Page 1 of 47
Exhibit Index is
on Page 12
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended October 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1939
For the transition period from to
Commission File Number: 0-28514
TREASURY INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0160284
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification number)
7040 Tranmere Drive Mississauga, Ontario L5S 1L9
(Address of principal executive offices) (Zip Code)
416-663-4194
(Issuer's telephone number)
1181 Finch Ave. West, Unit 21, North York, Ontario M3J 2V8
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes No X
State the number of shares outstanding of each of the issuer's classes of Common
equity, as of the latest practicable date.
Common Stock, par value
$.0001 per share 13,973,690
- ----------------------- ---------------
Class Shares Outstanding
<PAGE>
PART 1. Financial Information
ITEM 1. Financial Statements
TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS)
October 31 January 31
1996 1996
(Unaudited)
ASSETS
Current
Cash and short-term deposits $ 44,688 $ 292,611
Accounts receivable 1,063,043 180,304
Inventories (Note 1b) 584,126 117,838
Prepaid expenses 31,368 1,852
----------- ---------
1,723,225 592,605
Property and Equipment
(Note 1c & 4) 789,224 10,972
Goodwill (Note 3) 1,835,918 -
----------- ---------
$ 4,348,367 $ 603,577
=========== =========
LIABILITIES
Current
Bank indebtedness (Note 5) $ 703,746 $ -
Accounts payable 1,066,732 49,317
Debentures payable (Note 6) 1,000,627 -
----------- ---------
2,771,105 49,317
----------- ---------
Bank indebtedness (Note 5) 845,854 -
Debentures payable (Note 6) 501,253 -
Deferred taxes payable 57,744 -
----------- ---------
1,404,851 -
----------- ---------
4,175,956 49,317
----------- ---------
SHAREHOLDERS' EQUITY
Share capital
Authorized
30,000,000 Common shares at $.0001
Issued
13,973,690 Common shares 1,397 1,222
Contributed surplus (Note 7) 1,313,191 1,077,866
DEFICIT ( 1,142,177) ( 524,828)
----------- ---------
172,411 554,260
----------- ---------
$ 4,348,367 $ 603,577
=========== =========
2
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TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
October 31 October 31
1996 1995
Sales $ 128,364 $ 314,786
----------- ---------
Cost of Sales 287,229 183,255
Operating, general
and administrative expenses 446,493 129,753
Depreciation expense 549 592
----------- ---------
734,271 313,600
----------- ---------
Income (loss) from operations ( 605,907) 1,186
Other income 33,990 -
----------- ---------
Income (loss) before income taxes ( 571,917) 1,186
Income taxes - 274
----------- ---------
Income (loss) before undernoted item ( 571,917) 912
=========== =========
Income tax reduction arising from
loss carryforward - 274
----------- ---------
Net income (loss) $( 571,917) $ 1,186
=========== =========
Loss per Common share $( 0.04)
===========
Weighted average number of
Common shares outstanding 13,973,690
===========
3
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TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
October 31 October 31
1996 1995
Sales $ 689,690 $ 863,928
---------- ----------
Cost of Sales 612,725 506,977
Operating, general
and administrative expenses 726,658 265,232
Depreciation expense 1,646 1,923
---------- ----------
1,341,029 774,132
---------- ----------
Income (loss) from operations ( 651,339) 89,796
Other income 33,990 -
---------- ----------
Income (loss) before income taxes ( 617,349) 89,796
Income taxes - 20,743
---------- ----------
Income (loss) before undernoted item ( 617,349) 69,053
Income tax reduction arising
from loss carryforward - 940
---------- ----------
Net income (loss) $( 617,349) $ 69,993
========== ==========
Loss per Common share $( 0.04)
==========
Weighted average number of
Common shares outstanding 13,973,690
==========
4
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TREASURY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996
(U.S. DOLLARS)
COMMON PAID-IN CONTRIBUTED
SHARES CAPITAL SURPLUS
------ ------- -----------
Common stock issued
in exchange for the assets
and liabilities of J.J.A.M.P.
Treasury International Corp.
in August 1995 8,023,812 $ 802 $ 78,347
Issuance of stock in
August 1995 in connection
with a private placement
offering 2,750,000 275 274,725
Issuance of stock in
August, September and
October 1995 with a
private placement offering 985,578 99 492,690
Issuance of stock in
November 1995 with a
private placement offering 464,300 46 232,104
---------- ------ ----------
Balance - January 31, 1996 12,223,690 1,222 1,077,866
Issuance of stock in
July 1996 with a private
placement offering 1,000,000 100 197,900
Issuance of stock in
July 1996 as per stock
option plan 750,000 75 37,425
---------- ------- ----------
Balance - October 31, 1996
(Unaudited) 13,973,690 $ 1,397 $1,313,191
========== ======= ==========
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TREASURY INTERNATIONAL, INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
October 31 October 31
1996 1995
Cash flows from operating activities
Net income (loss) $( 617,349) $ 69,993
Adjustments to reconcile net
income to net cash used in
operating activities
Depreciation 1,646 1,923
Deferred taxes payable 57,744 -
Increase in accounts receivable ( 882,739) (107,972)
Increase in inventories ( 466,288) ( 61,729)
Decrease (increase) in prepaid
expenses ( 29,516) 2,479
Increase (decrease) in accounts
payable 1,017,415 ( 62,933)
----------- ---------
Net cash used in operating activities ( 919,087) (158,239)
----------- ---------
Cash flows from financing activities
Debenture payable 750,000 -
Advances by shareholders - ( 71,267)
Issue of Common shares 175 1,132
Contributed surplus 235,325 845,762
----------- ---------
Cash flows from financing activities 985,500 775,627
----------- ---------
Cash flows from investing activities
Purchase of capital assets ( 779,898) ( 2,494)
Deferred costs - (249,842)
Debendure payable 751,880 -
Goodwill (1,835,918) -
----------- ---------
Cash used for investing activities (1,863,936) (252,336)
----------- ---------
Increase in cash, short-term
deposits and
(bank indebtedness) (1,797,523) 365,052
Cash and short-term deposits,
beginning of period 292,611 3,401
----------- ---------
Cash and short-term deposits
(bank indebtedness), end of period $(1,504,912) $ 368,453
=========== =========
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TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
1. Summary of significant accounting policies
(a) Basis of consolidation:
These consolidated financial statements include the accounts of the
corporation and its wholly-owned subsidiaries, J.J.A.M.P. Treasury
International Corp., Megatran Investments Ltd. and Mega Blow
Moulding Limited.
(b) Inventories:
Inventories are valued at the lower of cost (first-in, first-out
method) and net realizable value.
(c) Capital assets:
Capital assets are recorded at cost less accumulated depreciation.
Depreciation is provided as follows:
Leasehold improvements - Straight line over term of lease
Office equipment - 20% diminishing balance
Machinery and equipment - 20% diminishing balance
(d) Revenue recognition:
Revenue is generally recognized when customers are invoiced for
products shipped by the corporation.
(e) Loss per share
Loss per share is calculated based on the weighted average number of
shares outstanding during the period of 13,973,690.
(f) General
The financial data for the nine and three months ended October 31,
1996 and 1995 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results of
operations for such periods.
2. Incorporation:
The corporation was incorporated on August 18, 1995 in the state of
Delaware.
3. Business combination:
On October 30, 1996, the corporation acquired 100% of the issued and
outstanding Common shares of Megatran Investments Ltd., parent
company of Mega Blow Moulding Limited. The purchase price consisted
of $2,111,302 cash and a debenture of $751,880 for a total of
$2,863,182.
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TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
4. Capital assets:
October 31 January 31
1996 1996
-------------------------------------------
Accumulated Net Net
Cost depreciation book value book value
---- ------------ ---------- ----------
Leasehold
improvements $ 4,348 1,260 $ 3,088 $ -
Office equipment 105,668 49,698 55,970 10,972
Machinery and
equipment 2,511,623 1,781,457 730,166 -
---------- --------- --------- -------
$2,621,639 1,832,415 $ 789,224 $10,972
========== ========== ========= =======
5. Bank indebtedness:
The bank indebtedness consists of a revolving credit line and two bank
loans of $225,564 payable on demand and $1,015,037 repayable by 72
consecutive monthly payments of $14,098 plus interest. Bank indebtedness
is secured by a general security agreement with a first charge over all
assets.
