (as defined in Section 6) prior to each Interest
Payment Date, the Company shall provide the Holder with
written notice of its election to pay interest hereunder in
cash or in shares of Common Stock pursuant to the terms of
Section 4(a)(i) (the Company may indicate in such notice that
the election contained in such notice shall continue for later
periods until revised). Failure to timely provide such written
notice shall be deemed an election by the Company to pay the
<PAGE>
interest on such Interest Payment Date in shares of Common
Stock pursuant to the terms of Section 4(a)(i). If interest
is paid by the Company in shares of its Common Stock, then the
number of shares Common Stock issuable on account of such
interest shall equal the cash amount of such interest on such
Conversion Date divided by the Conversion Price (as defined
below) on such date. Interest shall be calculated on the
basis on a 360-day year and 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 which may become
due hereunder, has been made. Interest hereunder will be paid
to the Person (as defined in Section 6) in whose name this
Debenture is registered on the records of the Company
regarding registration and transfers of Debentures (the
"Debenture Register"). All overdue accrued and unpaid
interest to be paid in cash hereunder shall entail a late fee
at the rate of 18% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) ("Late
Fee") (to accrue daily, from the date such interest is due
hereunder through and including the date of payment), payable
in cash. If such Late Fee is paid by the Company in shares of
its Common Stock, then the number of shares of Common Stock
issuable on account of such Late Fee shall equal the cash
amount of such Late Fee on such Late Fee payment date divided
by the Conversion Price (as defined herein) on such date.
This Debenture is subject to the following additional
provisions:
Section 1. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for
such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to
certain investment representations of the original Holder set
forth in the Purchase Agreement (as defined in Section 6) and
may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of
the Company may treat the Person (as defined in Section 6) in
whose name this Debenture is duly registered on the Debenture
Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether
or not this Debenture is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "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):
(i) any default in the payment of the
principal of, interest on or liquidated damages in
respect of, any Debentures, free of any claim of
subordination, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity
Date or by acceleration or otherwise);
<PAGE>
(ii) the Company shall fail to observe or
perform any other covenant, agreement or warranty
contained in, or otherwise commit any breach of any of
the Transaction Documents (as defined in Section 6), and
such failure or breach shall not have been remedied
within five days after the date on which notice of such
failure or breach shall have been given;
(iii) the Company or any of its
subsidiaries shall commence, or there shall be commenced
against the Company or any such subsidiary a case under
any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, 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 any subsidiary
thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or
other proceeding which remains undismissed for a period
of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is
entered; or the Company or any subsidiary thereof 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 or any subsidiary thereof 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, or shall be unable to pay, its debts generally as
they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of
its debts; or the Company or any subsidiary thereof shall
by any act or failure to act expressly indicate its
consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by
the Company or any subsidiary thereof for the purpose of
effecting any of the foregoing;
(iv) the Company shall default in any of its
obligations under any other Debenture or any mortgage,
credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there
may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money
due under any long term leasing or factoring arrangement
of the Company in an amount exceeding $100,000, 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;
(v) the Common Stock shall fail to be quoted
for trading on the OTC Bulletin Board ("OTC") or listed
for trading on the New York Stock Exchange, American
Stock Exchange, the NASDAQ National Market or NASDAQ
SmallCap Market (each, a "Subsequent Market") for an
aggregate of five Trading Days (which need not be
consecutive Trading Days);
(vi) the Company shall be a party to any
Change of Control Transaction (as defined in Section 6),
shall agree to sell or dispose all or in excess of 33% of
its assets in one or more transactions (whether or not
<PAGE>
such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a
de minimis number of shares of Common Stock or other
equity securities of the Company (other than redemptions
of Underlying Shares (as defined in Section 6));
(vii) an Underlying Shares Registration
Statement (as defined in Section 6) shall not have been
declared effective by the Commission (as defined in
Section 6) on or prior to the 180th day after the
Original Issue Date;
(viii) if, during the Effectiveness Period
(as defined in the Registration Rights Agreement (as
defined in Section 6)), the effectiveness of the
Underlying Shares Registration Statement lapses for any
reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration
Rights Agreement) under the Underlying Shares
Registration Statement, in either case, for more than
five consecutive Trading Days or an aggregate of eight
Trading Days (which need not be consecutive Trading
Days);
(ix) an Event (as defined in the Registration
Rights Agreement) shall not have been cured to the
satisfaction of the Holder prior to the expiration of
thirty days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other
than an Event resulting from a failure of an Underlying
Shares Registration Statement to be declared effective by
the Commission on or prior to the 120th day after the
Original Issue Date, which shall be covered by Section
3(a)(vii));
(x) the Company shall fail for any reason to
deliver certificates to a Holder prior to the third
Trading Day after a Conversion Date pursuant to and in
accordance with Section 4(b) 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 Debentures in
accordance with the terms hereof; and
(xi) the Company shall fail for any reason to
deliver the payment in cash pursuant to a Buy-In (as
defined herein) within five days after notice is deemed
delivered hereunder.
