CERISTAR, INC.
PROMISSORY NOTE
$175,000.00
Original Issue Date: November 25,
2003
FOR VALUE RECEIVED, the undersigned, CERISTAR,
INC., a Delaware corporation with offices at 50 West Broadway,
Suite 1100, Salt Lake City, UT, 84101 (the "Maker"),
unconditionally promises to pay to the order of SOVCAP EQUITY
PARTNERS, LTD., a Bahamas corporation, or its registered assigns
(the "Holder"), at its office at c/o Lion Corporate Securities
Ltd., Cumberland House #27, Cumberland Street, P.O. Box N-10818,
Nassau, New Providence, The Bahamas or at such other place as may
be designated by the holder hereof in writing, the principal sum of
ONE HUNDDRED, SEVENTY-FIVE THOUSAND DOLLARS ($175,000), without
interest, except as specified herein.
1. Payments.
The Maker agrees to pay the principal of this Note within ten (10)
days following demand from the Holder requesting payment, which
demand may be made at any time after the 120
th day following the issue date of this Note. The
Maker shall have the right to prepay this Note in whole at any time
or in part from time to time. Any payments, including prepayments,
of principal of this Note, whether upon demand, at the option of
the Company, upon default or otherwise shall include a repayment
premium equal to the product of (a) the Repayment Percentage (as
defined below) and (b) the number of thirty (30) day periods
(rounded up to the next whole number) (each 30-day period referred
to as a "Monthly Period") that this Note has been outstanding
(computed from the date of issuance of this Note to the date of
payment) but in no event higher than the maximum amount permitted
by law. For purposes of this Note, the Repayment Percentage shall
mean one and one-half percent (1.5%) of the outstanding principal
amount of this Note. All payments by the Maker on account of
principal, premium, interest or fees hereunder shall be made in
money of the United States of America that at the time of payment
is legal tender, by wire transfer of immediately available
funds.
2. Interest.
Without limiting any of the rights of the holder of this Note under
Section 4 of this Note, if any payment of principal or premium
thereon is not made when the same shall become due and payable
hereunder, interest shall accrue thereon at a rate per annum equal
to twelve percent (12%) per annum. Notwithstanding anything to the
contrary contained herein, no payments that are considered interest
shall accrue or be payable at a rate in excess of the maximum
amount permitted by law.
3. Use of
Proceeds. The Company agrees use the proceeds from the sale and
issuance of the Bridge Notes only for payment of following
expenses:
b.
Employee/Management Compensation
c. Equipment
Lease/Purchase Payments
(a) At any time after
the date that is 120 days following the issue date of this Note and
from time to time, the Holder may convert all or any portion of
this Note, together with the Repayment Percentage, and accrued and
unpaid interest and fees due on this Note (the "Conversion Amount")
into shares of common stock of the Maker (the "Common
Stock").
(b) If the Holder
elects to convert less than the full principal amount of this Note,
the Maker shall issue a Note in substantially the same form as this
Note, except that the principal amount shall be reduced by the
principal amount so converted (exclusive of the redemption
premium).
(c) The number of
shares of Common Stock issuable upon conversion of this Note is
equal to the quotient of the Conversion Amount of that portion of
the Note being converted divided by the Conversion Price.
Fractional shares will not be issued. In lieu of any fraction of a
share, the Maker shall deliver its check for the dollar amount of
the less than full share remainder. For purposes of this Note, the
"Conversion Price" shall mean the product of (a) .75 and (b) the
average closing bid price of the Common Stock for the five trading
days ending on the trading day immediately preceding the Conversion
Date.
(d) To convert this
Note into Common Stock, (the "Conversion Date"), the Holder hereof
shall (A) deliver or transmit by facsimile, for receipt on or prior
to 11:59 P.M., Eastern Time, on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice") to the Maker or its designated
transfer agent for its Common Stock (the "Transfer Agent"), and (B)
surrender to a common carrier for delivery to the Maker or the
Transfer Agent as soon as practicable following such date, this
Note (or an indemnification undertaking with respect to such shares
in the case of the loss, theft, or destruction of this Note) and
the originally executed Conversion Notice. The date the Maker
receives the Conversion Note and this Note is hereinafter the
"Conversion Date."
(e) Upon receipt by
the Maker of a facsimile copy of a Conversion Notice, the Maker
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to Holder. Upon receipt by the Maker or the
Transfer Agent of the Note to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice,
the Maker or the Transfer Agent (as applicable) shall, within five
(5) business days following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery to the address
as specified in the Conversion Notice, a certificate, registered in
the name of Holder or its designee, for the number of shares of
Common Stock to which Holder shall be entitled or (B) credit the
aggregate number of shares of Common Stock to which such Holder
shall be entitled to the Holder's or its designee's balance account
at The Depository Trust Company.
(f) The Person or
persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the "Record Holder" or Holder of such shares of Common Stock on the
Conversion Date.
(g) If the Maker shall
fail to issue to Holder within five (5) business days following the
date of receipt by the Maker or the Transfer Agent of this Note to
be converted pursuant to a Conversion Notice, a certificate for the
number of shares of Common Stock to which each Holder' is entitled
upon Holder's conversion of this Note, in addition to all other
available remedies which such Holder may pursue hereunder, the
Maker shall pay additional damages to Holder' on each day after the
fifth (5th) business day following the date of receipt by the Maker
or the Transfer Agent an amount equal to 1,0% of the product of (A)
the number of shares of Common Stock not issued to Holder and to
which Holder is entitled multiplied by (B) the Closing Bid Price of
the Common Stock on the business day following the date of receipt
by the Maker or the Transfer Agent of the Conversion Notice. The
foregoing notwithstanding, Holder at its option may withdraw a
Conversion Notice, and remain a Holder of this Note, if Holder has
otherwise complied with this Section 4.
(h) If any adjustment
to the Conversion Price to be made pursuant to clause (j) of this
Section 4 becomes effective immediately after a record date for an
event as therein described, and conversion occurs prior to such
event but after the record date, the Maker may defer issuing,
delivering, or paying to Holder any additional shares of Common
Stock or check for any cash remainder required by reason of such
adjustment until the occurrence of such event, provided that the
Maker delivers to Holder a due bill or other appropriate instrument
evidencing the Holders' right to receive such additional shares or
check upon the occurrence of the event giving rise to the
adjustment.
(i) Until
such time as this Note has been fully redeemed, the Maker
shall
reserve out of its authorized but unissued
Common Stock enough shares of Common Stock to
permit the conversion of the entire Redemption
Price and all accrued and unpaid interest due on
this Note at any time. All shares of Common
Stock issued upon conversion of this Note shall be
fully paid and nonassessable. The Maker
covenants that if any shares of Common Stock,
required to be reserved for purposes of
conversion of this Note hereunder, require registration
with or approval of any governmental authority
under any federal or state law or listing upon any
national securities exchange before such shares
may be issued upon conversion, the Maker shall
in good faith, as expeditiously as possible,
endeavor to cause such shares to be duly registered,
approved or listed, as the case may
be.
(j) The
Conversion Price shall be subject to adjustment from time to time
as
follows:
(i) If the
Maker at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Maker at any
time combines (by combination, reverse stock split, or otherwise)
one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased.
(ii) Prior to the
consummation of any Organic Change (as defined below), the Maker
will make appropriate provision (in form and substance satisfactory
to the Holder to insure that Holder will thereafter have the right
to acquire and receive in lieu of, or in addition to, (as the case
may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of this Holder's
Note, such shares of stock, securities, or assets as may be issued
or payable with respect to, or in exchange for, the number of
shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of this Note had such Organic Change
not taken place. In any such case, the Maker will make appropriate
provision (in form and substance satisfactory to Holder with
respect to such Holder's rights and interests to insure that the
provisions of this clause (j) will thereafter be applicable. The
Maker will not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor entity (if
other than the Maker) resulting from consolidation or merger or the
entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to Holder), the obligation to
deliver to Holder such shares of stock, securities, or assets as,
in accordance with the foregoing provisions, that Holder may be
entitled to acquire. For purposes of this Agreement, "Organic
Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, or sale of all or
substantially all of the Maker's assets to another Person (as
defined below), or other similar transaction which is effected in
such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities,
or assets with respect to or in exchange for Common Stock; and
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department or
agency thereof.
(k) The Holder
shall be entitled to piggyback registration rights with respect to
the shares of Common Stock issuable upon conversion of this Note by
the Holder. The Company agrees to include such shares on the first
available registration, including forms S-l, SB-2 or S-3, filed by
the Company with Securities and Exchange Commission.
(1) Unless
the Note is under Default (as defined in Section 5 of the Note) or
unless prior to an Organic Change (as defined in Section 4(j)(n) of
the Note), in no event shall the Holder be entitled to convert the
Notes in excess of that number, which upon giving effect to such
conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed
9.99% of the outstanding shares of the Common Stock following the
conversion. For purposes of the foregoing proviso, the aggregate
number of shares of common stock beneficially owned by the Holder
and its affiliates shall include the number of shares of Common
Stock issuable upon conversion or exercise of the Notes with
respect to which the determination is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon
(i) conversion of the remaining unconverted Notes owned by the
Holder or its affiliates, and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the holder
and it affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4(1), beneficial ownership shall be
calculated in accordance with Section 13(d) of the 1934
Act.
5. Events of
Default . If any of the following conditions or events shall
occur and be continuing: (a) the Maker shall default in the payment
of principal of this Note when the same becomes due and payable;
(b) the Maker shall admit in writing its inability to pay its debts
as such debts become due; (c) the Maker shall make a general
assignment for the benefit of creditors; (d) the Maker shall
commence a voluntary case under the Federal Bankruptcy Code (as now
or hereafter in effect); (e) the Maker shall file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, or adjustment of debts; (f) there shall have been
instituted against the Maker any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other
proceedings for relief under the Federal Bankruptcy Code or any
other law relating to bankruptcy, insolvency or adjustment of
debts, which are not dismissed within sixty (60) days after such
institution; or (g) the Maker shall take any action for the
purposes of effecting any of the foregoing; then, and in any such
event, the Holder may at any time (unless all defaults shall
theretofore have been remedied) at its option, declare this Note to
be due and payable, whereupon this Note shall forthwith mature and
become due and payable, together with interest accrued thereon,
without presentment, demand, protest or notice, all of which are
hereby waiver.
6. NEGATIVE
COVENANTS. The provisions of this Section 6 shall remain in effect
so long as any of the Bridge Notes shall remain
outstanding
(a) Restrictions on
Debt. Hereafter, the Company will not create, assume, or incur or
become or at any time be liable in respect of, any Debt, except:
Bridge Notes issued pursuant to this Agreement; Debt outstanding on
the date hereof to the extent reflected on the most recent balance
sheet of the Company or incurred in the ordinary course of business
thereafter and debt incurred to accomplish duties and obligations
of the Company under contracts to provide customer premises
equipment, services, or other related obligations to existing or
new customers of the Company as a result of business contracts;
Purchase money security interests not to exceed $250,000 per year;
and Secured debt in an aggregate principal amount up to $20
million.