The principal amounts payable in the next five years are approximately as
follows:
1997 - $ 169,176
1998 - 169,176
1999 - 169,176
2000 - 169,176
2001 and subsequent to expiry - 338,333
----------
$1,015,037
----------
8
<PAGE>
TREASURY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS AT OCTOBER 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
6. Debentures payable:
The Corporation has three debentures payable as follows:
1997 - $ 500,000 - Subject to 8% interest
250,000 - Interest free
250,627 - Interest free (first of three payments)
----------
1,000,627
----------
1998 - 250,627 - Interest free (second of three payments)
1999 - 250,626 - Interest free (third of three payments)
----------
501,253
----------
$1,501,880
==========
7. Contributed surplus:
Contributed surplus represents the premium paid on the issuance of Common
shares.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
INTERIM PERIODS:
Results of Operations
For the three months ended October 31, 1996.
During the three months ended October 31, 1996 the Company's sales
decreased by 59% to $128,364 from $314,786 in the three months ended October 31,
1995. The Company experienced a net loss of $571,917 in the three months ended
October 31, 1996 compared to a net income of $1,186 in the three months ended
October 31, 1995. The cost of products sold by the Company was 224% of sales
during the three months ended October 31, 1996, up from 58% of sales in the
three months ended October 31, 1995. The increase is attributable to the
write-down of obsolete and slow-moving inventories. Operating, general and
administrative expenses increased in the three months ended October 31, 1996 to
$446,493 or 348% of sales, compared to $129,753 or 41% of sales, in the three
months ended October 31, 1995. The increase is attributable to the write-off of
uncollectible accounts receivable, expenses related to an acquisition on October
30, 1996, and marketing and promotion activities. These results do not
effectively reflect the operations Mega Blow Moulding Limited ("Mega Blow"), the
100% subsidiary of Megatran Investments Ltd., a holding company which the
Company acquired on October 30, 1996 for a $2,863,182 purchase price paid
$2,111,302 in cash and $751,880 in principal amount of a convertible debenture .
Results of Operations
For the nine months ended October 31, 1996.
During the nine months ended October 31, 1996 the Company's sales
decreased by 20% to $ 689,690 from $ 863,928 in the nine months ended October
31, 1995. The Company experienced a net loss of $ 617,349 in the nine months
ended October 31, 1996 compared to net income of $69,993 in the nine months
ended October 31, 1995. The cost of products sold by the Company was 89% of
sales during the nine months ended October 31, 1996, up from 59% of sales in the
nine months ended October 31, 1995. The increase is attributable to the
write-down of obsolete and slow-moving inventories. Operating, general and
administrative expenses increased in the nine months ended October 31, 1996 to
$726,658, or 105% of sales, compared to $ 265,232, or 31% of sales, in the nine
months ended October 31, 1995. The increase is attributable to the write-off of
uncollectible accounts receivable, expenses related to a recent acquisition on
October 30, 1996, and marketing and promotion activities. These results do not
effectivley reflect the operations of Mega Blow.
10
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Liquidity and Capital Resources:
Current assets totalled $1,723,225 at October 31, 1996 compared to
$592,605 at January 31, 1996. At October 31, 1996, the Company had cash and
short-term deposits of $44,688, and net bank indebtedness (current and
non-current) of $1,549,600 incurred to finance both the Company's October 30,
1996 acquisition of Mega Blow and accounts receivable. Accounts receivable
totalled $1,063,043 at October 31, 1996 compared to $180,304 at January 31,
1996, an increase principally attributable to the Mega Blow acquisition.
The Company's $1,549,600 in bank debt is secured by a first priority lien
on the assets of Mega Blow and the personal guarantee of the Company's
president. The Company also has outstanding $1,501,880 principal amount of
debentures, due as follows: $1,00,627 in 1997; $250,627 in 1998; and $250,626 in
1999. All the debentures are convertible into common shares at the option of the
holder. In the event the holders convert these debentures as to which no
assurance can be given, the Company's obligation to repay the $1,501,880
indebtedness would be eliminated.
The Company has high expectations for Mega Blow, which manufactures
plastic bottles principally used by the health, beauty and pharmaceutical
industries. Mega Blow was formed in 1982, and for its fiscal year ended August
31, 1996 it had net income (audited) of $98,182 on sales of $6,431,291. Mega
Blow's 1996 results represented an 22% increase in net income and a 14% increase
in sales, based on unaudited fiscal 1995 results. Although no assurance can be
given, the Company expects continued growth in Mega Blow's sales and net income
and believes Mega Blow will make a significant contribution to the Company's
1997 operating results while providing cash flow which can be used to pay down
the Company's bank debt.
The Company believes it will generate sufficient positive cash flow from
operations to meet its operating requirements for the next twelve months.
However, there can be no assurance that the Company will be able to repay the
debentures that mature in 1997 if they are not converted. Accordingly, the
Company likely will seek additional financing and there can be no assurance it
can be obtained on commercially acceptable terms, if at all.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
Statements containted in this Report which are not historical facts are
forward looking statements that involve riskes and uncertainties that could
cause the Company's actual results to differ from projected results. Factors
that could cause actual results to differ materially include, among others, the
inability to obtain additional capital, intense competition, the political and
economic uncertainties of doing business in South America and other foreign
markets, and other risk factors detailed in the Company's Securities and
Exchange Commission filings.
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ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed with this report: Page
2 Megatran Investments Ltd. Acquisition
Agreement. *
4.1 Junior 0% Convertible Subordinated
Debenture due October 30, 1999. 14
4.2 Series A Senior Convertible
Subordinated Debenture due October 29,
1997. 24
4.3 Series B Senior Convertible
Subordinated Debenture due October 29,
1997. 36
11 Statement re: Computation of Earnings
per share. 47
27 Financial Data Schedule.
---------------------
* Incorporated by reference to Exhibit 2 of Registrant's Current
Report on Form 8-K, dated October 30, 1996.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter for which this
report is filed.
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereinto duly
authorized.
Dated: December 19, 1996 TREASURY INTERNATIONAL, INC.
By /s/ James Hal
--------------------
James Hal, President
By /s/ Howard Halpern
------------------
Howard Halpern, Principal
Financial Officer
13
EXHIBIT 4.1
THE SECURITIES REPRESENTED BY THIS DEBENTURE CERTIFICATE AND THOSE ISSUABLE UPON
THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE UNITED SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
TREASURY INTERNATIONAL, INC.
0% JUNIOR SUBORDINATED CONVERTIBLE DEBENTURE DUE OCTOBER 30, 1999
Number: 1
Amount: $1,000,000 (CDN)
Original Issue Date: October 30, 1996
Registered Holder: David M. Bereskin, as nominee
Treasury International, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay the registered holder
hereof (the "Holder") the principal sum of CDN $1,000,000.00 in two installments
of $333,333.33 on October 30, 1997 and October 30, 1998 and one installment of
$333,333.34 on October 30, 1999 (each of said three dates being hereinafter
referred to as an "Installment Date"), in such coin or currency of Canada as at
the time of payment shall be the legal tender for the payment of public and
private debts. This Debenture shall not bear interest.
By acceptance and purchase of this Debenture, the registered holder
hereof agrees with the Company that the Debenture shall be subject to the
following terms and conditions:
1. Restrictions on Transfer. Neither the Debenture nor any part
thereof, nor any Common Stock into which it is convertible or issued, shall be
sold, transferred, assigned, pledged, hypothecated or
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otherwise disposed of, and the Company shall not be required to effect any such
disposition, unless and until:
1.1 The Company shall have received (i) written notice of the
contemplated disposition, setting forth all of the circumstances and details
thereof, and (ii) an opinion of counsel, in the form and substance satisfactory
to the Company and its counsel, stating that the contemplated disposition is
exempt from the registration and prospectus requirements of the Act and the
rules and regulations of the Securities and Exchange Commission (the "SEC")
under the Act and of any applicable state or foreign securities act; or
1.2 The Debenture or shares of Common Stock, as the case might
be, are disposed of pursuant to and in strict accordance with a registration
statement which has been filed under the Act with the SEC and a similar
registration statement filed with any state securities administrators having
jurisdiction.
The Company has placed a restrictive legend on this certificate for
the Debenture and may place such a legend on any future certificates for the
Debenture and on the certificates for shares of Common Stock issued upon
conversion thereof reflecting the requirements of this Section.
2. Conversion.
2.1 Conversion of the Debenture.
(a) The Holder of the Debenture may, at his, her or its
option, on any Installment Date, convert one- third of
the outstanding principal amount of this Debenture into
the Company's Common Stock at the rate, expressed in
principal amount of Debenture per share of Common Stock,
determined pursuant to the formula set forth in
paragraph (b) of this Section 2.1 subject to adjustment
in certain events as hereinafter set forth (the
"Conversion Price").
