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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to__________
Commission File No. 0-13992
CYBER DIGITAL, INC.
(Name of small business issuer in its charter)
NEW YORK 11-2644640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 OSER AVENUE, HAUPPAUGE, NEW YORK 11788
(Address of principal executive offices) (Zip Code)
(516) 231-1200
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge. In definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB.
Yes X No
--- ---
This issuer's revenues for its most recent fiscal year are $701,410.
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant at March 31, 1996 was $27,127,647 based on a total of 9,864,599
shares held by nonaffiliates and the closing bid price in the Over-theCounter
Market on that date which was $2.75.
The number of shares of stock outstanding at March 31, 1996: 15,110,311 shares
of Common Stock, par value $.01 per share.
Documents Incorporated by Reference: None
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: July 25, 1996
CYBER DIGITAL, INC.
By:/s/ J.C. Chatpar
-----------------
J.C. Chatpar,
President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ J.C. Chatpar Chairman, President and Director July 25, 1996
- --------------------
J.C. Chatpar (Principal Executive, Accounting
and Financial Officer)
/s/ Jack P. Dorfman Secretary and Director July 25, 1996
- --------------------
Jack P. Dorman
____________________ Director July __, 1996
Dr. Anil K. Agarwal
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INDEX TO EXHIBITS
Exhibit Number Description
3(a) Composite Amended and Restated Certificate of Incorporation
of the Company.
3(b) Bylaws of the Company (incorporated herein by reference to
Exhibit 3(c) to the Company's Registration Statement No. 2-
87696-NY on Form S-18).
10(a) 1993 Stock Incentive Plan (incorporated herein by reference
to Exhibit 10(a) to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994 (the "1994 Form 10-
K")).
10(b) Employment Agreement between the Company and J.C. Chatpar
(incorporated herein by reference to Exhibit 10(b) to the
1994 Form 10-K).
10(c) Manufacturing License Contract between the Company and
National Telecommunications Co., dated as of December 4,
1995.
11 Statement Regarding Computation of Loss Per Share
(incorporated herein by reference to Exhibit 11 to the
Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1996 (the "1996 Form 10-KSB") filed on July
19, 1996).
27 Financial Data Schedule (incorporated herein by reference to
Exhibit 27 to the 1996 Form 10-KSB).
Exhibit 3(a)
COMPOSITE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CYBER DIGITAL, INC.
AS OF JULY 25, 1996
--------
FIRST: The name of the corporation is CYBER DIGITAL, INC.
SECOND: The corporation is formed for the following purpose or purposes:
To manufacture, maintain, sell, operate, repair and generally deal in and
with telecommunication and electronic equipment of all types, including, but not
limited to equipment and services useful in transmission by aural broadcasting,
facsimile, television, radio, energy, pictures, graphic images, sounds or other
visual or aural signals.
To carry on a general mercantile, industrial, investing, and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, and in
any other lawful capacity, goods, wares, merchandise, commodities, and
unimproved, improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components, resultants, and
by-products thereof; to acquire by purchase or otherwise own, hold, lease,
mortgage, sell, or otherwise dispose of, erect, construct, make, alter, enlarge,
improve, and to aid or subscribe toward the construction, acquisition or
improvement of any factories, shops, storehouses, buildings, and commercial and
retail establishments of every character, including all equipment, fixtures,
machinery, implements and supplies necessary, or incidental to, or connected
with, any of the purposes or business of the corporation; and generally to
perform any and all acts connected therewith or arising therefrom or incidental
thereto, and all acts proper or necessary for the purpose of the business.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase, or
otherwise acquire, and to
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own, use, hold, sell, convey, exchange, lease, mortgage, work, clear, improve,
develop, divide, and otherwise handle, manage, operate, deal in and dispose of
real estate, real property, lands, multiple-dwelling structures, houses,
buildings and other works and any interest or right therein; to take, lease,
purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange,
hire, lease, pledge, mortgage, and otherwise handle, and deal in and dispose of,
as principal, agent, broker, and in any lawful capacity, such personal property,
chattels, chattels real, rights, easements, privileges, choses in action, notes,
bonds, mortgages, and securities as may lawfully be acquired, held, or disposed
of; and to acquire, purchase, sell, assign, transfer, dispose of, and generally
deal in and with, as principal, agent, broker, and in any lawful capacity,
mortgages and other interests in real, personal, and mixed properties; to carry
on a general construction, contracting, building, and realty management business
as principal, agent, representative, contractor, subcontractor, and in any other
lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in respect
of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to
account, grant licenses and immunities in respect of, manufacture under and to
introduce, sell, assign, mortgage, pledge or otherwise dispose of, and, in any
manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes and any improvements and
modifications thereof;
(b) letters patent, patent rights, patented processes, copyrights, designs,
and similar rights, trade-marks, trade symbols and other indications of origin
and ownership granted by or recognized under the laws of the United States of
America or of any state or subdivision thereof, or of any foreign country or
subdivision thereof, and all rights connected therewith or appertaining
thereunto;
(c) franchises, licenses, grants and concessions.
To have, in furtherance of the corporate purposes, all of the powers
conferred upon corporations organized under the Business Corporation Law subject
to any limitations thereof contained in this certificate of incorporation or in
the laws of the State of New York.
THIRD: The office of the corporation is to be located in the City of New
York, County of New York, State of New York.
FOURTH: The total number of shares of capital stock which the Corporation
shall be authorized to issue is 40 million of which 10 million shares shall be
shares of Preferred Stock, having par value of $.05 per share, and 30 million
shares shall be shares of Common Stock, having a par value of $.01 per share.
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Preferred Stock may be issued in one or more series with such rights and
designations, including without limitation, voting powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, conversion rights, liquidation privileges,
dividend rights, redemption price or prices and terms of redemption, including
sinking funds provision, as may be determined by action of the Board of
Directors without any further vote or action by the stockholders. Authority is
hereby expressly granted to the Board of Directors to establish and designate
one or more series of Preferred Stock subject to the provisions of this Article.