(i) Definition
of Debt. For purposes of this Agreement, the capitalized term
"Debt" of any Person shall mean: all indebtedness of such Person
for borrowed money, including without limitation obligations
evidenced by bonds, debentures, Bridge Notes, or other similar
instrument; all indebtedness guaranteed in any manner by such
Person, or in effect guaranteed by such Person through an agreement
to purchase, contingent or otherwise; all accounts payable which,
to the knowledge of such Person, have remained unpaid for a period
of 90 days after the same become due and payable in accordance with
their respective terms taking into account any grace period
relating to the due date expressly set forth in the applicable
invoice with respect to the payment of such accounts payable; all
indebtedness secured by any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in property owned by
such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness; all indebtedness
created or arising under any conditional sale agreement or lease in
the nature thereof (including obligations as lessee under leases
which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capitalized leases)
(but excluding operating leases) or other title
retention
agreement with respect to property acquired by such Person, even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession of
such property all bankers' acceptances and letters of credit; and
liabilities in respect of unfunded vested benefits under Plans
covered by Title IV of ERISA
(b) Restrictions on
Equity Sales. The Company will not offer or enter into an agreement
to sell equity securities of the Company, under private placement
memorandum or other private offering document or letter, whether of
equity securities, convertible debt securities, or securities or
instruments convertible into or exchangeable for debt or equity
securities of the Company, except through an underwritten public
offering or after receiving approval by the purchaser as described
in 6(f) below.
(c) Restrictions on
Transactions with Affiliates. The Company will not make any loans
or advances to any of its officers, shareholders, or Affiliates,
other than expense advances made by the Company to its officers and
employees in the ordinary course of business The Company will not
increase the salary of any executive officer, or the remuneration
of any director.
(d) Restrictions on
Investments. Other than as permitted by this Agreement, the Company
will not purchase or acquire or invest in, or agree to purchase or
acquire or invest in the business, property, or assets of, or any
securities of, any other company or business, provided
however, that the Company may enter into contracts relating
to the expansion of its business and may invest its Excess Cash as
defined below in: securities issued or directly and fully
guaranteed or insured by the United States government or any agency
thereof having maturities of not more than one year from the date
of acquisition; certificates of deposit or eurodollar certificates
of deposit, having maturities of not more than one hundred eighty
days from the date of acquisition, or one year from the date of
acquisition in the case of certificates of deposit or eurodollar
certificates of deposit being used to secure the Company's
reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of
credit not otherwise permitted under this Agreement); commercial
paper of any Person that is not a subsidiary or an Affiliate of the
Company, maturing within one hundred eiaht v da v s
after the date of acquisition 0 bank loan participations* and money market
instruments having maturities of not more than one hundred eighty
days from the date of acquisition, or one year from the date of
acquisition in the case of money market instruments being used to
secure the Company's reimbursement obligations under letters of
credit (provided that nothing contained herein shall be construed
to permit letters of credit not otherwise permitted under this
Agreement); in all cases of such credit quality as a prudent
business person would invest in. As used in this Section,
"Excess Cash" shall mean that portion of the proceeds of the
Bridge Notes that has not been invested as described in Section 3
hereof.
(e) Change in
Business; Operations. The Company will not cause or effect any
change in or addition to the primary business of the Company that
has not been approved by Purchaser, such that more than 20% of the
consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged
on the date hereof as reflected in the applicable last SEC Document
filed prior to the First Closing ("Change in Business"). The
business of the Company and its subsidiaries shall not be conducted
in violation of any law, ordinance, or regulation of any
governmental entity.
(f) Exceptions With
Consent of Purchasers. The Company may seek an exception to any
prohibited action under this Section by first, giving
written notice to Purchaser of Bridge Note under this Agreement,
along with copies of all documentation requested by any Purchaser
relating to such requested exception, and second, in
the sole discretion of Purchaser, satisfactorily responding to any
Purchaser inquiries about the requested action. The Company may
undertake any such requested action otherwise prohibited by this
Section 6 only after receiving the advance written consent of
Purchaser hereunder.
7. No Waiver:
Rights and Remedies Cumulative . No failure on the part of the
holder of this Note to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the holder of this Note of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies herein
provided are cumulative and not exclusive of any remedies or rights
provided by law or by any other agreement between the Maker and the
Holder.
8. Costs and
Expenses . The Maker shall reimburse the holder of this Note
for all costs and expenses incurred by it, and shall pay the
reasonable fees and disbursements of counsel to the holder of this
Note, in connection with the enforcement of the holder's rights
hereunder, whether or not legal proceedings are
initiated.
9. Amendments
. No amendment, modification or waiver of any provision of this
Note nor consent to any departure by the Maker therefrom shall be
effective unless the same shall be in writing and signed by the
holder of this Note and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
10. Governing Law;
Jurisdiction and Service of Process . This Note shall be
governed by and construed in accordance with the laws of the State
of Utah, without giving effect to conflict of laws. The Maker
hereby irrevocably consents to the jurisdiction of the courts of
the State of Utah and of any federal court located in such State in
connection with any action or proceeding arising out of or relating
to this Note, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Note or a breach of
this Note or any such document or instrument. In any such action or
proceeding, the Maker waives personal service of any summons,
complaint, or other process and agrees that service thereof may be
made in accordance with Section 11 of this Note. Within 30 days
after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties to such action or
proceeding, the Maker shall appear or answer such summons,
complaint, or other process. Should the Maker so served fail to
appear or answer within such 30-day period or such extended period,
as the case may be, the Maker shall be deemed in default and
judgment may be entered by the Holder against the Maker as demanded
in any summons, complaint, or other process so served.
11. Successors and
Assigns . This Note shall be binding upon the Maker and its
successors and permitted assigns and the terms hereof shall inure
to the benefit of the Holder and its successors and assigns,
including subsequent holders hereof.
12. Notice ,
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received: (a) upon hand delivery (receipt acknowledged) or delivery
by telecopy or facsimile (with transmission confirmation report) if
delivered on a business day during normal business hours where such
notice is to be received, or the first business day following such
delivery if delivered other than on a business day during normal
business hours where such notice is to be received; or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever first shall occur, to the
address set forth above or to such other address as the party shall
have furnished in writing in accordance with the provisions of this
Section 10 except that such change shall not be effective until
actual receipt thereof.
13.
Severability . The provisions of this Note are severable,
and if any provision shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any
jurisdiction.
14. Waiver of
Notice . The Maker hereby waives presentment, demand for
payment, protest, notice of protest and all other demands or
notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
15. Set-off.
Counterclaim . In the event the holder hereof seeks to enforce
its rights under this Note, the Maker waives the right to interpose
any set-off or counterclaim of any nature or description against
the holder.
16. Headings .
The headings in this Note are solely for the convenience of
reference and shall be given no effect in the construction or
interpretation of this Note.
IN WITNESSETH WHEREOF, the undersigned has duly
executed this Note as date first above written.
COUNTY OF SALT
LAKE ) STATE OF UTAH ) Subscribed and sworn to before me thi
s 25th dav o f November 2003
Notary Public Residing in Salt Lake City, Utah /
My Commission Expires : 1/15/2007
Reference is
made to terms and conditions of the Note, dated November 25,2003,
in the principal amount of $175,000.00, and registered in the name
of SovCap Equity Partners, Ltd {NAME OF HOLDER} (the
"Note"). In accordance with and pursuant to the terms of the
Note, the undersigned hereby elects to
convert
$ in
principal amount of the Note into shares of Common Stock, $ 001 par
value
per share (the
"Common Stock"), of the Company, by tendering the original
Note specified below as of the date specified below.
Date of
Conversion:
Principal
Amount of Note to be converted: Redemption Premium Accrued Interest
and/or Fees
Total Amount of
Note to be Converted
Please
confirm the following information:
Conversion
Price:
Number of
shares of Common Stock to be issued:
Please issue
the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue
to:
Authorization:
If electronic
book entry transfer, complete the following:
Account
Number:
Transaction
Code
Number:
COMPANY
ACKNOWLEDGEMENT TO CONVERSION NOTICE
ACKNOWLEDGED
AND AGREED: CERISTAR, INC.
By:___________________________________
Date:
IRREVOCABLE
STOCK OR BOND POWER
For Value
received, the undersigned does (do) hereby sell, assign, and
transfer to:
❖
If stock,
complete this portion:
represented
by certificate(s) Number(s)_
In the name of
the undersigned on the books of said company.
❖
If Bonds,
complete this portion:
bonds
of IMHI (fka Ceristar, Inc.)
in the
principal amount of $175,000 Number(s) November 25,
2003
inclusive
standing in the name of the undersigned on books of said
company.
The undersigned
does (do) hereby irrevocably constitute and appoint
[Missing
Graphic Reference]
attorney to
transfer the said stock or bond(s), as the case may be, on the
books of said company, with full power of substitution in the
premises.
CERISTAR, INC.
PROMISSORY
NOTE
Original Issue Date: May 28,
2004
FOR VALUE RECEIVED, the undersigned, CERISTAR,
INC., a Delaware corporation with offices at 50 West Broadway,
Suite 1100, Salt Lake City, UT, 84101 (the "Maker"),
unconditionally promises to pay to the order of SOVCAP EQUITY
PARTNERS, LTD., a Bahamas corporation, or its registered assigns
(the "Holder"), at its office at c/o Lion Corporate Securities
Ltd., Cumberland House #27, Cumberland Street, P.O. Box N-10818,
Nassau, New Providence, The Bahamas or at such other place as may
be designated by the holder hereof in writing, the principal sum of
THIRTY-FIVE THOUSAND DOLLARS ($35,000.00), without interest, except
as specified herein.
1. Payments.
The Maker agrees to pay the principal of this Note within ten (10)
days following demand from the Holder requesting payment, which
demand may be made at any time after the 120
th day following the issue date of this Note. The
Maker shall have the right to prepay this Note in whole at any time
or in part from time to time. Any payments, including prepayments,
of principal of this Note, whether upon demand, at the option of
the Company, upon default or otherwise shall include a repayment
premium equal to the product of (a) the Repayment Percentage (as
defined below) and (b) the number of thirty (30) day periods
(rounded up to the next whole number) (each 30-day period referred
to as a "Monthly Period") that this Note has been outstanding
(computed from the date of issuance of this Note to the date of
payment) but in no event higher than the maximum amount permitted
by law. For purposes of this Note, the Repayment Percentage shall
mean one and one-half percent (1.5%) of the outstanding principal
amount of this Note. All payments by the Maker on account of
principal, premium, interest or fees hereunder shall be made in
money of the United States of America that at the time of payment
is legal tender, by wire transfer of immediately available
funds.
