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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 Report (Date of earliest event May 23, 2000 (May 9, 2000)
reported): ----------------------------
Forest Glade International Inc.
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(Exact Name of Registrant as Specified in Charter)
Nevada 000-25251 52-212549
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
444 Victoria Street, Suite 370, Prince George, British Columbia, Canada V2L 2J7
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area (250) 564-6868
code: --------------------------
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Former Name and Former Address (Changed Since Last Report)
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Item 5. Other Matters
A. Private Placement
On May 9, 2000, Forest Glade International Inc. (the
"Company") closed a private placement of certain of its securities to an
accredited investor pursuant to the terms of a Convertible Debenture Purchase
Agreement (the "Agreement") dated as of May 1, 2000. The proceeds from the
private placement transaction are principally intended to be used to finance the
development of a web site, www.fetchomatic.com, containing an Internet search
engine. The web site is operated by Fetchomatic.com Online Inc. (formerly known
as SSA Coupon Limited), a wholly owned subsidiary of the Company. The Company
raised $3,500,000 in the private placement transaction from the sale of its 7%
convertible debentures (the "Debentures"), due May 1, 2003, and common stock
purchase warrants (the "Warrants") to purchase up to 521,765 shares of the
Company's common stock, $.001 par value (the "Common Stock").
Pursuant to the terms of the Debentures and the Agreement, the
Debentures may be converted into shares of Common Stock at the option of the
holders of such Debentures, in whole or in part at any time and from time to
time. The number of shares of Common Stock issuable upon a conversion is based
on the conversion price (the "Conversion Price") in effect at the time of
conversion. The Conversion Price is the lesser of (i) $2.295 and (ii) 80% of the
average of the lowest three per share market values (determined as the last
closing bid price per share), which need not occur on consecutive days, during
the twenty (20) trading days immediately preceding the applicable conversion
date. In the event of a conversion, the holder of the Debenture exercising its
right to convert will receive a number of shares of Common Stock equal to the
sum of (i) the quotient obtained by dividing (x) the outstanding principal of
the Debenture to be converted and (y) the Conversion Price, and (ii) the amount
of interest accrued on the principal amount of the Debentures to be converted as
of the date of conversion divided by the Conversion Price.
The Warrants entitle the holders thereof to purchase from the Company
up to a total of 521,765 shares of Common Stock at an exercise price (the
"Exercise Price") equal to $2.295 per share (subject to adjustment in the event
of the payment of dividends, stock splits or similar transactions prior to the
date of conversion). The Warrants are exercisable at any time and from time to
time from the date of the closing of the private placement through and including
May 1, 2005.
The Company has agreed with the purchaser of the Debentures and
Warrants to file a registration statement (the "Registration Statement") with
the Securities and Exchange Commission ("SEC"), by no later than forty (40) days
after the closing of the private placement transaction, for the purpose of
registering the resale of the shares of Common Stock issuable upon a conversion
in full of all of the Debentures and exercise in full of the Warrants.
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The purchaser of the Debentures and Warrants has also agreed, subject
to the satisfaction of certain conditions as more fully described below, to
purchase from the Company two additional tranches of debentures and warrants
(respectively, the "Additional Debentures" and the "Additional Warrants,"
collectively the "Additional Securities"). The Additional Debentures and
Additional Warrants shall be issued in forms identical to the Debentures and
Warrants, except that: (i) the Conversion Price applicable to (x) the first
Additional Debentures shall equal 120% of the average of the per share market
value for the five (5) trading days preceding the closing date of the first
Additional Debentures and (y) the second Additional Debentures shall equal 120%
of the average of the per share market value for the five (5) trading days
preceding the closing date of the second Additional Debentures, and (ii) the
Exercise Price applicable to (x) the first Additional Warrants shall equal 120%
of the average of the per share market values for the five (5) trading days
immediately preceding the closing date of the first Additional Warrants and (y)
the second Additional Warrants shall equal 120% of the average of the per share
market values for the five (5) trading days immediately preceding the closing
date of the second Additional Warrants. Each of the Additional Debentures will
be in the aggregate principal amount of $3,250,000 and shall rank pari passu
with the initial Debentures. The Additional Warrants entitle the holders thereof
to purchase a number of shares of Common Stock equal to 20% of the principal
amount of the Additional Debenture that is contemporaneously purchased with such
Additional Warrant.