Eight Hundred Five (805) of the Ten Million (10,000,000) authorized shares
of Preferred Stock of the Company are hereby designated Series A Preferred
Stock, par value $.05 per share, and shall possess the rights and preferences
set forth below:
Section 1. Designation and Amount. The shares of such series shall have a
par value of $.05 per share and shall be designated as Series A Preferred Stock
(the "Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be Eight Hundred Five (805). The Series A
Preferred Stock shall be offered at a purchase price of Ten Thousand Dollars
($10,000.00) per share (the "Original Series A Issue Price"), with a ten percent
(10%) per annum accretion rate as set forth herein.
Section 2. Rank. The Series A Preferred Stock shall rank: (i) junior to any
other class or series of capital stock of the Company hereafter created
specifically ranking by its terms senior to the Series A Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.01 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with any class or series of capital
stock of the Company hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities") in each case as
to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
Section 3. Dividends. The Series A Preferred Stock will bear no dividends,
and the holders of the Series A Preferred Stock ("Holders") shall not be
entitled to receive dividends on the Series A Preferred Stock.
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Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, the Holders of shares of Series A
Preferred Stock shall be entitled to receive, immediately after any
distributions to Senior Securities required by the Company's Certificate of
Incorporation or any certificate of designation, and prior in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the sum of (i) the Original Series A
Issue Price for each outstanding share of Series A Preferred Stock and (ii) an
amount equal to ten percent (10%) of the Original Series A Issue Price per annum
for the period that has passed since the date that, in connection with the
consummation of the purchase by Holder of shares of Series A Preferred Stock
from the Company, the escrow agent first had in its possession funds
representing full payment for the shares of Series A Preferred Stock (such
amount being referred to herein as the "Premium"). If upon the occurrence of
such event, and after payment in full of the preferential amounts with respect
to the Senior Securities, the assets and funds available to be distributed among
the Holders of the Series A Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full preferential
amounts due to the Holders of the Series A Preferred Stock and the Parity
Securities, respectively, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the Holders of the
Series A Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate(s) of designation
relating thereto.
(b) Upon the completion of the distribution required by subsection 4(a), if
assets remain in this Company, they shall be distributed to holders of Junior
Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 4; provided further that an event described in the prior clause that the
Holder does not elect to treat as a liquidation and a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
company or companies shall not be treated as a liquidation, dissolution or
winding up within the meaning of this Section 4, but instead shall be treated
pursuant to Section 5(e) hereof.
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(d) In the event that, immediately prior to the closing of a transaction
described in Section 4(c) which would constitute a liquidation event, the cash
distributions required by Section 4(a) or Section 6 have not been made, the
Company shall either: (i) cause such closing to be postponed until such cash
distributions have been made, or (ii) cancel such transaction, in which event
the rights of the Holders of Series A Preferred Stock shall be the same as
existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of this Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each record Holder of Series A Preferred Stock shall
be entitled (at the times and in the amounts set forth below) and subject to the
Company's right of redemption set forth in Section 6(a), at the office of the
Company or any transfer agent for the Series A Preferred Stock (the "Transfer
Agent"), to convert (in multiples of one (1) share of Preferred Stock) as
follows: (x) up to one-third (1/3) of the shares of Series A Preferred Stock
initially issued to such Holder at any time beginning forty-five (45) days
following the date of the last closing of a purchase and sale of Series A
Preferred Stock that occurs pursuant to the offering of the Series A Preferred
Stock by the Company (the "Last Closing Date") and at any time thereafter, (y)
up to an additional one-third (1/3) of the shares of Series A Preferred Stock
initially issued to such Holder at any time beginning seventy-five (75) days
following the Last Closing Date and at any time thereafter, and (z) all
remaining Series A Preferred Stock held by such Holder at any time beginning one
hundred five (105) days following the Last Closing Date (each of the time
periods referenced in subclauses (x), (y) and (z) is hereinafter referred to
singularly as a "Conversion Gate") at the office of the Company or any Transfer
Agent for the Series A Preferred Stock, into that number of fully-paid and
non-assessable shares of Common Stock of the Company calculated in accordance
with the following formula (the "Conversion Rate"):
Number of shares issued upon conversion of one (1) share of Series A
Preferred Stock =
(.10) (N/365) (10,000) + 10,000
-------------------------------
Conversion Price
where,
o N= the number of days between (i) the date that, in connection with the
consummation of the initial purchase by Holder of shares of Series A
Preferred Stock from the Company, the escrow agent first had in its
possession funds representing full payment for the shares of Series A
Preferred
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Stock for which conversion is being elected, and (ii) the applicable Date
of Conversion (as defined in Section 5(c)(iv) below) for the shares of
Series A Preferred Stock for which conversion is being elected, and
o Conversion Price = the lesser of (x) 100% of the average Closing Bid
Price, as that term is defined below, for the five (5) trading days ending
on June 28, 1996 (the "Fixed Conversion Price"), or (y) .85 times the
average Closing Bid Price, as that term is defined below, of the Company's
Common Stock for the five (5) trading days immediately preceding the Date
of Conversion, as defined below (the "Variable Conversion Price").
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the OTC Electronic Bulletin Board, or if no longer traded thereon,
on the Nasdaq Small Cap Market or the Nasdaq National Market, or if not traded
on the Nasdaq Small Cap Market or the Nasdaq National Market, the closing bid
price on the principal national securities exchange or the automatic quotation
system on which the Common Stock is so traded and if not available, the price of
the last sale on the principal national securities exchange or the automatic
quotation system on which the Common Stock is so traded.
