SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of earliest event reported: March 31, 2000
Stockgroup.Com Holdings, Inc.
(Exact name of registrant as specified in its charter)
Colorado 000-23687 84-1379282
(State of Incorporation) (Commission File Number) (IRS Identification No.)
500-750 W. Pender Street, Vancouver, British Columbia, Canada V6C 2T7
(Address of principal executive offices)(Zip Code)
(604) 331-0995
(Registrant's telephone number, including area code)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. OTHER EVENTS
Financing Arrangement
On April 3, 2000, Stockgroup.com Holdings, Inc. ("STOCKGROUP") entered into
a Convertible Note Purchase Agreement pursuant to which it obtained $3 million
in a financing led by Deephaven Capital Management LLC, a subsidiary of
Knight/Trimark. Amro International S.A., managed by Rhino Advisors was an
additional lender in the funding. Jesup and Lamont Securities Corporation served
as the placement agent for the transaction.
The funding included $3 million of 8% Convertible Notes (the "Notes"), and
5-year Callable Warrants (the "Warrants"). The Notes mature on March 31, 2002
and are convertible into STOCKGROUP common shares only after July 31, 2000. The
Notes may only be converted if STOCKGROUP does not make payment on a
Noteholder's prepayment request, or if STOCKGROUP seeks to prepay the Notes. The
initial conversion price (the "Initial Conversion Price") for the Notes is
$3.72, and the exercise price (the "Exercise Price") of the Warrants is $3.30.
The Initial Conversion Price and the Exercise Price are subject to adjustment
upon the happening of certain events, such as the payment of a stock dividend,
or the issuance of warrants at a below market price or at a price below the
conversion price. Prepayments on the Notes are subject to a tiered prepayment
schedule that increases as the number of days between the closing date and the
prepayment date increases, being 105%, 110%, and 115% of principal from days
1-60, 61-120, and after 120 days, respectively. Interest accrues on the Notes at
the rate of 8% per annum, and is payable on each conversion date and at
maturity. Interest may be paid in the form of cash or registered stock, at
STOCKGROUP's option. The lenders have the right to put back to STOCKGROUP up to
25% of the unconverted amount of the Notes during any 30 day period after July
31, 2000. Upon the lenders' exercise of such right, STOCKGROUP has the option of
prepaying the portion of the Notes sought to be converted, such prepayment to be
in accordance with the tiered prepayment schedule set forth above. If STOCKGROUP
does not make such a prepayment within 10 days after its receipt of a "put"
notice, the conversion rate of the Notes changes to the lesser of (a) the
Initial Conversion Price, and (b) 88% of the 5 lowest closing prices of
STOCKGROUP's common shares during the 30 trading days prior to the date of
conversion.
The Warrants permit the holders to acquire up to 181,818 STOCKGROUP common
shares. STOCKGROUP has agreed to file a registration statement covering these
shares, and the shares underlying the Notes. The Warrants may be called by
STOCKGROUP, at a purchase price of $.01 per underlying share, if STOCKGROUP's
common shares trade at the level of 175% of the Initial Conversion price of
$3.72 for any 20 consecutive trading days after the effective date of the
registration statement, provided that the holders have the right to exercise the
warrants within 30 days after their receipt of such a call.
The placement agent in the transaction received a fee of $120,000 and
Warrants to purchase 90,909 common shares on the same terms as the Warrants
issued to the lenders.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Stockgroup.com Holdings, Inc.
(Registrant)
Dated: April 14, 2000 By: /s/ MARCUS A. NEW
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Marcus A. New, Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Exhibit
4.1 Convertible Note Purchase Agreement
4.2 8% Convertible Note
4.3 Callable Warrant
4.4 Registration Rights Agreement
99.1 Press Release
Exhibit 4.1 Convertible Note Purchase Agreement
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CONVERTIBLE NOTE PURCHASE AGREEMENT
Among
STOCKGROUP.COM HOLDINGS, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of March 31, 2000
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CONVERTIBLE NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of March
31, 2000, among Stockgroup.com Holdings, Inc., a Colorado corporation (the
"Company"), and the investors signatory hereto (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company an aggregate
principal amount of $3,000,000 of the Company's 8% Convertible Notes due March
31, 2002, which shall be in the form of Exhibit A (the "Notes"), and which are
convertible into shares of the Company's common stock, no par value (the "Common
Stock"). All references to $ (dollars) shall be to US$ (United States Dollars).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set forth in
this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase from the Company the
Notes for an aggregate purchase price of $3,000,000. The closing of the
purchase and sale of the Notes (the "Closing") shall take place at the
offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson
Silverman"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as
the "Closing Date."
(ii) On the Closing Date, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver to
each Purchaser (1) the Notes in the aggregate principal amount
indicated below such Purchaser's name on the signature page to this
Agreement, registered in the name of such Purchaser, (2) a Common
Stock purchase warrant, in the form of Exhibit D, registered in the
name of such Purchaser, pursuant to which such Purchaser shall have
the right to acquire the number of shares of Common Stock indicated
below such Purchaser's name on the signature page to this Agreement
(collectively, the "Warrants"), (3) the legal opinion of Sierchio &
Albert, P.C., outside counsel to the Company, in the form of Exhibit
C, and (4) an executed Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit B
(the "Registration Rights Agreement"), and the Transfer Agent
Instructions, in the form of Exhibit E, delivered to and acknowledged
by the Company's transfer agent (the "Transfer Agent Instructions");
and (B) each Purchaser shall deliver (1) the purchase price indicated
below such Purchaser's name on the signature page to this Agreement in
United States dollars in immediately available funds by wire transfer
to an account designated in writing by the Company for such purpose,
and (2) an executed Registration Rights Agreement.
1.2 Certain Defined Terms. For purposes of this Agreement, "Conversion
Price," "Original Issue Date" and "Trading Day" shall have the meanings set
forth in the Notes; "Business Day" shall mean any day except Saturday, Sunday
and any day which shall be a federal legal holiday in the United States or
Canada or a day on which banking institutions in the State of New York or the
Province of British Columbia, Canada are authorized or required by law or other
governmental action to close; "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Colorado with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries
is an entity, duly incorporated or otherwise organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction
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in which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified
or in good standing, as the case may be, could not, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability of
the Securities (as defined below) or any of this Agreement, the
Registration Rights Agreement, the Notes or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect
on the results of operations, assets, prospects, or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis
its obligations under any of the Transaction Documents (any of (x), (y) or
(z), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no
further action is required by the Company to authorize the Transaction
Documents. Each of the Transaction Documents has been duly executed by the
Company and, when delivered (or filed, as the case may be) in accordance
with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). The Company
owns all of the capital stock of each subsidiary. No shares of Common Stock
are entitled to preemptive or similar rights, nor is any holder of the
Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the
Notes and the Warrants and except as disclosed in Schedule 2.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any
Person (as defined below) any right to subscribe for or acquire, any shares
of Common Stock, or contracts, commitments, understandings, or arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock.
(d) Issuance of the Notes and the Warrants. The Notes and the Warrants
are duly authorized and, when issued and paid for in accordance with the
terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of
first refusal of any kind (collectively, "Liens"), other than those created
by the Purchasers with third parties. The Company has on the date hereof
and will, at all times while the Notes and the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock,
reserved for issuance to the holders of the Notes and the Warrants, to
enable it to perform its conversion, exercise and other obligations under
this Agreement, the Notes and the Warrants. Such number of reserved and
available shares of Common Stock is not less than the sum of (i) 200% of
the number of shares of Common Stock which would be issuable upon
conversion in full of the Notes, assuming such conversion occurred on the
Original Issue Date, the Notes remain outstanding for two years and all
interest is paid in shares of Common Stock and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrants (such number of shares
of Common Stock as contemplated in clauses (i)-(ii), the "Initial
Minimum"). All such authorized shares of Common Stock shall be duly
reserved for issuance to the holders of the Notes and the Warrants. The
shares of Common Stock issuable upon conversion of the Notes and upon
exercise of the Warrants are collectively referred to herein as the
"Underlying Shares." The Notes, the Warrants and the Underlying Shares are
collectively referred to herein as, the "Securities." When issued in
accordance with the Notes and the Warrants, the Underlying Shares will be
duly authorized, validly issued, fully paid and nonassessable, free and
clear of all Liens other than those created by the Purchasers with third
parties.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other charter documents (each as
amended through the date hereof), or (ii) subject to obtaining the Required
Approvals (as defined below), conflict with, or constitute a default (or an
event which with
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notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt
or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary
is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company is bound or affected;
except in the case of each of clauses (ii) and (iii), as could not,
individually or in the aggregate, have or result in a Material Adverse
Effect. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental authority, except for
violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (i) the filings
required pursuant to Section 3.10, (ii) the filing with the Securities and
Exchange Commission (the "Commission") of a registration statement meeting
the requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by the Purchasers (the
"Underlying Shares Registration Statement"), (iii) applicable Blue Sky
filings and (iv) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make
such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "Required
Approvals").
(g) Litigation; Proceedings. There is no action, suit, inquiry, notice
of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action")
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, individually or in the aggregate, have or result in a Material
Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which
has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
in each case of clause (i), (ii) or (iii) above, except as could not
individually or in the aggregate, have or result in a Material Adverse
Effect.
(i) Private Offering. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated
hereby are exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"). Neither the Company nor any
Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the Purchasers, to the registration
requirements of the Securities Act including soliciting any offer to buy or
sell the Securities by means of any form of general solicitation or
advertising.
(j) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a)
or 15(d) thereof, for the twelve months preceding the date hereof (or such
shorter period as the Company was required by law to file such material)
(the foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Transaction Documents and the Schedules
to this Agreement, the "Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the
SEC Documents, when filed,
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contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. All material agreements to which the Company is a
party or to which the property or assets of the Company are subject have
been filed as exhibits to the SEC Documents as required. The financial
statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in
all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments or other adjustments required to reconcile GAAP and generally
accepted accounting principles under Canadian practice. Since December 31,
1999, except as specifically disclosed in the Disclosure Materials, (a)
there has been no event, occurrence or development that has or that could
result in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities incurred
in the ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to
its stockholders or officers or directors (other than in compliance with
existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(l) Certain Fees. Except for certain fees payable to Jesup & Lamont
Securities Corp. by the Company, no fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement. The Company shall indemnify and hold harmless the
Purchasers, their employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees, as such fees and
expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person acting
on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Exclusivity. The Company shall not issue and sell the Notes to any
Person other than the Purchasers without the specific prior written consent
of the Purchasers.
(o) Listing and Maintenance Requirements Compliance. Except as set
forth in the SEC Documents, the Company has not, in the twelve months
preceding the date hereof, received notice (written or oral) from any stock
exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company
is not in compliance with the listing or maintenance requirements of such
exchange or market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
(p) Patents and Trademarks. The Company and its Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
which are necessary or material for use in connection with their respective
businesses, as described in the SEC Documents and which the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or
its Subsidiaries violates or infringes upon the rights of any
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Person. To the best knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights.
(q) Registration Rights; Rights of Participation. Except as set forth
on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with
the Commission or any other governmental authority which has not been
satisfied. No Person, has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.