The commitment of the purchaser of the Debentures to acquire the
Additional Securities is subject to satisfaction of the following conditions:
(i) the registration statement covering the shares underlying the Debentures and
Warrants shall have been declared effective by the SEC under the Securities Act
of 1933, as amended, and shall have remained effective at all times prior to the
closing date for the applicable tranche of Additional Securities, (ii) for the
ten (10) trading days immediately preceding the date upon which the Company or
the purchaser of the Debentures provides written notice to the other requiring
the other party to sell or buy, as the case may be, the Additional Securities,
the average daily trading volume of the Common Stock on the OTC Bulletin Board
shall be at least 150,000 shares and the average of the per share market value
for such ten (10) trading day period shall be greater than $1.75, and (iii) such
other conditions as are more fully described in Sections 7 and 8 of Exhibit
10.5.
B. Acquisition or Disposition of Assets
On May 2, 2000, 514592 B.C. Ltd. (the "Subsidiary"), a British
Columbia corporation, entered into a Contract of Purchase and Sale (the
"Contract") with 525560 B.C. Ltd. (the "Purchaser"), a British Columbia
corporation, to sell Mountain View Park (as defined below) for a purchase price
(the "Purchase Price") of Can$1,000,000.
The Subsidiary is a wholly owned subsidiary of Forest Glade
Properties Inc. ("Properties"). Properties is a wholly owned subsidiary of the
Company. The historical business of the Company, through the Subsidiary, is
owning and operating mobile home parks in Canada. The primary asset of the
Subsidiary is the mobile home park ("Mountain View Park") located at 100 Aspen
Drive, Sparwood, British Columbia, Canada. The
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Subsidiary's ownership interest in Mountain View Park is subject to a mortgage
(the "Mortgage") held by the Royal Bank of Canada. The outstanding principal
balance of the Mortgage was approximately Can$655,000 as of May 1, 2000.
The Subsidiary and the Purchaser have not completed the transaction
relating to the Contract as they are currently in the process of registering a
"State of Title Certificate" to effect the transfer of ownership of Mountain
View Park from the Subsidiary to the Purchaser. Upon the consummation of the
sale of Mountain View Park, (i) the Subsidiary and the Company will cease to be
in the business of owning and operating mobile home parks, and (ii) the
Company's business will focus solely on the development of the web site and
Internet search engine described below in Item 5(C).
C. Internet Initiatives
The Company, through its wholly owned subsidiary
Fetchomatic.com Online Inc., has been developing www.fetchomatic.com, a web site
with an integrated search engine and portal that utilizes a geographical
searching capability. The intellectual property owned and developed by the
Company permits users to locate a business or service in a geographical location
selected by the user by clicking on an online map. The Company currently has
over 16 million United States' businesses in its database which can be accessed
through a variety of business classifications. The Company expects to add to
listings for businesses in Canada and other countries to its database.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a)-(b) Not Applicable
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C> <C>
10.1 Convertible Debenture Purchase Agreement between Forest Glade International Inc. and
Collinson Road LLC, dated as of May 1, 2000
10.2 Forest Glade International Inc. 7% Convertible Debenture No.1 Due May 1, 2003
10.3 Registration Rights Agreement between Forest Glade International Inc. and Collinson Road LLC
10.4 Forest Glade International Inc. Warrant No. 1
10.5 Letter Agreement between Forest Glade International Inc. and Collinson Road LLC, dated as of
May 1, 2000
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
Forest Glade International Inc.
By: /s/ Wayne E. Loftus
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Wayne E. Loftus
President and Chief Executive Officer
May 23, 2000
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
FOREST GLADE INTERNATIONAL, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of May 1, 2000
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated as
of May 1, 2000, among Forest Glade International, Inc., a Nevada corporation
(and such other name that such entity may herewith be changed to, 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 $3,500,000 of the Company's 7% Convertible
Debentures, due May 1, 2003, which shall be in the form of Exhibit A (the
"Debentures"), and which are convertible into shares of the Company's common
stock, $.001 par value per share (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. (a) 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
Debentures for an aggregate purchase price of $3,500,000. The closing of the
purchase and sale of the Debentures (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) Debentures 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) a legal opinion of Camhy, Karlinsky & Stein
LLP, outside counsel to the Company, in the form of Exhibit C, (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"), (5)
Transfer Agent Instructions, in the form of Exhibit E, delivered to and
acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); (6) an executed Stock Pledge Agreement, dated the date hereof,
in the form of Exhibit G, guaranteeing certain obligations of the Company under
the Registration Rights Agreement (the "Pledge Agreement"); and (7) an executed
Letter Agreement, dated the date hereof, among the Company and the Purchasers,
in form of Exhibit F (the "Letter
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Agreement"); and (B) each Purchaser shall deliver to the Company (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, Letter Agreement and Pledge
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 Debentures; "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. A "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 and Warranties 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 Nevada 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 organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite corporate 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 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 Transfer Agent
Instructions, the Letter Agreement, the Pledge Agreement, the Debentures 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
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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. 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 charter or
organizational documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed 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 securities of the Company or any Subsidiary
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or any Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the
Debentures 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 Debentures and the Warrants. The
Debentures 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"). The Company has, on the date
hereof and will, at all times while the Debentures and the Warrants are
outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the holders of the Debentures and the Warrants,
to enable it to perform its conversion, exercise and other obligations under
this Agreement, the Debentures 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 Debentures, assuming such conversion occurred on the Original Issue
Date, the Debentures remain outstanding for three 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 Debentures and the Warrants. The shares of Common Stock issuable
upon conversion of the Debentures and upon exercise of the Warrants are
collectively referred to herein as the "Underlying Shares." The Debentures, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"Securities." When issued in accordance with the Debentures and the Warrants,
the Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(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
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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 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 or a Subsidiary
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 (whether or not such default or violation has been waived),
(ii) is in violation of any judgement or order of any court, arbitrator, or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental
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authority, in each case of clauses (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 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 two years 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 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
except for the reports set forth on Schedule 2.1(j). 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,
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. 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.