(b) Mechanics of Conversion. In order to convert Series A Preferred Stock
into full shares of Common Stock, the Holder shall (i) fax, on or prior to 11:59
p.m., New York City time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Company at the office of the Company or its designated
Transfer Agent for the Series A Preferred Stock stating that the Holder elects
to convert, which notice shall specify the date of conversion, the number of
shares of Series A Preferred Stock to be converted, the applicable conversion
price and a calculation of the number of shares of Common Stock issuable upon
such conversion (together with a copy of the front page of each certificate to
be converted) and (ii) surrender to a common courier, for delivery to the office
of the Company or the Transfer Agent, the original certificates representing the
Series A Preferred Stock being converted (the "Preferred Stock Certificates"),
duly endorsed for transfer; provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless either the Preferred Stock Certificates are
delivered to the Company or its Transfer Agent as provided above, or the Holder
notifies the Company or its Transfer Agent that such certificates have been
lost, stolen or destroyed (subject to the requirements of subparagraph (i)
below). Upon receipt by Company of a facsimile copy of a Notice of Conversion,
Company shall immediately send, via facsimile, a confirmation of receipt of the
Notice of Conversion to Holder which shall specify that the Notice of Conversion
has been received and the name and telephone number of a contact person at
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the Company whom the Holder should contact regarding information related to the
Conversion. In the case of a dispute as to the calculation of the Conversion
Rate, the Company shall promptly issue to the Holder the number of Shares that
are not disputed and shall submit the disputed calculations to its outside
accountant via facsimile within three (3) days of receipt of Holder's Notice of
Conversion. The Company shall cause the accountant to perform the calculations
and notify Company and Holder of the results no later than forty-eight (48)
hours from the time it receives the disputed calculations. Accountant's
calculation shall be deemed conclusive absent manifest error.
(i) Lost or Stolen Certificates. Upon receipt by the Company of evidence of
the loss, theft, destruction or mutilation of any Preferred Stock Certificates
representing shares of Series A Preferred Stock, and (in the case of loss, theft
or destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the Preferred Stock Certificate(s), if
mutilated, the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, Company shall not be obligated
to re-issue such lost or stolen Preferred Stock Certificates if Holder
contemporaneously requests Company to convert such Series A Preferred Stock into
Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The Transfer Agent or the
Company (as applicable) shall, no later than the close of business on the second
(2nd) business day (the "Deadline") after receipt by the Company or Transfer
Agent of a facsimile copy of a Notice of Conversion and receipt by Company or
the Transfer Agent of all necessary documentation duly executed and in proper
form required for conversion, including the original Preferred Stock
Certificates to be converted (or after provision for security or indemnification
in the case of lost or destroyed certificates, if required), issue and surrender
to a common courier for either overnight or (if delivery is outside the United
States) two (2) day delivery (or the shortest period of time in which a
recognized international courier can deliver) to the Holder at the address of
the Holder as shown on the stock records of the Company a certificate for the
number of shares of Common Stock to which the Holder shall be entitled as
aforesaid.
(iii) No Fractional Shares. If any conversion of the Series A Preferred
Stock would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion, in the aggregate,
shall be the next lower number of shares.
(iv) Date of Conversion. The date on which conversion occurs (the "Date of
Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
faxed to the
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Company before 11:59 p.m., New York City time, on the Date of Conversion, and
(ii) that the original Preferred Stock Certificates representing the shares of
Series A Preferred Stock to be converted are surrendered by depositing such
certificates with a common courier, as provided above, and received by the
Transfer Agent or the Company as soon as practicable after the date set forth in
the Notice of Conversion. The person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record Holder or Holders of such shares of Common Stock on the Date of
Conversion. If the original Preferred Stock Certificates representing the Series
A Preferred Stock to be converted are not received by the Transfer Agent or the
Company within ten (10) business days after the Date of Conversion, or if the
facsimile of the Notice of Conversion is not received by the Company or its
designated Transfer Agent prior to the Conversion Notice Deadline, the Notice of
Conversion, at the Company's option, may be declared null and void.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all then outstanding Series A
Preferred Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Series A Preferred Stock, the Company will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose; provided, however, that the taking of such action shall not affect the
Company's liability, if any, for damages arising as a result of its failure to
have a sufficient number of shares reserved.
(d) Automatic Conversion. Each share of Series A Preferred Stock
outstanding on the date which is three (3) years after the Last Closing Date
automatically shall be converted into Common Stock on such date at the
Conversion Rate then in effect (calculated in accordance with the formula in
Section 5(a) above), and the date which is three (3) years after the Last
Closing Date shall be deemed the Date of Conversion with respect to such
conversion.
(e) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the conversion of all of the Series A Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price shall
be proportionately reduced, or if the number of outstanding shares of Common
Stock is decreased by a combination or reclassification
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of shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased.
(ii) Adjustment to Variable Conversion Price. If, at any time when any
shares of the Series A Preferred Stock are issued and outstanding, the number of
outstanding shares of Common Stock is increased or decreased by a stock split,
stock dividend, or other similar event, which event shall have taken place
during the reference period for determination of the Conversion Price for any
conversion of the Series A Preferred Stock, then the Variable Conversion Price
shall be calculated giving appropriate effect to the stock split, stock
dividend, combination, reclassification or other similar event for all five (5)
trading days immediately preceding the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets or there is a
change of control transaction not deemed to be a liquidation pursuant to section
4(c), then the Holders of Series A Preferred Stock shall thereafter have the
right to receive upon conversion of Series A Preferred Stock, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such stock,
securities and/or other assets which the Holder would have been entitled to
receive in such transaction had the Series A Preferred Stock been converted
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holders
of the Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection
5(e)(iii) unless (a) it first uses its best efforts to give thirty (30) days and
in any event gives at least twenty (20) days notice prior to the record date of
such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holder shall be
entitled to convert its shares of Series A Preferred Stock into Common Stock)
and (b) the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligations of the Company under this Certificate of
Designation including this subsection 5(e)(iii).
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(iv) No Fractional Shares. If any adjustment under this Section 5(e) would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion shall be the next lower
number of shares.
Section 6. Redemption by Company.
(a) Company's Right to Redeem Upon Receipt of Notice of Conversion. If the
Conversion Price of the Company's Common Stock is less than the Fixed Conversion
Price (as defined in Section 5(a)), at the time of receipt of a Notice of
Conversion pursuant to Section 5, the Company shall have the right, in its sole
discretion, to redeem in whole or in part any Series A Preferred Stock submitted
for conversion, immediately prior to and in lieu of conversion ("Redemption Upon
Receipt of Notice of Conversion"). If the Company elects to redeem some, but not
all, of the Series A Preferred Stock submitted for conversion, the Company shall
redeem from among the Series A Preferred Stock submitted by the various
shareholders for conversion on the applicable date, a pro-rata amount from each
such Holder so submitting Series A Preferred Stock for conversion.