(b) If any Event of Default occurs and is
continuing, the full principal amount of this Debenture (and,
at the Holder's option, all other Debentures then held by such
Holder), together with interest and other amounts owing in
respect thereof, to the date of acceleration shall become at
the Holder's election, immediately due and payable in cash,
provided, that if the Company fails to pay the amounts due as
a result of an Event of Default by the seventh Trading Day
following the declaration of an Event of Default in cash, the
Holder may demand payment of such amounts in shares of Common
Stock under the Vesting Warrant, determined by reference to
the Conversion Price then in effect. The number of shares of
Common Stock issuable in payment thereof shall be determined
by dividing the aggregate amount due to the Holder by the
Conversion Price on the seventh Trading Day. The aggregate
amount payable upon an Event of Default shall be equal to the
sum of (i) the Mandatory Prepayment Amount (as defined in
Section 6) plus (ii) the product of (A) the number of
<PAGE>
Underlying Shares issued in respect of conversions hereunder
within thirty days of the date of a declaration of an Event of
Default and then held by the Holder and (B) the Closing Price
(as defined in Section 6) on the date prepayment is due or the
date the full prepayment price is paid, whichever is greater.
Interest shall accrue on the prepayment amount hereunder from
the seventh day after such amount is due (being the date of an
Event of Default) through the date of prepayment in full
thereof at the rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law), to
accrue daily from the date such payment is due hereunder
through and including the date of payment. All Debentures and
Underlying Shares for which the full prepayment price
hereunder shall have been paid in accordance herewith shall
promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder. This
Debenture shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and
from time to time, after the Original Issue Date (subject to
the limitations on conversion set forth in Section 4(a)(iii)
hereof). The Holder shall effect conversions at its option by
delivering to the Company the form of conversion notice
attached hereto as Exhibit A (a "Conversion Notice"),
specifying therein the principal amount of Debentures to be
converted and the date on which such conversion is to be
effected, which date may not be prior to the date such
Conversion Notice is deemed to have been delivered hereunder
(a "Conversion Date") and shall contain a schedule in the form
of Schedule 1 to the Conversion Notice (as amended on each
Conversion Date, the "Conversion Schedule") reflecting the
remaining principal amount of this Debenture and all accrued
and unpaid interest thereon subsequent to the conversion at
issue. If no Conversion Date is specified in a Conversion
Notice, the Conversion Date shall be the date that such
Conversion Notice is deemed delivered hereunder. Subject to
Section 4(b), each Conversion Notice, once given, shall be
irrevocable. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Debenture to the
Company unless the aggregate principal amount of this
Debenture is so converted in which event the Holder shall
promptly thereafter (but not as a condition to the Company's
obligation to timely deliver Underlying Shares) deliver such
Debenture certificate to, or as directed by the Company for
cancellation. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Debenture
plus all accrued and unpaid interest thereon in an amount
equal to the applicable conversion, which shall be evidenced
by entries set forth in the Conversion Schedule. The Holder
and the Company shall maintain records showing the principal
amount converted and the date of such conversions. In the
event of any dispute or discrepancy, the records of the Holder
shall be controlling and determinative in the absence of
manifest error. The Holder and any assignee, by acceptance of
this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a
portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture may be less than the amount
stated on the face hereof.
<PAGE>
(ii) Number of Underlying Shares Issuable Upon
Conversion. (A) The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by
adding the sum of (i) the quotient obtained by dividing (x)
the outstanding principal amount of this Debenture to be
converted and (y) the Conversion Price (as defined herein),
and (ii) the amount equal to (I) the product of (x) the
outstanding principal amount of this Debenture to be converted
and (y) the product of (1) the quotient obtained by dividing
.08 by 360 and (2) the number of days for which such principal
amount was outstanding, divided by (II) the Conversion Price
on the Conversion Date, provided, that if the Company shall
have elected to pay the interest due on a Conversion Date in
cash pursuant to the terms hereof, subsection (ii) shall not
be used in the calculation of the number of shares of Common
Stock issuable upon a conversion hereunder.