(r) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the
aggregate, have or result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
(s) Title. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them which is material to
the business of the Company and its Subsidiaries and good and marketable
title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for Liens as do not materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company and its Subsidiaries. Any real
property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and its Subsidiaries are in compliance and do
not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(t) Absence of Certain Proceedings. Except as described in the SEC
Documents, (i) there is no Action pending or threatened in writing against
the Company, in any such case wherein an unfavorable decision, ruling or
finding could have or result in a Material Adverse Effect; (ii) neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving (A) a claim of violation of or
liability under federal or state securities laws or (B) a claim of breach
of fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the
Company has no knowledge of any expected such request that would be made
prior to the Effectiveness Date (as defined in the Registration Rights
Agreement); and (iv) there has not been, and to the best of the Company's
knowledge there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or
officer of the Company.
(u) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the key
employees of the Company.
(x) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that
the Purchasers shall be relying on the foregoing representations in
effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser hereby
for itself and for no other Purchaser represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The purchase by such Purchaser of the
Securities hereunder
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has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has
been duly executed by such Purchaser, and when delivered by such Purchaser
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to
the provisions of this Agreement, the Registration Rights Agreement and the
Warrant, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable federal and state
securities laws or under an exemption from such registration. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of
its business. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the Notes
and its respective Warrants, it was, and at the date hereof it is, and at
each exercise date under its respective Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
Such Purchaser has not been formed solely for the purpose of acquiring the
Securities.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment. Such Purchaser understands the restrictions relevant to
transfers of Securities as set forth in the Transaction Documents.
(f) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of
the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with
respect to the investment and to verify the accuracy and completeness of
the information contained in the Disclosure Materials. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect
such Purchaser's right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such
exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company, without requiring a legal opinion as
described in the immediately preceding sentence, hereby consents to and agrees
to register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by a Purchaser to one or
more funds or managed accounts under common management with such Purchaser, and
any transfer among any such funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Notes and exercise of the Warrants or other
issuances of Underlying Shares as contemplated hereby, by the Notes or the
Warrants occurs at any time while an Underlying Shares Registration Statement is
effective under the Securities Act or, in the event there is not an effective
Underlying Shares Registration Statement, at such time, in the opinion of
counsel to the Company, such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the day that the Underlying
Shares Registration Statement is declared effective by the Commission (the
"Effective Date"). The Company agrees that, in the event any Underlying Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three Trading Days after request therefor by a Purchaser, provide such Purchaser
with a certificate or certificates representing such Underlying Shares, free
from such legend at such time as such legend would not have been required under
this Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Underlying Shares upon (i) conversion of the Notes in accordance with the
terms of the Notes, and (ii) exercise of the Warrants in accordance with their
terms, will result in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x) conversion
of the Notes in accordance with the terms of the Notes, and (y) exercise of
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the Warrants in accordance with their terms, is unconditional and absolute,
subject to the limitations set forth herein in the Notes or pursuant to the
Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of conversion or exercise (as the case may be) were to be delivered on
such date, precluded from (a) issuing (a) 200% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the Notes, and (b)
the number of Underlying Shares issuable upon exercise in full of the Warrants
(the "Current Required Minimum"), in either case, due to the unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Board of Directors of the Company shall promptly (and in any case,
within 30 Business Days from such date) prepare and mail to the stockholders of
the Company proxy materials requesting authorization to amend the Company's
certificate or articles of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchasers in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its issuance, conversion exercise and reservation of shares
obligations as set forth in this Agreement, the Notes and the Warrants (the sum
of (x) the number of shares of Common Stock then outstanding plus all shares of
Common Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the 60th day after delivery of the proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate or
articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall (i)
in the time and manner required by any exchange, market or quotation system on
which the Common Stock is traded, prepare and file with such national securities
exchange or market or trading or quotation facility on which the Common Stock is
then listed, an additional shares listing application covering a number of
shares of Common Stock which is not less than the Initial Minimum, (ii) take all
steps necessary to cause such shares of Common Stock to be approved for listing
on any such national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed, as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon conversion in full of the then
outstanding Notes and upon exercise of the then unexercised portion of the
Warrants exceeds 85% of the number of Underlying Shares previously listed on
account thereof with any such required exchanges, then the Company shall take
the necessary actions to immediately list a number of Underlying Shares as
equals no less than the then Current Required Minimum.
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(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon conversion of the Notes in full and upon exercise in full of
the Warrants in accordance with this Agreement, the Notes and the Warrants,
respectively, in such amount as may be required to fulfill its obligations
in full under the Transaction Documents, which reserve shall equal no less
than the then Current Required Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent Instructions,
Conversion Notice (as defined in the Notes) and Notice of Exercise under the
Warrants set forth the totality of the procedures with respect to the conversion
of the Notes and exercise of the Warrants, including the form of legal opinion,
if necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchasers to convert their Notes and exercise their Warrants as contemplated in
the Notes and the Warrants (as applicable).
3.8 Conversion and Exercise Obligations of the Company. The Company shall
honor conversions of the Notes and exercises of the Warrants and shall deliver
Underlying Shares in accordance with the respective terms, conditions and time
periods set forth in the Notes and the Warrants.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company shall
not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities including the issuance of any debt or other instrument at any time
over life thereof convertible into or exchangeable for Common Stock, or any
other transaction intended to be exempt or not subject to registration under the
Securities Act (a "Subsequent Placement") for a period of 180 Trading Days after
the Effective Date, provided, that such 180 Trading Day period shall be extended
for the number of Trading Days during such period (A) in which trading in the
Common Stock is suspended by the securities exchange or such market or quotation
system on which the Common Stock is then listed, or (B) during which the
Underlying Shares Registration Statement is not effective, or (C) during which
the prospectus included in the Underlying Shares Registration Statement may not
be used by the holders thereof for the resale of Underlying Shares, except (i)
the granting of options or warrants to employees, officers and directors, and
the issuance of shares upon exercise of options granted, under any stock option
or employee stock purchase plan heretofore or hereinafter duly adopted by the
Company, (ii) shares of Common Stock issuable upon exercise of any currently
outstanding warrants and upon conversion of any currently outstanding
convertible securities of the Company, in each case disclosed in Schedule 2.1(c)
but not with respect to any amendments or modifications thereof (except pursuant
to the foregoing clause (i)), (iii) shares of Common Stock issuable upon
conversion of Notes and upon exercise of the Warrants in accordance with the
Notes or the Warrants, (iv) up to 1,000,000 shares of Common Stock issued at a
fixed price of not less than $3.50 per share (subject to adjustment for stock
splits) and not subject to any adjustment or reset, pursuant to a private
placement transaction, (v) securities issued pursuant to an underwritten public
offering by the Company (and not of any securities of a shareholder of the
Company other than up to 4% of the holdings of the Chief Executive Officer of
the Company if such participation is required by the rules and regulations of
the stock market on which such offering will take place or by the rules and
regulations of the securities authority governing such stock market) resulting
in gross proceeds to the Company of not less than $10,000,000, where the price
per share of Common Stock offered is fixed and the underwriter is an investment
bank nationally recognized in the United States of America (if the offering is
to be conducted in the United States of America or in Great Britain (if the
offering is to be conducted in Great Britain) ("equity lines of credit" or their
equivalents shall not satisfy this exception), (iv) issuance pursuant to a
private placement to Hollinger International, Inc., and (v) shares of Common
Stock issued as payment of the purchase price in connection with a Strategic
Transaction (as defined below) (the offerings specified in clauses (i)-(v) of
this Section not being deemed Subsequent Placements), unless (A) the Company
delivers to each of the Purchasers a written notice (the "Subsequent Placement
Notice") of its intention to effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of such
Subsequent Placement, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Placement shall be effected, and attached
to which shall be a term sheet or similar document relating thereto and (B) such
Purchaser shall not have notified the Company by 5:00 p.m. (New York City time)
on the fifth Trading Day after its receipt of the Subsequent Placement Notice of
its willingness to provide (or to cause its sole designee to provide), subject
to completion of mutually acceptable documentation, financing to the Company on
the same terms set forth in the Subsequent Placement Notice. If the Purchasers
shall fail to notify the Company of their intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement
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Notice; provided, that the Company shall provide the Purchasers with a second
Subsequent Placement Notice, and the Purchasers shall again have the right of
first refusal set forth above in this paragraph (a), if the Subsequent Placement
subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within thirty Trading Days after the date of the initial Subsequent
Placement Notice with the Person (or an Affiliate of such Person) identified in
the Subsequent Placement Notice. If the Purchasers shall indicate a willingness
to provide financing in excess of the amount set forth in the Subsequent
Placement Notice, then each Purchaser shall be entitled to provide financing
pursuant to such Subsequent Placement Notice up to an amount equal to such
Purchaser's pro-rata portion of the aggregate principal amount of Notes
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice. For purposes of this
Section, a "Strategic Transaction" shall mean a transaction or relationship in
which the Company issues shares of Common Stock to an entity which is, itself or
through its subsidiaries, an operating company in a business related to the
business of the Company and in which the Company receives material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement)
to be registered, and securities of the Company permitted pursuant to
Section 6(c) of the Registration's Rights Agreement to be registered, in
the Underlying Shares Registration Statement in accordance with the
Registration Rights Agreement, and (z) Common Stock permitted to be issued
pursuant to paragraph (a)(i)- (v) of Section 3.9(a), the Company shall not,
for a period of not less than 90 Trading Days after the Effective Date,
without the prior written consent of the Purchasers (i) issue or sell any
of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii)
register any securities of the Company. Any days that a Purchaser is unable
to sell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period for the purposes of
(i) and (ii) above.
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall: (i)
by the Business Day immediately following the Closing Date issue a press release
acceptable to the Purchasers disclosing the transactions contemplated hereby,
(ii) file with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten Business Days after the Closing Date, and (iii)
timely file with the Commission a Form D promulgated under the Securities Act as
required under Regulation D promulgated under the Securities Act and provide a
copy thereof to the Purchasers promptly after the filing thereof. The Company
shall, no less than two Business Days prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to the
Purchasers. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the names
of the Purchasers, or include the names of the Purchasers in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of the Purchasers, except to the extent such
disclosure is required by law, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
3.11 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.12 Reimbursement. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith,
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as such expenses are incurred. In addition, other than with respect to any
matter in which a Purchaser is a named party, the Company will pay such
Purchaser the charges, as reasonably determined by such Purchaser, for the time
of any officers or employees of such Purchaser devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearings, trials,
and other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of the consummation of the
Transaction Documents (as opposed to subsequent breaching by the Purchasers of
obligations hereunder) except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Robinson
Silverman $10,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be retained by the Purchasers and shall not be delivered to the Company at the
Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents, together with
the Exhibits and Schedules thereto and the Transfer Agent Instructions contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Stockgroup.com Holdings, Inc.
750 West Pender Street, Suite 500
Vancouver, British Columbia
Canada V6C 2T7
Facsimile No.: (604) 331-1194
Attn: Corporate Secretary
With copies to: Sierchio & Albert
150 West 58th Street, 25th floor
New York, NY 10155
Facsimile No.: (212) 446-9504
Attn: Joseph Sierchio, Esq.