2. Interest.
Without limiting any of the tights of the holder of this Note under
Section 4 of this Note, if any payment of principal or premium
thereon is not made when the same shall become due and payable
hereunder, interest shall accrue thereon at a rate per annum equal
to twelve percent (12%) per annum. Notwithstanding anything to the
contrary contained herein, no payments that are considered interest
shall accrue or be payable at a rate in excess of the maximum
amount permitted by law.
3. Use of
Proceeds. The Company agrees use the proceeds from the sale and
issuance of the Bridge Notes only for payment of following
expenses:
a. May 2004 budget,
as provided by the Company in attached Exhibit B
b. Consulting fees,
as agreed
(a) At any time after
the date that is 120 days following the issue date of this Note and
from time to time, the Holder may convert all or any portion of
this Note, together with the Repayment Percentage, and accrued and
unpaid interest and fees due on this Note (the "Conversion Amount")
into shares of common stock of the Maker (the "Common
Stock").
(b) If the Holder
elects to convert less than the full principal amount of this Note,
the Maker shall issue a Note in substantially the same form as this
Note, except that the principal amount shall be reduced by the
principal amount so converted (exclusive of the redemption
premium).
(c) The number of
shares of Common Stock issuable upon conversion of this Note is
equal to the quotient of the Conversion Amount of that portion of
the Note being converted divided by the Conversion Price.
Fractional shares will not be issued. In lieu of any fraction of a
share, the Maker shall deliver its check for the dollar amount of
the less than full share remainder. For purposes of this Note, the
"Conversion Price" shall mean the product of (a) .75 and (b) the
average closing bid price of the Common Stock for the five trading
days ending on the trading day immediately preceding the Conversion
Date.
(d) To convert this
Note into Common Stock, (the "Conversion Date"), the Holder hereof
shall (A) deliver or transmit by facsimile, for receipt on or prior
to 11:59 P.M., Eastern Time, on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice") to the Maker or its designated
transfer agent for its Common Stock (the "Transfer Agent"), and (B)
surrender to a common carrier for delivery to the Maker or the
Transfer Agent as soon as practicable following such date, this
Note (or an indemnification undertaking with respect to such shares
in the case of the loss, theft, or destruction of this Note) and
the originally executed Conversion Notice. The date the Maker
receives the Conversion Note and this Note is hereinafter the
"Conversion Date."
(e) Upon receipt by
the Maker of a facsimile copy of a Conversion Notice, the Maker
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to Holder. Upon receipt by the Maker or the
Transfer Agent of the Note to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice,
the Maker or the Transfer Agent (as applicable) shall, within five
(5) business days following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery to the address
as specified in the Conversion Notice, a certificate, registered in
the name of Holder or its designee, for the number of shares of
Common Stock to which Holder shall be entitled or (B) credit the
aggregate number of shares of Common Stock to which such Holder
shall be entitled to the Holder's or its designee's balance account
at The Depository Trust Company.
(f) The Person or
persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the "Record Holder" or Holder of such shares of Common Stock on the
Conversion Date.
(g) If the Maker shall
fail to issue to Holder within five (5) business days following the
date of receipt by the Maker or the Transfer Agent of this Note to
be converted pursuant to a Conversion Notice, a certificate for the
number of shares of Common Stock to which each Holder is entitled
upon Holder's conversion of this Note, in addition to all other
available remedies which such Holder may pursue hereunder, the
Maker shall pay additional damages to Holder on each day after the
fifth (5th) business day following the date of receipt by the Maker
or the Transfer Agent an amount equal to 1.0% of the product of (A)
the number of shares of Common Stock not issued to Holder and to
which Holder is entitled multiplied by (B) the Closing Bid Price of
the Common Stock on the business day following the date of receipt
by the Maker or the Transfer Agent of the Conversion Notice. The
foregoing notwithstanding, Holder at its option may withdraw a
Conversion Notice, and remain a Holder of this Note, if Holder has
otherwise complied with this Section 4.
(h) If any adjustment
to the Conversion Price to be made pursuant to clause (j) of this
Section 4 becomes effective immediately after a record date for an
event as therein described, and conversion occurs prior to such
event but after the record date, the Maker may defer issuing,
delivering, or paying to Holder any additional shares of Common
Stock or check for any cash remainder required by reason of such
adjustment until the occurrence of such event, provided that the
Maker delivers to Holder a due bill or other appropriate instrument
evidencing the Holders' right to receive such additional shares or
check upon the occurrence of the event giving rise to the
adjustment.
(i) Until
such time as this Note has been fully redeemed, the Maker
shall
reserve out of its authorized but unissued
Common Stock enough shares of Common Stock to
permit the conversion of the entire Redemption
Price and all accrued and unpaid interest due on
this Note at any time. All shares of Common
Stock issued upon conversion of this Note shall be
fully paid and nonassessable. The Maker
covenants that if any shares of Common Stock,
required to be reserved for purposes of
conversion of this Note hereunder, require registration
with or approval of any governmental authority
under any federal or state law or listing upon any
national securities exchange before such shares
may be issued upon conversion, the Maker shall
in good faith, as expeditiously as possible,
endeavor to cause such shares to be duly registered,
approved or listed, as the case may
be.
(j) The
Conversion Price shall be subject to adjustment from time to time
as
follows:
(i) If the
Maker at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Maker at any
time combines (by combination, reverse stock split, or otherwise)
one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased.
(ii) Prior to the
consummation of any Organic Change (as defined below), the Maker
will make appropriate provision (in form and substance satisfactory
to the Holder to insure that Holder will thereafter have the right
to acquire and receive in lieu of, or in addition to, (as the case
may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of this Holder's
Note, such shares of stock, securities, or assets as may be issued
or payable with respect to, or in exchange for, the number of
shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of this Note had such Organic Change
not taken place. In any such case, the Maker will make appropriate
provision (in form and substance satisfactory to Holder with
respect to such Holder's rights and interests to insure that the
provisions of this clause (j) will thereafter be applicable. The
Maker will not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor entity (if
other than the Maker) resulting from consolidation or
merger or the
entity purchasing such assets assumes, by written instrument (in
form and
substance
satisfactory to Holder), the obligation to deliver to Holder such
shares of stock, securities, or assets as, in accordance with the
foregoing provisions, that Holder may be entitled to acquire. For
purposes of this Agreement, "Organic Change" means any
recapitalization, reorganization, reclassification, consolidation,
merger, or sale of all or substantially all of the Maker's assets
to another Person (as defined below), or other similar transaction
which is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent
liquidation) stock, securities, or assets with respect to or in
exchange for Common Stock; and "Person" means an individual, a
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.
(k) The Holder
shall be entitled to piggyback registration rights with respect to
the shares of Common Stock issuable upon conversion of this Note by
the Holder. The Company agrees to include such shares on the first
available registration, including forms S-l, SB-2 or S-3, filed by
the Company with Securities and Exchange Commission.
(1) Unless
the Note is under Default (as defined in Section 5 of the Note) or
unless prior to an Organic Change (as defined in Section 4(j)(ii)
of the Note), in no event shall the Holder be entitled to convert
the Notes in excess of that number, which upon giving effect to
such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to
exceed 9.99% of the outstanding shares of the Common Stock
following the conversion. For purposes of the foregoing proviso,
the aggregate number of shares of common stock beneficially owned
by the Holder and its affiliates shall include the number of shares
of Common Stock issuable upon conversion or exercise of the Notes
with respect to which the determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (i) conversion of the remaining unconverted Notes
owned by the Holder or its affiliates, and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the holder and it affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 4(1), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the 1934 Act.
5. Events of
Default . If any of the following conditions or events shall
occur and be continuing: (a) the Maker shall default in the payment
of principal of this Note when the same becomes due and payable;
(b) the Maker shall admit in writing its inability to pay its debts
as such debts become due; (c) the Maker shall make a general
assignment for the benefit of creditors; (d) the Maker shall
commence a voluntary case under the Federal Bankruptcy Code (as now
or hereafter in effect); (e) the Maker shall file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, or adjustment of debts; (f) there shall have been
instituted against the Maker any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other
proceedings for relief under the Federal Bankruptcy Code or any
other law relating to bankruptcy, insolvency or adjustment of
debts, which are not dismissed within sixty (60) days after such
institution; or (g) the Maker shall take any action for the
purposes of effecting any of the foregoing; then, and in any such
event, the Holder may at any time (unless all defaults shall
theretofore have been remedied) at its option, declare this Note to
be due and payable, whereupon this Note shall forthwith mature and
become due and payable, together with interest accrued thereon,
without presentment, demand, protest or notice, all of which are
hereby waiver.
6. NEGATIVE
COVENANTS. The provisions of this Section 6 shall remain in effect
so long as any of the Bridge Notes shall remain
outstanding.
(a) Restrictions on
Debt. Hereafter, the Company will not create, assume, or incur or
become or at any time be liable in respect of, any Debt, except:
Bridge Notes issued pursuant to this Agreement; Debt outstanding on
the date hereof to the extent reflected on the most recent balance
sheet of the Company or incurred in the ordinary course of business
thereafter and debt incurred to accomplish duties and obligations
of the Company under contracts to provide customer premises
equipment, services, or other related obligations to existing or
new customers of the Company as a result of business contracts;
Purchase money security interests not to exceed $250,000 per year;
and Secured debt in an aggregate principal amount up to $20
million.
(i) Definition
of Debt. For purposes of this Agreement, the capitalized term
"Debt" of any Person shall mean: all indebtedness of such Person
for borrowed money, including without limitation obligations
evidenced by bonds, debentures, Bridge Notes, or other similar
instrument; all indebtedness guaranteed in any manner by such
Person, or in effect guaranteed by such Person through an agreement
to purchase, contingent or otherwise; all accounts payable which,
to the knowledge of such Person, have remained unpaid for a period
of 90 days after the same become due and payable in accordance with
their respective terms taking into account any grace period
relating to the due date expressly set forth in the applicable
invoice with respect to the payment of such accounts payable; all
indebtedness secured by any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in property owned by
such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness; all indebtedness
created or arising under any conditional sale agreement or lease in
the nature thereof (including obligations as lessee under leases
which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capitalized leases)
(but excluding operating leases) or other title
retention
agreement with respect to property acquired by such Person, even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession of
such property all bankers' acceptances and letters of credit; and
liabilities in respect of unfunded vested benefits under Plans
covered by Title IV of ERISA.
(b) Restrictions on
Equity Sales. The Company will not offer or enter into an agreement
to sell equity securities of the Company, under private placement
memorandum or other private offering document or letter, whether of
equity securities, convertible debt securities, or securities or
instruments convertible into or exchangeable for debt or equity
securities of the Company, except through an underwritten public
offering or after receiving approval by the purchaser as described
in 6(f) below.
(c) Restrictions
on Transactions with Affiliates. The Company will not make any
loans or advances to any of its officers, shareholders, or
Affiliates, other than expense advances made by the Company to its
officers and employees in the ordinary course of business. The
Company will not increase the salary of any executive officer, or
the remuneration of any director.