(B) Notwithstanding anything to the contrary
contained herein, if on any Conversion Date:
(1) the number of shares of Common Stock at
the time authorized, unissued and unreserved for all
purposes, or held as treasury stock, is insufficient to
pay interest hereunder in shares of Common Stock;
(2) after the Interest Effectiveness Date (as
defined in Section 6) such shares of Common Stock (x)
are not registered for resale pursuant to an effective
Underlying Shares Registration Statement and (y) may not
be sold without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act;
(3) the Common Stock shall fail to be listed
or quoted for trading on the OTC or a Subsequent Market;
(4) the Company has failed to timely satisfy
its conversion obligations hereunder; or
(5) the issuance of such shares of Common
Stock would result in a violation of Sections
4(a)(iii)(A) or (B),
then, at the option of the Holder, the
Company, in lieu of delivering shares of Common Stock pursuant
to Section 4(a)(ii)(A)(ii), shall deliver, within three
Trading Days of each applicable Conversion Date, an amount in
cash equal to the product of (a) the outstanding principal
amount of the Debentures to be converted on such Conversion
Date and (b) the product of (x) the quotient obtained by
dividing .08 by 360 and (y) the number of days for which such
principal amount was outstanding.
(iii) Certain Conversion Restrictions.
(A) A Holder may not convert Debentures
or receive shares of Common Stock as payment of interest
<PAGE>
hereunder to the extent such conversion or receipt of such
interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the
rules promulgated thereunder) in excess of 4.999% of the then
issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest
on, the Debentures held by such Holder after application of
this Section. Since the Holder will not be obligated to
report to the Company the number of shares of Common Stock it
may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of
Common Stock in excess of 4.999% of the then outstanding
shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section
will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation
contained in this Section applies, the determination of which
portion of the principal amount of Debentures are convertible
shall be the responsibility and obligation of the Holder. If
the Holder has delivered a Conversion Notice for a principal
amount of Debentures that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact
and shall honor the conversion for the maximum principal
amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount
tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess
principal amount to 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 61 days prior
notice to the Company. Other Holders shall be unaffected by
any such waiver.
(B) A Holder may not convert Debentures
or receive shares of Common Stock as payment of interest
hereunder to the extent such conversion or receipt of such
interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the
rules promulgated thereunder) in excess of 9.999% of the then
issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest
on, the Debentures held by such Holder after application of
this Section. Since the Holder will not be obligated to
report to the Company the number of shares of Common Stock it
may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of
Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section
will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation
contained in this Section applies, the determination of which
portion of the principal amount of Debentures are convertible
shall be the responsibility and obligation of the Holder. If
the Holder has delivered a Conversion Notice for a principal
amount of Debentures that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact
and shall honor the conversion for the maximum principal
amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount
tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess
<PAGE>
principal amount to 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 61 days prior
notice to the Company. Other Holders shall be unaffected by
any such waiver.
(b) (i) Not later than three Trading Days after
any Conversion Date, the Company will deliver to the Holder
(i) a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement)
representing the number of shares of Common Stock being
acquired upon the conversion of Debentures, and (ii) a bank
check in the amount of accrued and unpaid interest (if the
Company has timely elected or is required to pay accrued
interest in cash). The Company shall, upon request of the
Holder, if available, 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 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, in which event the
Company shall immediately return the certificates representing
the principal amount of Debentures tendered for conversion.
(ii) If the Company fails to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion
Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each
Trading Day after such third Trading Day until such
certificates are delivered. Nothing herein shall limit a
Holder's right to pursue actual damages or declare an Event of
Default pursuant to Section 3 herein for the Company's failure
to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such
Holder shall have the right to pursue all remedies available
to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders
from seeking to enforce damages pursuant to any other Section
hereof or under applicable law. Further, if the Company shall
not have delivered any cash due in respect of conversions of
Debentures or as payment of interest thereon by the third
Trading Day after the Conversion Date, the Holder may, by
notice to the Company, require the Company to issue shares of
Common Stock pursuant to Section 4(c), except that for such
purpose the Conversion Price applicable thereto shall be the
lesser of the Conversion Price on the Conversion Date and the
Conversion Price on the date of such Holder demand. Any such
shares will be subject to the provision of this Section.