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If to a Purchaser: To the address set forth under such
Purchaser's name on the
signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement in accordance
with its terms.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. The corporate laws of the State of Colorado shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Notes and the Warrants.
4.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible Note
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
STOCKGROUP.COM HOLDINGS, INC.
By:_____________________________________
Name:
Title:
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<PAGE>
DEEPHAVEN PRIVATE PLACEMENT TRADING LTD.
By:_____________________________________
Name:
Title:
Notes Purchase Price: $2,000,000
Number of Shares underlying
Warrant: 121,212
Address for Notice:
Deephaven Private Placement Ltd.
c/o Deephaven Capital Management LLC
130 Cheshire Lane
Minnentonka, MN 55305
Facsimile No.: (612) 249-5300
Attn: Bruce Lieberman
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and
(212) 541-1432
Attn: Eric L. Cohen, Esq.
<PAGE>
AMRO INTERNATIONAL, S.A.
By: ___________________________
Name:
Title:
Notes Purchase Price: $1,000,000
Number of Shares underlying Warrant: 60,606
Address for Notice:
[ ]
Exhibit 4.2 8% Convertible Note
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
No. 6 US $500,000
STOCKGROUP.COM HOLDINGS, INC.
8% CONVERTIBLE NOTE
DUE MARCH 31, 2002
THIS Note is one of a series of duly authorized and issued notes of
Stockgroup.com Holdings, Inc., a Colorado corporation, having a principal place
of business at 750 West Pender Street, Suite 500, Vancouver, British Columbia,
Canada V6C 2T7 (the "Company"), designated as its 8% Convertible Notes, due
March 31, 2002, in the aggregate principal amount of Three Million Dollars
($3,000,000) (the "Notes"). All references to $ (dollars) shall be to US$
(United States Dollars).
FOR VALUE RECEIVED, the Company promises to pay to Amro International,
S.A., or its registered assigns (the "Holder"), the principal sum of Five
Hundred Thousand Dollars ($500,000), on March 31, 2002 or such earlier date as
the Notes are required or permitted to be repaid as provided hereunder (the
"Maturity Date") and to pay interest to the Holder on the aggregate outstanding
principal amount of this Note at the rate of 8% per annum, in cash or shares of
Common Stock (as defined in Section 7), on each Conversion Date and on the
Maturity Date (as defined herein). Subject to the terms and conditions herein,
the decision whether to pay interest hereunder in shares of Common Stock or cash
shall be at the discretion of the Company. Not less than ten Trading Days (as
defined in Section 7) prior to each Conversion Date, the Company shall provide
the Holder with written notice of its election to pay interest hereunder either
in cash or shares of Common Stock pursuant to the terms of Section 4(a)(i) (the
Company may indicate in such notice that the election contained in such notice
shall continue for later periods until revised). Subject to Section 4(a)(i)(B),
failure to timely provide such written notice shall be deemed an election by the
Company to pay the interest on such Conversion Date in shares of Common Stock
pursuant to the terms of Section 4(a)(i). Interest shall be calculated on the
basis of a 360-day year and shall accrue daily commencing on the Original Issue
Date (as defined in Section 7) until payment in full of the principal sum,
together with all accrued and unpaid interest and other amounts which may become
due hereunder, has been made. Interest hereunder will be paid to the Person (as
defined in Section 7) in whose name this Note is registered on the records of
the Company regarding registration and transfers of Notes (the "Note Register").
All overdue accrued and unpaid interest to be paid in cash hereunder shall
entail a late fee at the rate of 18% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (to accrue daily, from
the date such interest is due hereunder through and including the date of
payment), payable in cash.
This Note is subject to the following additional provisions:
Section 1. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations of at least $50,000 (or
such lesser principal amount as shall then be outstanding under this Note), as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 7) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Note, the Company and any agent of the Company may treat the
Person (as defined in Section 7) in whose name this Note is duly registered on
the Note Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Note is overdue,
and neither the Company nor any such agent shall be affected by notice to the
contrary.
<PAGE>
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, any Notes (other than a failure
to pay the Put Price (as, defined in Section 7), the remedy of which
is contained in Section 5), free of any claim of subordination, within
five days of the date the same shall become due and payable (whether
on a Conversion Date or the Maturity Date or by acceleration or
otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of any of the Transaction Documents (as defined in Section 7)
other than such covenants or agreements which are the specific subject
of another Event of Default under this Section 3, and such failure or
breach shall not have been remedied within twenty days after the date
on which notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company
or any subsidiary thereof suffers any appointment of any custodian or
the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the
Company or any subsidiary thereof makes a general assignment for the
benefit of creditors; or the Company shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or the Company
or any subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding one
hundred thousand dollars ($100,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in
such indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable;
(v) the Common Stock shall not be eligible for quotation on and
quoted for trading on the OTC Bulletin Board ("OTC') or listed for
trading on the Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a
"Subsequent Market") and shall not again be eligible for and quoted or
listed for trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 7), shall agree to sell or dispose
all or in excess of 40% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase
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<PAGE>
more than a de minimis number of shares of Common Stock or other
equity securities of the Company (other than redemptions of Underlying
Shares (as defined in Section 7));
(vii) an Underlying Shares Registration Statement (as defined in
Section 7) shall not have been declared effective by the Commission
(as defined in Section 7) on or prior to the 180th day after the
Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in the
Registration Rights Agreement (as defined in Section 8)), the
effectiveness of the Underlying Shares Registration Statement lapses
for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for more than twenty Trading Days (which need not be
consecutive Trading Days);
(ix) an Event (as defined in the Registration Rights Agreement)
shall not have been cured to the satisfaction of the Holder prior to
the expiration of thirty days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to
the 180th day after the Original Issue Date, which shall be covered by
Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver certificates
to a Holder prior to the twelfth day after a Conversion Date pursuant
to and in accordance with Section 4(b) or the Company shall provide
notice to the Holder, including by way of public announcement, at any
time, of its intention not to comply with requests for conversions of
any Notes in accordance with the terms hereof; or
(xi) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within seven days
after notice is delivered hereunder.
(b) During the time that any portion of this Note remains outstanding,
if any Event of Default occurs and is continuing, the full principal amount
of this Note (and, at the Holder's option, all other Notes then held by
such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration shall at the written election of the
Holders become, immediately due and payable in cash in accordance with the
following sentence. The aggregate amount payable upon an Event of Default
shall be equal to the sum of (i) the Mandatory Prepayment Amount (as
defined in Section 7) plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions hereunder within thirty days prior
to the date of a declaration of an Event of Default and then held by the
Holder and (B) the Per Share Market Value (as defined in Section 7) on the
date prepayment is due or the date the full prepayment price is paid,
whichever is greater. Interest shall accrue on the prepayment amount
hereunder from the seventh day after such amount is due (being the date of
an Event of Default) through the date of prepayment in full thereof at the
rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law), to accrue daily from the date such payment is
due hereunder through and including the date of payment. All Notes and
Underlying Shares for which the full prepayment price hereunder shall have
been paid in accordance herewith shall promptly be surrendered to or as
directed by the Company. The Holder need not provide and the Company hereby
waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period
(other than such grace period as may be specified within a particular Event
of Default) enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Any such
declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder. (A) This Note shall be
convertible into shares of Common Stock at the option of the Holder at any
time and from time to time (1) from and after a Put Default Date (as
defined in Section 5) with respect to the principal amount of the Note
subject to the Put Notice (as defined in Section 5) giving rise thereto and
(2) from and after a Notice Date (as defined in Section 6) with respect to
the
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<PAGE>
principal amount of the Note subject to the applicable Optional Prepayment
Notice (as defined in Section 6). Notwithstanding the foregoing, this Note
may not be converted by the Holder prior to the 120th following the
Original Issue Date. The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by adding the sum of (i) the
quotient obtained by dividing (x) the outstanding principal amount of this
Note to be converted and (y) the Conversion Price (as defined herein), and
(ii) the amount equal to the product of (x) the outstanding principal
amount of this Note to be converted and (y)(I) the product of (1) the
quotient obtained by dividing .08 by 360 and (2) the number of days for
which such principal amount was outstanding, divided by (II) the Conversion
Price on the Conversion Date, provided, that if the Company shall have
timely elected to pay the interest due on a Conversion Date in cash
pursuant to the terms hereof, subsection (ii) shall not be used in the
calculation of the number of shares of Common Stock issuable upon a
conversion hereunder.
(B) Notwithstanding anything to the contrary contained herein, if
on any Conversion Date or on the Maturity Date:
(1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay interest hereunder in
shares of Common Stock;
(2) after the Interest Effectiveness Date (as defined in
Section 7) such shares of Common Stock (x) are not registered for
resale pursuant to an effective Underlying Shares Registration
Statement and (y) may not be sold without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act (as
defined in Section 7), as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Company's
transfer agent in the form and substance acceptable to the
applicable Holder and such transfer agent (if the shares of
Common Stock are permitted by the Holder to be delivered under
this clause (2) prior to the Effectiveness Date (as defined in
the Registration Rights Agreement) and thereafter an Underlying
Shares Registration Statement shall be declared effective by the
Commission, the Company shall, within three Trading Days after
the date of such declaration of effectiveness, exchange such
shares for shares of Common Stock that are free of restrictive
legends of any kind);
(3) the Common Stock is not listed or quoted on the OTC or
on a Subsequent Market;
(4) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(5) the issuance of such shares of Common Stock would result
in a violation of Sections 4(a)(iii)(A) and (B),
then, at the option of the Holder, the Company, in lieu of
delivering shares of Common Stock pursuant to Section 4(a)(i)(A)(ii),
shall deliver, within three Trading Days of each applicable Conversion
Date, an amount in cash equal to the product of (a) the outstanding
principal amount of the Notes to be converted on such Conversion Date
and (b) the product of (x) the quotient obtained by dividing .08 by
360 and (y) the number of days for which such principal amount was
outstanding.
(C) The Holder shall effect conversions by surrendering the Notes
(or such portions thereof) to be converted, together with the form of
conversion notice attached hereto as Exhibit A (a "Conversion Notice")
to the Company. Each Conversion Notice shall specify the principal
amount of Notes to be converted and the date on which such conversion
is to be effected, which date may not be prior to the date such
Conversion Notice is delivered hereunder (a "Conversion Date"). If no
Conversion Date is specified in a Conversion Notice, the Conversion
Date shall be the date that such Conversion Notice is delivered
hereunder. Subject to Section 4(b), each Conversion Notice, once
given, shall be irrevocable. If the Holder is converting less than all
of the principal amount represented by the Note(s) tendered by the
Holder with the Conversion Notice, or if a conversion hereunder cannot
be effected in full for any reason, the Company shall honor such
conversion to the extent permissible hereunder and shall promptly
deliver to such Holder (in the manner and within the time set forth in
Section 4(b)) a new Note for such principal amount as has not been
converted.