(d) Restrictions on
Investments. Other than as permitted by this Agreement, the Company
will not purchase or acquire or invest in, or agree to purchase or
acquire or invest in the business, property, or assets of, or any
securities of, any other company or business, provided
however, that the Company may enter into contracts relating
to the expansion of its business and may invest its Excess Cash as
defined below in: securities issued or directly and fully
guaranteed or insured by the United States government or any agency
thereof having maturities of not more than one year from the date
of acquisition; certificates of deposit or eurodollar certificates
of deposit, having maturities of not more than one hundred eighty
days from the date of acquisition, or one year from the date of
acquisition in the case of certificates of deposit or eurodollar
certificates of deposit being used to secure the Company's
reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of
credit not otherwise permitted under this Agreement); commercial
paper of any Person that is not a subsidiary or an Affiliate of the
Company, maturing within one hundred eighty days after the date of
acquisition; bank loan participations; and money market instruments
having maturities of not more than one hundred eighty days from the
date of acquisition, or one year from the date of acquisition in
the case of money market instruments being used to secure the
Company's reimbursement obligations under letters of credit
(provided that nothing contained herein shall be construed to
permit letters of credit not otherwise permitted under this
Agreement); in all cases of such credit quality as a prudent
business person would invest in. As used in this Section,
"Excess Cash" shall mean that portion of the proceeds of the
Bridge Notes that has not been invested as described in Section 3
hereof.
(e) Change in
Business; Operations. The Company will not cause or effect any
change in or addition to the primary business of the Company that
has not been approved by Purchaser, such that more than 20% of the
consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged
on the date hereof as reflected in the applicable last SEC Document
filed prior to the First Closing ("Change in
Business"). The business of the Company and its subsidiaries
shall not be conducted in violation of any law, ordinance, or
regulation of any governmental entity.
(f) Exceptions
With Consent of Purchasers. The Company may seek an exception to
any prohibited action under this Section by first,
giving written notice to Purchaser of Bridge Note under this
Agreement, along with copies of all documentation requested by any
Purchaser relating to such requested exception, and
second, in the sole discretion of Purchaser,
satisfactorily responding to any Purchaser inquiries about the
requested action. The Company may undertake any such requested
action otherwise prohibited by this Section 6 only after receiving
the advance written consent of Purchaser hereunder.
7. No Waiver;
Rights and Remedies Cumulative . No failure on the part of the
holder of this Note to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the holder of this Note of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies herein
provided are cumulative and not exclusive of any remedies or rights
provided by law or by any other agreement between the Maker and the
Holder.
8. Costs and
Expenses . The Maker shall reimburse the holder of this Note
for all costs and expenses incurred by it, and shall pay the
reasonable fees and disbursements of counsel to the holder of this
Note, in connection with the enforcement of the holder's rights
hereunder, whether or not legal proceedings are
initiated.
9. Amendments
. No amendment, modification or waiver of any provision of this
Note nor consent to any departure by the Maker therefrom shall be
effective unless the same shall be in writing and signed by the
holder of this Note and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
10. Governing Law;
Jurisdiction and Service of Process . This Note shall be
governed by and construed in accordance with the laws of the State
of Utah, without giving effect to conflict of laws. The Maker
hereby irrevocably consents to the jurisdiction of the courts of
the State of Utah and of any federal court located in such State in
connection with any action or proceeding arising out of or relating
to this Note, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Note or a breach of
this Note or any such document or instrument. In any such action or
proceeding, the Maker waives personal service of any summons,
complaint, or other process and agrees that service thereof may be
made in accordance with Section 11 of this Note. Within 30 days
after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties to such action or
proceeding, the Maker shall appear or answer such summons,
complaint, or other process. Should the Maker so served fail to
appear or answer within such 30-day period or such extended period,
as the case may be, the Maker shall be deemed in default and
judgment may be entered by the Holder against the Maker as demanded
in any summons, complaint, or other process so served.
11. Successors and
Assigns . This Note shall be binding upon the Maker and its
successors and permitted assigns and the terms hereof shall inure
to the benefit of the Holder and its successors and assigns,
including subsequent holders hereof.
12. Notice .
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received: (a) upon hand delivery (receipt acknowledged) or delivery
by telecopy or facsimile (with transmission confirmation report) if
delivered on a business day during normal business hours where such
notice is to be received, or the first business day following such
delivery if delivered other than on a business day during normal
business hours where such notice is to be received; or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever first shall occur, to the
address set forth above or to such other address as the party shall
have furnished in writing in accordance with the provisions of this
Section 10 except that such change shall not be effective until
actual receipt thereof.
13.
Severability . The provisions of this Note are severable,
and if any provision shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any
jurisdiction.
14. Waiver of
Notice . The Maker hereby waives presentment, demand for
payment, protest, notice of protest and all other demands or
notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
15. Set-off,
Counterclaim . In the event the holder hereof seeks to enforce
its rights under this Note, the Maker waives the right to interpose
any set-off or counterclaim of any nature or description against
the holder.
16. Headings .
The headings in this Note are solely for the convenience of
reference and shall be given no effect in the construction or
interpretation of this Note.
[signature on next page]
IN WITNESSETH WHEREOF, the undersigned has duly
executed this Note as date first above written.
Reference is
made to terms and conditions of the Note, dated April 14, 2004, in
the principal amount of $35,000.00, and registered in the name of
SovCap Equity Partners, Ltd {NAME OF HOLDER} (the "Note").
In accordance with and pursuant to the terms of the Note, the
undersigned hereby elects to
convert
$ in
principal amount of the Note into shares of Common Stock, $.001 par
value
per share (the
"Common Stock"), of the Company, by tendering the original
Note specified below as of the date specified below.
Date of
Conversion:
Principal
Amount of Note to be converted: Redemption Premium Accrued Interest
and/or Fees
Total Amount of
Note to be Converted
Please
confirm the following information:
Conversion
Price:
Number of
shares of Common Stock to be issued:
Please issue
the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue
to:
Authorization:
If electronic
book entry transfer, complete the following:
Account
Number:
Transaction
Code
Number:
Signature
BY: BARRY W. HERMAN PRESIDENT
COMPANY
ACKNOWLEDGEMENT TO CONVERSION NOTICE
ACKNOWLEDGED
AND AGREED: CERISTAR, INC.
Date:
|
EXHIBIT B CERISTAR BUDGET, DATED
APRIL 14, 2004
|
|
Unit Name CeriStar, Inc.
(CTRI)
Fiscal Year
2004
|
|
Net
Investment Ending cash balance
|
Qwest
22,000
22,000
American
Fork Fiber
1,500
1,500
3,000
Provo
City utilities
1,978
1,978
Provo
Cable
1,464
1,464
Other/Eschelon
4,000
4,000
Cost of
goods sold
1,500
30,942
32,442
Salaries
32,000
32,000
64,000
Commissions
15,000
15,000
Health
insurance
5,800
5,800
Office
rent
3,967
3,967
D&O
Insurance
5,609
5,609
Billing
expenses
720
720
Customer
service
0
Employee
expenses
7,500
7,500
15,000
Audit
& Tax
5,000
5,000
Legal
20,000
20,000
Supplies
1,000
1,000
Marketing
2,000
2,000
Sales
tax
0
Website
1,000
1,000
Miscellaneous
1,000
1,000
S.G&A
56,596
83,500
140,096
Network
capex
7,300
7,300
Move-ins
13,000
13,000
Other
0
Test
equipment
0
Switch
move to FiberNet
5,000
5,000
Pulver
FreeWorld Dial-up
0
Parkway
Phase 2
0
Equipment
25,300
0
25,300
Conference/marketing
1,000
1,000
Aggregate
Networks
3,000
3,000
AlphaWest
Capital
2,000
2,000
Fundraising
0
Consulting expenses
5,000
5,000
Research
0
B of D
stipend
0
Interest
expense - UTFC
o
Interest
expense - Ridgeline
0
Other
9,000
2,000
11,000
Total
Expenses
92,396
116,442
208,838
FourfhGear
1,000
1,000
Office
Team
1,500
1,500
David
Burns
500
500
Earl
Demorest
0
Internal
revenue
0
Utah
state tax commission
0
Vocal
Data
10,000
10,000
20,000
Genuity
500
500
1,000
Ed
Ekstrom
0
Dave
Bailey credit card
0
American
Banknote
0
Westchester invesment Ptnrs
0
George
Kiser, et al
1,000
1,000
Work
Comp
1,100
1,100
Xtend
Communications
2,500
2,500
Swindler,
Berlin
5,000
5,000
Sreve
Stewart
0
Accounts
payable
23,100
30,500
53,600
Total budget
(115,496
) 0
| (140,386
)
0| (255,882 )
Date
Updated:
May 10, 2004
Page 12 of 12
CTRIPromissory
Note_052804
IRREVOCABLE
STOCK OR BOND POWER
For Value
received, the undersigned does (do) hereby sell, assign, and
transfer to:
❖
If stock, complete this
portion:
represented
by certificate(s)
Number(s)
In the name
of the undersigned on the books of said company.
❖
If Bonds, complete this
portion:
bonds of
IMHI (fka Ceristar, Inc.)
in the
principal amount of $ 35,000
Number(s) May 28,
2009
inclusive
standing in the name of the undersigned on books of said
company.
The undersigned
does (do) hereby irrevocably constitute and appoint
attorney to
transfer the said stock or bond(s), as the case may be, on the
books of said company, with full power of substitution in the
premises.
SOVCAP
EQUITY PARTNERS. LTD
Signature
Signature
|
|
BY: BARRY W.
HERMAN PRESIDENT
|
CERISTAR, INC. PROMISSORY
NOTE
$69,000.00
Original Issue
Date:
June 16, 2004
FOR VALUE RECEIVED, the undersigned, CERISTAR,
INC., a Delaware corporation with offices at 50 West Broadway,
Suite 1100, Salt Lake City, UT, 84101 (the "Maker"),
unconditionally promises to pay to the order of SOVCAP EQUITY
PARTNERS, LTD., a Bahamas corporation, or its registered assigns
(the "Holder"), at its office at c/o Lion Corporate Securities
Ltd., Cumberland House #27, Cumberland Street, P.O. Box N-10818,
Nassau, New Providence, The Bahamas or at such other place as may
be designated by the holder hereof in writing, the principal sum of
SIXTY-NINE THOUSAND DOLLARS ($69,000.00), without interest, except
as specified herein.