(iii) In addition to any other rights
available to the Holder, if the Company fails to deliver to
the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion
Date, and if after such third Trading Day the Holder purchases
(in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall (A) pay
in cash to the Holder (in addition to any remedies available
to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds
<PAGE>
(y) the product of (1) the aggregate number of shares of
Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the market price of the
Common Stock at the time of the sale giving rise to such
purchase obligation and (B) at the option of the Holder,
either reissue Debentures in principal amount equal to the
principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its delivery
requirements under Section 4(b)(i). For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market
price of the Underlying Shares on the date of conversion was
a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect
of the Buy-In. Notwithstanding anything contained herein to
the contrary, if a Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full
such payment, the Company shall not be required to pay such
Holder liquidated damages under Section 4(b)(ii) in respect of
the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion
Price") in effect on any Conversion Date shall be the lesser
of (1) $$0.90 (the "Initial Conversion Price"), and (2) 80% of
the average of the three lowest Per Share Market Values
during the ten consecutive Trading Days immediately preceding
the applicable Conversion Date, provided, that such ten
Trading Day period shall, at the option of the Holder, be
extended for the number of Trading Days during such period in
which (A) trading in the Common Stock is not eligible for
quotation on the OTC or listed or quoted for trading on a
Subsequent Market, or (B) after the date declared effective by
the Commission, the Underlying Shares Registration Statement
is either not effective or the Prospectus included in the
Underlying Shares Registration Statement may not be used by
the Holder for the resale of Underlying Shares.
(ii) If the Company, at any time while
any Debentures 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 Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of
shares, (c) combine (including by way of reverse stock split)
outstanding shares of 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, then
the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of
shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 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 Debentures are outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to
Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share
<PAGE>
Market Value at the record date mentioned below, then 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 Common Stock offered for subscription or
purchase, and of which 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
such Per Share Market Value. 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,
options or warrants. However, upon the expiration of any such
right, option 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, if any such right,
option 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 after the
issuance of such rights or warrants) had the adjustment of the
Conversion Price made upon the issuance of such rights,
options 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, options or warrants actually exercised.
(iv) If the Company or any subsidiary
thereof, as applicable with respect to Common Stock
Equivalents (as defined below), at any time while this
Debenture is outstanding, shall issue shares of Common Stock
or rights, warrants (including those issued under the Purchase
Agreement), 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 (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights issued in connection
with such issuance, be entitled to receive shares of Common
Stock at a price less than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion
Price), then, at the option of the Holder for such conversions
as it shall indicate, the Conversion Price shall be adjusted
to mirror the conversion, exchange or purchase price for such
Common Stock or Common Stock Equivalents (including any reset
provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are
issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalent subject to this
section, indicating therein the applicable issuance price, or
of applicable reset price, exchange price, conversion price
and other pricing terms. No adjustment under this Section
shall be made as a result of (i) issuances of Common Stock or
Common Stock Equivalents to the extent disclosed in Schedule
2.1(c) to the Purchase Agreement, (ii) issuances and exercises
of options to purchase shares of Common Stock issued for
compensatory purposes pursuant to any of the Company's stock
option or stock purchase plans, or (iii) exercises under the
Warrants (as defined in the Purchase Agreement).
<PAGE>
(v) If the Company, at any time while
Debentures are outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the
Conversion Price at which Debentures shall thereafter be
convertible shall be determined by multiplying the 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 determined as of the record date
mentioned above, and of which the numerator shall be such Per
Share Market Value 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. In either case the
adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one
share of 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 Holders shall have the right thereafter
to, at their option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid
interest and any other amounts then owing hereunder in respect
of this Debenture 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
Debentures 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, together with all accrued but unpaid
interest and any other amounts then owing hereunder in respect
of this Debenture could have been converted immediately prior
to such reclassification or share exchange would have been
entitled or (B) require the Company to prepay the aggregate of
its outstanding principal amount of Debentures, plus all
interest and other amounts due and payable thereon, at a price
determined in accordance with Section 3(b). The entire
prepayment price shall be paid in cash. This provision shall
similarly apply to successive reclassifications or share
exchanges.
(vii) 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. No adjustments in
either the Initial Conversion Price or Conversion Price shall
be required if such adjustment is less than $0.01, provided,
that any adjustments which by reason of this Section are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(viii) Whenever either the Initial
Conversion Price or Conversion Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail
to each Holder a notice setting forth the Initial Conversion
Price or the Conversion Price (as applicable) after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(ix) If (A) the Company shall declare a
dividend (or any other distribution) on the Common Stock; (B)
the Company shall declare a special nonrecurring cash dividend
<PAGE>
on or a redemption of the Common Stock; (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; (D) the approval
of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, 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 exchange whereby the
Common Stock is converted into other securities, cash or
property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the
purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 20
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, 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 Debentures during the 20-day period commencing the
date of such notice to the Effective Date of the event
triggering such notice.