Since March 27, 2000, except as specifically disclosed in the SEC Documents, (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.
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(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.
(1) Certain Fees. Except for certain fees payable to Merchant
Bancorp of America and Next Millennium Capital Holdings, LLC 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) Seniority. No indebtedness of the Company is senior to
the Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.
(o) Listing and Maintenance Requirements. Except as set forth
in the SEC Documents, the Company has not, in the two years preceding the date
hereof received written notice 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, market or trading
facility. 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 business 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 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.
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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) 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; (ii) 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 (iii) 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 employees
of the Company.
(v) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
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 therein, in light of the circumstances under which they were made,
not misleading.
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(w) Termination of Mobile Home Parks Operations. The Company
has terminated or will terminate simultaneously with the Closing, all its
operations and dispose of all assets relating to its mobile home parks business.
Notwithstanding the foregoing, the Company must provide the Purchasers with
evidence acceptable to them regarding the termination of operations and
disposition of the assets relating to the mobile home parks business prior to
payment of the purchase price by the Purchasers.
(x) No Liabilities Arising From Termination of Mobile Home
Parks Operations. The Company has no liabilities concerning the sale and
disposition of all assets relating to its mobile home parks business and has no
indemnification liabilities to the purchasers of such business.
(y) No Registration of Restricted Securities. The Company
agrees that it will not register for resale any of the restricted securities
listed on Schedule 2.1(y) until the later to occur of (a) 270 days after the
Effective Date and (b) the date on which the Company has fully discharged all of
its conversion and exercise obligations under the Debentures and the Warrants.
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 has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement, the Letter Agreement, the Pledge 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 or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. 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 Securities, 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.
(d) Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial
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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.
(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.
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,
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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 an
Affiliate of such Purchaser or to one or more funds or managed accounts under
common management with such Purchaser, and any transfer among any such
Affiliates or one or more 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 Debentures or exercise of 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.
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3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and (ii)
exercise of the Warrants 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 Debentures and (y) exercise of the Warrants is
unconditional and absolute, subject to the limitations set forth in the
Debentures or in 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 causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to sell Underlying Shares under Rule 144 upon
notice of an intention to sell or other form of notice having a similar effect.
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
Debentures, 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 60 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's certificate 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 Debentures and the
Warrants (the sum of (x) the number of shares of Common Stock then outstanding
plus all shares of Common
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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 national securities exchange,
market, trading or quotation facility on which the Common Stock is then traded,
prepare and file with such national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed for trading 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 Debentures 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
list immediately a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, the Debentures 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 Debentures) and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the conversion of the Debentures 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 Debentures and
exercise their Warrants.
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures and the Warrants.
3.9 Subsequent Financing: Right of First Refusal Limitation on
Registration.