1. Payments.
The Maker agrees to pay the principal of this Note within ten (10)
days following demand from the Holder requesting payment, which
demand may be made at any time after the 120
th day following the issue date of this Note. The
Maker shall have the right to prepay this Note in whole at any time
or in part from time to time. Any payments, including prepayments,
of principal of this Note, whether upon demand, at the option of
the Company, upon default or otherwise shall include a repayment
premium equal to the product of (a) the Repayment Percentage (as
defined below) and (b) the number of thirty (30) day periods
(rounded up to the next whole number) (each 30-day period referred
to as a "Monthly Period") that this Note has been outstanding
(computed from the date of issuance of this Note to the date of
payment) but in no event higher than the maximum amount permitted
by law. For purposes of this Note, the Repayment Percentage shall
mean one and one-half percent (1.5%) of the outstanding principal
amount of this Note. All payments by the Maker on account of
principal, premium, interest or fees hereunder shall be made in
money of the United States of America that at the time of payment
is legal tender, by wire transfer of immediately available
funds.
2. Interest.
Without limiting any of the rights of the holder of this Note under
Section 4 of this Note, if any payment of principal or premium
thereon is not made when the same shall become due and payable
hereunder, interest shall accrue thereon at a rate per annum equal
to twelve percent (12%) per annum. Notwithstanding anything to the
contrary contained herein, no payments that are considered interest
shall accrue or be payable at a rate in excess of the maximum
amount permitted by law.
3. Use of
Proceeds. The Company agrees use the proceeds from the sale and
issuance of the Bridge Notes only for payment of following
expenses:
|
|
June 2004
operating budget, as provided by the Company in attached Exhibit
B
|
b. Consulting fees,
as agreed
(a) At any time after
the date that is 120 days following the issue date of this Note and
from time to time, the Holder may convert all or any portion of
this Note, together with the Repayment Percentage, and accrued and
unpaid interest and fees due on this Note (the "Conversion Amount")
into shares of common stock of the Maker (the "Common
Stock").
(b) If the Holder
elects to convert less than the full principal amount of this Note,
the Maker shall issue a Note in substantially the same form as this
Note, except that the principal amount shall be reduced by the
principal amount so converted (exclusive of the redemption
premium).
(c) The number of
shares of Common Stock issuable upon conversion of this Note is
equal to the quotient of the Conversion Amount of that portion of
the Note being converted divided by the Conversion Price.
Fractional shares will not be issued. In lieu of any fraction of a
share, the Maker shall deliver its check for the dollar amount of
the less than full share remainder. For purposes of this Note, the
"Conversion Price" shall mean the product of (a) .75 and (b) the
average closing bid price of the Common Stock for the five trading
days ending on the trading day immediately preceding the Conversion
Date.
(d) To convert this
Note into Common Stock, (the "Conversion Date"), the Holder hereof
shall (A) deliver or transmit by facsimile, for receipt on or prior
to 11:59 P.M., Eastern Time, on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice") to the Maker or its designated
transfer agent for its Common Stock (the "Transfer Agent"), and (B)
surrender to a common carrier for delivery to the Maker or the
Transfer Agent as soon as practicable following such date, this
Note (or an indernnification undertaking with respect to such
shares in the case of the loss, theft, or destruction of this Note)
and the originally executed Conversion Notice. The date the Maker
receives the Conversion Note and this Note is hereinafter the
"Conversion Date."
(e) Upon receipt by
the Maker of a facsimile copy of a Conversion Notice, the Maker
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to Holder. Upon receipt by the Maker or the
Transfer Agent of the Note to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice,
the Maker or the Transfer Agent (as applicable) shall, within five
(5) business days following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery to the address
as specified in the Conversion Notice, a certificate, registered in
the name of Holder or its designee, for the number of shares of
Common Stock to which Holder shall be entitled or (B) credit the
aggregate number of shares of Common Stock to which such Holder
shall be entitled to the Holder's or its designee's balance account
at The Depository Trust Company.
(f) The Person or
persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the "Record Holder" or Holder of such shares of Common Stock on the
Conversion Date.
(g) If the Maker shall
fail to issue to Holder within five (5) business days following the
date of receipt by the Maker or the Transfer Agent of this Note to
be converted pursuant to a Conversion Notice, a certificate for the
number of shares of Common Stock to which each Holder is entitled
upon Holder's conversion of this Note, in addition to all other
available remedies which such Holder may pursue hereunder, the
Maker shall pay additional damages to Holder on each day after the
fifth (5th) business day following the date of receipt by the Maker
or the Transfer Agent an amount equal to 1.0% of the product of (A)
the number of shares of Common Stock not issued to Holder and to
which Holder is entitled multiplied by (B) the Closing Bid Price of
the Common Stock on the business day following the date of receipt
by the Maker or the Transfer Agent of the Conversion Notice. The
foregoing notwithstanding, Holder at its option may withdraw a
Conversion Notice, and remain a Holder of this Note, if Holder has
otherwise complied with this Section 4.
(h) If any adjustment
to the Conversion Price to be made pursuant to clause (j) of this
Section 4 becomes effective immediately after a record date for an
event as therein described, and conversion occurs prior to such
event but after the record date, the Maker may defer issuing,
delivering, or paying to Holder any additional shares of Common
Stock or check for any cash remainder required by reason of such
adjustment until the occurrence of such event, provided that the
Maker delivers to Holder a due bill or other appropriate instrument
evidencing the Holders' right to receive such additional shares or
check upon the occurrence of the event giving rise to the
adjustment.
(i) Until
such time as this Note has been fully redeemed, the Maker
shall
reserve out of its authorized but unissued
Common Stock enough shares of Common Stock to
permit the conversion of the entire Redemption
Price and all accrued and unpaid interest due on
this Note at any time. All shares of Common
Stock issued upon conversion of this Note shall be
fully paid and nonassessable. The Maker
covenants that if any shares of Common Stock,
required to be reserved for
purposes of conversion of this Note hereunder, require
registration
with or approval of any governmental authority
under any federal or state law or listing upon any
national securities exchange before such shares
may be issued upon conversion, the Maker shall
in good faith, as expeditiously as possible,
endeavor to cause such shares to be duly registered,
approved or listed, as the case may
be.
(j) The
Conversion Price shall be subject to adjustment from time to time
as
follows:
(i) If the
Maker at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Maker at any
time combines (by combination, reverse stock split, or otherwise)
one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased.
(ii) Prior to the
consummation of any Organic Change (as defined below), the Maker
will make appropriate provision (in form and substance satisfactory
to the Holder to insure that Holder will thereafter have the right
to acquire and receive in lieu of, or in addition to, (as the case
may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of this Holder's
Note, such shares of stock, securities, or assets as may be issued
or payable with respect to, or in exchange for, the number of
shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of this Note had such Organic Change
not taken place. In any such case, the Maker will make appropriate
provision (in form and substance satisfactory to Holder with
respect to such Holder's rights and interests to insure that the
provisions of this clause (j) will thereafter be applicable. The
Maker will not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor entity (if
other than the Maker) resulting from consolidation or merger or the
entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to Holder), the obligation to
deliver to Holder such shares of stock, securities, or assets as,
in accordance with the foregoing provisions, that Holder may be
entitled to acquire. For purposes of this Agreement, "Organic
Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, or sale of all or
substantially all of the Maker's assets to another Person (as
defined below), or other similar transaction which is effected in
such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities,
or assets with respect to or in exchange for Common Stock; and
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department or
agency thereof.
(k) The Holder
shall be entitled to piggyback registration rights with respect to
the shares of Common Stock issuable upon conversion of this Note by
the Holder. The Company agrees to include such shares on the first
available registration, including forms S-l, SB-2 or S-3, filed by
the Company with Securities and Exchange Commission.
(1) Unless
the Note is under Default (as defined in Section 5 of the Note) or
unless prior to an Organic Change (as defined in Section 4(j)(ii)
of the Note), in no event shall the Holder be entitled to convert
the Notes in excess of that number, which upon giving effect to
such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to
exceed 9.99% of the outstanding shares of the Common Stock
following the conversion. For purposes of the foregoing proviso,
the aggregate number of shares of common stock beneficially owned
by the Holder and its affiliates shall include the number of shares
of Common Stock issuable upon conversion or exercise of the Notes
with respect to which the determination is being made, but shall
exclude the number of shares of Common Stock which would be
issuable upon (i) conversion of the remaining unconverted Notes
owned by the Holder or its affiliates, and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the holder and it affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 4(1), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the 1934 Act.
5. Events of
Default . If any of the following conditions or events shall
occur and be continuing: (a) the Maker shall default in the payment
of principal of this Note when the same becomes due and payable;
(b) the Maker shall admit in writing its inability to pay its debts
as such debts become due; (c) the Maker shall make a general
assignment for the benefit of creditors; (d) the Maker shall
commence a voluntary case under the Federal Bankruptcy Code (as now
or hereafter in effect); (e) the Maker shall file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, or adjustment of debts; (f) there shall have been
instituted against the Maker any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other
proceedings for relief under the Federal Bankruptcy Code or any
other law relating to bankruptcy, insolvency or adjustment of
debts, which are not dismissed within sixty (60) days after such
institution; or (g) the Maker shall take any action for the
purposes of effecting any of the foregoing; then, and in any such
event, the Holder may at any time (unless all defaults shall
theretofore have been remedied) at its option, declare this Note to
be due and payable, whereupon this Note shall forthwith mature and
become due and payable, together with interest accrued thereon,
without presentment, demand, protest or notice, all of which are
hereby waiver.
6. NEGATIVE
COVENANTS. The provisions of this Section 6 shall remain in effect
so long as any of the Bridge Notes shall remain
outstanding.
(a) Restrictions on
Debt. Hereafter, the Company will not create, assume, or incur or
become or at any time be liable in respect of, any Debt, except:
Bridge Notes issued pursuant to this Agreement; Debt outstanding on
the date hereof to the extent reflected on the most recent balance
sheet of the Company or incurred in the ordinary course of business
thereafter and debt incurred to accomplish duties and obligations
of the Company under contracts to provide customer premises
equipment, services, or other related obligations to existing or
new customers of the Company as a result of business contracts;
Purchase money security interests not to exceed $250,000 per year;
and Secured debt in an aggregate principal amount up to $20
million.
(i) Definition
of Debt. For purposes of this Agreement, the capitalized term
"Debt" of any Person shall mean: all indebtedness of such Person
for borrowed money, including without limitation obligations
evidenced by bonds, debentures, Bridge Notes, or other similar
instrument; all indebtedness guaranteed in any manner by such
Person, or in effect guaranteed by such Person through an agreement
to purchase, contingent or otherwise; all accounts payable which,
to the knowledge of such Person, have remained unpaid for a period
of 90 days after the same become due and payable in accordance with
their respective terms taking into account any grace period
relating to the due date expressly set forth in the applicable
invoice with respect to the payment of such accounts payable; all
indebtedness secured by any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in property owned by
such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness; all indebtedness
created or arising under any conditional sale agreement or lease in
the nature thereof (including obligations as lessee under leases
which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capitalized leases)
(but excluding operating leases) or other title
retention
agreement with respect to property acquired by such Person, even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession of
such property all bankers' acceptances and letters of credit; and
liabilities in respect of unfunded vested benefits under Plans
covered by Title IV of ERISA.