(i) Redemption Price Upon Receipt of a Notice of Conversion. The redemption
price per share of Series A Preferred Stock under this Section 6(a) shall be
calculated in accordance with the following formula ("Redemption Rate"):
[[(.10)(N/365)(10,000)] + 10,000] x Closing Bid Price on Date of Conversion
---------------------------------------
Conversion Price
where,
"N", "Date of Conversion", "Closing Bid Price" and "Conversion Price" shall
have the same meanings as defined in Section 5.
(ii) Mechanics of Redemption Upon Receipt of Notice of Conversion.
The Company shall effect each such redemption by giving notice of its election
to redeem, by facsimile, by 5:00 p.m. New York City time the next business day
following receipt of a Notice of Conversion from a Holder, and the Company shall
provide a copy of such redemption notice by overnight or two (2) day courier, to
(A) the Holder of the Series A Preferred Stock submitted for conversion at the
address and facsimile number of such Holder appearing in the Company's register
for the Series A Preferred Stock and (B) the Company's Transfer Agent. Such
redemption notice shall indicate whether the Company will redeem all or part of
the Series A Preferred Stock submitted for conversion and the applicable
redemption price.
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(b) Company's Right to Redeem at its Election. At any time, commencing
twelve (12) months and one (1) day after the Last Closing Date, the Company
shall have the right, in its sole discretion, to redeem ("Redemption at
Company's Election"), from time to time, any or all of the Series A Preferred
Stock; provided (i) Company shall first provide thirty (30) days advance written
notice as provided in subparagraph 6(b)(ii) below (which can be given beginning
thirty (30) business days prior to the date which is twelve (12) months and one
(1) day after the Last Closing Date), and (ii) that the Company shall only be
entitled to redeem Series A Preferred Stock having an aggregate Stated Value (as
defined below) of at least One Million Five Hundred Thousand Dollars
($1,500,000.00). If the Company elects to redeem some, but not all, of the
Series A Preferred Stock, the Company shall redeem a pro-rata amount from each
Holder of the Series A Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption Price At
Company's Election" shall be calculated as a percentage of Stated Value, as that
term is defined below, of the Series A Preferred Stock redeemed pursuant to this
Section 6(b), which percentage shall vary depending on the Date of Redemption at
Company's Election (as defined below), and shall be determined as follows:
Date of Notice of Redemption at Company's Election % of Stated Value
12 months and 1 day to 18 months following Last Closing Date 130%
18 months and 1 day to 24 months following Last Closing Date 125%
24 months and 1 day to 30 months following Last Closing Date 120%
30 months and 1 day to 36 months following Last Closing Date 115%
For purposes hereof, "Stated Value" shall mean the Original Series A Issue
Price (as defined in Section 4(a)) of the shares of Series A Preferred Stock
being redeemed pursuant to this Section 6(b), together with the accrued but
unpaid Premium (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The Company shall
effect each such redemption by giving at least thirty (30) days prior written
notice ("Notice of Redemption At Company's Election") to (A) the Holders of the
Series A Preferred Stock selected for redemption, at the address and facsimile
number of such Holder appearing in the Company's Series A Preferred stock
register and (B) the Transfer Agent, which Notice of Redemption At Company's
Election shall be deemed to have been delivered three (3) business days after
the Company's mailing (by overnight or two (2) day courier, with a copy by
facsimile) of such Notice of Redemption At Company's Election. Such Notice of
Redemption At Company's Election shall indicate (i) the number of shares of
Series A Preferred Stock that have been selected for redemption, (ii) the date
which such redemption is to become effective (the "Date of Redemption At
Company's Election") and (iii) the applicable Redemption Price At Company's
Election, as defined in subsection (b)(i) above. Notwithstanding the above,
Holder may convert into
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Common Stock pursuant to section 5, prior to the close of business on the Date
of Redemption at Company's Election, any Series A Preferred Stock which it is
otherwise entitled to convert, including Series A Preferred Stock that has been
selected for redemption at Company's election pursuant to this subsection 6(b);
provided, however, that the Company, shall still be entitled to exercise its
right to redeem upon receipt of a Notice of Conversion pursuant to Section 6(a).
(c) Company Must Have Immediately Available Funds or Credit Facilities. The
Company shall not be entitled to send any Redemption Notice and begin the
redemption procedure under Sections 6(a) and 6(b) unless it has:
(i) the full amount of the redemption price in cash, available in a
demand or other immediately available account in a bank or similar financial
institution; or
(ii) immediately available credit facilities, in the full amount of the
redemption price with a bank or similar financial institution; or
(iii) an agreement with a standby underwriter willing to purchase from
the Company a sufficient number of shares of stock to provide proceeds necessary
to redeem any stock that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and (iii) above,
aggregating the full amount of the redemption price.
(d) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed under this
Section 6 shall send their Preferred Stock Certificates so redeemed to the
Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five (5) business days of the Date of
Redemption at Company's Election. The Company shall not be obligated to deliver
the redemption price unless the Preferred Stock Certificates so redeemed are
delivered to the Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, until the Holder
has complied with Section 5(c)(i).
(ii) If Company elects to redeem pursuant to either Section 6(a) or
6(b) hereof, and Company fails to pay Holder the redemption price within the
time frame as required by this Section 6(d), then Company shall issue shares of
Common Stock to any such Holder who has submitted a Notice of Conversion in
compliance with Section 5(c) hereof. The shares to be issued to Holder pursuant
to this provision shall be the number of shares determined using a Conversion
Price (as defined in Section 6 hereof) that equals the
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lesser of (i) the Conversion Price on the date Holder sends its Notice of
Conversion to Company or Transfer Agent via facsimile, or (ii) the Conversion
Price on the date the Transfer Agent issues Common Stock pursuant to this
Section 6(d)(ii). The issuance of such shares shall not affect the Company's
liability to the Holder for damages, if any, arising as a result of its failure
to redeem.
(e) Blackout Period. Notwithstanding the foregoing, the Company may not
either send out a redemption notice or effect a redemption pursuant to Section
6(b) above during a Blackout Period (defined as a period during which the
Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten (10) days after the Company shall have given the Holder written notice that
the Blackout Period has been lifted.