(x) In case of any (1) merger or
consolidation of the Company with or into another Person, or
(2) sale by the Company of more than one-half of the assets of
the Company (on an as valued basis) in one or a series of
related transactions, a Holder shall have the right to (A) if
permitted under Section 3(b) hereof, exercise its rights of
prepayment under Section 3(b) with respect to such event, (B)
convert its aggregate principal amount of Debentures then
outstanding into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation
or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities,
cash and property as the shares of Common Stock into which
such aggregate principal amount of Debentures could have been
converted immediately prior to such merger, consolidation or
sales would have been entitled, or (C) in the case of a merger
or consolidation, (x) require the surviving entity to issue
convertible debentures in an aggregate principal amount equal
to the aggregate principal amount of Debentures then held by
such Holder, plus all accrued and unpaid interest and other
amounts owing thereon, which newly issued convertible
debentures shall have terms identical (including with respect
to conversion) to the terms of this Debenture and shall be
entitled to all of the rights and privileges of a Holder of
Debentures set forth herein and the agreements pursuant to
which the Debentures were issued (including, without
limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and
<PAGE>
(y) simultaneously with the issuance of such convertible
debentures, shall have the right to convert such instrument
only into shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of
Common Stock following such merger or consolidation. In the
case of clause (C), the conversion price applicable for the
newly issued convertible debentures shall be based upon the
amount of securities, cash and property that each share of
Common Stock would receive in such transaction and the
Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms
of any such merger, sale or consolidation shall include such
terms so as to continue to give the Holders the right to
receive the securities, cash and property set forth in this
Section upon any conversion or redemption following such
event. This provision shall similarly apply to successive such
events.
(d) 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.
(e) The issuance of certificates for shares of the
Common Stock on conversion of the Debentures 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 Debentures 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.
(f) Any and all notices or other communications or
deliveries to be provided by the Holders 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
1999 Lincoln Drive, Suite 202, Sarasota, FL 34236, facsimile
No.: (941) 953-4363, attention Chief Financial Officer, 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, with a copy to (other than
for Conversion Notices) David J. Feingold, Esq., Facsimile No.
(561) 630-8936. 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
each 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 6:30 p.m. (New York City time), (ii) the date
<PAGE>
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 6:30
p.m. (New York City time) on any date and earlier than 11:59
p.m. (New York City time) on such date, (iii) four days after
deposit in the United States mail, (iv) the Business Day
following the date of mailing, if sent 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 at the Option of the Company.
(a) The Company shall have the right at all times and
any time after the Original Issue Date, upon seven Trading
Days' notice to the Holders (an "Optional Prepayment Notice"
and the date such notice is received by the Holders, the
"Notice Date"), to prepay all or a portion of the Debentures
then held by the Holders at a cash price equal to the Optional
Prepayment Price (as defined in Section 6). The Company may
only deliver an Optional Prepayment Notice to the Holders if,
on the Notice Date: (i) either there is an effective
Underlying Shares Registration Statement pursuant to which the
Holders are permitted to utilize the prospectus thereunder to
resell all of the issued Underlying Shares and all of the
Underlying Shares as are issuable upon conversion in full of
the Notes subject to the Optional Prepayment Notice or all of
such issued or issuable Underlying Shares may be sold without
volume restrictions pursuant to Rule 144(k) promulgated under
the Securities Act and (ii) the Common Stock is either
eligible for quotation on the OTC or listed or quoted for
trading on a Subsequent Market. If any of the foregoing
conditions shall cease to be in effect during the period
between the Notice Date and the date the Optional Prepayment
Date is paid in full, then the Holders subject to such
prepayment may elect, by written notice to the Company given
at any time after any of the foregoing conditions shall cease
to be in effect, to invalidate ab initio such prepayment,
notwithstanding anything herein contained to the contrary.
The Holders may convert any portion of the outstanding
principal amount of the Debentures subject to an Optional
Redemption Notice prior to the seventh Trading Day following
the Notice Date (the "Due Date").
(b) The Optional Prepayment Price is due in full on the
Due Date. If any portion of the Optional Prepayment Price
shall not be paid by the Company by the Due Date, interest
shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law, whichever is less)
until the Optional Prepayment Price plus all such interest is
paid in full. In addition, if any portion of the Optional
Prepayment Price remains unpaid after such date, the Holder
subject to such prepayment may elect by written notice to the
Company to either: (x) demand conversion in accordance with
the formula and the time period therefor set forth in Section
4 of any portion of the principal amount of the Debentures for
which the Optional Prepayment Price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid
Prepayment Principal Amount"), in which event the applicable
Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Due Date and the Per Share
Market Value as of the Holder's written demand for exchange,
or (y) invalidate ab initio such optional prepayment,
notwithstanding anything herein contained to the contrary. If
the Holder elects option (x) above, the Company shall, within
<PAGE>
three (3) Trading Days after such election is deemed delivered
hereunder, deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Prepayment Principal
Amount subject to such conversion demand and otherwise perform
its obligations hereunder with respect thereto. If the Holder
elects option (y) above, the aggregate principal amount under
this Debenture and all interest due hereunder shall be
increased by the Unpaid Prepayment Principal Amount and the
Company shall no longer have any prepayment rights under this
Debenture. If, upon an election under option (x) above, the
Company fails to deliver the certificates representing the
shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Principal Amount within the time period set forth
in this Section, the Company shall pay to the Holder in cash,
as liquidated damages and not as a penalty, $5,000 per day
until the Company delivers such certificates to the Holder.