(b) The Conversion Price shall be the average high closing
bid price over the five trading days preceding the
Original Issue Date of this Debenture.
2.2 Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the Holder shall surrender such Debenture, together with
the Notice of Conversion in form acceptable to the Company, appropriately
endorsed to the Company at its principal office, accompanied by written notice
to the Company (a) stating that the Holder elects to convert the portion of the
Debenture described in Section 2.1(a) hereof, and (b) setting forth the name or
names (with address) in which the certificate or certificates for shares of
Common
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Stock issuable upon such conversion shall be issued. Provided the Debenture is
received properly endorsed, promptly by the Company, the date of conversion of
such Debenture shall be deemed to be the date of receipt of Notice of
Conversion, even if the Company's stock transfer books are at that time closed,
and the converting Holder shall be deemed to have become, on the date of
conversion, the record holder of the shares of Common Stock deliverable upon
such conversion. If the Debenture is not received, properly endorsed, by the
fifth business day following the date the Company receives Notice of Conversion,
the date of conversion shall be deemed to be the date the Debenture is received,
provided that such later receipt will not lower the Conversion Price stated in
the Notice of Conversion.
As soon as reasonably possible after the date of conversion, the
Company shall issue and deliver to such converting Holder a certificate or
certificates for the number of shares of Common Stock due on such conversion. No
adjustments in respect of interest or cash dividends shall be made upon the
conversion of any Debenture or Debentures.
Upon conversion of the Debenture in part, the Company shall execute
and deliver to the Holder thereof, at the expense of the Company, a new
Debenture, in aggregate principal amount equal to the unconverted portion of
such Debenture, and such new Debenture shall have the same terms and provisions
other than the principal amount as the Debenture surrendered for conversion.
2.3 Duration of Conversion Privilege. The right to subscribe for and
purchase shares of Common Stock pursuant to the conversion privilege granted
herein shall commence immediately following the Original Issue Date and shall
expire at 5:00 p.m., New York time, on the third anniversary of such date.
2.4 Stock Fully Paid. The Company covenants and agrees that all
shares which may be issued upon the exercise of the conversion privilege granted
herein will, upon issuance in accordance with the terms hereof, be fully paid,
nonassessable, and free from all taxes, liens and charges (except for taxes, if
any, upon the income of the Holder) with respect to the issue thereof, and that
the issuance thereof shall not give rise to any preemptive rights on the part of
the stockholders.
2.5 Antidilution Provisions. In case the Company shall (i) pay a
dividend or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, (iv) make a distribution on its Common Stock
in shares of its capital stock other than Common Stock, or (v) issue by
reclassification of its Common Stock other securities of the Company, the
conversion privilege of the Debenture and the Conversion Price then in effect
immediately prior thereto shall be adjusted so that the Holder shall be entitled
to
16
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receive the kind and number of shares of Common Stock and other securities of
the Company which it would have owned or would have been entitled to receive
after the happening of any of the events described above, had the Debenture been
converted immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this paragraph shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
No adjustment in the Conversion Price shall be required if the
amount of such adjustment would be less than $.01 per share; provided, however,
that any adjustment which by reason of this paragraph is not required to be made
immediately shall be carried forward and taken into account in any subsequent
adjustment.
When the number of shares of Common Stock or the Conversion Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Holder by first class mail, postage prepaid, notice of such adjustment or
adjustments and a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of shares of
Common Stock and the Conversion Price after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
2.6 No Adjustment for Dividends. No adjustment in respect to
any dividends paid shall be made during the term of the Debenture or upon the
exercise of the Debenture.
2.7 Preservation of Purchase Rights Upon Reclassification
Consolidation. etc. In the case of any consolidation of the Company with or
merger of the Company into another corporation or in the case of any sale or
conveyance to another corporation of all or substantially all of the property,
assets or business of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall provide that the Holder shall have the
right thereafter upon payment of the Conversion Price in effect immediately
prior to such action to purchase upon conversion of the Debenture the kind and
amount of shares and other securities and property which the Holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Debenture been converted
immediately prior to such action. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2. The provisions of this Section 2.7 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
2.8 Statement on Debenture Certificates. Irrespective of any
adjustments in the Conversion Price or the number of securities convertible,
this Debenture certificate or any certificates hereafter issued may continue to
express the same price and number of securities
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as are stated in this Debenture certificate. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of the Debenture certificate that it may deem appropriate and that does not
affect the substance thereof, and any Debenture, certificate thereafter issued,
whether upon registration or transfer of, or in exchange or substitution for, an
outstanding Debenture certificate, may be in the form so changed.
3. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any conversion hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor equal in amount
to the product of the applicable fraction multiplied by the Conversion Price
then in effect.
4. Subordination. Any right of the Holder to payment of principal or
interest from the Company shall be subordinated to the claims and rights of the
holders of Senior Debt ("Senior Debt Holders"). "Senior Debt" means the
indebtedness of the Company incurred in connection with: (i) all indebtedness of
the Company of any nature whatsoever incurred in order to close the transactions
contemplated by the Agreement (as hereinafter defined), (ii) all existing and
future secured or unsecured institutional financing, including without
limitation, financing from banks, savings and loan associations, mortgage
companies, insurance companies, governmental agencies and/or any other
institution which is engaged in whole or in part in making loans in the ordinary
course of its business, (iii) all future purchase money financing which is
secured by an encumbrance against all or any portion of the properties and/or
assets of the Company, and (iv) any refinancing of the type of indebtedness
referred to in Section 4(i), (ii) and (iii) above. Any payment of principal or
interest to the Holder shall be collected, enforced or received by the Holder as
trustee for the Senior Debt Holders and paid over to the Senior Debt Holders.
The Holder agrees that in the event of any payment of principal or interest by
the Company to the Holder by reason of any receivership, insolvency or
bankruptcy proceeding, or proceeding for reorganization or readjustment of the
Company or its properties, or otherwise, then, in any such event, the Senior
Debt Holders shall be preferred in the payment of their claims over the claim of
the Holder to payment of principal or interest against the Company or its
properties, and the claims of the Senior Debt Holders shall be first paid and
satisfied in full before any payment or distribution of any kind or character,
whether cash, property or securities, shall be made to the Holder; provided,
however, that this Section shall not apply to any payment of principal or
interest made to the Holder while the Company is solvent and not in default with
respect to its Senior Debt. As used in this Section 4, the term "Company shall
include the Company and its present and future wholly-owned subsidiaries.
5. Replacement of Debenture Certificate. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
the Debenture certificate and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity
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<PAGE>
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of the Debenture certificate, the Company will issue
a new Debenture certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated Debenture certificate.
6. Covenants of the Company. So long as any of the Debentures remain
outstanding, the Company shall at all times keep reserved the total number of
shares of Common Stock necessary for the conversion of the Debenture at the then
current Conversion Price.
7. Default. If any of the following events (herein called "Events
of Default") shall occur:
(a) if the Company shall default in the payment of any
installment of the principal of the Debenture, whether
due on the dates set forth on the face page hereof or by
acceleration or otherwise, and such default shall
continue for more than 30 days; or
(b) if the Company shall make an assignment for the benefit
of creditors or shall be unable to pay its debts as they
become due; or
(c) if the Company shall dissolve, terminate its existence,
become insolvent on a balance sheet basis, commence a
voluntary case under the federal bankruptcy laws or
under any other federal or state law relating to
insolvency or debtor relief, permit the entry of a
decree or order for relief against the Company in an
involuntary case under the federal bankruptcy laws or
under any other - applicable federal or state law
relating to insolvency or debtor's relief, permit the
appointment or consent to the appointment of a receiver,
trustee, or, custodian of the Company or of any of the
Company's property, make an assignment for the benefit
of creditors, or admit in writing to be failing
generally to pay its debts as such debts become due; or
(d) if the Company shall default in the performance of or
compliance with any agreement, condition or term
contained in this Debenture and such default shall not
have been cured within 30 days after such default;
then and in any such event the Holder of this Debenture shall have the option
(unless the default shall have theretofore been cured) by written notice to the
Company to declare the Debenture to be due and payable, whereupon the Debenture
shall forthwith mature and become due and payable without presentment, demand,
protest or further notice of
19
<PAGE>
any kind, all of which are hereby expressly waived, anything contained in this
Debenture to the contrary notwithstanding. Upon the occurrence of an Event of
Default, the Company shall promptly notify the Holder of this Debenture in
writing setting out the nature of the default in reasonable detail. An Event of
Default under this Debenture shall be deemed to be an event of default under a
certain security agreement given by Mega Blow Moulding Limited to the Holder.
