CAMBIO, INC.
SERIES A CONVERTIBLE PREFERRED STOCK
SUMMARY OF PRINCIPAL TERMS
Issuer: Cambio, Inc. ("CAMB" or the "Company")
Securities: Up to $3,750,000 (37,500 shares) of Series A Convertible
Preferred Stock (the "Preferred Stock"). See Exhibit A.
Price: $100 per share for the Preferred Stock.
Use of Proceeds: Debt conversion, to repay debt, to fund future development
opportunities, and for working capital needs.
Seniority: The Preferred Stock will rank senior in all respects,
including payment on liquidation and redemption, to all
other equity securities of the Company.
Rights, Preferences, and
Privileges of Preferred Stock
1) Conversion: The holders (collectively, the "Investor Group") shall have
the right to convert the Preferred Stock, in whole or in
part, at any time, into shares of Common Stock of the
Company.
2) Conversion
Price: $0.20 per share of Common Stock, subject to adjustment for a
Diluting Issuance (as defined below).
3) Dividend
Provisions: The holders of the Preferred Stock shall be entitled to
receive cash dividends in an amount equal to the equivalent
per share dividend declared on the Common Stock, when and as
declared by the Board of Directors. It is not expected,
however, that the Company will declare any dividends on the
Common Stock..
4) Liquidation
Preference: In the event of any liquidation or winding up of the
Company, the holders of the Preferred Stock shall be
entitled to receive, prior and in preference to the holders
of Common Stock and any series of preferred stock ranking
junior to the Preferred Stock, an amount (the "Liquidation
Amount") equal to the greater of: (i) the original purchase
price per share of Preferred Stock then held by such
holders, plus all declared but unpaid dividends; (ii) the
amount that such holder would receive if it had converted
the Preferred Stock to Common Stock prior to the event.
5) Anti-Dilution
Provisions: The Initial Conversion Price of the Preferred Stock shall be
subject to adjustment on a full ratchet basis for a period
of 18 months beginning on the closing date (i.e., if the
Company issues stock at a price less than the conversion
price, the conversion price will be adjusted downward to
such price), and thereafter on a weighted average basis, in
certain events including: (i) any subdivisions, combinations
or reclassifications of the Company's Common Stock; (ii) any
payment, issuance or distribution by the Company to its
stockholders of a stock dividend. The anti-dilution
provisions exclude shares subject to stock options under
stock option, compensation or similar benefit plans.
6) Early Redemption:At the option of the holders upon the occurrences of a
Liquidation Event the holders shall receive the Liquidation
Amount. A "Liquidation Event" shall include: (i) a sale of
all or substantially all of the operating assets of the
Company; (ii) an event that causes the Company to become
insolvent; (iii) an event that takes the Company private.
7) Call Privilege: At any time after the closing, the Company may "Call" the
Preferred Stock if the Common Stock has traded at 500% of
the Conversion Price, or above, for 30 consecutive days with
an average daily volume in excess of 50,000 shares. After
receiving a "Call Notice", the holders of the Preferred
Stock shall have 20 days in which to convert their Preferred
Stock prior to the Company effecting the Call.
8) Voting Rights: The holders of Preferred Stock shall vote with the holders
of Common Stock and shall have the right to that number of
votes equal to the number of whole shares of Common Stock
issuable upon conversion of the Preferred Stock in all
matters. See also "Restrictive Covenants" below.
9) Registration
Rights: The registration rights granted to holders of the Preferred
Stock will rank pari passu with any registration rights the
Company has previously granted and senior to any it may
grant hereafter with respect to priority in any offering. At
any time following the closing of the purchase of the
Preferred Stock, the holders shall be entitled to two (2)
demand registrations. All fees and expenses incident to the
Company's or the Investor Group's performance of or
compliance with the Registration pursuant to this Agreement
shall be borne by the Company whether or not any of the
Registration Statements become effective.
10) Information
Rights: So long as shares of Preferred Stock are outstanding, the
holders shall be furnished by the Company with: (i) all
publicly available financial and news information produced
by the Company; (ii) an officer's certificate of compliance
with the restrictive covenants referred to below on a
quarterly basis; (iii) audited yearly financials within 90
days of year end; (iv) quarterly financials within 45 days;
and (v) information that they may reasonably request.
11) Board of
Directors: The Board will consist of up to 7 members, a majority of
which will be comprised of persons other than employees of
the Company and its subsidiaries ("unaffiliated members").
Until such time as the holders of the Preferred Stock shall
have exercised their right to elect five (5) directors.
12) Restrictive
Covenants: The Company may not, without the consent of the holders of a
majority of the shares of Preferred Stock: (i) issue any
class or series of equity or equity-linked security senior
or pari passu to the Preferred Stock as to payment of
dividends or payments on liquidation or winding up of the
Company; (ii) enter into any agreement that would restrict
the Company's right to perform under the Stock Purchase
Agreement; (iii) incur debt or encumber its assets above $10
million; (iv) amend the charter or bylaws in any manner
which would impair or reduce the rights of the Preferred
Stock; (v) liquidate or dissolve; (vi) go private; (vii)
redeem or repurchase any outstanding stock except pursuant
to employee stock option or similar plans; or (viii) enter
into any other line of business other than a business
substantially similar or related to the existing business.
These rights will be transferable to any purchaser of the
Preferred Stock; provided that the purchaser is reasonably
acceptable to the Company.
13) Preemptive
Rights: Holders of Preferred Stock shall have the right to purchase
that number of shares of future offerings of equity
securities (or warrants or securities convertible into
equity securities) of the Company that will enable them to
maintain their fully diluted percentage ownership of the
Company at the offering price or the price being aid by the
third party, as applicable. Excluded are all shares issued:
(i) to employees, officers, or directors pursuant to plans
approved by the Board; (ii) in connection with mergers or
acquisitions.
14) Purchase
Agreement: The Preferred Stock shall be purchased pursuant to a stock
purchase agreement (the "Stock Purchase Agreement") drafted
by counsel to the Investor Group and shall contain
representations, warranties and covenants of the Company and
conditions to closing customary for transaction of this
kind.
15) Professional Fees
and Expenses: In the event the transactions contemplated by this letter of
intent are consummated, the Company shall pay all legal fees
and disbursements related to the transaction contemplated
hereby (which shall not exceed $10,000), such payment to be
made at the closing of the transaction.
EXHIBIT A
The Series A Convertible Preferred Stock will allow for the following possible
transactions.
Frederick Adler Note Conversion - $754,790
Euro-America Note Conversion - $302,528
Phifer Note Conversion - $200,000
Western Bank Note - $150,000
Existing Cambio Networks Note Holders - $250,000
Accrued Interest Owed to Cambio Networks Note Holders - $100,000
New Investment - $1,992,682