Section 7. Advance Notice of Redemption.
(a) Holder's Right to Elect to Receive Notice of Cash Redemption by the
Company. Holder shall have the right to require Company to provide advance
notice stating whether the Company will elect to redeem Holder's shares of
Series A Preferred Stock in cash, pursuant to the Company's redemption rights
discussed in Section 6(a).
(b) Mechanics of Holder's Election Notice. Holder shall send notice
("Election Notice") to the Company and such other person as the Company may
designate, via facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise his, her or its right of conversion
(pursuant to Section 5) whether Company would elect to redeem a specific number
of shares of Holder's Series A Preferred Stock for cash in lieu of issuing
Common Stock. Company is required to disclose to Holder what action Company
would take over the subsequent twenty (20) business day period, including the
date of such Election Notice, as further discussed in subsection 7(c).
(c) Company's Response. Upon receipt by the Company of a facsimile copy of
an Election Notice, Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to Holder which shall specify
that the Election Notice has been received and the name and telephone number of
a contact person at the Company whom the Holder should contact regarding
information related to the requested advance notice. Thereafter Company must
respond by the close of business on the next business day following receipt of
Holder's Election Notice (1) via facsimile and (2) by depositing such response
with an overnight or two (2) day courier. The Company's response must state
whether it would redeem the shares, in whole or in part, or allow conversion
into shares of Common Stock without redemption. If Company does not respond to
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Holder within one (1) business day via facsimile and overnight or two (2) day
courier, Company shall be required to issue to Holder Common Stock upon Holder's
conversion within the subsequent twenty (20) business day period of Holder's
Election Notice. However, if the Company's Common Stock price decreases so that
under the Conversion Rate Company would be required to issue more than an
additional ten percent (10%) of shares of Common Stock than Holder was entitled
to receive at the time Holder sent Company its Election Notice, then Company
shall no longer be bound to convert Holder's Preferred Stock into Common Stock
but may elect to redeem for cash pursuant to Section 6(a).
Section 8. Voting Rights. The Holders of the Series A Preferred Stock shall
have no voting power whatsoever, except as otherwise provided by the New York
General Corporation Law ("New York Law"), and no Holder of Series A Preferred
Stock shall vote or otherwise participate in any proceeding in which actions
shall be taken by the Company or the shareholders thereof or be entitled to
notification as to any meeting of the shareholders.
Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company. In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten (10) days prior
to the record date specified therein, of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under New York Law the vote of the Holders of the Series
A Preferred Stock, voting separately as a class, is required to authorize a
given action of the Company, the affirmative vote or consent of the Holders of
at least a majority of the shares of the Series A Preferred Stock represented at
a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series A Preferred Stock (except as otherwise may be
required under New York Law) shall constitute the approval of such action by the
class. To the extent that under New York Law the Holders of the Series A
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one (1) class, each share of Series A Preferred Stock shall
be entitled to a number of votes equal to the number of shares of
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<PAGE>
Common Stock into which it is then convertible using the record date for the
taking of such vote of stockholders as the date on which the Conversion Price is
calculated. Holders of the Series A Preferred Stock also shall be entitled to
notice of all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Company's by-laws and applicable statutes.
Section 9. Protective Provision. So long as shares of Series A Preferred
Stock are outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by New York Law) of the
Holders of at least seventy-five percent (75%) of the then outstanding shares of
Series A Preferred Stock, and at least seventy-five percent (75%) of the then
outstanding Holders:
(a) alter or change the rights, preferences or privileges of the Series A
Preferred Stock or any Senior Securities so as to affect adversely the Series A
Preferred Stock; provided, however, that no such change may be approved at any
time on or prior to the fortieth (40th) day following the Last Closing Date
unless such change is unanimously approved by all Holders;
(b) create any new class or series of stock having a preference over or on
parity with the Series A Preferred Stock with respect to Distributions (as
defined in Section 2 above) or increase the size of the authorized number of
Series A Preferred; or
(c) do any act or thing not authorized or contemplated by this Designation
which would result in taxation of the holders of shares of the Series A
Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as
amended (or any comparable provision of the Internal Revenue Code as hereafter
from time to time amended);
provided, however, that nothing in this subsection shall limit the Company's
right to issue (i) straight debt securities or (ii) debt securities which are
convertible into restricted Common Stock which is resaleable only after the
expiration of the Rule 144 holding period.
In the event Holders of at least seventy-five percent (75%) of the then
outstanding shares of Series A Preferred Stock and at least seventy-five percent
(75%) of the then outstanding Holders agree to allow the Company to alter or
change the rights, preferences or privileges of the shares of Series A Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series A Preferred
Stock, then the Company will deliver notice of such approved change to the
Holders of the Series A Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) business days to convert pursuant to the terms of
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<PAGE>
this Certificate of Designation as they exist prior to such alteration or change
(notwithstanding the forty-five (45) day, seventy-five (75) day, and one hundred
five (105) day holding requirements set forth in Section 5(a) hereof), or
continue to hold their shares of Series A Preferred Stock provided, however,
that the Dissenting Holders may not convert anytime on or before the fortieth
(40th) day following the Last Closing Date.
Section 10. Status of Redeemed or Converted Stock. In the event any shares
of Series A Preferred Stock shall be redeemed or converted pursuant to Section 6
or Section 5 hereof, the shares so converted or redeemed shall be canceled,
shall return to the status of authorized but unissued Preferred Stock of no
designated series, and shall not be issuable by the Company as Series A
Preferred Stock.
Section 11. Preference Rights. Nothing contained herein shall be construed
to prevent the Board of Directors of the Company from issuing one (1) or more
series of Preferred Stock with dividend and/or liquidation preferences junior to
the dividend and liquidation preferences of the Series A Preferred Stock."
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against the corporation may be served. The post office address
within the State of New York to which the Secretary of State shall mail a copy
of any process against the corporation served upon him is: c/o D. David Cohen,
Esq., 501 Madison Avenue, New York, New York 10022.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: Any one or more members of the Board of Directors of the
corporation or of any committee thereof may participate in a meeting of said
Board or of any such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time.