Section 6. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and
any day which shall be a federal legal holiday in the United
States or a day on which banking institutions in the State of
New York or State of Florida 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 effective
control (whether through legal or beneficial ownership of
capital stock of the Company, by contract or otherwise) of in
excess of 33% of the voting securities of the Company, (ii) a
replacement at one time or over time of more than one-half of
the members of the Company's board of directors which is not
approved by a majority of those individuals who are members of
the board of directors on the date hereof (or by those
individuals who are serving as members of the board of
directors on any date whose nomination to the board of
directors was approved by a majority of the members of the
board of directors who are members on the date hereof), (iii)
the merger of the Company with or into another entity that is
not wholly-owned by the Company, consolidation or sale of 50%
or more of the assets of the Company in one or a series of
related transactions, or (iv) 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), (ii) or (iii).
"Closing Price" means on any particular date: (a) the
closing sales price per share of Common Stock on such date on
the OTC or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted (as reported by
Bloomberg L.P. at 4:15 PM (New York time) for the closing
sales price for regular session trading on such day), or if
there is no such price on such date, then the closing sales
price on the OTC or on such Subsequent Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at
4:15 PM (New York time) for the closing sales price for
regular session trading on such day), or (b) if the shares of
Common Stock are not then listed or quoted on the OTC or a
Subsequent Market, the closing sales price for a share of
Common Stock in the over-the-counter market, as reported by
the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or
(c) if the shares of Common Stock are not then reported by the
National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good
faith by the Holder, or (d) if the shares of Common Stock are
not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good
faith by the Holders of a majority in interest of the
principal amount of Debentures then outstanding.
<PAGE>
"Commission" means the Securities and Exchange
Commission.
"Common Stock" means the common stock, $.001 par value
per share, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or
changed.
"Effective Date" means the date on which an Underlying
Shares Registration Statement shall have first been declared
effective by the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Interest Effectiveness Date" means the earlier to occur
of (x) the Effectiveness Date (as defined in the Registration
Right Agreement) and (y) the Effective Date.
"Mandatory Prepayment Amount" for any Debentures shall
equal the sum of (i) the greater of (A) 120% of the principal
amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, and (B) the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest
thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or
(y) the date the Mandatory Prepayment Amount is paid in full,
whichever is less, multiplied by the Closing Price on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise
due or (y) the date the Mandatory Prepayment Amount is paid in
full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages due in respect of such
Debentures.
"Optional Prepayment Price" shall equal the sum of: (i)
the greater of (A) 100% of the principal amount of the
Debentures to be prepaid, plus all accrued and unpaid interest
thereon, and (B) the principal amount of Debentures to be
prepaid, plus all accrued and unpaid interest thereon, divided
by the Conversion Price on (x) the Optional Prepayment Date or
(y) the date that the Optional Prepayment Price is paid in
full, whichever is less, and multiplied by the Closing Price
on (x) the Optional Prepayment Date or (y) the date that the
optional Prepayment Price is paid in full, whichever is
greater, and (ii) all other amounts, expenses, costs and
liquidated damages due in respect of such Debentures.
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of
transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such Debenture.
"Per Share Market Value" means on any particular date:
(a) the closing bid price per share of Common Stock on such
date on the OTC or on such Subsequent Market on which the
shares of Common Stock are then listed or quoted (as reported
by Bloomberg L.P. at 4:15 PM (New York time) for the closing
bid price for regular session trading on such day), or if
there is no such price on such date, then the closing bid
price on the OTC or on such Subsequent Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at
4:15 PM (New York time) for the closing bid price for regular
session trading on such day), or (b) if the shares of Common
Stock are not then listed or quoted on the OTC or a Subsequent
Market, the closing bid price for a share of Common Stock in
the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or
agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the shares of Common
Stock are not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the
"Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the shares
of Common Stock are not then publicly traded the fair market
value of a share of Common Stock as determined by an Appraiser
<PAGE>
selected in good faith by the Holders of a majority in
interest of the principal amount of Debentures then
outstanding.