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<PAGE>
(ii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Notes for which conversion notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the second
anniversary of the Original Issue Date (the "Automatic Conversion Date")
pursuant to Section 4(a)(i), at the Conversion Price on such date. The
conversion contemplated by this paragraph shall not occur if (a) (1) an
Underlying Securities Registration Statement is not then effective that
names the Holder as a selling stockholder thereunder and (2) the Holder is
not permitted to resell Underlying Shares pursuant to Rule 144(k)
promulgated under the Securities Act, without volume restrictions, as
evidenced by an opinion letter of counsel acceptable to the Holder and the
transfer agent for the Common Stock; or (b) there are not sufficient shares
of Common Stock authorized and reserved for issuance upon such conversion.
Notwithstanding anything herein to the contrary, the Automatic Conversion
Date shall be extended (on a day-for-day basis) for any Trading Days after
the Effectiveness Date that the Holder is unable to resell Underlying
Shares due to (a) the Common Stock not being listed for trading on the OTC
or any Subsequent Market, (b) the failure of an Underlying Securities
Registration Statement to be declared effective by the Commission or, if so
declared, to remain effective during the Effectiveness Period as to all
Underlying Shares, or (c) the suspension of the Holder's right to resell
Underlying Shares thereunder. Notwithstanding anything to the contrary
contained herein, a conversion pursuant to this Section shall not be
subject to the provisions of Section 4(a)(iii).
(iii) Certain Conversion Restrictions.
(i) (1) A Holder may not convert Notes or receive shares of
Common Stock as payment of interest hereunder to the extent such
conversion or receipt of such interest payment would result in the
Holder, together with any affiliate thereof, beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act (as
defined in Section 7) and the rules promulgated thereunder) in excess
of 4.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of, and payment of interest
on, the Notes held by such Holder after application of this Section.
Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in
the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine
whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Notes are
convertible shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Conversion Notice for a principal amount
of Notes that, without regard to any other shares that the Holder or
its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the
Holder of this fact and shall honor the conversion for the maximum
principal amount permitted to be converted on such Conversion Date in
accordance with the periods described in Section 4(b) and, at the
option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future
conversions or return such excess principal amount to the Holder. The
provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior
notice to the Company. Other Holders shall be unaffected by any such
waiver.
(2) A Holder may not convert Notes or receive shares of
Common Stock as payment of interest hereunder to the extent such
conversion or receipt of such interest payment would result in
the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of
9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of, and payment of
interest on, the Notes held by such Holder after application of
this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at
the time of a conversion hereunder, unless the conversion at
issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then outstanding shares of Common Stock
without regard to any other shares which may be beneficially
owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular
conversion hereunder and to the extent that the Holder determines
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<PAGE>
that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Notes
are convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a
principal amount of Notes that would result in the issuance of in
excess of the permitted amount hereunder, without regard to any
other shares that the Holder or its affiliates may beneficially
own, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted
to be converted on such Conversion Date in accordance with the
periods described in Section 4(b) and, at the option of the
Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future
conversions or return such excess principal amount to the Holder.
The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than
61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) (i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of Common Stock
being acquired upon the conversion of Notes (subject to the
limitations set forth in Section 4(a)(iii) hereof), (ii) Notes in a
principal amount equal to the principal amount of Notes not converted,
and (iii) a bank check in the amount of accrued and unpaid interest
(if the Company has timely elected or is required to pay accrued
interest in cash), provided, that the Company shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable
upon conversion of the principal amount of Notes until Notes are
delivered for conversion to the Company, or the Holder notifies the
Company that such Notes have been lost, stolen or destroyed and
provides a bond (or other adequate security) reasonably satisfactory
to the Company to indemnify the Company from any loss incurred by it
in connection therewith. The Company shall, upon request of the
Holder, if available, use its reasonable best efforts to deliver any
certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions. If in the case of any Conversion Notice such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after a Conversion Date,
the Holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the principal
amount of Notes tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i) by the
third Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a
penalty, $4,000 for each Trading Day after such third Trading Day
until such certificates are delivered. Nothing herein shall limit
a Holder's right to pursue actual damages or declare an Event of
Default pursuant to Section 3 for the Company's failure to
deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder
shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. Further, if the
Company shall not have delivered any cash due in respect of
conversions of Notes or as payment of interest thereon by the
third Trading Day after the Conversion Date, the Holder may, by
notice to the Company, require the Company to issue shares of
Common Stock pursuant to Section 4(c), except that for such
purpose the Conversion Price applicable thereto shall be the
lesser of the Conversion Price on the Conversion Date and the
Conversion Price on the date of such Holder demand. Any such
shares will be subject to the provision of this Section.
(iii) In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i) by the
third Trading Day after the Conversion Date, and if after such
third Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by such Holder of the Underlying Shares which the
Holder anticipated receiving upon such conversion (a "Buy-In"),
then the Company shall (A) pay in cash to the Holder (in addition
to any remedies available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the market price of the
Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue
Notes in principal amount equal to the
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principal amount of the attempted conversion or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery
requirements under Section 4(b)(i). For example, if the Holder
purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted conversion of
Notes with respect to which the market price of the Underlying
Shares on the date of conversion was a total of $10,000 under
clause (A) of the immediately preceding sentence, the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure to
timely deliver certificates hereunder and the Company timely pays
in full such payment, the Company shall not be required to pay
such Holder liquidated damages under Section 4(b)(ii) in respect
of the certificates resulting in such Buy-In.
(c) (i) The conversion price in effect on any Conversion Date
(the "Conversion Price") shall be the lesser of (1) $3.72 (the
"Initial Conversion Price"), and (2) 88% of the average of the five
lowest Per Share Market Values during the thirty Trading Days
immediately preceding the applicable Conversion Date, provided, that
such number of Trading Days counted for calculation of the Conversion
Price may include Per Share Market Values for up to thirty Trading
Days prior to the date on which Conversion Notices may first be
delivered hereunder and that such thirty Trading Day period shall be
extended for the number of Trading Days during such period in which
(A) trading in the Common Stock is suspended by the OTC or a
Subsequent Market on which the Common Stock is then listed, or (B)
after the date declared effective by the Commission, the Underlying
Shares Registration Statement is not effective, or (C) after the date
declared effective by the Commission, the Prospectus included in the
Underlying Shares Registration Statement may not be used by the Holder
for the resale of Underlying Shares.
(ii) If the Company, at any time while any Notes are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of
Common Stock into a larger number of shares, (c) combine
(including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Initial Conversion Price
shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective
immediately after the effective date in the case of a
subdivision, combination or re-classification. In any case in
which an adjustment under this Section 4(c)(ii) or Section
4(c)(iv) is required to be made effective as of the record date
for a specified event, if a Conversion Notice is delivered after
such record date and prior to the occurrence of the event, the
Company may elect to defer until the occurrence of such event
(provided, that if such event does not occur, then such
additional shares shall not be issued) issuing to the Holder the
shares of Common Stock, if any, in respect thereof over and above
the number of shares of Common Stock issuable upon such
conversion on the basis of the Initial Conversion Price prior to
adjustment, provided that the Company shall have delivered to the
Holder a due bill or other appropriate instrument reasonably
acceptable to the Holder evidencing the Holder's right to receive
such additional shares of Common Stock upon the occurrence of the
event requiring such adjustment.
(iii) If the Company, at any time while any Notes are
outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the Per Share Market Value at the record date
mentioned below, then the Conversion Price shall be multiplied by
a fraction, of which the denominator shall be the number of
shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at
such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become
effective immediately after the record
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date for the determination of stockholders entitled to receive
such rights, options or warrants. However, upon the expiration of
any such right, option or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in
the Conversion Price pursuant to this Section, if any such right,
option or warrant shall expire and shall not have been exercised,
the Conversion Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to
the provisions of this Section after the issuance of such rights
or warrants) had the adjustment of the Conversion Price made upon
the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number
of shares of the Common Stock actually purchased upon the
exercise of such rights, options or warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at
any time while Notes are outstanding, shall issue shares of
Common Stock or rights, warrants, options or other securities or
debt that are convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents") entitling any Person to
acquire shares of Common Stock at a price per share less than the
Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such
issuance, be entitled to receive shares of Common Stock at a
price less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then
the Conversion Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such shares of
Common Stock or such Common Stock Equivalents plus the number of
shares of Common Stock which the offering price for such shares
of Common Stock or Common Stock Equivalents would purchase at the
Conversion Price, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of Common Stock
so issued or issuable, provided, that for purposes hereof, all
shares of Common Stock that are issuable upon conversion,
exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares
of Common Stock or Common Stock Equivalents are issued. However,
upon the expiration of any Common Stock Equivalents the issuance
of which resulted in an adjustment in the Conversion Price
pursuant to this Section, if any such Common Stock Equivalents
shall expire and shall not have been exercised, the Conversion
Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other
adjustments in the Conversion Price made pursuant to the
provisions of this Section after the issuance of such Common
Stock Equivalents) had the adjustment of the Conversion Price
made upon the issuance of such Common Stock Equivalents been made
on the basis of offering for subscription or purchase only that
number of shares of Common Stock actually purchased upon the
exercise of such Common Stock Equivalents actually exercised.
Notwithstanding the foregoing, the following shall not be deemed
to be Common Stock Equivalents: (i) issuances pursuant to a grant
or exercise of stock or options which may hereafter be granted or
exercised under any employee benefit plan of the Company now
existing or to be implemented in the future; (ii) securities
issued pursuant to an underwritten public offering by the Company
(and not of any securities of a shareholder of the Company other
than up to 4% of the holdings of the Chief Executive Officer of
the Company if such participation is required by the rules and
regulations of the stock market on which such offering will take
place or by the rules and regulations of the securities authority
governing such stock market) resulting in gross proceeds to the
Company of not less than $10,000,000, where the price per share
of Common Stock offered is fixed and the underwriter is an
investment bank nationally recognized in the United States of
America (if the offering is to be conducted in the United States
of America or in Great Britain (if the offering is to be
conducted in Great Britain) ("equity lines of credit" or their
equivalents shall not satisfy this exception), (iii) up to
1,000,000 shares of Common Stock issued in an offering not
subject to the registration requirements of the Securities Act at
a fixed price of not less than $3.50 (with no direct or indirect
adjustments permissible to such fixed price at the closing or
over time), (iv) issuance pursuant to a private placement to
Hollinger International, Inc., and (v) shares of Common Stock
issued as payment of the purchase price in connection with a
Strategic Transaction. For purposes of this Section, a "Strategic
Transaction" shall mean a transaction or relationship in which
the Company issues shares of Common Stock to an entity which is,
itself or through its subsidiaries, an operating company in a
business related to the business of the Company and in which the
Company receives material benefits in addition to the investment
of
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funds, but shall not include a transaction in which the Company
is issuing securities primarily for the purpose of raising
capital.
(v) If the Company, at any time while Notes are outstanding,
shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each
such case the Conversion Price at which Notes shall thereafter be
convertible shall be determined by multiplying the Conversion
Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the
Per Share Market Value determined as of the record date mentioned
above, and of which the numerator shall be such Per Share Market
Value on such record date less the then fair market value at such
record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share
of the Common Stock as determined by the Board of Directors in
good faith. In either case the adjustments shall be described in
a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned
above.