(b) Restrictions on
Equity Sales. The Company will not offer or enter into an agreement
to sell equity securities of the Company, under private placement
memorandum or other private offering document or letter, whether of
equity securities, convertible debt securities, or securities or
instruments convertible into or exchangeable for debt or equity
securities of the Company, except through an underwritten public
offering or after receiving approval by the purchaser as described
in 6(f) below.
(c) Restrictions on
Transactions with Affiliates. The Company will not make any loans
or advances to any of its officers, shareholders, or Affiliates,
other than expense advances made by the Company to its officers and
employees in the ordinary course of business. The Company will not
increase the salary of any executive officer, or the remuneration
of any director.
(d) Restrictions on
Investments. Other than as permitted by this Agreement, the Company
will not purchase or acquire or invest in, or agree to purchase or
acquire or invest in the business, properly, or assets of, or any
securities of, any other company or business, provided
however, that the Company may enter into contracts relating
to the expansion of its business and may invest its Excess Cash as
defined below in: securities issued or directly and fully
guaranteed or insured by the United States government or any agency
thereof having maturities of not more than one year from the date
of acquisition; certificates of deposit or eurodollar certificates
of deposit, having maturities of not more than one hundred eighty
days from the date of acquisition, or one year from the date of
acquisition in the case of certificates of deposit or eurodollar
certificates of deposit being used to secure the Company's
reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of
credit not otherwise permitted under this Agreement); commercial
paper of any Person that is not a subsidiary or an Affiliate of the
Company, maturing within one hundred eighty days after the date of
acquisition; bank loan participations; and money market instruments
having maturities of not more than one hundred eighty days from the
date of acquisition, or one year from the date of acquisition in
the case of money market instruments being used to secure the
Company's reimbursement obligations under letters of credit
(provided that nothing contained herein shall be construed to
permit letters of credit not otherwise permitted under this
Agreement); in all cases of such credit quality as a prudent
business person would invest in. As used in this Section,
"Excess Cash" shall mean that portion of the proceeds of the
Bridge Notes that has not been invested as described in Section 3
hereof.
(e) Change in
Business; Operations. The Company will not cause or effect any
change in or addition to the primary business of the Company that
has not been approved by Purchaser, such that more than 20% of the
consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged
on the date hereof as reflected in the applicable last SEC Document
filed prior to the First Closing ("Change in
Business"). The business of the Company and its subsidiaries
shall not be conducted in violation of any law, ordinance, or
regulation of any governmental entity.
(f) Exceptions With
Consent of Purchasers. The Company may seek an exception to any
prohibited action under this Section by first, giving
written notice to Purchaser of Bridge Note under this Agreement,
along with copies of all documentation requested by any Purchaser
relating to such requested exception, and second, in
the sole discretion of Purchaser, satisfactorily responding to any
Purchaser inquiries about the requested action. The Company may
undertake any such requested action otherwise prohibited by this
Section 6 only after receiving the advance written consent of
Purchaser hereunder.
7. No Waiver;
Rights and Remedies Cumulative . No failure on the part of the
holder of this Note to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the holder of this Note of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies herein
provided are cumulative and not exclusive of any remedies or rights
provided by law or by any other agreement between the Maker and the
Holder.
8. Costs and
Expenses . The Maker shall reimburse the holder of this Note
for all costs and expenses incurred by it, and shall pay the
reasonable fees and disbursements of counsel to the holder of this
Note, in connection with the enforcement of the holder's rights
hereunder, whether, or not legal proceedings are
initiated.
9. Amendments
. No amendment, modification or waiver of any provision of this
Note nor consent to any departure by the Maker therefrom shall be
effective unless the same shall be in writing and signed by the
holder of this Note and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
10. Governing Law;
Jurisdiction and Service of Process . This Note shall be
governed by and construed in accordance with the laws of the State
of Utah, without giving effect to conflict of laws. The Maker
hereby irrevocably consents to the jurisdiction of the courts of
the State of Utah and of any federal court located in such State in
connection with any action or proceeding arising out of or relating
to this Note, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Note or a breach of
this Note or any such document or instrument. In any such action or
proceeding, the Maker waives personal service of any summons,
complaint, or other process and agrees that service thereof may be
made in accordance with Section 11 of this Note. Within 30 days
after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties to such action or
proceeding, the Maker shall appear or answer such summons,
complaint, or other process. Should the Maker so served fail to
appear or answer within such 30-day period or such extended period,
as the case may be, the Maker shall be deemed in default and
judgment may be entered by the Holder against the Maker as demanded
in any summons, complaint, or other process so served.
11. Successors and
Assigns . This Note shall be binding upon the Maker and its
successors and permitted assigns and the terms hereof shall inure
to the benefit of the Holder and its successors and assigns,
including subsequent holders hereof.
12. Notice .
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received: (a) upon hand delivery (receipt acknowledged) or delivery
by telecopy or facsimile (with transmission confirmation report) if
delivered on a business day during normal business hours where such
notice is to be received, or the first business day following such
delivery if delivered other than on a business day during normal
business hours where such notice is to be received; or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever first shall occur, to the
address set forth above or to such other address as the party shall
have furnished in writing in accordance with the provisions of this
Section 10 except that such change shall not be effective until
actual receipt thereof.
13.
Severability . The provisions of this Note are severable,
and if any provision shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any
jurisdiction.
14. Waiver of
Notice . The Maker hereby waives presentment, demand for
payment, protest, notice of protest and all other demands or
notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
15. Set-off,
Counterclaim . In the event the holder hereof seeks to enforce
its rights under this Note, the Maker waives the right to interpose
any set-off or counterclaim of any nature or description against
the holder.
16. Headings .
The headings in this Note are solely for the convenience of
reference and shall be given no effect in the construction or
interpretation of this Note.
[signature on next page]
IN WITNESSETH WHEREOF, the undersigned has duly
executed this Note as of the date first above written.
CONVERSION
NOTICE
Reference is
made to terms and conditions of the Note, dated April 14, 2004, in
the principal amount of $69,000.00, and registered in the name of
SovCap Equity Partners, Ltd. {NAME OF HOLDER} (the "Note").
In accordance with and pursuant to the terms of the Note, the
undersigned hereby elects to
convert
$ in
principal amount of the Note into shares of Common Stock, $.001 par
value
per share (the
"Common Stock"), of the Company, by tendering the original
Note specified below as of the date specified below.
Date of
Conversion:
Principal
Amount of Note to be converted: Redemption Premium Accrued Interest
and/or Fees
Total Amount of
Note to be Converted
Please
confirm the following information:
Conversion
Price:
Number of
shares of Common Stock to be issued:
Please issue
the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue
to:
Authorization:
If electronic
book entry transfer, complete the following:
Account
Number:
Transaction
Code
Number:
CTRIPromissory
Note_061604
- 1 -
COMPANY
ACKNOWLEDGEMENT TO CONVERSION NOTICE
ACKNOWLEDGED
AND AGREED: CERISTAR, INC.
Date:
CTRIPromissory
Note_061604
EXHIBIT B CERISTAR JUNE OPERATING
BUDGET
Supplier
United
Healthcare
Ridgeline
Qwest
Vocal
Data
Provo
Cable
Provo City
Utilities
Amer City
Fork
Eschelon
Elliott Bay
Eng
Highland
Lakes
$5,924.00 $5,500.00 $25,000.00
$10,000.00 $1,400.00 $2,000.00 $1,500.00 $2,400.00 $880.00 $728.00
$521.99
Amount Current
Amount Past Due Total
$5,500.00 Parkway Eq. $20,000.00
$45,000.00 $9,159.00 $19,159.00 $1,528.16 $2,928.16 $2,015.34
$4,015.34
$1,500.00 Fiber
Lease $2,400.00 Bandwidth $880.00 $728.00 Billing $521.99 Long
Distance
Wired Attorney
SEC Attorney
90000 30000
20000 20000 20000
25000 Equipment
replacement
|
|
|
|
|
|
|
|
|
Payday
Totals
|
|
Annual
|
|
|
|
3,229.50
|
|
|
|
|
|
2,691.25
|
|
65,000
|
|
|
|
3,105.29
|
80,738
|
|
|
|
|
1,341.48
|
|
|
|
|
|
2,484.23
|
|
|
|
33.46
|
|
2,484.23
|
64,590
|
60,000
|
|
|
|
1 ,159
.31
|
|
|
|
|
|
2,484.23
|
|
|
|
|
|
2,484.13
|
|
|
|
|
|
2,000.00
|
|
|
|
|
|
23.463,75
|
|
|
IRREVOCABLE
STOCK OR BOND POWER
For Value
received, the undersigned does (do) hereby sell, assign, and
transfer to:
❖
if stock, complete this
portion:
represented
by certificate(s)
Number(s)
In the name
of the undersigned on the books of said company,
❖
If Bonds, complete this
portion:
bonds of
IMHI (fka Ceristar, Inc.)
in the
principal amount of $ 69,000 Number(s) June 16,
2004
inclusive
standing in the name of the undersigned on books of said
company.
The undersigned
does (do) hereby irrevocably constitute and appoint
[Missing
Graphic Reference]
attorney to
transfer the said stock or bond(s), as the case may be, on the
books of said company, with full power of substitution in the
premises.
Signature
BY: BARRY W. HERMAN PRESIDENT
CERISTAR, INC PROMISSORY
NOTE
Original Issue Date July 1,2004
FOR VALUE RECEIVED, the undersigned, CERISTAR,
INC, a Delaware corporation with offices at 50 West Broadway, Suite
1100, Salt Lake City, UT, 84101 (the "Maker"), unconditionally
promises to pay to the order of SOVCAP EQUITY PARTNERS, LTD, a
Bahamas corporation, or its registered assigns (the "Holder"), at
its office at c/o Lion Corporate Securities Ltd, Cumberland House
#27, Cumberland Street, P O Box N-10818, Nassau, New Providence,
The Bahamas or at such other place as may be designated by the
holder hereof in writing, the principal sum of FIFTY-FIVE THOUSAND
DOLLARS ($55,000.00), without interest, except as specified
herein
1 Payments.
The Maker agrees to pay the principal of this Note within ten (10)