EIGHTH: No holder of any of the shares of any class of the corporation
shall be entitled as of right to subscribe for, purchase, or otherwise acquire
any shares of any class of the corporation which the corporation proposes to
issue or any rights or options which the corporation proposes to grant for the
purchase of shares of any class of the corporation or for the purchase of any
shares, bonds, securities, or obligations of the corporation which are
convertible into or exchangeable for, or which carry any rights, to subscribe
for, purchase, or otherwise acquire shares of any class of the corporation; and
any and all of such shares, bonds, securities or obligations of the corporation,
whether now or hereafter authorized or created, may be issued, or may be
reissued or transferred if the same have been reacquired and have treasury
status, and any and all of such rights and options may be granted
16
<PAGE>
by the Board of Directors to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms, as the Board of Directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the foregoing
stated denial of any and all preemptive rights, no holder of shares of any class
of the corporation shall have any preemptive rights in respect of the matters,
proceedings, or transactions specified in subparagraphs (1) to (6), inclusive,
of paragraph (e) of Section 622 of the Business Corporation Law.
NINTH: Except as may otherwise be specifically provided in this certificate
of incorporation, no provision of this certificate of incorporation is intended
by the corporation to be construed as limiting, prohibiting, denying, or
abrogating any of the general or specific powers or rights conferred under the
Business Corporation Law upon the corporation, upon its shareholders,
bondholders, and security holders, and upon its directors, officers, and other
corporate personnel, including, in particular, the power of the corporation to
furnish indemnification to directors and officers in the capacities defined and
prescribed by the Business Corporation Law and the defined and prescribed rights
of said persons to indemnification as the same are conferred by the Business
Corporation Law.
TENTH: A. In addition to any affirmative vote required by law, by this
Certificate of Incorporation or by any Preferred Stock designation, and
notwithstanding any other provision of the Certificate of Incorporation or the
By-Laws of the Corporation (and notwithstanding the fact that some lesser
percentage may be specified by law, the Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of at least 75% of the total
voting power of all the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the adoption or authorization
of a business combination (as defined herein ) with any other entity (as defined
herein), provided, however, the provisions of this Article TENTH shall not apply
to, and only such vote as shall otherwise be required by law, this Certificate
of Incorporation or the By-Laws of the Corporation, shall be required for, any
such business combination recommended to the stockholders by two-thirds of the
whole Board of Directors of the Corporation, provided that and so long as a
majority of the members of the Board of Directors acting upon such matter shall
be continuing directors (as defined herein).
B. As used in this Certificate of Incorporation, (a) the term "continuing
director" shall mean a member of the initial Board of Directors of the
Corporation, or a member of the Board of Directors of the Corporation who was
elected by the public stockholders prior to the time that such other entity (as
defined herein) acquired shares of stock of the Corporation entitling such other
entity to exercise in excess of ten percent (10%) of the
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total voting power of all classes of stock of the Corporation entitled to vote
in the election of directors, or a member of the Board of Directors of the
Corporation who was elected or nominated for election by a majority of
continuing directors; (b) the term "other entity" shall include any individual,
corporation, partnership, person or entity and any other entity with which it or
its "affiliate" or "associate" (as defined below) has any agreement, arrangement
or understanding, directly or indirectly, for the purpose of acquiring, holding,
voting or disposing of stock of the Corporation, or which is its "affiliate" or
"associate" as those terms are defined in Rule 12b-2 (or any successor rule) of
the General Rules and Regulations under the Securities Exchange Act of 1934,
together with the successors and assigns of such persons in any transaction or
series of transactions not involving a public offering of the Corporation's
stock within the meaning of the Securities Act of 1933; and (c) the term
"business combination" shall include (i) any merger or consolidation of the
Corporation with or into any other entity, other than a merger or consolidation
that does not require the vote of the stockholders of the Corporation; (ii) any
sale, lease, transfer or exchange (in one transaction or a series of
transactions) of all or substantially all of the property and assets of the
Corporation to any other entity; (iii) any merger of consolidation of any other
entity with or into the Corporation or any subsidiary of this Corporation; or
(iv) any agreement or contract with any other entity providing for any of the
transactions described in this subparagraph (c).
ELEVENTH: In addition to any affirmative vote required by law, by this
Certificate of Incorporation or by any Preferred Stock designation, and
notwithstanding any other provision of this Certificate of Incorporation or the
By-Laws of the Corporation (and notwithstanding the fact that some lesser
percentage may be specified by law, this Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of the holders of at least 75%
of the total voting power of all the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter, change or repeal
any one or more of the provisions contained in Articles TENTH or ELEVENTH of
this Certificate of Incorporation, subject to the provisions of any class or
series of Preferred Stock which may at the time be outstanding.
20
Exhibit 10(c)
MANUFACTURING LICENSE CONTRACT
This Manufacturing License Contract ("Contract") as of December 4, 1995 by and
between the National Telecommunications Co. ("NTC") with principle offices
located at 45 Alkods Alsharif Street, Mohandiseen, Cairo, Egypt, and Cyber
Digital, Inc., a New York Corporation ("Cyber") with principle offices located
at 400 Oser Avenue, Hauppauge, NY 11788, USA.
WHEREAS, Cyber has developed and manufactures a range of high-performance
software controlled Digital Switching Systems ("CSX" and "CRX") for both public
and private telephone exchange applications, and markets its systems
internationally;
WHEREAS, NTC is interested in licensing and purchasing certain products and
parts for manufacturing, distributing, selling, installing, maintaining and
servicing Cyber's digital switching systems in order to provide telephone
service to subscribers in Egypt on an exclusive basis;
WHEREAS, NTC wishes and Cyber grants a non-exclusive license to market Cyber's
digital switching systems in Kenya, Tanzania, Uganda, Sudan, Yemen, UAE and
Qatar;
WHEREAS, the parties desire to establish a mutually beneficial and harmonious
business and technical relationship;
NOW, THEREFORE, it is agreed as follows:
ARTICLE 1. DEFINITIONS:
(a) "Products" or "Systems" shall mean Cyber's CSX or CRX digital switching
systems and its derivatives used to provide public telephone exchange services.
