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EXHIBIT - 99
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY NOT BE SOLD,
TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT
UNDER THE 1933 ACT COVERING SUCH SECURITIES OR THE COMPANY
RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY
SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE 1933 ACT.
BESTNET COMMUNICATIONS CORP.
A Nevada corporation
CONVERTIBLE PROMISSORY NOTE
Scottsdale, Arizona
$110,000 March 23, 2005
FOR VALUE RECEIVED, BESTNET COMMUNICATIONS CORP., a Nevada
corporation (the
"Company"), hereby promises to pay to Anthony Silverman, whose
address is 2747
Paradise Rd. #903, Las Vegas, NV 89109, or registered assigns
(hereinafter
referred to as the "Holder"), the principal sum of $110,000.
Interest shall
accrue on the unpaid principal sum and on any accrued but unpaid
interest at the
rate of 10% per annum, to be paid monthly in arrears.
This Convertible Promissory Note (the "Note") is being issued in
consideration
of certain indebtedness of the Company to the Payee evidenced by
a certain
promissory note dated February 13, 2004, in the principal amount
of $50,000 and
a certain promissory note dated May 3, 2004 in the principal
amount of $60,000
(the "Prior Notes"). Both of the Prior Notes have been cancelled
and the
indebtedness evidenced thereby is now evidenced by this Note
1. Payment. Unless earlier converted pursuant to Section 5
hereof, the
principal of and any accrued interest under this Note shall be
due and
payable on March 31, 2006. Payment shall be made in lawful money
of
the United States of America at the address of the Holder, or at
such
other place as the Holder may designate in writing or, if
earlier, an
Event of Default (as defined below). Prepayment of principal
and
accrued interest may be made upon thirty (30) days' prior
written
notice to the Holder.
2. Default. If any of the following events (hereafter called
"Events of
Default") shall occur:
(a) the Company shall default in the payment of any principal
or
accrued interest due under this Note, whether at maturity or
by
acceleration or otherwise; or
(b) the Company shall default in the payment of any principal
or
accrued interest due under any other promissory note or
other
instrument evidencing debt for funds borrowed by the
Company;
(c) upon any breach by the Company of any representation,
warranty or
covenant in this Note; provided that, in the event of such
breach, to the extent that such breach is susceptible to
cure,
such breach shall not have been cured by the Company within
30
days after the earlier to occur of (a) written notice to the
Company of such breach or (b) the Company's knowledge of
such
breach; or
(d) the Company shall make a general assignment for the benefit
of
creditors; or
(e) the Company shall file a voluntary petition in bankruptcy,
or
shall be insolvent or adjudicated bankrupt, or shall file
any
petition or answer seeking any reorganization, arrangement,
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composition, readjustment, liquidation, dissolution or
similar
relief under the present or any future federal bankruptcy act
or
other applicable federal, state or other statute, law or
regulation, or shall file any answer admitting the material
allegation of a petition filed against the Company in such
proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of the
Company
of all or any substantial part of the properties of the
Company,
or the Company shall commence the winding up or the
dissolution
or liquidation of the Company; or
(f) within sixty (60) days after the commencement of an
action
against the Company (and service of process in connection
therewith on the Company) seeking any bankruptcy,
insolvency,
reorganization, liquidation, dissolution or similar relief
under
any present or future statute, law or regulation, such
action
shall not have been resolved in favor of the Company or all
orders or proceedings thereunder affecting the operations or
the
business of the Company stayed, or if the stay of any such
order
or proceeding shall thereafter be set aside, or if, within
sixty
(60) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part
of
the properties of the Company, such appointment shall not
have
been vacated; or
(g) the Company, without the Holder's prior written consent,
grants a
security interest in its assets, or any portion thereof: to
any
person, except for the grant of a security interest in a
purchase
money financing in which the Company grants a lien on an asset
in
connection with financing the purchase of that; or
(h) the Company (i) redeems, purchases or otherwise acquires
for
value, any share or shares of its equity securities other
than
shares issued to officers, directors, employees and
consultants
of the Company pursuant to agreements obligating the Company
to
repurchase such shares upon termination of employment with
or
service to the Company, or (ii) declares or pays any dividends
on
or declares or makes any other distribution (other than a
dividend payable on the common stock solely in shares of
common
stock) on account of any of its equity securities or sets
apart
any sum for any such purpose;
then, and in each and every such case, the Holder of this Note
may, by
written notice to the Company, declare all amounts under this
Note to be
forthwith due and payable (except that, in the case of an Event
of Default
under either Section 2(a), Section 3(d) or Section 2(f), this
Note shall
become immediately due and payable without notice, and in the
case of a
default under Section 2(a) and 2(b) the Holder of this Note may
by written
notice declare all amounts under this Note due and payable and
the balance
shall become so due and payable, without presentation, protest
or further
demand or notice of any kind, all of which are hereby expressly
waived. The
Company shall give promptly a written notice to the Holder of
the
occurrence or the approval by the Company or its Board of
Directors of any
and all of the foregoing events.
3. Conversion.
(a) Grant of Right. Subject to the terms of Section 3(d) hereof,
any Holder of
this Note has the right, at the Holder's option, at any time
prior to payment in
full of the principal balance of and accrued interest under this
Note including
without limitation during the thirty (30) day period mentioned
above, to
convert, in accordance with the provisions of this Section 3,
(i) the principal
amount of this Note, in whole but not in part, and (ii) at the
Holder's option,
the unpaid interest under the Note accrued to the date of such
conversion in
(i), above, into fully paid and non-assessable shares ("Shares")
of the Common
Stock, $.001 par value. The number of Shares into which this
Note may be
converted shall be determined by dividing the aggregate
principal amount of the
Note and/or accrued unpaid interest under the Note by the
conversion price
("Conversion Price") in effect at the time of such conversion.