8. Company's Right to Set-Off. The Company shall be entitled to
set-off against the outstanding indebtedness evidenced by this Debenture the
aggregate of all claims, demands, damages, losses, injuries, liabilities,
penalties, costs, expenses (including without limitation reasonable attorneys'
fees), suits, actions, investigations, judgments and fees which may be imposed
upon, suffered by or asserted against the Company arising out of or in
connection with any one or more of the following:
(a) any failure to perform or comply with any agreements,
obligations or undertakings on the part of any party (other than the
Company) to be performed pursuant to the Agreement between the
Company, Megatran Investments Limited ("Megatran") and the
stockholders of Megatran, dated of even date herewith (the
"Agreement"); and
(b) any breach of any representation, warranty, covenant or
agreement made by any party (other than the Company) to the
Agreement, or in respect of the facts associated therewith.
The right of set-off of the Company contained herein shall be
subject to the following conditions and limitations:
(a) the Company must notify the Holder of its intention to
assert this right of set-off no later than the 1st day of May, 1997
and such notification shall include a detailed description of the
grounds for such right of set-off; and
(b) the Company and the Holder shall act in an expeditious
manner to submit to a single arbitrator situated in Ontario the
question of determining whether the Company may properly claim a
right of set-off in respect of the stated grounds upon which the
right is based.
9. Remedies on Default; Notice to Other Holders. In case any one or
more of the Events of Default shall occur, the Holder may proceed to protect and
enforce his or her rights by a suit in equity, action at law or other
appropriate proceeding, whether, to the extent permitted by law, for the
specific performance of any agreement of the Company contained herein or in aid
of the exercise of any power granted hereby.
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<PAGE>
10. Amendments. The Company, when authorized by a resolution of its
Board of Directors, may enter into a supplementary agreement for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Debenture or of any supplemental agreement or modifying in
any manner the rights and obligations of the holder of the Debenture or Common
Stock issued upon conversion of the Debenture, and of the Company; provided,
however, that no such supplemental agreement shall extend the fixed maturity of
this Debenture, or reduce the principal amount thereof, or alter or impair the
right to convert the same into Common Stock at the rates and upon the terms
provided in this Debenture, without the consent of the Holder.
11. Changes, Waivers. etc. Neither this Debenture nor any provisions
hereof may be changed, waived, discharged or terminated orally, except by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in Section 9 of this Debenture.
12. Entire Agreement. This Debenture embodies the entire agreement
and understanding between the Holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
13. Governing Law, Jurisdiction, etc. It is the intention of the
parties that the laws of the Province of Ontario shall govern the validity of
this Debenture, the construction of its terms and the interpretation of the
rights and duties of the parties.
14. Notices. All notices and consents required or desired to be
given pursuant hereto shall be in writing and shall be deemed properly given if
delivered to the addressee, in person, or if mailed, by registered or certified
mail, return receipt requested, to the Company at 1181 Finch Avenue West, Unit
21, North York, Ontario M3J 2V8, Canada, attention President, and to Holder at
Briarwood Business Park, 418 North Service Road East, Oakville,
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<PAGE>
Ontario L6H 5R2. Any address specified above may be changed by notice given, as
herein provided, by the party hereto whose address is being changed to the other
party hereto. Notices delivered in person shall be deemed given on the date of
delivery; and notices mailed shall be deemed given three days after the date of
mailing.
TREASURY INTERNATIONAL, INC.
By: /s/ James Hal
------------------------
James Hal, President and
Chief Executive Officer
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<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert
$_______________ of the above Debenture No. 1 into shares of Common Stock of
Treasury International, Inc. (the "Company") according to the conditions set
forth in such Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined
in Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person.
------------------------------------
Date of Conversion*
------------------------------------
Applicable Conversion Price
------------------------------------
Signature
------------------------------------
Name
------------------------------------
Address
------------------------------------
* The original Debenture and this Notice of Conversion must be received by
the Company within five business days following the date of Conversion.
23
EXHIBIT 4.2
THE SECURITIES REPRESENTED BY THIS DEBENTURE CERTIFICATE AND THOSE ISSUABLE UPON
THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE UNITED SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
TREASURY INTERNATIONAL, INC.
SERIES A 8% SENIOR SUBORDINATED CONVERTIBLE DEBENTURE
DUE OCTOBER 29, 1997
Number: 1
Amount: US $500,000.00
Original Issue Date: October 30, 1996
Registered Holder(s): Firmcorp Equities Limited
(name)
Treasury International, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay the registered holder
hereof (the "Holder") the principal sum of US $500,000.00 on October 29, 1997
(subject to extension as provided in Section 2.3 hereof), in such coin or
currency of the United States of America as at the time of payment shall be the
legal tender for the payment of public and private debts, and to pay interest,
less any amounts required by law to be deducted or withheld, computed on the
basis of a 365-day year, on the unpaid principal balance hereof from the date
hereof (the "Original Issue Date"), and to the extent permitted by applicable
law on any overdue interest, at the rate of 8% per year, until such principal
sum and accrued interest shall have been paid. At the Company's option, interest
may be capitalized quarterly on to the principal balance then outstanding or
paid in shares of Common Stock the number of which shall be determined by
dividing the dollar amount of the interest payment due by the average of
Conversion Prices (defined in Section 2.1(b) below) prevailing during the ten
business days preceding the due date of the interest payment.
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<PAGE>
By acceptance and purchase of this Debenture, the registered holder
hereof agrees with the Company that the Debenture shall be subject to the
following terms and conditions:
1. Restrictions on Transfer. During the Restricted Period, as such
term is defined in the Regulation S Securities Subscription Agreement pursuant
to which this Debenture was issued, neither the Debenture nor any part thereof,
nor any Common Stock into which it is convertible or issued in lieu of interest,
shall be sold, transferred, assigned, pledged, hypothecated or otherwise
disposed of, and the Company shall not be required to effect any such
disposition, unless and until:
1.1 The Company shall have received (i) written notice of the
contemplated disposition, setting forth all of the circumstances and details
thereof, and (ii) an opinion of counsel, in the form and substance satisfactory
to the Company and its counsel, stating that the contemplated disposition is
exempt from the registration and prospectus requirements of the Act and the
rules and regulations of the Securities and Exchange Commission (the "SEC")
under the Act and of any applicable state or foreign securities act; or
1.2 The Debenture or shares of Common Stock, as the case might
be, are disposed of pursuant to and in strict accordance with a registration
statement which has been filed under the Act with the SEC and a similar
registration statement filed with any state securities administrators having
jurisdiction.
The Company has placed a restrictive legend on this certificate for
the Debenture and may place such a legend on any future certificates for the
Debenture and on the certificates for shares of Common Stock issued upon
conversion thereof reflecting the requirements of this Section.
2. Conversion.
2.1 Conversion of the Debenture.
(a) Any Holder of the Debenture may, at his, her or its
option, at any time and from time to time on or after
the Original Issue date set forth above, convert such
Debenture into the Company's Common Stock at the rate,
expressed in principal amount of Debenture per share of
Common Stock, determined pursuant to the formula set
forth in paragraph (b) of this Section 2.1 subject to
adjustment in certain events as hereinafter set forth
(the "Conversion Price").
(b) The Conversion Price shall be the lower of:
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<PAGE>
(i) US$.75; or
(ii) 50% of the average high closing bid price over the
five trading days preceding the date of
conversion.
2.2 Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the Holder shall surrender such Debenture, together with
the Notice of Conversion in the form attached hereto appropriately endorsed to
the Company at its principal office, accompanied by written notice to the
Company (a) stating that the Holder elects to convert the Debenture or a portion
thereof, and if a portion, the amount of such portion in multiples of $10,000 in
principal amount, and (b) setting forth the name or names (with address) in
which the certificate or certificates for shares of Common Stock issuable upon
such conversion shall be issued. Provided the Debenture is received properly
endorsed, promptly by the Company, the date of conversion of such Debenture
shall be deemed to be the date of receipt of Notice of Conversion, even if the
Company's stock transfer books are at that time closed, and the converting
Holder shall be deemed to have become, on the date of conversion, the record
holder of the shares of Common Stock deliverable upon such conversion. If the
Debenture is not received, properly endorsed by the fifth business day following
the date the Company receives Notice of Conversion, the date of conversion shall
be deemed to be the date the Debenture is received, provided that such later
receipt will not lower the Conversion Price stated in the Notice of Conversion.