days following demand from the Holder requesting payment, which
demand may be made at any time after the 120
th day following the issue date of this Note The
Maker shall have the right to prepay this Note in whole at any time
or in part from time to time. Any payments, including prepayments,
of principal of this Note, whether upon demand, at the option of
the Company, upon default or otherwise shall include a repayment
premium equal to the product of (a) the Repayment Percentage (as
defined below) and (b) the number of thirty (30) day periods
(rounded up to the next whole number) (each 30-day period referred
to as a "Monthly Period") that this Note has been outstanding
(computed from the date of issuance of this Note to the date of
payment) but in no event higher than the maximum amount permitted
by law For purposes of this Note, the Repayment Percentage shall
mean one and one-half percent (15%) of the outstanding principal
amount of this Note All payments by the Maker on account of
principal, premium, interest or fees hereunder shall be made in
money of the United States of America that at the time of payment
is legal tender, by wire transfer of immediately available
funds
2 Interest.
Without limiting any of the rights of the holder of this Note under
Section 4 of this Note, if any payment of principal or premium
thereon is not made when the same shall become due and payable
hereunder, interest shall accrue thereon at a rate per annum equal
to twelve percent (12%) per annum Notwithstanding anything to the
contrary contained herein, no payments that are considered interest
shall accrue or be payable at a rate in excess of the maximum
amount permitted by law
3 Use of
Proceeds. The Company agrees use the proceeds from the sale and
issuance of the Bridge Notes only for payment of following
expenses:
Wired, LLC
Settlement Agreement, Commitment Letter attached as Exhibit
B
Pemberley
development fiber-to-the-premises, equipment installation
Consulting fees, as agreed
CTRIPromissory
Note_061604
(a) At any time after
the date that is 120 days following the issue date of this Note and
from time to time, the Holder may convert all or any portion of
this Note, together with the Repayment Percentage, and accrued and
unpaid interest and fees due on this Note (the "Conversion Amount")
into shares of common stock of the Maker (the "Common
Stock")
(b) If the Holder
elects to convert less than the full principal amount of this Note,
the Maker shall issue a Note in substantially the same form as this
Note, except that the principal amount shall be reduced by the
principal amount so converted (exclusive of the redemption
premium)
(c) The number of
shares of Common Stock issuable upon conversion of this Note is
equal to the quotient of the Conversion Amount of that portion of
the Note being converted divided by the Conversion Price Fractional
shares will not be issued In lieu of any fraction of a share, the
Maker shall deliver its check for the dollar amount of the less
than full share remainder For purposes of this Note, the
"Conversion Price" shall mean the product of (a) 75 and (b) the
average closing bid price of the Common Stock for the five trading
days ending on the trading day immediately preceding the Conversion
Date
(d) To convert this
Note into Common Stock, (the "Conversion Date"), the Holder hereof
shall (A) deliver or transmit by facsimile, for receipt on or prior
to 11 59 P.M., Eastern Time, on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
Exhibit A (the "Conversion Notice") to the Maker or its designated
transfer agent for its Common Stock (the "Transfer Agent"), and (B)
surrender to a common carrier for delivery to the Maker or the
Transfer Agent as soon as practicable following such date, this
Note (or an indemnification undertaking with respect to such shares
in the case of the loss, theft, or destruction of this Note) and
the originally executed Conversion Notice The date the Maker
receives the Conversion Note and this Note is hereinafter the
"Conversion Date "
(e) Upon receipt by
the Maker of a facsimile copy of a Conversion Notice, the Maker
shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to Holder Upon receipt by the Maker or the
Transfer Agent of the Note to be converted pursuant to a Conversion
Notice, together with the originally executed Conversion Notice,
the Maker or the Transfer Agent (as applicable) shall, within five
(5) business days following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery to the address
as specified in the Conversion Notice, a certificate, registered in
the name of Holder or its designee, for the number of shares of
Common Stock to which Holder shall be entitled or (B) credit the
aggregate number of shares of Common Stock to which such Holder
shall be entitled to the Holder's or its designee's balance account
at The Depository Trust Company
(f) The Person or
persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the "Record Holder" or Holder of such shares of Common Stock on the
Conversion Date
(g) If the Maker shall
fail to issue to Holder within five (5) business days
following the date of receipt by the Maker or the Transfer Agent of
this Note to be converted pursuant to a Conversion Notice, a
certificate for the number of shares of Common Stock to which each
Holder is entitled upon Holder's conversion of this Note, in
addition to all other available remedies which such Holder may
pursue hereunder, the Maker shall pay additional damages to Holder
on each day after the fifth (5th) business day following the date
of receipt by the Maker or the Transfer Agent an amount equal to
1.0% of the product of (A) the number of shares of Common Stock not
issued to Holder and to which Holder is entitled multiplied by (B)
the Closing Bid Price of the Common Stock on the business day
following the date of receipt by the Maker or the Transfer Agent of
the Conversion Notice The foregoing notwithstanding, Holder at its
option may withdraw a Conversion Notice, and remain a Holder of
this Note, if Holder has otherwise complied with this Section
4
(h)
If anv adjustment to the Conversion
Price to be made pursuant to clause ffi of this Section 4 becomes
effective immediately after a record date for an event as therein
described, and conversion occurs prior to such event but after the
record date, the Maker may defer issuing, delivering, or paying to
Holder any additional shares of Common Stock or check for any cash
remainder required by reason of such adjustment until the
occurrence of such event, provided that the Maker delivers to
Holder a due bill or other appropriate instrument evidencing the
Holders' right to receive such additional shares or check upon the
occurrence of the event giving rise to the adjustment
(i) Until
such time as this Note has been fully redeemed, the Maker
shall
reserve out of its authorized but unissued
Common Stock enough shares of Common Stock to
permit the conversion of the entire Redemption
Price and all accrued and unpaid interest due on
this Note at any time All shares of Common Stock
issued upon conversion of this Note shall be
fully paid and nonassessable The Maker covenants
that if any shares of Common Stock,
required to be reserved for purposes of
conversion of this Note hereunder, require registration
with or approval of any governmental authority
under any federal or state law or listing upon any
national securities exchange before such shares
may be issued upon conversion, the Maker shall
in good faith, as expeditiously as possible,
endeavor to cause such shares to be duly registered,
approved or listed, as the case may
be
(j) The
Conversion Price shall be subject to adjustment from time to time
as
follows:
(i) If the
Maker at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced If the Maker at any
time combines (by combination, reverse stock split, or otherwise)
one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased
(ii) Prior to the
consummation of any Organic Change (as defined below), the Maker
will make appropriate provision (in form and substance satisfactory
to the Holder to insure that Holder will thereafter have the right
to acquire and receive in lieu of, or in addition to, (as the case
may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of this Holder's
Note, such shares of stock, securities, or assets as may be issued
or payable with respect to, or in exchange for, the number of
shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of this Note had such Organic Change
not taken place In any such case, the Maker will make appropriate
provision (in form and substance satisfactory to Holder with
respect to such Holder's rights and interests to insure that the
provisions of this clause (j) will thereafter be applicable The
Maker will not effect any such consolidation, merger, or sale,
unless prior to the consummation thereof the successor entity (if
other than the Maker) resulting from consolidation or merger or the
entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to Holder), the obligation to
deliver to Holder such shares of stock, securities, or assets as,
in accordance with the foregoing provisions, that Holder may be
entitled to acquire For purposes of this Agreement, "Organic
Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, or sale of all or
substantially all of the Maker's assets to another Person (as
defined below), or other similar transaction which is effected in
such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities,
or assets with respect to or in exchange for Common Stock, and
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department or
agency thereof.
(k) The Holder
shall be entitled to piggyback registration rights with respect to
the shares of Common Stock issuable upon conversion of this Note by
the Holder The Company agrees to include such shares on the first
available registration, including forms S-l, SB-2 or S-3, filed by
the Company with Securities and Exchange Commission
(1) Unless
the Note is under Default (as defined in Section .5 of the Note) or
unless prior to an Organic Change (as defined in Section 4(j)(ii)
of the Note), in no event shall the Holder be entitled to convert
the Notes in excess of that number, which upon giving effect to
such conversion, would cause the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates to
exceed 9 99% of the outstanding shares of the Common Stock
following the conversion For purposes of the foregoing proviso, the
aggregate number of shares of common stock beneficially owned by
the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion or exercise of the Notes with
respect to which the determination is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon
(i) conversion of the remaining unconverted Notes owned by the
Holder or its affiliates, and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the holder
and it affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4(1), beneficial ownership shall be
calculated in accordance with Section 13(d) of the 19.34
Act
5
Events of Default If any of the following conditions or
events shall occur and be continuing: (a) the Maker shall default
in the payment of principal of this Note when the same becomes due
and payable, (b) the Maker shall admit in writing its inability to
pay its debts as such debts become due, (c) the Maker shall make a
general assignment for the benefit of creditors, (d) the Maker
shall commence a voluntary case under the Federal Bankruptcy Code
(as now or hereafter in effect), (e) the Maker shall file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, or adjustment of debts, (f) there shall
have been instituted against the Maker any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings for relief under the Federal Bankruptcy Code
or any other law relating to bankruptcy, insolvency or adjustment
of debts, which are not dismissed within sixty (60) days after such
institution, or (g) the Maker shall take any action for the
purposes of effecting any of the foregoing, then, and in any such
event, the Holder may at any time (unless all defaults shall
theretofore have been remedied) at its option, declare this Note to
be due and payable, whereupon this Note shall forthwith mature and
become due and payable, together with interest accrued thereon,
without presentment, demand, protest or notice, all of which are
hereby waiver
6. NEGATIVE
COVENANTS The provisions of this Section 6 shall remain in effect
so long as any of the Bridge Notes shall remain
outstanding
(a) Restrictions on
Debt Hereafter, the Company will not create,
assume, or incur or become or at any time be liable in respect of,
any Debt, except Bridge Notes issued pursuant to this Agreement,
Debt outstanding on the date hereof to the extent reflected on the
most recent balance sheet of the Company or incurred in the
ordinary course of business thereafter and debt incurred to
accomplish duties and obligations of the Company under contracts to
provide customer premises equipment, services, or other related
obligations to existing or new customers of the Company as a result
of business contracts, Purchase money security interests not to
exceed $250,000 per year, and Secured debt in an aggregate
principal amount up to $20 million
(i) Definition
of Debt For purposes of this Agreement, the capitalized term "Debt"
of any Person shall mean: all indebtedness of such Person for
borrowed money, including without limitation obligations evidenced
by bonds, debentures, Bridge Notes, or other similar instrument,
all indebtedness guaranteed in any manner by such Person, or in
effect guaranteed by such Person through an agreement to purchase,
contingent or otherwise, all accounts payable which, to the
knowledge of such Person, have remained unpaid for a period of 90
days after the same become due and payable in accordance with their
respective terms taking into account any grace period relating to
the due date expressly set forth in the applicable invoice with
respect to the payment of such accounts payable, all indebtedness
secured by any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in property owned by such Per son, even
though such Person has not assumed or become liable for the payment
of such indebtedness, all indebtedness created or arising under any
conditional sale agreement or lease in the nature thereof
(including obligations as lessee under leases which shall have been
or should be, in accordance with generally accepted accounting
principles, recorded as capitalized leases) (but excluding
operating leases) or other title
retention
agreement with respect to property acquired by such Person, even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession of