"Person" means an individual, a corporation, a
partnership, a limited liability company, an association, a
trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality
thereof.
"Purchase Agreement" means the Convertible Debenture
Purchase Agreement, dated as of the Original Issue Date, to
which the Company and the original Holder are parties, as
amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated November 14, 2000, to which the
Company and the original Holder are parties, as amended,
modified or supplemented from time to time in accordance with
its terms.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Trading Day" means (a) a day on which the shares of
Common Stock are traded on the OTC or on such Subsequent
Market on which the shares of Common Stock are then listed or
quoted, or (b) if the shares of Common Stock are not listed on
the OTC or a Subsequent Market, a day on which the shares of
Common Stock are traded 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, that in the event that the shares
of Common Stock are not listed or quoted as set forth in (a)
and (b) hereof, then Trading Day shall mean a Business Day.
"Transaction Documents" shall have the meaning set forth
in the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock
issuable upon conversion of Debentures or as payment of
interest in accordance with the terms hereof.
"Underlying Shares 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.
Section 7. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and
<PAGE>
liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth
herein. As long as there are Debentures 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; (ii) repay,
repurchase or offer to 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 Transaction Documents; or (iii) enter into
any agreement with respect to any of the foregoing. The
Company may only voluntarily prepay the outstanding principal
amount on the Debentures in accordance with Section 5 hereof.
Section 8. This Debenture 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.
Section 9. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss,
theft or destruction of such Debenture, and of the ownership
hereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
Section 10. No indebtedness of the Company is senior
to this Debenture in right of payment, whether with respect to
interest, damages or upon liquidation or dissolution or
otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind,
on or with respect to any of its property or assets now owned
or hereafter acquired or any interest therein or any income or
profits therefrom that is senior in any respect to the
Company's obligations under the Debentures.
Section 11. This Debenture shall be governed by and
construed in accordance with the laws of the State of New
York, without giving effect to conflicts of laws thereof. The
Company and the Holder hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting
in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any
such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by
receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that
such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any
manner permitted by law. Each party irrevocably waives, to the
fullest extent permitted by applicable law, any and all right
<PAGE>
to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding
to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be
reimbursed by the other party for its' attorneys fees and
other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
Section 12. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture 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
Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture 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 Debenture.
Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture 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. If it
shall be found that any interest or other amount deemed
interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum permitted rate
of interest. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the
Debentures as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants
or the performance of this indenture, and the Company (to the
extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though
no such law has been enacted.
<PAGE>
Section 14. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Convertible Debenture to be duly executed by a duly authorized
officer as of the date first above indicated.
SALIENT CYBERTECH, INC.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF HOLDER CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the principal amount
of Debenture set forth below into shares of common stock,
$.001 par value per share (the "Common Stock"), of Salient
Cybertech, 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 the 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. 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 Debentures
to be Converted _______________
Number of shares of Common Stock
to be Issued __________________
Payment of Interest in Kind Yes No
If yes, $ _______ of Interest
Accrued on Account of
Conversion at Issue
Applicable Conversion Price _____________________
Signature ______________________
Name ___________________________
Address ________________________
<PAGE>
Schedule 1
CONVERSION SCHEDULE
8% Convertible Debentures, due November 14, 2003, in the
aggregate principal amount of $2,000,000 issued by Salient
Cybertech, Inc. This Conversion Schedule reflects conversions
made under Section 4(a)(i) of the above referenced Debentures.
Dated:
Date of Conversion Amount of Conversion Aggregate Company Attest
Principal
Amount
Remaining
Subsequent
to
Conversion
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
<PAGE>
Exhibit 22
Subsidiaries of the Corporation
Subsidiary #1:
Gemini Learning Systems, Inc.
Suite 605, 839 - 5th Avenue SW
Calgary, Alberta
Canada T2P 3C8
Gemini Learning Systems, Inc. is a wholly owned Subsidiary of Salient
Cybertech, Inc.
Subsidiary #2:
Futronix, Inc.
1760 S. Dimensions Terrace
Homosassa, FL 34448
Futronix, Inc. is a wholly owned Subsidiary of Salient Cybertech, Inc.
<PAGE>
EXHIBIT 24.6
Consent of Registrant's Auditors
December 12, 2000
Securities and Exchange Commission
Washington, D.C. 20549
RE: Salient Cybertech, Inc.