As soon as reasonably possible after the date of conversion but not
later than three business days thereafter, the Company shall issue and deliver
to such converting Holder a certificate or certificates for the number of shares
of Common Stock due on such conversion. No adjustments in respect of interest or
cash dividends shall be made upon the conversion of any Debenture or Debentures.
Upon conversion of the Debenture in part, the Company shall execute
and deliver to the Holder thereof, at the expense of the Company, a new
Debenture, in aggregate principal amount equal to the unconverted portion of
such Debenture, and such new Debenture shall have the same terms and provisions
other than the principal amount as the Debenture surrendered for conversion.
2.3 Duration of Conversion Privilege. The right to subscribe for and
purchase shares of Common Stock pursuant to the conversion privilege granted
herein shall commence immediately following the Original Issue Date and shall
expire at 5:00 p.m., New York time, on the first anniversary of such date;
provided, however, that such expiration date shall, without the need for further
action by the Company or the Holder, be automatically
26
<PAGE>
extended on a month-to-month basis until this Debenture has been fully
converted.
2.4 Stock Fully Paid. The Company covenants and agrees that all
shares which may be issued upon the exercise of the conversion privilege granted
herein will, upon issuance in accordance with the terms hereof, be fully paid,
nonassessable, and free from all taxes, liens and charges (except for taxes, if
any, upon the income of the Holder) with respect to the issue thereof, and that
the issuance thereof shall not give rise to any preemptive rights on the part of
the stockholders.
2.5 Antidilution Provisions. In case the Company shall (i) pay a
dividend or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, (iv) make a distribution on its Common Stock
in shares of its capital stock other than Common Stock, or (v) issue by
reclassification of its Common Stock other securities of the Company, the
conversion privilege of the Debenture and the Conversion Price then in effect
immediately prior thereto shall be adjusted so that the Holder shall be entitled
to receive the kind and number of shares of Common Stock and other securities of
the Company which it would have owned or would have been entitled to receive
after the happening of any of the events described above, had the Debenture been
converted immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this paragraph shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
No adjustment in the Conversion Price shall be required if the
amount of such adjustment would be less than $.01 per share; provided, however,
that any adjustment which by reason of this paragraph is not required to be made
immediately shall be carried forward and taken into account in any subsequent
adjustment.
When the number of shares of Common Stock or the Conversion Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Holder by first class mail, postage prepaid, notice of such adjustment or
adjustments and a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of shares of
Common Stock and the Conversion Price after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
2.6 No Adjustment for Dividends. No adjustment in respect to any
dividends paid shall be made during the term of the Debenture or upon the
exercise of the Debenture.
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<PAGE>
2.7 Preservation of Purchase Rights Upon Reclassification
Consolidation. etc. In the case of any consolidation of the Company with or
merger of the Company into another corporation or in the case of any sale or
conveyance to another corporation of all or substantially all of the property,
assets or business of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall provide that the Holder shall have the
right thereafter upon payment of the Conversion Price in effect immediately
prior to such action to purchase upon conversion of the Debenture the kind and
amount of shares and other securities and property which the Holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Debenture been converted
immediately prior to such action. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2. The provisions of this Section 2.7 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
2.8 Statement on Debenture Certificates. Irrespective of any
adjustments in the Conversion Price or the number of securities convertible,
this Debenture certificate or any certificates hereafter issued may continue to
express the same price and number of securities as are stated in this Debenture
certificate. However, the Company may at any time in its sole discretion (which
shall be conclusive) make any ministerial change in the form of the Debenture
certificate that it may deem appropriate that does not affect the substance
thereof, and any Debenture, certificate thereafter issued, whether upon
registration or transfer of, or in exchange or substitution for, an outstanding
Debenture certificate, may be in the form so changed.
3. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any conversion hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor equal in amount
to the product of the applicable fraction multiplied by the Conversion Price
then in effect.
4. Subordination. Any right of the Holder to payment of principal or
interest from the Company shall be subordinated to the claims and rights of the
holders of Senior Debt ("Senior Debt Holders"). "Senior Debt" means the
indebtedness of the Company incurred in connection with: (i) all existing
financing of the Company of any nature whatsoever which is secured by an
encumbrance against all or any portion of the properties and/or assets of the
Company, including, but not limited to, the financing arrangements between the
Company and Royal Bank of Canada as exists on the date hereof and as may be
amended from time to time, (ii) all existing and future secured or unsecured
institutional financing, including without limitation, financing from banks,
savings and loan associations, mortgage companies, insurance companies,
governmental agencies and/or any other institution which is engaged in whole or
28
<PAGE>
in part in making loans in the ordinary course of its business, (iii) all future
purchase money financing which is secured by an encumbrance against all or any
portion of the properties and/or assets of the Company, and (iv) any refinancing
of the type of indebtedness referred to in Section 4(i), (ii) and (iii) above.
Any payment of principal or interest to the Holder shall be collected, enforced
or received by the Holder as trustee for the Senior Debt Holders and paid over
to the Senior Debt Holders. The Holder agrees that in the event of any payment
of principal or interest by the Company to the Holder by reason of any
receivership, insolvency or bankruptcy proceeding, or proceeding for
reorganization or readjustment of the Company or its properties, or otherwise,
then, in any such event, the Senior Debt Holders shall be preferred in the
payment of their claims over the claim of the Holder to payment of principal or
interest against the Company or its properties, and the claims of the Senior
Debt Holders shall be first paid and satisfied in full before any payment or
distribution of any kind or character, whether cash, property or securities,
shall be made to the Holder; provided, however, that this Section shall not
apply to any payment of principal or interest made to the Holder while the
Company is solvent and not in default with respect to its Senior Debt. As used
in this Section 4, the term "Company shall include the Company and its present
and future wholly-owned subsidiaries.
5. Replacement of Debenture Certificate. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Debenture certificate and, in the case of any such loss, theft or destruction,
upon delivery of a bond of indemnity satisfactory to the Company, or, in the
case of any such mutilation, upon surrender and cancellation of the Debenture
certificate, the Company will issue a new Debenture certificate of like tenor in
lieu of such lost, stolen, destroyed or mutilated Debenture certificate.
6. Covenants of the Company. So long as any of the Debentures
remain outstanding, the Company shall:
(a) At all times keep reserved the total number of shares of
Common Stock necessary for the conversion of all of the
then outstanding Debentures at the then current
Conversion Price;
(b) Not complete within 60 days after the Original Issue
Date any non-public offering of its securities, unless
the proceeds thereof are to be used to effectuate the
purchase of another business or corporation; and
(c) Grant to Firmcorp Equities Limited, for a period of 12
months from the Original Issue
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<PAGE>
Date, a right of first refusal to subscribe for future
non-public offerings of the Company, such right to be
exercised by such firm within 48 hours of its receipt of
the Company's notice of any such offering.
7. Default. If any of the following events (herein called
"Events of Default") shall occur:
(a) if the Company shall default in the payment of the
principal of the Debenture at maturity or by
acceleration or otherwise, and such default shall
continue for more than 30 days; or
(b) if the Company shall default in the payment of any
installment of interest on any of the Debentures for
more than 30 days after the same shall become due and
payable; or
(c) if the Company shall make an assignment for the benefit
of creditors or shall be unable to pay its debts as they
become due; or
(d) if the Company shall dissolve, terminate its existence,
become insolvent on a balance sheet basis, commence a
voluntary case under the federal bankruptcy laws or
under any other federal or state law relating to
insolvency or debtor relief, permit the entry of a
decree or order for relief against the Company in an
involuntary case under the federal bankruptcy laws or
under any other applicable federal or state law relating
to insolvency or debtor's relief, permit the appointment
or consent to the appointment of a receiver, trustee,
or, custodian of the Company or of any of the Company's
property, make an assignment for the benefit of
creditors, or admit in writing to be failing generally
to pay its debts as such debts become due;
(e) if the Company shall default in the performance of or
compliance with any agreement, condition or term
contained in this Debenture or any of the other
Debentures and such default shall not have been cured
within 30 days after such default;
(f) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in any
certificate or financial or other statements heretofore
or hereafter
30
<PAGE>
furnished by or on behalf of the Company in connection
with the execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading in
any material respect at the time made; or
(g) The Company shall have its Common Stock delisted from an
exchange or over-the-counter market,
then and in any such event the Holder of this Debenture shall have the option
(unless the default shall have theretofore been cured) by written notice to the
Company to declare the Debenture to be due and payable, whereupon the Debenture
shall forthwith mature and become due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived,
anything contained in this Debenture to the contrary notwithstanding. Upon the
occurrence of an Event of Default, the Company shall promptly notify the Holder
of this Debenture in writing setting out the nature of the default in reasonable
detail.