The initial
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Conversion Price shall be $0.12 per Share, determined as being
equal to the
closing price for the Common Stock as reported on the OTC
BULLETIN BOARD at the
close of business on the date of this Note.
(b) Notice of Conversion. Before the Holder shall be entitled to
convert this
Note into Shares, he shall surrender this Note at the office of
the Company and
shall give written notice by mail, postage prepaid, to the
Company at its
principal corporate office, of the election to convert the same,
if the Holder
is electing to convert pursuant to Section 5 (a), and shall
state therein on the
Notice of Conversion annexed to this Note the entire principal
amount of the
Note to be converted and the accrued and unpaid interest on such
principal
amount that is also to be converted.
(c) Satisfaction with Requirements of Securities Act of 1933.
Notwithstanding
anything to the contrary contained herein, each and every
conversion of this
Note is contingent upon the Company's satisfaction that the
issuance of Common
Stock upon the conversion is exempt from the requirements of the
Securities Act
of 1933, as amended, and all applicable state securities laws.
The Holder agrees
to execute any and all documents deemed necessary by the Company
to effect a
conversion of this Note.
(d) Mechanics and Effect of Conversion. No fractional Shares
shall be issued
upon conversion of this Note. In lieu of the Company issuing any
fractional
Shares to the Holder upon the conversion of this Note, the
Company shall pay to
the Holder, when it is due, the amount of outstanding principal
that is not so
converted. Upon the conversion of this Note pursuant to Section
3(a) above, the
Holder shall surrender this Note, duly endorsed, at the
principal office of the
Company. At its expense, the Company shall, as soon as
practicable thereafter,
issue and deliver to such Holder at such principal office a
certificate or
certificates evidencing the number of Shares to which the Holder
shall be
entitled upon such conversion (bearing such legends as are
required by
applicable state and federal securities laws in the opinion of
counsel to the
Company), together with any other securities and property to
which the Holder is
entitled upon such conversion under the terms of this Note,
including a check
payable to the Holder for any cash amounts payable for unpaid
and accrued
interest and for fractional shares as described above. In the
event of any
conversion of this Note pursuant to Section 3(a) above, such
conversion shall be
deemed to have been made immediately prior to the closing of the
issuance of
such Common Stock and on and after such date the Holder of this
Note entitled to
receive the shares of such Common Stock issuable upon such
conversion shall be
treated for all purposes as the record holder of such shares.
Upon conversion of
this Note, the Company shall be forever released from all its
obligations and
liabilities under this Note, except that the Company shall be
obligated to pay
the Holder within ten (10) days after the date of such
conversion any cash
amounts resulting from fractional shares as described above, and
any unpaid and
accrued interest (not converted under the Note) to and including
the date of
such conversion, and no more.
4. Conversion Price Adjustments.
(a) Stock Splits and Combinations. If the Company shall at any
time subdivide or
combine its outstanding shares of Common Stock, this Note shall,
after that
subdivision or combination, evidence the right to convert into
the number of
shares of Common Stock that would have been issuable as a result
of that change
with respect to the Shares of Common Stock which were issuable
upon conversion
of this Note immediately before that subdivision or combination.
If the Company
shall at any time subdivide the outstanding shares of Common
Stock, the
Conversion Price then in effect immediately before that
subdivision shall be
proportionately decreased, and, if the Company shall at any time
combine the
outstanding shares of Common Stock, the Conversion Price then in
effect
immediately before that combination shall be proportionately
increased. Any
adjustment under this section shall become effective at the
close of business on
the date the subdivision or combination becomes effective.
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(b) Reclassification, Exchange and Substitution. If the Common
Stock issuable
upon conversion of this Note shall be changed into the same or a
different
number of shares of any other class or classes of stock, whether
by capital
reorganization, reclassification, or otherwise (other than a
subdivision or
combination of shares provided for above), the holder of this
Note shall, on its
conversion be entitled to receive in lieu of the Common Stock
which the Holder
would have become entitled to receive but for such change, a
number of shares of
such other class or classes of stock equivalent to the number of
shares of
Common Stock that would have been received by the holder on
conversion of this
Note immediately before that change.
(c) Reorganizations, Mergers, Consolidations or Sale of Assets.
If at any time
there shall be a capital reorganization of the Company's Common
Stock (other
than a combination, reclassification, exchange, or subdivision
of shares
provided for elsewhere above) or merger or consolidation of the
Company with or
into another corporation, or the sale of the Company's
properties and assets as,
or substantially as, an entirety to any other person, then, as a
part of such
reorganization, merger, consolidation or sale, lawful provision
shall be made so
that the holder of this Note shall thereafter be entitled to
receive upon
conversion of this Note, the number of shares of Common Stock or
other
securities or property of the Company, or of the successor
corporation resulting
from such merger or consolidation, to which a holder of the
Common Stock
deliverable upon conversion of this Note would have been
entitled in such
capital reorganization, merger, or consolidation or sale if this
Note had been
converted immediately before that capital reorganization,
merger, consolidation,
or sale. In any such case, appropriate adjustment (as determined
in good faith
by the Company's Board of Directors) shall be made in the
application of the
provision
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