Registration Number: __________
Gentlemen:
We have audited the balance sheet, pro-forma balance sheet, and
accompanying statements of the Registrant, as found in the Prospectus
which forms part of this Registration Statement, for the 1999 and 1998
fiscal years, ending on December 31, and consent to the Auditor's
reports, statements, and notes being filed with the SB2 Registration
Statement of which this exhibit forms a part, and with any amendment
thereto.
This accounting firm hereby consents to the filing of this
consent as an exhibit to the Registration Statement.
/s/Stan J. H. Lee/s/
440 West St., 3rd Fl.
Fort Lee, NJ 07024-5058
<PAGE>
EXHIBIT 5.1
Opinion of Selling Stockholders' Counsel
December 12, 2000
Securities and Exchange Commission
Washington, D.C. 20549
RE: SALIENT CYBERTECH, INC.
Registration Number: _______________
Gentlemen:
This opinion is given in connection with the filing of a Registration
Statement on Form SB-2 by Salient Cybertech, Inc., registration number __
(the "Registration Statement"), filed with the United States Securities and
Exchange Commission, as it pertains to 16,895,035
shares in the common stock of Salient Cybertech, Inc. (the "Company"), with par
value of $0.001 per share being registered herein for Selling Stockholders(as
defined in the said Registration Statement), as described in the Registration
Statement.
Certain terms used in this opinion characterized by initial capital
letters have the meaning set forth in the Prospectus which constitutes a
portion of the Registration.
We have examined the originals and copies of corporate instruments,
certificates and other documents of the Company and interviewed represent-
atives of the Company to the extent we deemed it necessary, in order to
form the basis for the opinion hereinafter set forth.
In such examination we have assumed the genuineness of all signatures
and authenticity of all documents submitted to us as certified or photostatic
copies. As to all questions of fact material to this opinion which have
not been independently established, we have relied upon statements or
certificates of officers or representatives of the Company.
Based upon the foregoing, we are of the opinion that:
The 16,895,035 shares of Common Stock of the Company, when issued
will be fully paid and non- assessable and there is no personal
liability to the owners thereof.
<PAGE>
This law firm hereby consents to the filing of this opinion as an
exhibit to the Registration Statement; however, this opinion is limited to
the facts set forth herein and is not to be interpreted as an opinion that
the Registration Statement has been properly prepared, or provides all
required disclosure.
Very truly yours,
/s/Bernabe Diaz/s/
Bernabe Diaz, Esq.
Corporate Counsel for the Company
71 Stony Hill Rd., 2nd Flr.
Bethel CT 06801
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
[ARTICLE] 5
<TABLE>
<S> <C> <C> <C>
[PERIOD-TYPE] 9-MOS YEAR YEAR
[FISCAL-YEAR-END] DEC-31-2000 DEC-31-1999 DEC-31-1998
[PERIOD-END] SEP-30-2000 DEC-31-1999 DEC-31-1998
[CASH] 2,000 3,650 19,792
[SECURITIES] 4,002 0 0
[RECEIVABLES] 407,052 8,873 48,919
[ALLOWANCES] 0 0 0
[INVENTORY] 708,614 19,566 27,171
[CURRENT-ASSETS] 1,531,792 893,778 224,522
[PP&E] 5,185,260 26,909 19,700
[DEPRECIATION] 0 0 0
[TOTAL-ASSETS] 8,688,424 1,456,616 652,657
[CURRENT-LIABILITIES] 2,601,336 762,988 546,931
[BONDS] 0 0 0
[PREFERRED-MANDATORY] 0 0 0
[PREFERRED] 0 0 0
[COMMON] 7,496 3,165 10,635
[OTHER-SE] 5,356,055 536,641 47,940
[TOTAL-LIABILITY-AND-EQUITY] 8,688,424 1,456,616 652,657
[SALES] 3,281,909 112,554 119,782
[TOTAL-REVENUES] 3,281,909 112,554 119,782
[CGS] 2,945,584 11,386 67,959
[TOTAL-COSTS] 2,945,584 11,386 67,959
[OTHER-EXPENSES] 3,052,353 1,474,693 467,385
[LOSS-PROVISION] 0 0 0
[INTEREST-EXPENSE] 117,919 48,114 39,481
[INCOME-PRETAX] (2,600,705) (1,365,334) (360,393)
[INCOME-TAX] 0 0 0
[INCOME-CONTINUING] 0 0 0
[DISCONTINUED] 0 0 0
[EXTRAORDINARY] 0 0 50,185
[CHANGES] 0 0 0
[NET-INCOME] (2,600,705) (1,365,334) (310,208)
[EPS-BASIC] (.668) (.198) (.031)
[EPS-DILUTED] (.668) (.198) (.031)
</TABLE>
<PAGE>
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<PAGE>