8. Remedies on Default; Notice to Other Holders. In case any one or
more of the Events of Default shall occur, the Holder may proceed to protect and
enforce his or her rights by a suit in equity, action at law or other
appropriate proceeding, whether, to the extent permitted by law, for the
specific performance of any agreement of the Company contained herein or in aid
of the exercise of any power granted hereby. If any Holder of one or more of the
Debentures shall declare the same due and payable or take any other action
against the Company in respect of an Event of Default, the Company will
forthwith give written notice to the Holder of this Debenture, specifying such
action and the nature of the default alleged.
9. Amendments. With the consent of the Holders of more than 50% in
aggregate principal amount of the Debentures at the time outstanding, the
Company, when authorized by a resolution of its Board of Directors, may enter
into a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Debenture or
of any supplemental agreement or modifying in any manner the rights and
obligations of the holders of Debentures or Common Stock issued upon conversion
of the Debentures, and of the Company; provided, however, that no such
supplemental agreement shall (a) extend the fixed maturity of any Debenture, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or alter or impair the right to convert the same
into Common Stock at the rates and upon the terms provided in this Debenture,
without the consent of the Holder of each of the Debentures so affected, or (b)
reduce the aforesaid percentage of principal amount of Debentures the Holders of
which are required to
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<PAGE>
consent to any supplemental agreement, without the consent of the Holders of all
Debentures then outstanding.
10. Changes, Waivers. etc. Neither this Debenture nor any provisions
hereof may be changed, waived, discharged or terminated orally, except by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in Section 9 of this Debenture.
11. Entire Agreement. This Debenture embodies the entire agreement
and understanding between the Holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
12. Governing Law. This Debenture shall be governed by and construed
in accordance with the laws of the Province of Ontario, Canada, applicable to
agreements made in and wholly to be performed in that jurisdiction, except for
matters arising under the Securities Act or the Exchange Act which matters shall
be construed and interpreted in accordance with such laws.
13. Arbitration. If, at any time during the continuance of this
Agreement or after the termination thereof, any dispute, difference or question
shall arise between or among any of the parties hereto concerning the
construction, meaning or effect of this Agreement or any agreement or covenant
entered into pursuant to this Agreement or the rights or obligations of the
parties hereto or their heirs, estate trustees, successors or assigns, every
such dispute, difference or question shall be submitted to and settled by
arbitration. The arbitration shall be conducted by a single arbitrator, if the
parties can agree upon one, otherwise by three arbitrators, one to be appointed
by one side to the dispute, one to be appointed by the other side to the dispute
and a third to be chosen by the first two named arbitrators, before they enter
upon the business of arbitration. Once the first arbitrator has been appointed,
the other arbitrator must be appointed within seven (7) days, failing which the
arbitrator first appointed shall be the sole arbitrator. The two arbitrators
chosen shall agree upon a third arbitrator within fourteen (14) days of the
appointment of the last of the two arbitrators, failing which the matter shall
be arbitrated by a single Judge pursuant to the Arbitration Act of Ontario. The
award and determination of such arbitrator or arbitrators or any two of such
three arbitrators, shall be binding upon the parties to such dispute, difference
or question and their respective heirs, estate trustees, successors and assigns,
and there shall be no appeal therefrom. The arbitration shall be conducted in
accordance with the provisions of the Arbitration Act of Ontario and of any
amendment thereto, or of any successor statute thereof, in force at the time of
such dispute, difference or question. The prevailing party shall be entitled to
an award of arbitration costs.
14. Notices. All notices and consents required or desired to be
given pursuant hereto shall be in writing and shall be deemed properly given if
delivered to the addressee, in person,
32
<PAGE>
or if mailed, by registered or certified mail, return receipt requested, to the
Company at 1181 Finch Avenue West, Unit 21, North York, Ontario M3J 2V8, Canada,
attention President, and to Holder in care of Firmcorp Equities Limited, 3845
Bathurst Street, Suite 202, North York, Ontario M3H 3N2 Canada, Attention:
Anthony Heller, President. Any address specified above may be changed by notice
given, as herein provided, by the party hereto whose address is being changed to
the other party hereto. Notices delivered in person shall be deemed given on the
date of delivery; and notices mailed shall be deemed given three days after the
date of mailing.
TREASURY INTERNATIONAL, INC.
By: /s/ James Hal
------------------------------
James Hal, President and
Chief Executive Officer
33
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
of the Debenture)
The undersigned is the registered holder of the foregoing Debenture
and hereby irrevocably elects to convert $_______________ of such Debenture into
shares of Common Stock of Treasury International, Inc. (the "Company") to be
registered in the name of the undersigned as of the date of conversion written
below, according to both the conditions set forth in such Debenture and the
attached copy of the Company's enclosed Irrevocable Instructions to Transfer
Agent, the original of which the Company has previously delivered to its
Transfer Agent.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Debenture was made to him outside of
the U.S., and the undersigned was, at the time the Subscription Agreement was
executed and delivered, and is now, outside the U.S.;
(2) The undersigned is not an U.S. Person (as such term is defined
in Rule 902(a) of Regulation S ("Regulation S") promulgated under the U.S.
Securities Act of 1933 (the "Securities Act"), and has purchased the Debenture
for the account of the undersigned and not for account or benefit of any U.S.
person; and is not converting the Debentures on behalf of any U.S. Person;
(3) All offers and sales by the undersigned of the Debenture and the
Shares acquired pursuant to the Subscription Agreement shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act;
(4) The undersigned has been advised of and understands the terms
and conditions and requirements contained in Regulation S;
(5) The undersigned has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to the Debenture
and the Shares; and
34
<PAGE>
(6) During the Restricted Period (as defined in Regulation S), the
undersigned has not engaged in any short sales or other transactions in
violation of Regulation S.
------------------------------------
Date of Conversion*
------------------------------------
Applicable Conversion Price
------------------------------------
Signature
------------------------------------
Name
------------------------------------
Address
------------------------------------
* The original Debenture and this Notice of Conversion must be received by
the Company within five business days following the date of Conversion.
35
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS DEBENTURE CERTIFICATE AND THOSE ISSUABLE UPON
THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE UNITED SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
TREASURY INTERNATIONAL, INC.
SERIES B 0% SENIOR SUBORDINATED CONVERTIBLE DEBENTURE
DUE OCTOBER 29, 1997
Number: 1
Amount: US $250,000.00
Original Issue Date: October 30, 1996
Registered Holder(s): Leslie Z. Gerendasi
(name)
Treasury International, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay the registered holder
hereof (the "Holder") the principal sum of US $250,000.00 on October 29, 1997
(subject to extension as provided in Section 2.3 hereof), in such coin or
currency of the United States of America as at the time of payment shall be the
legal tender for the payment of public and private debts, without any interest.
By acceptance and purchase of this Debenture, the registered holder
hereof agrees with the Company that the Debenture shall be subject to the
following terms and conditions:
1. Restrictions on Transfer. During the Restricted Period, as such
term is defined in the Regulation S Securities Subscription Agreement pursuant
to which this Debenture was issued, neither the Debenture nor any part thereof,
nor any Common Stock into which it is convertible or issued in lieu of interest,
shall be sold, transferred, assigned, pledged, hypothecated or otherwise
disposed of, and the Company shall not be required to effect any such
disposition, unless and until:
36
<PAGE>
1.1 The Company shall have received (i) written notice of the
contemplated disposition, setting forth all of the circumstances and details
thereof, and (ii) an opinion of counsel, in the form and substance satisfactory
to the Company and its counsel, stating that the contemplated disposition is
exempt from the registration and prospectus requirements of the Act and the
rules and regulations of the Securities and Exchange Commission (the "SEC")
under the Act and of any applicable state or foreign securities act; or
1.2 The Debenture or shares of Common Stock, as the case might
be, are disposed of pursuant to and in strict accordance with a registration
statement which has been filed under the Act with the SEC and a similar
registration statement filed with any state securities administrators having
jurisdiction.
The Company has placed a restrictive legend on this certificate for
the Debenture and may place such a legend on any future certificates for the
Debenture and on the certificates for shares of Common Stock issued upon
conversion thereof reflecting the requirements of this Section.
2. Conversion.
2.1 Conversion of the Debenture.
(a) Any Holder of the Debenture may, at his, her or its
option, at any time and from time to time on or after
the Original Issue date set forth above, convert such
Debenture into the Company's Common Stock at the rate,
expressed in principal amount of Debenture per share of
Common Stock, determined pursuant to the formula set
forth in paragraph (b) of this Section 2.1 subject to
adjustment in certain events as hereinafter set forth
(the "Conversion Price").