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock
is converted into other securities, cash or property, the Holders
shall have the right thereafter to, at their option, (A) convert
the then outstanding principal amount, together with all accrued
but unpaid interest and any other amounts then owing hereunder in
respect of this Note only into the shares of stock and other
securities, cash and property receivable upon or deemed to be
held by holders of the Common Stock following such
reclassification or share exchange, and the Holders of the Notes
shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount,
together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Note could have
been converted immediately prior to such reclassification or
share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal
amount of Notes, plus all interest and other amounts due and
payable thereon, at a price determined in accordance with Section
3(b). The entire prepayment price shall be paid in cash. This
provision shall similarly apply to successive reclassifications
or share exchanges.
(vii) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case
may be. Any adjustments which by reason of this Section are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(viii) Whenever either the Initial Conversion Price or the
Conversion Price is adjusted pursuant to any of Section 4(c)(ii)
- (v), the Company shall promptly mail to each Holder a notice
setting forth the Initial Conversion Price or Conversion Price
(as applicable) after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption
of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of
the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company; then, in each case, the Company
shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Notes, and shall cause to be
mailed to the Holders at their last addresses as they shall
appear upon the stock books of the Company, at least 20 calendar
days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions,
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redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided, that the failure to
mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to
be specified in such notice. Holders are entitled to convert
Notes during the 20-day period commencing the date of such notice
to the effective date of the event triggering such notice.
(x) In case of any (1) merger or consolidation of the
Company with or into another Person, or (2) sale by the Company
of more than one-half of the assets of the Company (on an as
valued basis) in one or a series of related transactions, a
Holder shall have the right to (A) if permitted under Section
3(b) hereof, exercise its rights of prepayment under Section 3(b)
with respect to such event, (B) convert its aggregate principal
amount of Notes then outstanding into the shares of stock and
other securities, cash and property receivable upon or deemed to
be held by holders of Common Stock following such merger,
consolidation or sale, and such Holder shall be entitled upon
such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into
which such aggregate principal amount of Notes could have been
converted immediately prior to such merger, consolidation or
sales would have been entitled, or (C) in the case of a merger or
consolidation, (x) require the surviving entity to issue shares
of convertible preferred stock or convertible debentures with
such aggregate stated value or in such face amount, as the case
may be, equal to the aggregate principal amount of Notes then
held by such Holder, plus all accrued and unpaid interest and
other amounts owing thereon, which newly issued shares of
preferred stock or debentures shall have terms identical
(including with respect to conversion) to the terms of this Note
(except, in the case of preferred stock, as may be required to
reflect the differences between equity and debt) and shall be
entitled to all of the rights and privileges of a Holder of Notes
set forth herein and the agreements pursuant to which the Notes
were issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing of
such shares of stock other securities issuable upon conversion
thereof), and (y) simultaneously with the issuance of such
convertible preferred stock or convertible debentures, shall have
the right to convert such instrument only into shares of stock
and other securities, cash and property receivable upon or deemed
to be held by holders of Common Stock following such merger or
consolidation. In the case of clause (C), the conversion price
applicable for the newly issued shares of convertible preferred
stock or convertible debentures shall be based upon the amount of
securities, cash and property that each share of Common Stock
would receive in such transaction and the Conversion Price in
effect immediately prior to the effectiveness or closing date for
such transaction. The terms of any such merger, sale or
consolidation shall include such terms so as to continue to give
the Holders the right to receive the securities, cash and
property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly
apply to successive such events.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the Notes
and payment of interest on the Notes, each as herein provided, free
from preemptive rights or any other actual contingent purchase rights
of persons other than the Holders, not less than such number of shares
of the Common Stock as shall (subject to any additional requirements
of the Company as to reservation of such shares set forth in the
Purchase Agreement) be issuable (taking into account the adjustments
and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Notes and payment of interest
hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Underlying Shares Registration Statement has been declared effective
under the Securities Act, registered for public sale in accordance
with such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Company elects not, or is unable, to make
such a cash payment, the Holder shall be entitled to receive, in lieu
of the final fraction of a share, one whole share of Common Stock.
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(f) The issuance of certificates for shares of the Common Stock
on conversion of the Notes shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that
the Company shall not be required to pay any tax that may be payable
in respect of any transfer involved in the issuance and delivery of
any such certificate upon conversion in a name other than that of the
Holder of such Notes so converted and the Company shall not be
required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holders hereunder, including, without limitation,
any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid,
addressed to the Company, 750 West Pender Street, Suite 500,
Vancouver, British Columbia, Canada V6C 2T7 (facsimile number: (604)
331-1194, attention: Corporate Secretary, or such other address or
facsimile number as the Company may specify for such purposes by
notice to the Holders delivered in accordance with this Section, with
a copy other than Conversion Notices to Sierchio & Albert, P.C.
(facsimile number (212) 446-9504), attention Joseph Sierchio, Esq. Any
and all notices or other communications or deliveries to be provided
by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid,
addressed to each Holder at the facsimile telephone number or address
of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place
of business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:30 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be
given.
Section 5. Put Option. At any time and from time to time commencing on the
120th calender day after the Original Issue Date, the Holder shall have the
right (the "Put Right") to request that the Company prepay up to 25% of the
original principal amount of this Note at a price equal to the Put Price (as
defined in Section 7) by delivering to the Company a written notice (a "Put
Notice") specifying (i) the outstanding principal amount of this Note subject to
the Put Right and the amount of all accrued and unpaid interest owing on such
principal amount, and the amount of liquidated damages (if any) then owing in
respect of such principal amount and (ii) the applicable Put Price. The Holder
shall not be entitled to deliver Put Notices for in excess of an aggregate of
25% of the original principal amount under this Note in any thirty day period;
provided, that, the amount of principal for which a Put Notice may be delivered
shall be measured on a cumulative basis from the date which the Put Notice may
first be delivered hereunder (for example, if prior to day 180 following the
Original Issue Date, Put Notices for only 10% of the original principal have
been delivered and paid, then on day 180 following the Original Issue Date a Put
Notice for up to 65% of the original principal amount may be delivered).
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Section 6. Prepayment at the Option of the Company.
(a) The Company shall have the right at all time and any time after
the Original Issue Date, upon (x) if prior to the 120th day following the
Original Issue Date, three Trading Days' notice to the Holders and (y) if
on or after the 120th day following the Original Issue Date, fifteen
Trading Days' notice to the Holders (in either case, an "Optional
Prepayment Notice" and the date such notice is received by the Holders, the
"Notice Date"), to prepay all or a portion of the Notes then held by the
Holders at a cash price equal to the Optional Prepayment Price (as defined
below). From and after the 120th day following the Original Issue Date, the
Company may only deliver an Optional Prepayment Notice to the Holders if,
on the Notice Date (i) there is an effective Underlying Shares Registration
Statement pursuant to which the Holders are permitted to utilize the
prospectus thereunder to resell all of the issued Underlying Shares and all
of the Underlying Shares as are issuable upon conversion in full of the
principal amount of the Notes subject to the Optional Prepayment Notice and
(ii) the Common Stock is listed for trading on the OTC or on a Subsequent
Market. If any of the foregoing conditions shall cease to be in effect
during the period between the Notice Date and the date the Optional
Prepayment Price is paid in full, then the Holders subject to such
prepayment may elect, by written notice to the Company given at any time
after any of the foregoing conditions shall cease to be in effect, to
invalidate ab initio such Optional Prepayment Notice.
(b) The following provisions shall govern the rights of the Holders to
convert principal amounts of the Note subject to an Optional Prepayment
Notice.
(1) Prior to the 120th day following the Original Issue Date no
conversions of the Note may be tendered.
(ii) From and after the 120th day following the Original Issue
Date, the Holders may convert any portion of the
outstanding principal amount of the Notes subject to an
Optional Redemption Notice prior to the later of the Due
Date (as defined below) and the date that the Optional
Prepayment Price is paid in full. Any such principal amount
subject to a non-payment pursuant to a Put Notice under
Section 5 after the Put Exercise Date shall be convertible
at the lower of the Conversion Price under Section
4(c)(i)(1) and 4(c)(i)(2). Principal amount subject to an
Optional Prepayment Notice and not subject to a non-payment
pursuant to a Put Notice under Section 5 after the Put
Exercise Date shall be convertible at the Initial
Conversion Price.
(iii) If an Optional Redemption Notice is delivered prior to the
120th day following the Original Issue Date but the Due
Date or the date on which actual payment of the full
Optional Prepayment Price is made occurs on or after such
120th day, then the Holder may convert principal hereunder
subject to such Optional Prepayment Notice in accordance
with Clause (ii) above.
(iv) If a Put Notice is delivered prior to delivery of an
Optional Redemption Notice but the Due Date shall not have
occurred, then the Holder may convert principal hereunder
subject to such Optional Prepayment Notice in accordance
with Clause (ii) above.
(c) The Optional Prepayment Price is due on the (x) if the Optional
Prepayment Notice is delivered on three Trading Days' notice in accordance
with clause (x) of Section 6(a), the third Trading Day following the Notice
Date, and (y) if the Optional Prepayment Notice is delivered on fifteen
Trading Days' notice in accordance with clause (y) of Section 6(a), the
fifteenth Trading Day following the Notice Date (in either case, the "Due
Date"). If any portion of the Optional Prepayment Price shall not be paid
by the Company by expiration of such fifteenth Trading Day, interest shall
accrue thereon at the rate of 18% per annum (or the maximum rate permitted
by applicable law, whichever is less) until the Optional Prepayment Price
plus all such interest is paid in full. In addition, if any portion of the
Optional Prepayment Price remains unpaid after such date, the Holders
subject to such prepayment may elect, by written notice to the Company
given within 45 Trading Days after the Due Date, to invalidate ab initio
such prepayment, notwithstanding anything herein contained to the contrary.
If a Holder
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elects to invalidate such prepayment the Company shall promptly, and, in
any event, not later than three Trading Days from receipt of such Holder's
notice of such election, return to such Holder all of the Notes for which
the Optional Prepayment Price shall not have been paid in full and the
Holder shall return the portion of the Optional Prepayment Price, if any,
previously paid.
(d) The "Optional Prepayment Price" for the principal amount of the
Notes to be prepaid shall equal the sum of (i) (1) in the event that the
Due Date or, if payment made later, such later date, is between the
Original Issue Date and the 60th day following the Original Issue Date,
105% of the principal amount of the Notes, (2) in the event that the Due
Date or, if payment made later, such later date, is between the 61st day
and the 120th following the Original Issue Date, 110% of the principal
amount of the Notes to be prepaid, or (3) in the event that the Due Date
or, if payment made later, such later date, is at any time after 121st day
following the Original Issue Date, 115% of the principal amount of the
Notes to be prepaid and (ii) all interest, other amounts, costs, expenses
and liquidated damages due in respect of such Notes.
Section (ii Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of New York or the Province of British Columbia, Canada are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of effective control (whether through legal or beneficial ownership of
capital stock of the Company, by contract or otherwise) of in excess of 40%
of the voting securities of the Company, (ii) a replacement at one time or
over time of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority
of the members of the board of directors who are members on the date
hereof), (iii) the merger of the Company with or into another entity that
is not wholly-owned by the Company, consolidation or sale of 50% or more of
the assets of the Company in one or a series of related transactions, or
(iv) the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth
above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, no par value, of the Company
and stock of any other class into which such shares may hereafter have been
reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Interest Effectiveness Date" means the earlier to occur of (x) the
Effectiveness Date and (y) the date that an Underlying Shares Registration
Statement is declared effective by the Commission.