(b) "Public Telephone Exchange" shall comprise of digital exchanges for cities,
towns, villages and rural sites.
(c) "Line" is defined as subscriber line, trunk line, signaling line, data line,
operator line, tandem trunk line, inter-nodal digital channels, or a digital
channel of a digital trunk (i.e. E1 digital trunk consisting of 32 channels is
construed as 32 lines and T1 digital trunk consisting of 24 channels is
construed as 24 lines).
(d) "Total Number of Lines" shall be the total of all types of lines defined in
Article 1(c).
(e) "Node" is defined as consisting of 512 ports which may be used for data,
voice or trunking. Multiple nodes may be networked to obtain the desired line
size capacity.
<PAGE>
(f) "Basic Switch" is defined as node or nodes consisting of common equipment,
combination of peripheral cards for lines as defined above in Article 1(c),
generic operating software (GOS), and standard billing package with software.
The Basic Switch shall be powered from standard DC power input at -48VDC.
(g) "Common Equipment" for each node consists of one Disk Drive Module (DDM) in
SKD form w/o housing, one Main Processor Unit (MPU) in SKD form, one Time Switch
Unit (TSU) in SKD form, one DC Power Supply in SKD form, and one or two
backplanes in SKD form.
(h) "Peripheral Cards" for lines as defined in Article 1(c) consists of Voice
Interface Unit (VIU) providing 16 subscriber lines in CKD form, T1/E1 Interface
Unit (T1U/E1U) providing 2T1 or 1E1 digital trunk in SKD form, and Voice Trunk
Unit (VTU) providing 8 analog trunks in CKD form. Each node can support a
maximum of 30 Peripheral Cards.
(i) "SKD" means semi-knocked down cards which are fully tested but w/o
faceplace.
(j) "CKD" means completely knocked down cards which are unassembled with parts
in kit form.
(k) "Manufacturing Technology" shall mean the following technical information,
data, and know-how furnished to NTC by Cyber under the terms of this Contract:
(1) Know-how, methods, processes and techniques for the manufacture of VIU
and VTU peripheral cards from CKD parts provided by Cyber;
(2) Know-how, methods, processes and techniques for the manufacture,
assembly, testing and system integration of System;
(3) Drawings for mechanical parts such as cabinet, housings and faceplates
for the manufacture and fabrication of such items.
ARTICLE 2. LICENSE TO MANUFACTURE, DISTRIBUTE AND SELL PRODUCTS
2.1. Cyber hereby grants to NTC the following licenses:
(a) an exclusive non-transferrable license to use the Manufacturing
Technology for the purpose of manufacturing, selling, installing, maintaining
and servicing Systems in Egypt;
(b) a non-transferrable and a non-exclusive license to market Systems in
Kenya, Tanzania, Uganda, Sudan, Yemen, UAE and Qatar;
(c) Cyber agrees to furnish NTC with all improvements or modifications to
Systems on an ongoing basis, for a period of five years from the date of this
Contract given above.
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<PAGE>
(d) NTC must comply with the Export Administration Act of the United
States, as amended, and rules and regulations promulgated from time to time
thereunder. Accordingly NTC agrees (1) not to engage in any transaction
involving Cyber's products which is prohibited by said law and regulations, (2)
not to re-export Cyber's products to any country, (3) to execute and deliver to
Cyber such documentation as Cyber may request in order to satisfy the
requirements imposed by the United States from time to time.
2.2. Cyber hereby appoints NTC as its exclusive agent in Egypt to distribute all
of Cyber's products made in the U.S.A. Cyber also grants NTC non-exclusive
agency for the other mentioned countries in 2.1.b.
ARTICLE 3. TECHNICAL ASSISTANCE AND TRAINING
For the purposes of assisting NTC in the use of Manufacturing Technology and
Cyber's Systems, Cyber agrees to provide the following services:
3.1. Cyber shall provide technical training with respect to manufacturing,
assembly, testing, system integration, installation, database programming,
maintenance and service to sufficient number of engineers/technicians of NTC at
Cyber's facilities. Cyber shall, for a period of three months, provide technical
training to approximately ten engineers/technicians of NTC, including: four
hardware engineers, three data base programming engineers, and three
installation/maintenance engineers. The details of the technical training
program are set forth in Exhibit B attached hereto.
3.2. One field trial system comprising of 440 lines (32 trunks and 408
subscriber lines) shall be manufactured, assembled and tested by Cyber, in
accordance with the configuration which is set forth in Exhibit C attached
hereto. NTC agrees to issue an irrevocable Letter of Credit in favor of Cyber in
the amount given in Exhibit C. This system shall be delivered to NTC for
four-month field trial operation in Egypt. Upon certification and acceptance of
the field trial system by ARENTO, NTC shall permit Cyber to execute the
underlining irrevocable Letter of Credit. Cyber shall be responsible for solving
any possible problems arising out of the connection to the existing Egyptian
network. Cyber shall assist NTC in obtaining the necessary certification from
the Egyptian telephone network authorities after signing of this Contract. Upon
successful completion of such trial period to the satisfaction of NTC, Cyber
will commence deliveries of products to NTC, when requested, based on an
appropriate schedule as set forth in Exhibit D attached hereto.
3.3. It shall be Cyber's intent to fully train and certify the
engineers/technicians so they can perform all functions of manufacturing,
assembly, testing, installation, database programming, maintenance and service
on their own, without assistance from Cyber, on all future systems.
3.4. Cyber shall provide such other advice, design services and consultation
relating to the outside plant cabling, transmission systems, etc. as may be
reasonably required by NTC, from time to time, for a mutually acceptable fee
depending on the kind of services required of Cyber.
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ARTICLE 4. CONSIDERATION
4.1. As Cyber's compensation for the licenses granted to NTC hereunder, Cyber
shall be entitled to the following payments based on a selection of an option
listed below by NTC upon certification:
(a) OPTION 1:
For Egypt, NTC shall pay to Cyber a license fee of * U.S. Dollars in
installments as follows:
(1) * Dollars upon successful field trial and commencement of first year
license fee;
(2) * Dollars upon commencement of second year license fee;
(3) * Dollars upon commencement of third and final year license fee;
(b) OPTION 2:
For Egypt and other countries, NTC shall pay to Cyber on an ongoing basis a
License Fee of * per port over and above the prices for items given in
Manufacturing License Price List.