(b) The Conversion Price shall be the lower of:
(i) US$.50; or
(ii) 50% of the average high closing bid price over the
five trading days preceding the date of
conversion.
2.2 Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the Holder shall surrender such Debenture, together with
the Notice of Conversion in the form attached hereto appropriately endorsed to
the Company at its principal office, accompanied by written notice to the
Company (a) stating that the Holder elects to convert the Debenture or a portion
thereof, and if a portion, the amount of such portion in multiples of $10,000 in
principal amount, and (b) setting forth the
37
<PAGE>
name or names (with address) in which the certificate or certificates for shares
of Common Stock issuable upon such conversion shall be issued. Provided the
Debenture is received properly endorsed, promptly by the Company, the date of
conversion of such Debenture shall be deemed to be the date of receipt of Notice
of Conversion, even if the Company's stock transfer books are at that time
closed, and the converting Holder shall be deemed to have become, on the date of
conversion, the record holder of the shares of Common Stock deliverable upon
such conversion. If the Debenture is not received, properly endorsed by the
fifth business day following the date the Company receives Notice of Conversion,
the date of conversion shall be deemed to be the date the Debenture is received,
provided that such later receipt will not lower the Conversion Price stated in
the Notice of Conversion.
As soon as reasonably possible after the date of conversion but not
later than three business days thereafter, the Company shall issue and deliver
to such converting Holder a certificate or certificates for the number of shares
of Common Stock due on such conversion. No adjustments in respect of cash
dividends shall be made upon the conversion of any Debenture or Debentures.
Upon conversion of the Debenture in part, the Company shall execute
and deliver to the Holder thereof, at the expense of the Company, a new
Debenture, in aggregate principal amount equal to the unconverted portion of
such Debenture, and such new Debenture shall have the same terms and provisions
other than the principal amount as the Debenture surrendered for conversion.
2.3 Duration of Conversion Privilege. The right to subscribe for and
purchase shares of Common Stock pursuant to the conversion privilege granted
herein shall commence immediately following the Original Issue Date and shall
expire at 5:00 p.m., New York time, on the first anniversary of such date;
provided, however, that such expiration date shall, without the need for further
action by the Company or the Holder, be automatically extended on a
month-to-month basis until this Debenture has been fully converted.
2.4 Stock Fully Paid. The Company covenants and agrees that all
shares which may be issued upon the exercise of the conversion privilege granted
herein will, upon issuance in accordance with the terms hereof, be fully paid,
nonassessable, and free from all taxes, liens and charges (except for taxes, if
any, upon the income of the Holder) with respect to the issue thereof, and that
the issuance thereof shall not give rise to any preemptive rights on the part of
the stockholders.
2.5 Antidilution Provisions. In case the Company shall (i) pay a
dividend or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares
38
<PAGE>
of Common Stock, (iv) make a distribution on its Common Stock in shares of its
capital stock other than Common Stock, or (v) issue by reclassification of its
Common Stock other securities of the Company, the conversion privilege of the
Debenture and the Conversion Price then in effect immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive the kind and
number of shares of Common Stock and other securities of the Company which it
would have owned or would have been entitled to receive after the happening of
any of the events described above, had the Debenture been converted immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
No adjustment in the Conversion Price shall be required if the
amount of such adjustment would be less than $.01 per share; provided, however,
that any adjustment which by reason of this paragraph is not required to be made
immediately shall be carried forward and taken into account in any subsequent
adjustment.
When the number of shares of Common Stock or the Conversion Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Holder by first class mail, postage prepaid, notice of such adjustment or
adjustments and a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of shares of
Common Stock and the Conversion Price after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which such
adjustment was made.
2.6 No Adjustment for Dividends. No adjustment in respect to
any dividends paid shall be made during the term of the Debenture or upon the
exercise of the Debenture.
2.7 Preservation of Purchase Rights Upon Reclassification
Consolidation. etc. In the case of any consolidation of the Company with or
merger of the Company into another corporation or in the case of any sale or
conveyance to another corporation of all or substantially all of the property,
assets or business of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall provide that the Holder shall have the
right thereafter upon payment of the Conversion Price in effect immediately
prior to such action to purchase upon conversion of the Debenture the kind and
amount of shares and other securities and property which the Holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Debenture been converted
immediately prior to such action. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2. The provisions of this Section 2.7 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
39
<PAGE>
2.8 Statement on Debenture Certificates. Irrespective of any
adjustments in the Conversion Price or the number of securities convertible,
this Debenture certificate or any certificates hereafter issued may continue to
express the same price and number of securities as are stated in this Debenture
certificate. However, the Company may at any time in its sole discretion (which
shall be conclusive) make any ministerial change in the form of the Debenture
certificate that it may deem appropriate that does not affect the substance
thereof, and any Debenture, certificate thereafter issued, whether upon
registration or transfer of, or in exchange or substitution for, an outstanding
Debenture certificate, may be in the form so changed.
3. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any conversion hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor equal in amount
to the product of the applicable fraction multiplied by the Conversion Price
then in effect.
4. Subordination. Any right of the Holder to payment of principal or
interest from the Company shall be subordinated to the claims and rights of the
holders of Senior Debt ("Senior Debt Holders"). "Senior Debt" means the
indebtedness of the Company incurred in connection with: (i) all existing
financing of the Company of any nature whatsoever which is secured by an
encumbrance against all or any portion of the properties and/or assets of the
Company, including, but not limited to, the financing arrangements between the
Company and Royal Bank of Canada as exists on the date hereof and as may be
amended from time to time, (ii) all existing and future secured or unsecured
institutional financing, including without limitation, financing from banks,
savings and loan associations, mortgage companies, insurance companies,
governmental agencies and/or any other institution which is engaged in whole or
in part in making loans in the ordinary course of its business, (iii) all future
purchase money financing which is secured by an encumbrance against all or any
portion of the properties and/or assets of the Company, and (iv) any refinancing
of the type of indebtedness referred to in Section 4(i), (ii) and (iii) above.
Any payment of principal or interest to the Holder shall be collected, enforced
or received by the Holder as trustee for the Senior Debt Holders and paid over
to the Senior Debt Holders. The Holder agrees that in the event of any payment
of principal or interest by the Company to the Holder by reason of any
receivership, insolvency or bankruptcy proceeding, or proceeding for
reorganization or readjustment of the Company or its properties, or otherwise,
then, in any such event, the Senior Debt Holders shall be preferred in the
payment of their claims over the claim of the Holder to payment of principal or
interest against the Company or its properties, and the claims of the Senior
Debt Holders shall be first paid and satisfied in full before any payment or
distribution of any kind or character, whether cash, property or securities,
shall be made to the Holder; provided, however, that this Section shall not
apply to any payment of principal or interest made to the Holder while the
Company is
40
<PAGE>
solvent and not in default with respect to its Senior Debt. As used in this
Section 4, the term "Company shall include the Company and its present and
future wholly-owned subsidiaries.
5. Replacement of Debenture Certificate. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Debenture certificate and, in the case of any such loss, theft or destruction,
upon delivery of a bond of indemnity satisfactory to the Company, or, in the
case of any such mutilation, upon surrender and cancellation of the Debenture
certificate, the Company will issue a new Debenture certificate of like tenor in
lieu of such lost, stolen, destroyed or mutilated Debenture certificate.
6. Covenants of the Company. So long as any of the Debentures
remain outstanding, the Company shall:
(a) At all times keep reserved the total number of shares of
Common Stock necessary for the conversion of all of the
then outstanding Debentures at the then current
Conversion Price; and
(b) Not complete within 60 days after the Original Issue
Date any non-public offering of its securities, unless
the proceeds thereof are to be used to effectuate the
purchase of another business or corporation.