"Mandatory Prepayment Amount" for any Notes shall equal the sum of (i)
the greater of (A) 120% of the principal amount of Notes to be prepaid,
plus all accrued and unpaid interest thereon, and (B) the principal amount
of Notes to be prepaid, plus all accrued and unpaid interest thereon,
divided by the Conversion Price on (x) the date the Mandatory Prepayment
Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the Per
Share Market Value on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due or (y) the date the Mandatory Prepayment Amount
is paid in full, whichever is greater, and (ii) all other amounts, costs,
expenses and liquidated damages, if any, due in respect of such Notes.
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"Original Issue Date" shall mean the date of the first issuance of the
Notes regardless of the number of transfers of any Note and regardless of
the number of instruments which may be issued to evidence such Note.
"Per Share Market Value" means on any particular date means on any
particular date (a) the closing bid price per share of Common Stock on such
date on the Subsequent Market on which the Common Stock is then listed or
quoted, or if there is no such price on such date, then the closing bid
price on the Subsequent Market on the date nearest preceding such date, or
(b) if the Common Stock is not then listed or quoted on a Subsequent
Market, the closing bid price for a shares of Common Stock in the OTC, as
reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at
the close of business on such date, or (c) if the Common Stock is not then
reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common
Stock are not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the
Holders of a majority of the Notes.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Note Purchase Agreement,
dated as of the Original Issue Date, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time
in accordance with its terms.
"Put Price" for any Notes shall equal the sum of (i) 115% of the
principal amount of the Notes subject to the Put Right, plus all accrued
and unpaid interest thereon, and (ii) all other amounts, expenses, costs
and liquidated damages, if any, due in respect of such Notes.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and
the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded on a
Subsequent Market on which the Common Stock is then listed or quoted, as
the case may be, or (b) if the Common Stock is not listed on a Subsequent
Market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC, or (c) if the Common Stock is not quoted on
the OTC, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other government action to close.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Notes or as payment of interest in accordance with the terms
hereof.
"Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares
and naming the Holder as a "selling stockholder" thereunder.
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Section 8 Except as expressly provided herein, no provision of this Note
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any)
on, this Note at the time, place, and rate, and in the coin or currency, herein
prescribed. This Note is a direct obligation of the Company. This Note ranks
pari passu with all other Notes now or hereafter issued under the terms set
forth herein. As long as there are Notes outstanding, the Company shall not and
shall cause it subsidiaries not to, without the consent of the Holders, (i)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holders; (ii) repay, repurchase or offer
to repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing. The Company may only voluntarily prepay
the outstanding principal amount on the Notes in accordance with Section 5
hereof.
Section 9 This Note shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
Section 10 If this Note shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost,
stolen or destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof, and
indemnity and bond, if requested, all reasonably satisfactory to the Company.
Section 11 No indebtedness of the Company is senior to this Note in right
of payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom.
Section 12 This Note shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflicts of laws
thereof. The Company and the Holder hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
Section 13 Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
Section 14 If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
Section 15 Whenever any payment or other obligation hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
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IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly
executed by a duly authorized officer as of the date first above indicated.
STOCKGROUP.COM HOLDINGS, INC.
By:___________________________________________________
Name:
Title:
Attest:
By:___________________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby elects to convert the attached Note into shares of common
stock, without par value (the "Common Stock"), of Stockgroup.com Holdings, Inc.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations: _________
Date to Effect Conversion
______________________________________________
Principal Amount of Notes to be Converted
______________________________________________
Number of shares of Common Stock to be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name
______________________________________________
Address
Exhibit 4.3 Callable Warrant
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
STOCKGROUP.COM HOLDINGS, INC.
CALLABLE WARRANT
Warrant No. C-3 Dated: March 31, 2000
Stockgroup.com Holdings, Inc., a Colorado corporation (the "Company"),
hereby certifies that, for value received, Jesup & Lamont Securities Corp., or
its registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company a total of 90,909 shares of common stock, no
par value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price
equal to $3.30 per share (as adjusted from time to time as provided in Section
9, the "Exercise Price"), at any time and from time to time from and after the
date hereof and through and including March 31, 2005 (the "Expiration Date"),
and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges
(a) Subject to compliance with the legend on the face of this Warrant,
the Company shall register the transfer of any portion of this Warrant in
the Warrant Register, upon surrender of this Warrant, with the Form of
Assignment attached hereto duly completed and signed, to the Transfer Agent
or to the Company at the office specified in or pursuant to Section 3(b).
Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall
be issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance of such transferee of all of the
rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company specified in or pursuant to Section
3(b) for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased
hereunder, provided that the denominations for each exchange shall be for
least 5,000 Warrant Shares (or such lesser number of Warrant Shares to
which this Warrant entitles the Holder to receive upon exercise in full).
Any such New Warrant will be dated the date of such exchange.
3. Duration, Exercise and Redemption of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:00 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration
Date. At 5:00 P.M., New York City time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void and of
no value.
(b) Subject to Sections 2(b), 5 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 13 and upon payment of the Exercise Price multiplied by the number
of Warrant Shares that the
<PAGE>
Holder intends to purchase hereunder, in the manner provided hereunder, all
as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 4 business days after the Date
of Exercise (as defined herein)) issue or cause to be issued and cause to
be delivered to or upon the written order of the Holder and in such name or
names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either
in the event that a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is
not then effective or the Warrant Shares are not freely transferable
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), or (ii) if this
Warrant shall have been issued pursuant to a written agreement between the
original Holder and the Company, as required by such agreement. Any person
so designated by the Holder to receive Warrant Shares shall be deemed to
have become holder of record of such Warrant Shares as of the Date of
Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares of at least
5,000 (or such lesser number of Warrant Shares to which this Warrant
entitles the Holder to receive upon exercise in full). If less than all of
the Warrant Shares which may be purchased under this Warrant are exercised
at any time, the Company shall issue or cause to be issued, at its expense,
a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
(d) Commencing at any time after the date of the issuance of this
Warrant, if (i) the average closing bid price of the Common Stock on the
OTC Bulletin Board (or such other national securities exchange on which the
Common Stock is then listed or quoted for trading) for any 20 consecutive
trading days exceeds $6.51 (a "Trigger Period"), and (ii) the Warrant
Shares are either registered for resale pursuant to an effective
registration statement naming the Holder as a selling stockholder
thereunder or freely transferable without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act, as determined by counsel
to the Company pursuant to a written opinion letter addressed and in form
and substance acceptable to the Holder and the transfer agent for the
Common Stock, then the Company shall have the right, upon 30 days' notice
to the Holder given not later than ten (10) Trading Days after the
conclusion of any such Trigger Period (the "Redemption Notice"), to redeem
all of the then issuable Warrant Shares at a price of $.01 per Warrant
Share (the "Redemption Price"), on the date set forth in the Redemption
Notice, but in no event earlier than 30 days following the date of the
receipt by the Holder of the Redemption Notice (the "Redemption Date"). The
Holder may exercise this Warrant at any time prior to the Redemption Date.
Any portion of this Warrant not exercised by 6:30 p.m. (New York City time)
on the Redemption Date shall no longer be exercisable and shall be returned
to the Company (and, if not so returned, shall automatically be deemed
canceled), and the Company, upon its receipt of the unexercised portion of
this Warrant, shall issue therefor in full and complete satisfaction of its
obligations under such remaining portion of this Warrant to the Holder an
amount equal to the number of shares of Common Stock then issuable
hereunder multiplied by the Redemption Price. The Redemption Price shall be
mailed to such Holder at its address of record, and the Warrant shall be
canceled.
4. Piggyback Registration Rights. During the Effectiveness Period (as
defined in the Registration Rights Agreement, of even date herewith, between the
Company and the original Holder (the "Registration Rights Agreement")), the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act, pursuant to which the
Company is registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including supplements
thereto) at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, unless the Company provides the Holder with not less
than 20 days notice of its intention to file such registration statement and
provides the Holder the option to include any or all of the applicable Warrant
Shares therein. The piggyback registration rights granted to the Holder pursuant
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to this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in connection
therewith.
5. Demand Registration Rights. During the Effectiveness Period if the
Warrant Shares are not registered pursuant to an effective registration
statement, the Holder may make a written request for the registration under the
Securities Act (a "Demand Registration"), of all of the Warrant Shares (the
"Registrable Securities"), and the Company shall use its best efforts to effect
such Demand Registration as promptly as possible, but in any case within 90 days
thereafter. Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold and shall also specify the
intended method of disposition thereof. The right to cause a registration of the
Registrable Securities under this Section 5 shall be limited to one such
registration. In any registration initiated as a Demand Registration, the
Company will pay all of its registration expenses in connection therewith. A
Demand Registration shall not be counted as a Demand Registration hereunder
until the registration statement filed pursuant to the Demand Registration has
been declared effective by the Securities and Exchange Commission and maintained
continuously effective for a period of at least 360 days or such shorter period
when all Registrable Securities included therein have been sold in accordance
with such registration statement, provided, however that any days on which such
registration statement is not effective or on which the Holder is not permitted
by the Company or any governmental authority to sell Warrant Shares under such
registration statement shall not count towards such 360 day period.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction, and indemnity
and bond, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated dividend rate)
or otherwise make a distribution or distributions on shares of its Common
Stock or on any other
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<PAGE>
class of capital stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, or (iii)
combine outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and of which the denominator shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations. In any case in which an
adjustment under this Section 9(a) is required to be made effective as of
the record date for a specified event, if a Form of Election To Purchase is
delivered after such record date and prior to the occurrence of the event,
the Company may elect to defer until the occurrence of such event
(provided, that if such event does not occur, then such additional shares
shall not be issued) issuing to the Holder the Warrant Shares, if any, in
respect thereof over and above the number of Warrant Shares issuable upon
such exercise on the basis of the Exercise Price prior to adjustment,
provided that the Company shall have delivered to the Holder a due bill or
other appropriate instrument reasonably acceptable to the Holder evidencing
the Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustment.
(b) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the
right thereafter to exercise this Warrant only into the shares of stock and
other securities and property receivable upon or deemed to be held by
holders of Common Stock following such reclassification or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities or property equal to the amount of Warrant Shares such Holder
would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification or share exchange. The terms of
any such reclassification or share exchange shall include such terms so as
to continue to give to the Holder the right to receive the securities or
property set forth in this Section 9(b) upon any exercise following any
such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled
to receive such distribution by a fraction of which the denominator shall
be the Exercise Price determined as of the record date mentioned above, and
of which the numerator shall be such Exercise Price on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Company's
independent certified public accountants that regularly examine the
financial statements of the Company (an "Appraiser").