In addition, Cyber reserves the right to discount any portion of the * per
port License Fee to be applied as Cyber's equity investment in providing
telephone service. In that case, Cyber will receive a percentage of the net
revenues based on Cyber's portion of the equity investment in relative to NTC's
capital participation in perpetuity. For instance, if * per port corresponds to
20% of total investment then Cyber would be entitled to receive 20% of net
revenues generated from all telephone service billings in perpetuity.
ARTICLE 5. EQUIPMENT CONFIGURATION AND PRICES
5.1. Under this Contract, NTC plans to purchase from Cyber its Basic Switches in
SKD and CKD form at prices set forth in Exhibit A attached hereto. All prices
are FOB, New York, and subject to change if product prices increase or decrease.
5.2. All payments for equipment in SKD and CKD form shall be through irrevocable
confirmed letters of credit in favor of Cyber in U.S. dollars payable upon
shipment. With NTC's agreement, Cyber may request to receive partial cash
advance from NTC when NTC places an order.
5.3. Under this Contract, NTC can purchase products from Cyber, manufactured in
the U.S., for distribution in the territories permitted, at a large volume
discount of 30% from
- --------
* This confidential portion has been omitted and filed separately with the
Commission.
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prices as set forth in Exhibit E, Commercial Price List effective April 1, 1995,
attached hereto. All prices are FOB, New York. In addition, Cyber agrees to
match or be lower than the price per port of any major switch manufacturer such
as Mitel, AT&T, NEC, etc. Cyber also guarantees that it will not sell its
products anywhere for prices less than that given to NTC for those products
manufactured in the U.S.A. Warranty for such products shall be three months from
the date of acceptance by the customer of NTC.
ARTICLE 6. WARRANTY
6.1. Cyber warrants that the products shall be free from defects in material and
workmanship for a period of three months from the date of shipment of SKD and
CKD parts. Cyber's liability shall be limited to repair or replacement of the
defective goods at no charge to NTC during the warranty period.
6.2. Cyber shall incur no liability under this warranty if: (1) NTC fails to
notify Cyber promptly of any known alleged defect: or, (2) Cyber's tests
disclose that the alleged defect is not due to defects in material or
workmanship, but due to any non-authorized alterations, repairs to or
mishandling, abuse or misuse of equipment or any installation and maintenance
not in accordance with Cyber's procedures.
6.3. The warranty provided is the only warranty given by Cyber. All other
representations and warranties, impressed or implied, including but not limited
to implied warranties of quality and merchantability are excluded. Cyber shall
have no liability to any person or entity for any incidental, consequential, or
punitive damages (whether for property damage, other commercial or business
loss) of any kind.
ARTICLE 7. SOFTWARE
7.1. Title to all Software furnished by Cyber to NTC shall remain in Cyber. For
the useful life of any hardware provided to NTC, Cyber shall, and does hereby,
grant to NTC a non-exclusive license, annexed hereto as Exhibit F hereof, to use
such Software in connection with the Cyber equipment. Cyber shall provide the
Software (Generic Operating Software) on hard disk drive only. NTC cannot copy
or distribute the Software. NTC may sublicense use of the Software in connection
with the sale of Cyber equipment.
ARTICLE 8. NON DISCLOSURE OF CONFIDENTIAL INFORMATION
8.1. During the term of this Contract, NTC will hold confidential, treat as
proprietary, and provide adequate safeguards against any unauthorized disclosure
of Confidential Information of Cyber. Confidential information shall consist
only of those documents and data provided by Cyber to NTC. Annexed hereto and
hereby made part of this Contract as Exhibit G is properly executed Confidential
Information Agreement between both parties.
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ARTICLE 9. TERM
9.1. The terms of this Contract is in perpetuity from the date hereof. After two
years, if NTC does not perform to a mutually-agreed performance criteria, in
order to maintain exclusivity in Egypt, Cyber may, at its option, convert it to
a non-exclusive Contract on six months written notice.
ARTICLE 10. EQUITY INVESTMENT OPTION
10.1. Should NTC elect to invest in the equity of Cyber, Cyber agrees to
favorably consider the issue of equity type investments, provided however, the
terms and conditions are acceptable to the Board of Directors of Cyber.
ARTICLE 11. FORCE MAJEURE
11.1. Neither party shall be held responsible for any delay or failure to
perform resulting from a cause beyond the control of such party, including
strikes, embargoes, requirements imposed by Government regulation, civil or
military authorities, acts of God or the public enemy, and acts or omissions of
carriers.
ARTICLE 12. ARBITRATION
12.1. This Contract shall be construed and interpreted and all rights and
obligations hereunder determined in accordance with the laws of the State of New
York.
12.2. In case of any disputes which cannot be resolved by mutual goodwill, the
matter shall be resolved by submitting the dispute to the American Arbitration
Association ("AAA") in New York. If a dispute is submitted by one party to the
AAA, the other party or parties to the dispute shall participate in the
proceedings in accordance with the rules of the AAA. All parties agree to submit
to the award of the AAA which shall be final and binding.
ARTICLE 13. ENTIRE CONTRACT
13.1. This Contract constitute the entire agreement between the parties with
respect to the subject matter of this Contract. The provisions of this Contract
supersede all prior oral and written quotations, communications, agreements, and
understanding of the parties in respect of the subject matter of this Contract.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed
by their representatives duly authorized and empowered thereunto, as of the date
set forth above.
National Telecom Co.
By: /s/ Hussein A. Elkholy
----------------------
Dr. Hussein A. Elkholy, Chairman
Cyber Digital, Inc.
By: /s/ J.C. Chatpar
----------------------
J.C. Chatpar, Chairman & CEO
Witnessed:
By: /s/ Kosta S. Kovachev
----------------------
Kosta S. Kovachev, CEO
Kosmar Enterprises, Inc.
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