such property all bankers' acceptances and letters of credit, and
liabilities in respect of unfunded vested benefits under Plans
covered by Title IV of ERISA
(b) Restrictions on
Equity Sales The Company will not offer or enter into an agreement
to sell equity securities of the Company, under private placement
memorandum or other private offering document or letter, whether of
equity securities, convertible debt securities, or securities or
instruments convertible into or exchangeable for debt or equity
securities of the Company, except through an underwritten public
offering or after receiving approval by the purchaser as described
in 6(f) below
(c) Restrictions on
Transactions with Affiliates, The Company will not make anv loans
or advances to anv of its officers, shareholders, or Affiliates,
other than expense advances made by the Company to its officers and
employees in the ordinary course of business The Company will not
increase the salary of any executive officer, or the remuneration
of any director
(d) Restrictions on
Investments Other than as permitted by this Agreement, the Company
will not purchase or acquire or invest in, or agree to purchase or
acquire or invest in the business, property, or assets of, or any
securities of, any other company or business, provided
however, that the Company may enter into contracts relating
to the expansion of its business and may invest its Excess Cash as
defined below in securities issued or directly and fully guaranteed
or insured by the United States government or any agency thereof
having maturities of not more than one year from the date of
acquisition, certificates of deposit or eurodollar certificates of
deposit, having maturities of not more than one hundred eighty days
from the date of acquisition, or one year from the date of
acquisition in the case of certificates of deposit or eurodollar
certificates of deposit being used to secure the Company's
reimbursement obligations under letters of credit (provided that
nothing contained herein shall be construed to permit letters of
credit not otherwise permitted under this Agreement), commercial
paper of any Person that is not a subsidiary or an Affiliate of the
Company, maturing within one hundred eighty days after the date of
acquisition, bank loan participations, and money market instruments
having maturities of not more than one hundred eighty days from the
date of acquisition, or one year from the date of acquisition in
the case of money market instruments being used to secure the
Company's reimbursement obligations under letters of credit
(provided that nothing contained herein shall be construed to
permit letters of credit not otherwise permitted under this
Agreement), in all cases of such credit quality as a prudent
business person would invest in As used in this Section, "Excess
Cash" shall mean that portion of the proceeds of the Bridge
Notes that has not been invested as described in Section 3
hereof
(e) Change in
Business, Operations The Company will not cause or effect any
change in or addition to the primary business of the Company that
has not been approved by Purchaser, such that more than 20% of the
consolidated net earnings of the Company are derived from a
business other than the business in which the Company was engaged
on the date hereof as reflected in the applicable last SEC Document
filed prior to the First Closing ("Change in
Business") The business of the Company and its subsidiaries
shall not be conducted in violation of any law, ordinance, or
regulation of any governmental entity
(f) Exceptions
With Consent of Purchasers. The Company may seek an exception to
any prohibited action under this Section by first,
giving written notice to Purchaser of Bridge Note under this
Agreement, along with copies of all documentation requested by any
Purchaser relating to such requested exception, and
second, in the sole discretion of Purchaser,
satisfactorily responding to any Purchaser inquiries about the
requested action The Company may undertake any such requested
action otherwise prohibited by this Section 6 only after receiving
the advance written consent of Purchaser hereunder
7 No Waiver.
Rights and Remedies Cumulative No failure on the part of the
holder of this Note to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the holder of this Note of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right The rights and remedies herein provided
are cumulative and not exclusive of any remedies or rights provided
by law or by any other agreement between the Maker and the
Holder
8 Costs and
Expenses The Maker shall reimburse the holder of this Note for
all costs and expenses incurred by it, and shall pay the reasonable
fees and disbursements of counsel to the holder of this Note, in
connection with the enforcement of the holder's rights hereunder,
whether or not legal proceedings are initiated.
9 Amendments
No amendment, modification or waiver of any provision of this Note
nor consent to any departure by the Maker therefrom shall be
effective unless the same shall be in writing and signed by the
holder of this Note and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given
10 Governing Law.
Jurisdiction and Service of Process This Note shall be governed
by and construed in accordance with the laws of the State of Utah,
without giving effect to conflict of laws. The Maker hereby
irrevocably consents to the jurisdiction of the courts of the State
of Utah and of any federal court located in such State in
connection with any action or proceeding arising out of or relating
to this Note, any document or instrument delivered pursuant to, in
connection with, or simultaneously with, this Note or a breach of
this Note or any such document or instrument In any such action or
proceeding, the Maker waives personal service of any summons,
complaint, or other process and agrees that service thereof may be
made in accordance with Section 11 of this Note Within 30 days
after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties to such action or
proceeding, the Maker shall appear or answer such summons,
complaint, or other process Should the Maker so served fail to
appear or answer within such 30-day period or such extended period,
as the case may be, the Maker shall be deemed in default and
judgment may be entered by the Holder against the Maker as demanded
in any summons, complaint, or other process so served
11 Successors and
Assigns This Note shall be binding upon the Maker and its
successors and permitted assigns and the terms hereof shall inure
to the benefit of the Holder and its successors and assigns,
including subsequent holders hereof
12 Notice Any
notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received: (a) upon hand delivery (receipt acknowledged) or delivery
by telecopy or facsimile (with transmission confirmation report) if
delivered on a business day during normal business hours where such
notice is to be received, or the first business day following such
delivery if delivered other than on a business day during normal
business hours where such notice is to be received, or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever first shall occur, to the
address set forth above or to such other address as the party shall
have furnished in writing in accordance with the provisions of this
Section 10 except that such change shall not be effective until
actual receipt thereof
13
Severability The provisions of this Note are severable, and
if any provision shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or
unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any
jurisdiction.
14. Waiver of
Notice The Maker hereby waives presentment, demand for payment,
protest, notice of protest and all other demands or notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note
15 Set-off
Counterclaim In the event the holder hereof seeks to enforce
its rights under this Note, the Maker waives the right to interpose
any set-off or counterclaim of any nature or description against
the holder
16 Headings
The headings in this Note are solely for the convenience of
reference and shall be given no effect in the construction or
interpretation of this Note
[signature on next page]
IN WITNESSETH WHEREOF, the undersigned has duly
executed this Note as of the date first above written
EXHIBIT A-
CONVERSION NOTICE
Reference is
made to terms and conditions of the Note, dated July 1, 2004, in
the principal amount of $5.5,000 00 (the "Note"), and
registered in the name of SovCap Equity Partners, Ltd In accordance
with
and pursuant to
the terms of the Note, the undersigned hereby elects to convert
$in
principal
amount of the Note into shares of Common Stock, $ 001 par value per
share (the "Common Stock"), of the Company, by tendering the
original Note specified below as of the date specified
below
Date of
Conversion
Principal
Amount of Note to be converted: Redemption Premium Accrued Interest
and/or Fees
Total Amount of
Note to be Converted
Please
confirm the following information:
Conversion
Price
Number of
shares of Common Stock to be issued:
Please issue
the Common Stock into which the Note is being converted in the
following name and to the
Issue
to:
Authorization:
If electronic
book entry transfer, complete the following:
Account
Number
Transaction
Code
Number:
-2-
CTRIPromissory
Note_070104
COMPANY
ACKNOWLEDGEMENT TO CONVERSION NOTICE
ACKNOWLEDGED
AND AGREED CERISTAR, INC.
Date;
CTRJ_Promissory
Note_070104
IRREVOCABLE
STOCK OR BOND POWER
For Value
received, the undersigned does (do) hereby sell, assign, and
transfer to:
❖
If stock,
complete this portion:
represented
by certificate(s) Number(s)_
In the name
of the undersigned on the books of said company.
❖
If Bonds,
complete this portion:
bonds
of IMHI (fka Ceristar, Inc.)
the
principal amount of $ 55,000Number(s) July 1, 2004
inclusive
standing in the name of the undersigned on books of said
company.
The undersigned
does (do) hereby irrevocably constitute and appoint
[Missing
Graphic Reference]
attorney to
transfer the said stock or bond(s), as the case may be, on the
books of said company, with full power of substitution in the
premises.
Signature
Date BY: BARRY W. HERMAN
CERISTAR, INC. PROMISSORY NOTE
Original Issue Date July 9, 2004
FOR VALUE RECEIVED, the undersigned, CERISTAR,
INC , a Delaware corporation with offices at 50 West Broadway,
Suite 1100, Salt Lake City, UT, 84101 (the "Maker"),
unconditionally promises to pay to the order of SOVCAP EQUITY
PARTNERS, LTD, a Bahamas corporation, or its registered assigns
(the "Holder"), at its office at c/o Lion Corporate Securities
Ltd., Cumberland House #27, Cumberland Street, P.O BoxN-10818,
Nassau, New Providence, The Bahamas or at such other place as may
be designated by the holder hereof in writing, the principal sum of
THIRTY-FIVE THOUSAND DOLLARS ($35,000.00), without interest, except
as specified herein
1 Payments.
The Maker agrees to pay the principal of this Note within ten (10)
days following demand from the Holder requesting payment, which
demand may be made at any time after the 120
th day following the issue date of this Note The
Maker shall have the right to prepay this Note in whole at any time
or in part from time to time. Any payments, including prepayments,
of principal of this Note, whether upon demand, at the option of
the Company, upon default or otherwise shall include a repayment
premium equal to the product of (a) the Repayment Percentage (as
defined below) and (b) the number of thirty (30) day periods
(rounded up to the next whole number) (each 30-day period referred
to as a "Monthly Period") that this Note has been outstanding
(computed from the date of issuance of this Note to the date of
payment) but in no event higher than the maximum amount permitted
by law. For purposes of this Note, the R-epayment Percentage shall
mean one and one-half percent (1.5%) of the outstanding principal
amount of this Note All payments by the Maker on account of
principal, premium, interest or fees hereunder shall be made in
money of the United States of America that at the time of payment
is legal tender, by wire transfer of immediately available
funds
2 Interest.
Without limiting any of the rights of the holder of this Note under
Section 4 of this Note, if any payment of principal or premium
thereon is not made when the same shall become due and payable
hereunder, interest shall accrue thereon at a rate per annum equal
to twelve percent (12%) per annum Notwithstanding anything to the
contrary contained herein, no payments that are considered interest
shall accrue or be payable at a rate in excess of the maximum
amount permitted by law.
3 Use of
Proceeds. The Company agrees use the proceeds from the sale and
issuance of the Bridge Notes only for payment of following
expenses:
a July 9, 2004 payroll and
other agreed expenses b Consulting fees, as agreed
4. Conversion
(a) At any time after
the date that is 120 days following the issue date of this Note and
from time to time, the Holder may convert all or any portion of
this Note, together with the Repayment Percentage, and accrued and
unpaid interest and fees due on this Note (the "Conversion Amount")
into shares of common stock of the Maker (the "Common
Stock")
(b) If the Holder-
elects to convert less than the full principal amount of this Note,
the Maker shall issue a Note in substantially the same form as this
Note, except that the principal amount shall be reduced by the
principal amount so converted (exclusive of the redemption
premium)
(c) The number of
shares of Common Stock issuable upon conversion of this Note is
equal to the quotient of the Conversion Amount of that portion of
the Note being converted divided by the Conversion Price Fractional
shares will not be issued In lieu of any fraction of a share, the
Maker shall deliver its check for the dollar amo