(d) If at any time the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below),
shall issue shares of Common Stock or rights, warrants, options or other
securities or debt that is convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents"), entitling any person or entity
to acquire shares of Common Stock at a price per share less than both the
market price of the Common Stock at the time of issuance and the Exercise
Price then in effect (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights issued
in connection with such issuance, be entitled to receive shares of Common
Stock at a price less than either the Exercise Price prevailing or the
market price, such issuance shall be deemed to have occurred for less than
such Exercise Price or market price), then, forthwith upon such issue or
sale, the Exercise Price shall be reduced to the price (calculated to the
nearest cent) determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
the sum of (i) the number of shares of Common Stock outstanding immediately
prior to such issuance, and (ii) the number of shares of Common Stock which
the aggregate consideration received (or to be received, assuming exercise
or conversion in full of such Common Stock Equivalents) for the issuance of
such additional shares of Common Stock would purchase at the Exercise
Price, and the denominator of which shall be the sum of the number of
shares of Common Stock
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outstanding immediately after the issuance of such additional shares. For
purposes hereof, all shares of Common Stock that are issuable upon
conversion, exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. However, upon the expiration of any
Common Stock Equivalents the issuance of which resulted in an adjustment in
the Exercise Price pursuant to this Section, the Exercise Price shall
immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been
(but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of this Section after the issuance of such Common Stock
Equivalents) had the adjustment of the Exercise Price made upon the
issuance of such Common Stock Equivalents been made on the basis of
offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such Common Stock
Equivalents actually exercised. Notwithstanding anything herein to the
contrary, issuances of any stock or stock options under any employee
benefit plan of the Company, whether now existing or approved by the
Company and its stockholders in the future, shall not be subject to the
provisions of this Section. Notwithstanding the foregoing, the following
shall not be deemed to be Common Stock Equivalents: (i) issuances pursuant
to a grant or exercise of stock or options which may hereafter be granted
or exercised under any employee benefit plan of the Company now existing or
to be implemented in the future; (ii) securities issued pursuant to an
underwritten public offering by the Company (and not of any securities of a
shareholder of the Company other than up to 4% of the holdings of the Chief
Executive Officer of the Company if such participation is required by the
rules and regulations of the stock market on which such offering will take
place or by the rules and regulations of the securities authority governing
such stock market) resulting in gross proceeds to the Company of not less
than $10,000,000, where the price per share of Common Stock offered is
fixed and the underwriter is an investment bank nationally recognized in
the United States of America (if the offering is to be conducted in the
United States of America or in Great Britain (if the offering is to be
conducted in Great Britain) ("equity lines of credit" or their equivalents
shall not satisfy this exception), (iii) up to 1,000,000 shares of Common
Stock issued in an offering not subject to the registration requirements of
the Securities Act at a fixed price of not less than $3.50 (with no direct
or indirect adjustments permissible to such fixed price at the closing or
over time), (iv) issuance pursuant to a private placement to Hollinger
International, Inc., and (v) shares of Common Stock issued as payment of
the purchase price in connection with a Strategic Transaction. For purposes
of this Section, a "Strategic Transaction" shall mean a transaction or
relationship in which the Company issues shares of Common Stock to an
entity which is, itself or through its subsidiaries, an operating company
in a business related to the business of the Company and in which the
Company receives material benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital.
(e) In case of any (1) merger or consolidation of the Company with or
into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a market value basis) in one or a series of
related transactions, or (3) tender or other offer or exchange (whether by
the Company or another Person) pursuant to which holders of Common Stock
are permitted to tender or exchange their shares for other securities,
stock, cash or property of the Company or another Person; then the Holder
shall have the right thereafter to (A) exercise this Warrant for the shares
of stock and other securities, cash and property receivable upon or deemed
to be held by holders of Common Stock following such merger, consolidation
or sale, and the Holder shall be entitled upon such event or series of
related events to receive such amount of securities, cash and property as
the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled, (B) in the case of a merger or consolidation, require the
surviving entity to issue to the Holder a warrant entitling the Holder to
acquire shares of such entity's common stock, which warrant shall have
terms identical mutatis mutandis (including with respect to exercise) to
the terms of this Warrant and shall be entitled to all of the rights and
privileges set forth herein and the agreements pursuant to which this
Warrant was issued (including, without limitation, as such rights relate to
the acquisition, transferability, registration and listing of such shares
of stock other securities issuable upon exercise thereof), or (C) in the
event of an exchange or tender offer or other transaction contemplated by
clause (3) of this Section, tender or exchange this Warrant for such
securities, stock, cash and other property receivable upon or deemed to be
held by holders of Common Stock that have tendered or exchanged their
shares of Common Stock following such tender or exchange, and the Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such tender or
exchange
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would have been entitled as would have been issued. In the case of clause
(B), the exercise price applicable for the newly issued warrant shall be
based upon the amount of securities, cash and property that each shares of
Common Stock would receive in such transaction and the Exercise Price
immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale, consolidation, tender or
exchange shall include such terms so as continue to give the Holder the
right to receive the securities, cash and property set forth in this
Section upon any conversion or exercise following such event. This
provision shall similarly apply to successive such events.
(f) For the purposes of this Section 9, the following clauses shall
also be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or
(B) to subscribe for or purchase Common Stock or securities
convertible or exchangeable into shares of Common Stock, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(g) All calculations under this Section 9 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to Section 9(c)
above, the Holders, acting collectively, after receipt of the determination
by the Appraiser, shall have the right to select an additional appraiser
(which shall be a nationally recognized accounting firm), in which case the
adjustment shall be equal to the average of the adjustments recommended by
each of the Appraiser and such appraiser. The Holder shall promptly mail or
cause to be mailed to the Company, a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Such adjustment shall become effective
immediately after the record date mentioned above.
(i) If (i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or (ii) the Company shall declare a
special nonrecurring cash dividend on or a redemption of its Common Stock;
or (iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or (iv) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of
the assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; or (v)
the Company shall authorize the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall cause to
be mailed to each Holder at their last addresses as they shall appear upon
the Warrant Register, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, grant of rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
provided, however, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
one of the following manners:
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(a) Cash Exercise. The Holder may deliver immediately available funds;
or
(b) Cashless Exercise. Except during the 30 days preceding the
Redemption Date, if any, and at any time after the earlier to occur of the
Effectiveness Date (as defined in the Registration Rights Agreement) and
the date the initial registration statement filed pursuant to the
Registration Rights Agreement is declared effective by the Commission, when
a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then
effective, the Holder may surrender this Warrant to the Company together
with a notice of cashless exercise, in which event the Company shall issue
to the Holder the number of Warrant Shares determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common Stock
for the five (5) trading days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date of this Warrant.
11. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares of Common Stock
issuable upon such exercise and held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of an
exercise hereunder, unless the exercise at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares of
Common Stock which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine
whether the restriction contained in this Section will limit any particular
exercise hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that would result in the issuance
in excess of the permitted amount hereunder, the Company shall notify the
Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in
accordance with the periods described herein and disregard the balance of
such Form of Election to Purchase, as if never delivered The provisions of
this Section may be waived by a Holder (but only as to itself and not to
any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act) in excess of 9.999% of the then issued and outstanding shares
of Common Stock, including shares of Common Stock issuable upon such
exercise and held by such Holder after application of this Section. Since
the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the
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<PAGE>
time of an exercise hereunder, unless the exercise at issue would result in
the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares of
Common Stock which may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine
whether the restriction contained in this Section will limit any particular
exercise hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that would result in the issuance
in excess of the permitted amount hereunder, the Company shall notify the
Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in
accordance with the periods described herein and disregard the balance of
such Form of Election to Purchase, as if never delivered The provisions of
this Section may be waived by a Holder (but only as to itself and not to
any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
750 West Pender Street, Vancouver, British Columbia, Canada V6C 2T7, or
Facsimile No.: (604) 331-1194, attention: Corporate Secretary, with a copy (for
other than Form of Elections to Purchase) to Sierchio & Albert, P.C. (facsimile
number (212) 446-9504), attention Joseph Sierchio, Esq., or (ii) if to the
Holder, to the Holder at the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section.
14. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and
their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and
the Holder any legal or equitable right, remedy or cause under this
Warrant. This Warrant shall inure to the sole and exclusive benefit of the
Company and the Holder.
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<PAGE>
(c) The corporate laws of the State of Colorado shall govern all
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) All references herein to $ (dollars) shall be to US$ (United
States Dollars).
(f) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its authorized officer as of the date first indicated above.
STOCKGROUP.COM HOLDINGS, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Stockgroup.com Holdings, Inc:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, no par value per share, of Stockgroup.com Holdings, Inc.
(the "Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
____________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:___________ , _____ Name of Holder:
(Print)______________________________
(By:)________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Stockgroup.com
Holdings, Inc to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of Stockgroup.com Holdings, Inc.
with full power of substitution in the premises.
Dated:
___________ , _____
__________________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
__________________________________________________
Address of Transferee
__________________________________________________
__________________________________________________
In the presence of:
________________________
Exhibit 4.4 Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 31, 2000, among Stockgroup.com Holdings, Inc., a Colorado
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Convertible Note Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. All references to $ (dollars) shall be to US$
(United States Dollars). As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of New York or the State of Canada generally are authorized or
required by law or other government actions to close.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, no par value, or such
securities that such stock shall hereafter be reclassified into.
"Notes" means the Company's Convertible Notes in the aggregate
principal amount of $3,000,000 issued to the Purchasers in accordance with
the Purchase Agreement.
"Effectiveness Date" means the 120th day following the Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 45th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time, of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
<PAGE>
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means the shares of Common Stock issuable
upon conversion in full of the Notes and exercise in full of the Warrants.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Special Counsel" means one law firm acting as counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section
4.
"Warrants" shall mean (i) the Common Stock purchase warrants issued to
the Purchasers pursuant to the Purchase Agreement and (ii) the Common Stock
purchase warrant issued to Jesup & Lamont Securities Corp. in connection
with the transactions contemplated by the Purchase Agreement.
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<PAGE>
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-1 (or
on another appropriate form available to the Company for the registration
contemplated hereby) and shall contain (except if otherwise directed by the
Holders) the "Plan of Distribution" attached hereto as Annex A, and cause
the Registration Statement to become effective and remain effective as
provided herein. The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to
the Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act
until the date which is two years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when
all Registrable Securities covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company's transfer
agent and the affected Holders (the "Effectiveness Period"), provided, that
the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being
able to sell the Registrable Securities covered by such Registration
Statement during the Effectiveness Period, unless such action is required
under applicable law or the Company has filed a post-effective amendment to
the Registration Statement and the Commission has not declared it
effective.
(b) The initial Registration Statement required to be filed hereunder
shall include (but not be limited to) a number of shares of Common Stock
equal to no less than the sum of (i) 200% of the number of shares of Common
Stock issuable upon conversion in full of the outstanding principal amount
of the Notes, assuming all interest is paid in shares of Common Stock, that
the Notes remain outstanding for two years, and that such conversion
occurred on the Closing Date, the Filing Date or the Business Day preceding
the date the Company files an acceleration request with the Commission
relating to the Registration Statement, whichever yields the lowest
Conversion Price (as defined in the Notes) and (ii) the number of shares of
Common Stock issuable upon exercise in full of the Warrants.