7. Default. If any of the following events (herein called
"Events of Default") shall occur:
(a) if the Company shall default in the payment of the
principal of the Debenture at maturity or by
acceleration or otherwise, and such default shall
continue for more than 30 days; or
(b) if the Company shall default in the payment of any
installment of interest on any of the Debentures for
more than 30 days after the same shall become due and
payable; or
(c) if the Company shall make an assignment for the benefit
of creditors or shall be unable to pay its debts as
they become due; or
(d) if the Company shall dissolve, terminate its existence,
become insolvent on a balance sheet basis, commence a
voluntary case under the federal bankruptcy laws or
under any other federal or state law relating to
insolvency or debtor relief, permit the entry of a
decree or order for relief against the Company in an
involuntary case under the federal bankruptcy
41
<PAGE>
laws or under any other applicable federal or state law
relating to insolvency or debtor's relief, permit the
appointment or consent to the appointment of a receiver,
trustee, or, custodian of the Company or of any of the
Company's property, make an assignment for the benefit
of creditors, or admit in writing to be failing
generally to pay its debts as such debts become due;
(e) if the Company shall default in the performance of or
compliance with any agreement, condition or term
contained in this Debenture or any of the other
Debentures and such default shall not have been cured
within 30 days after such default;
(f) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in any
certificate or financial or other statements heretofore
or hereafter furnished by or on behalf of the Company in
connection with the execution and delivery of this
Debenture or the Subscription Agreement shall be false
or misleading in any material respect at the time made;
or
(g) The Company shall have its Common Stock delisted from an
exchange or over-the-counter market,
then and in any such event the Holder of this Debenture shall have the option
(unless the default shall have theretofore been cured) by written notice to the
Company to declare the Debenture to be due and payable, whereupon the Debenture
shall forthwith mature and become due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived,
anything contained in this Debenture to the contrary notwithstanding. Upon the
occurrence of an Event of Default, the Company shall promptly notify the Holder
of this Debenture in writing setting out the nature of the default in reasonable
detail.
8. Remedies on Default; Notice to Other Holders. In case any one or
more of the Events of Default shall occur, the Holder may proceed to protect and
enforce his or her rights by a suit in equity, action at law or other
appropriate proceeding, whether, to the extent permitted by law, for the
specific performance of any agreement of the Company contained herein or in aid
of the exercise of any power granted hereby. If any Holder of one or more of the
Debentures shall declare the same due and payable or take any other action
against the Company in respect of an Event of Default, the Company will
forthwith give written notice to the Holder of this Debenture, specifying such
action and the nature of the default alleged.
42
<PAGE>
9. Amendments. With the consent of the Holders of more than 50% in
aggregate principal amount of the Debentures at the time outstanding, the
Company, when authorized by a resolution of its Board of Directors, may enter
into a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Debenture or
of any supplemental agreement or modifying in any manner the rights and
obligations of the holders of Debentures or Common Stock issued upon conversion
of the Debentures, and of the Company; provided, however, that no such
supplemental agreement shall (a) extend the fixed maturity of any Debenture, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or alter or impair the right to convert the same
into Common Stock at the rates and upon the terms provided in this Debenture,
without the consent of the Holder of each of the Debentures so affected, or (b)
reduce the aforesaid percentage of principal amount of Debentures the Holders of
which are required to consent to any supplemental agreement, without the consent
of the Holders of all Debentures then outstanding.
10. Changes, Waivers. etc. Neither this Debenture nor any provisions
hereof may be changed, waived, discharged or terminated orally, except by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in Section 9 of this Debenture.
11. Entire Agreement. This Debenture embodies the entire agreement
and understanding between the Holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
12. Governing Law. This Debenture shall be governed by and construed
in accordance with the laws of the Province of Ontario, Canada, applicable to
agreements made in and wholly to be performed in that jurisdiction, except for
matters arising under the Securities Act or the Exchange Act which matters shall
be construed and interpreted in accordance with such laws.
13. Arbitration. If, at any time during the continuance of this
Agreement or after the termination thereof, any dispute, difference or question
shall arise between or among any of the parties hereto concerning the
construction, meaning or effect of this Agreement or any agreement or covenant
entered into pursuant to this Agreement or the rights or obligations of the
parties hereto or their heirs, estate trustees, successors or assigns, every
such dispute, difference or question shall be submitted to and settled by
arbitration. The arbitration shall be conducted by a single arbitrator, if the
parties can agree upon one, otherwise by three arbitrators, one to be appointed
by one side to the dispute, one to be appointed by the other side to the dispute
and a third to be chosen by the first two named arbitrators, before they enter
upon the business of arbitration. Once the first arbitrator has been appointed,
the other arbitrator must be
43
<PAGE>
appointed within seven (7) days, failing which the arbitrator first appointed
shall be the sole arbitrator. The two arbitrators chosen shall agree upon a
third arbitrator within fourteen (14) days of the appointment of the last of the
two arbitrators, failing which the matter shall be arbitrated by a single Judge
pursuant to the Arbitration Act of Ontario. The award and determination of such
arbitrator or arbitrators or any two of such three arbitrators, shall be binding
upon the parties to such dispute, difference or question and their respective
heirs, estate trustees, successors and assigns, and there shall be no appeal
therefrom. The arbitration shall be conducted in accordance with the provisions
of the Arbitration Act of Ontario and of any amendment thereto, or of any
successor statute thereof, in force at the time of such dispute, difference or
question. The prevailing party shall be entitled to an award of arbitration
costs.
14. Notices. All notices and consents required or desired to be
given pursuant hereto shall be in writing and shall be deemed properly given if
delivered to the addressee, in person, or if mailed, by registered or certified
mail, return receipt requested, to the Company at 1181 Finch Avenue West, Unit
21, North York, Ontario M3J 2V8, Canada, Attention: President, and to Holder at
Leslie Z. Gerendasi & Company, 3101 Bathurst Street, Suite 600, Toronto, Ontario
M6A 2A6 Canada. Any address specified above may be changed by notice given, as
herein provided, by the party hereto whose address is being changed to the other
party hereto. Notices delivered in person shall be deemed given on the date of
delivery; and notices mailed shall be deemed given three days after the date of
mailing.
TREASURY INTERNATIONAL, INC.
By: /s/ James Hal
---------------------------------
James Hal, President and
Chief Executive Officer
44
<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
of the Debenture)
The undersigned is the registered holder of the foregoing Debenture
and hereby irrevocably elects to convert $_______________ of such Debenture into
shares of Common Stock of Treasury International, Inc. (the "Company") to be
registered in the name of the undersigned as of the date of conversion written
below, according to both the conditions set forth in such Debenture and the
attached copy of the Company's enclosed Irrevocable Instructions to Transfer
Agent, the original of which the Company has previously delivered to its
Transfer Agent.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Debenture was made to him outside of
the U.S., and the undersigned was, at the time the Subscription Agreement was
executed and delivered, and is now, outside the U.S.;
(2) The undersigned is not an U.S. Person (as such term is defined
in Rule 902(a) of Regulation S ("Regulation S") promulgated under the U.S.
Securities Act of 1933 (the "Securities Act"), and has purchased the Debenture
for the account of the undersigned and not for account or benefit of any U.S.
person; and is not converting the Debentures on behalf of any U.S. Person;
(3) All offers and sales by the undersigned of the Debenture and the
Shares acquired pursuant to the Subscription Agreement shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act;
(4) The undersigned has been advised of and understands the terms
and conditions and requirements contained in Regulation S;
(5) The undersigned has not engaged in any "directed selling
efforts" (as such term is defined in Regulation S) with respect to the Debenture
and the Shares; and
45
<PAGE>
(6) During the Restricted Period (as defined in Regulation S), the
undersigned has not engaged in any short sales or other transactions in
violation of Regulation S.
----------------------------------
Date of Conversion*
----------------------------------
Applicable Conversion Price
----------------------------------
Signature
----------------------------------
Name
----------------------------------
Address
----------------------------------
* The original Debenture and this Notice of Conversion must be received by
the Company within five business days following the date of Conversion.
46
EXHIBIT 11
TREASURY INTERNATIONAL, INC.
COMPUTATION OF EARNINGS/LOSS PER SHARE
AS OF OCTOBER 31, 1996
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING $13,973,690
NET INCOME (LOSS) $ (571,917)
NET INCOME (LOSS) PER COMMON SHARE $ ( 0.04)
47
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited October 31, 1996 financial statements of Treasury International, Inc.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 44,688
<SECURITIES> 0
<RECEIVABLES> 1,063,043
<ALLOWANCES> 0
<INVENTORY> 584,126
<CURRENT-ASSETS> 1,723,225
<PP&E> 2,621,639
<DEPRECIATION> 1,832,415
<TOTAL-ASSETS> 4,348,367
<CURRENT-LIABILITIES> 2,771,105
<BONDS> 1,501,880
0
0
<COMMON> 1,397
<OTHER-SE> 1,313,191
<TOTAL-LIABILITY-AND-EQUITY> 4,348,367
<SALES> 689,690
<TOTAL-REVENUES> 723,680
<CGS> 726,658
<TOTAL-COSTS> 728,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (617,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (617,349)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