(c) If (a) the initial Registration Statement is not filed on or prior
to the Filing Date (if the Company files such Registration Statement
without affording the Holder the opportunity to review and comment on the
same as required by Section 3(a) hereof, the Company shall not be deemed to
have satisfied this clause (a)), or (b) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not
subject to further review, or (c) the initial Registration Statement filed
hereunder is not declared effective by the Commission on or prior to the
Effectiveness Date, or (d) after a Registration Statement is filed with and
declared effective by the Commission, such Registration Statement ceases to
be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period without being succeeded within
twelve Business Days by an amendment to such Registration Statement or by a
subsequent Registration Statement filed with and declared effective by the
Commission, or (e) the Common Stock shall not be quoted on the OTC Bulletin
Board or shall be suspended or delisted from Trading on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market (each, a
"Subsequent Market") for more than ten days (which need not be consecutive
days), or (f) the conversion rights of the Holders pursuant to the Notes
are suspended for any reason, or (g) an amendment to a Registration
Statement is not filed by the Company with the Commission within twelve
Business Days of the Commission's notifying the Company that such amendment
is required in order for such Registration Statement to be declared
effective (any such failure or breach being referred to as an "Event," and
for purposes of clauses (a), (c), (f) the date on which such Event occurs,
or for purposes of clause (b) the date on which such five day period is
exceeded, or for purposes of clauses (d) and (g) the date which such 12
Business Day-period is exceeded, or for purposes of clause (e) the date on
which such ten day-period is exceeded, being referred to as "Event Date"),
then, on the Event Date and each monthly anniversary thereof until the
applicable Event is cured, the Company shall pay to each Holder 2.0% of the
purchase price paid by such Holder pursuant to the Purchase Agreement, in
cash, as liquidated damages and not as a penalty. Liquidated damages under
this section shall be due and payable seven days from the applicable Event
Date. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will
pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. As to a periods
following the initial Event Date at issue, the liquidated
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<PAGE>
damages pursuant to the terms hereof shall apply on a pro-rata basis for
any portion of a month prior to the cure of an Event.
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Not less than five Business Days prior to the filing of the
Registration Statement or any related Prospectus (other than a
Prospectus filed pursuant to Rule 424) and not less than two Business
Days prior to the filing of any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to
the Holders and their Special Counsel copies of all such documents
proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the
review of such Holders and their Special Counsel, and (ii) cause its
officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such to conduct a
reasonable investigation within the meaning of the Securities Act. The
Company shall not file the Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities and their Special
Counsel shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and
the Prospectus used in connection therewith as may be necessary to
keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event
within ten Business Days, to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable
period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended
or in such Prospectus as so supplemented.
(c) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares
of Common Stock then registered in a Registration Statement. The
Company shall have twenty-five days to file such additional
Registration Statements after such requirement notice of which is
given by the Holders.
(d) Notify the Holders of Registrable Securities to be sold and
their Special Counsel as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than two Business Days prior to such
filing) and (if requested by any such Person) confirm such notice in
writing no later than one Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in
writing on such Registration Statement (the Company shall provide true
and complete copies thereof and all written responses thereto to each
of the Holders); and (C) with respect to the Registration Statement or
any post-effective amendment, when the same has become effective; (ii)
of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) if at any time any of the representations and
warranties of the Company contained in any agreement contemplated
hereby ceases to be true and correct in all material respects; (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (vi)
of the occurrence of any event or passage of time that makes the
financial statements included in the Registration Statement ineligible
for
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<PAGE>
inclusion therein or any statement made in the Registration Statement
or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus
or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(f) Furnish to each Holder and their Special Counsel, without
charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with
the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or subject the Company to any material tax or general
service of process in any such jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted
by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered
in such names as any such Holders may request.
(j) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(k) Comply with all applicable rules and regulations of the
Commission.
(l) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common
Stock beneficially owned by such Holder and, if requested by the
Commission, the controlling person thereof.
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4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be
borne by the Company whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with any
Subsequent Market on which the Common Stock is then listed for trading, and
(B) in compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel for the Holders in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the
Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) Securities Act liability
insurance, if the Company so desires such insurance, and (v) fees and
expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit and the fees and expenses incurred
in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. The Holder will be responsible
for any of its own brokerage commissions and discounts incurred by it in
selling its Registrable Securities.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a
margin call of Common Stock), investment advisors and employees of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in
any amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, except to the extent, but only
to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus after
the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(e). The Company shall notify the
Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees
of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court
of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising solely out of or based solely upon any
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only
to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Company
specifically for
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inclusion in the Registration Statement or such Prospectus or to the
extent that (1) such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder's proposed
method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus after
the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(e). In no event shall the liability
of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further
review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense thereof and such counsel shall be
at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Business Days of written notice thereof
to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such fees
and expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or
made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The
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amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in Section
5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section was available to such
party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder
or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each Holder agree that
monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions
of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Except as
and to the extent specified in Schedule 6(b) hereto, neither the
Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its
securities to any Person.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall
not after the date hereof enter into any agreement providing any such
right to any of its security holders.
(d) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(e) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind
described in Section 3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or
3(d)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(j), or until
it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
(f) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to
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prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their
then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written
notice of such determination and, if within fifteen days after receipt
of such notice, any such Holder shall so request in writing, the
Company shall include in such registration statement all or any part
of such Registrable Securities such holder requests to be registered.
If, in connection with any underwritten offering for the account of
the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such
underwriter(s)' judgment, such limitation is necessary to effect an
orderly public distribution of securities covered thereby, then the
Company shall be obligated to include in such registration statement
only such limited portion of the Registrable Securities for to which
such Holder has requested inclusion hereunder as such underwriter(s)
shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Holders seeking to include Registrable Securities,
in proportion to the number of Registrable Securities sought to be
included by such holders; provided, however, that the Company shall
not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities the holders of which are not
entitled by right to inclusion of securities in such registration
statement; and provided, further, however, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities
having the right to include such securities in such registration
statement.
(h) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Holders of at least
two-thirds of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to
the rights of Holders and that does not directly or indirectly affect
the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may
not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(i) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a Business Day,
(ii) the Business Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile telephone
number specified in the Purchase Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications
shall be as follows:
If to the Company: Stockgroup.com Holdings, Inc.
750 West Pender Street, Suite 500
Vancouver, British Columbia
Canada V6C 2T7
Facsimile No.: (604) 331-1194
Attn: Corporate Secretary
With copies to: Sierchio & Albert
150 West 58th Street, 25th floor
New York, NY 10155
Facsimile No.: (212) 446-9504
Attn: Joseph Sierchio, Esq.
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in
the stock transfer books of the Company
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<PAGE>
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(j) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(k) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(l) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(m) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(o) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning
hereof.
(p) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities
held by the Company or its Affiliates (other than any Holder or
transferees or successors or assigns thereof if such Holder is deemed
to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage.
(q) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with
the obligations of any other Purchaser hereunder, and neither
Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. Nothing contained herein
or in any other agreement or document delivered at any closing, and no
action taken by any Purchaser pursuant hereto or thereto, shall be
deemed to constitute the Purchasers as a partnership, an
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association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this
Agreement. Each Purchaser shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
STOCKGROUP.COM HOLDINGS, INC.
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASER TO FOLLOW]
<PAGE>
DEEPHAVEN PRIVATE PLACEMENT
TRADING LTD.
By:_____________________________________
Name:
Title:
Address for Notice:
Deephaven Private Placement Trading Ltd.
c/o Deephaven Capital Management LLC
130 Cheshire Lane
Minnentonka, MN 55305
Facsimile No.: (612) 249-5320
Attn: Bruce Lieberman
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Eric L. Cohen, Esq.
<PAGE>
AMRO INTERNATIONAL, S.A.
By: ___________________________
Name:
Title:
Address for Notice:
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<PAGE>
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
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<PAGE>
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including the fees and disbursements of counsel to
the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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Exhibit 99.1 Press Release
[GRAPHIC]stockgroup.com
8:00 am EST, Wednesday April 5, 2000
STOCKGROUP.COM
Contact: Marcus New, Chairman & CEO
[email protected]
(800) 650-1211
STOCKGROUP.COM COMPLETES ROUND OF INSTITUTIONAL FUNDING
Institutions support Expansion Strategy
New York, NY - April 5, 2000 - Stockgroup.com Holdings Inc. (OTCBB: SWEB) today
announced that it has completed a US$3 million round of new funding led by
Deephaven Capital Management LLC, a subsidiary of Knight/Trimark (NASDAQ: NITE).
Amro International S.A., managed by Rhino Advisors is an additional investor in
the funding. Jesup & Lamont Securities Corporation served as a placement agent
for this transaction.
Details of the funding include US$3 million of 8% Notes and Callable Warrants.
The Notes are for a term of 2 years. These notes are convertible only after July
31, 2000, and only if the Company does not make payment on a noteholder's
prepayment request, or, if the Company seeks to prepay the notes. The Callable
Warrants have a 5 year term at a strike price of $3.72, and permit the holders
to acquire up to 290,322 shares.
Mr. Marcus New, Chairman and CEO of Stockgroup.com Holdings Inc. commented,
"This funding provides Stockgroup.com with additional resources to aggressively
implement our strategies, including the roll out of our international operations
in Asia." He continued, "The strong endorsement from Deephaven Capital
Management and Amro International S.A. are indicative of our continuing efforts
toward building a world class financial news and information destination for
small cap investors."
ABOUT DEEPHAVEN
Deephaven Capital Management LLC is a subsidiary of Knight/Trimark (NASDAQ:
NITE).
ABOUT RHINO ADVISORS
Rhino Advisors (formerly Curzon Capital Management) are fund managers of two
families of private funds: Creon Management and Amro International S.A. The
investors in Creon and Amro are European high net worth individuals. In its
three years of operation, Rhino's investment strategies have nearly quadrupled
the base capital deposited into Amro and Creon.
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ABOUT STOCKGROUP.COM
Stockgroup.com is a leading online provider of financial news and information
services, disseminated from corporate offices and news bureaus in New York, San
Francisco, Toronto, Vancouver, and Calgary. The Company's Web site
www.smallcapcenter.com, is a state-of-the-art research center focusing on small
and micro cap news information and data. The Company also delivers a Premium
Service of news available on a subscription basis. The Company recently
announced that it has been contracted to develop a string of Asian enterprise
financial sites for Asian Exchange Information Service Pty Ltd. (AsiaXIS) of
Singapore. Stockgroup.com has acquired an equity position in AsiaXis. The
Company is also the leading provider of Web site development and Internet
marketing services to small and micro cap companies. Key comparable public
companies include TheStreet.com (NASDAQ: TSCM), Marketwatch.com (NASDAQ: MKTW)
and GlobalNet Financial (NASDAQ: GLBN)
Disclaimer: This release contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21B of the
Securities Exchange Act of 1934. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, goals, assumptions or future events or performance are
not statements of historical fact and may be "forward looking statements."
Forward looking statements are based on expectations, estimates and projections
at the time the statements are made that involve a number of risks and
uncertainties which could cause actual results or events to differ materially
from those presently anticipated. Forward looking statements in this action may
be identified through the use of words such as "expects", "will," "anticipates,"
"estimates," "believes," or statements indicating certain actions "may,"
"could," or "might" occur.
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