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(a) Without the prior written consent of the Purchasers, prior to the
181st day following the Effective Date (such date will be extended by the
number of days after the Effectiveness Date (as defined in the Registration
Rights Agreement) that an Underlying Shares Registration Statement has not been
declared effective by the Commission and by the number of days after the
Effective Date during which a Purchaser is not permitted or unable to utilize
the prospectus or otherwise to resell Underlying Shares under the Underlying
Shares Registration Statement) (the "Restricted Period"), the Company shall not
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 securities (including the issuance of any debt or other instrument at any
time over the life thereof convertible into or exchangeable for Common Stock) or
any of its Affiliate's securities that may be exchangeable or convertible into
Common Stock, or otherwise enter into any other transaction intended to be
exempt or not subject to registration under the Securities Act (collectively, a
"Subsequent Placement"), unless none of the securities issued or granted (or
securities issuable upon conversion or exercise thereof) may be resold or
registered for issuance or resale under the Securities Act until the termination
of the Restricted Period. The restriction contained in the foregoing sentence
shall not apply to (i) issuances of Common Stock pursuant to a Strategic
Transaction (as defined below), (ii) issuances of shares of Common Stock as
payment of the purchase price for an acquisition of assets or stock of an
unaffiliated Person, (iii) issuances of shares of Common Stock at a price per
share that is fixed (and not subject to any adjustments or repricings and not in
any way accompanied by any other issuance of securities of the Company or an
Affiliate thereof) at a price that is greater than the Initial Conversion Price
(as defined in the Debentures), and (iv) the granting of options or warrants to
employees, officers and directors of the Company, and the issuance of Common
Stock upon exercise of such options or warrants granted under any stock option
plan heretofore or hereinafter duly adopted by the Company ("Option Plan
Issuances"). A "Strategic Transaction" shall mean a transaction or relationship
in which the Company issues shares of Common Stock to a Person 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 or to an entity whose primary business is investing in securities.
(b) Without the prior written consent of the Purchasers, prior to the
270th day following the Closing Date, the Company shall not, directly or
indirectly enter into a Subsequent Placement, 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 6:30 p.m. (New York City time)
on the tenth 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 Notice, provided, that the
Company shall provide the Purchasers with
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a second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this paragraph (b), 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 number of Shares 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. The restrictions of this subsection shall not
apply to: (i) a Subsequent Placement in which the securities (and securities
issuable upon conversion or exercise thereof) shall be restricted from resale
and conversion and will not be registered for issuance or resale for at least
365 days following the issuance date thereof, (ii) issuances of shares of Common
Stock pursuant to a Strategic Transaction, (iii) issuances of shares of Common
Stock as payment of the purchase price for an acquisition of assets or stock of
an unaffiliated Person and (iv) Option Plan Issuances.
(c) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered,
and securities of the Company permitted pursuant to Section 6(c) of the
Registration 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 paragraphs (a)(i) - (iv) of
Section 3.9, 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 after
the Effective Date that a Purchaser is unable to sell Underlying Shares under
the Underlying Shares Registration Statement shall be added to such 90 Trading
Day period.
3.10 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date, issue a press release in a form reasonably
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 (10) 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 one Business Day prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers. Such filings will not be made without the consent of the
Purchasers, not to unreasonably withheld or delayed. 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 or stock market
regulations, in which
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such case the disclosing party shall provide the other party with prior notice
of such public statement, filing or other communication.
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 and travel in
connection therewith) incurred in connection therewith, 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 in connection with or
as a result of the consummation of the Transaction Documents 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.
3.13 Change of Name. As soon as practicable and in any event prior to
the 61st day following the Closing Date, the Company shall make all public
filings (including those filings required to be made with the Commission and any
trading facility or stock market on which the Common Stock is quoted or listed
for trading) in order to change the name of the Company to "Fetchomatic.com" or
other name mutually acceptable to the Company and the Purchasers. Such filing
shall be made by the 60th day following the Closing Date and the Company shall
use its best efforts to have such name change effective as soon as possible
thereafter. If before the second Business Day following such name change, the
Company shall cause new Securities to be issued to the Purchasers, identical to
the Securities issued previously in connection with the Transaction Documents
and the Company shall make such amendments to any Underlying Shares Registration
Statement to give effect to such name change.
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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 $30,000 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 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 U.S.
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: Forest Glade International, Inc.
444 Victoria Street, Suite 370
Prince George, B.C., Canada V2L 2J7
Facsimile No.: (250) 377-3569
Attn: Chief Financial Officer
With copies to: Northern Business Consultants
Unit 431
230-1210 Summit Drive
Kamloops, BC V2C 6M1
Facsimile No.: (250) 377-3569
Attn: Robert Munro
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<PAGE>
and
Camhy, Karlinsky & Stein LLP
1740 Broadway, 16th Floor,
New York, NY 10019
Facsimile No.: (212) 977-8389
Attn: Willie E. Dennis, Esq.
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.
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 Nevada
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 the Transaction Documents 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
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<PAGE>
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, exercise
and conversion (as the case may be) of the Warrants and the Debentures.
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.
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
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<PAGE>
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
FOREST GLADE INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
<PAGE>
COLLINSON ROAD LLC
By:
--------------------------------
Name:
Title:
Debentures Purchase Price: $3,500,000
Number of Shares underlying Closing Warrant: 521,765
Address for Notice:
Collinson Road LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7568
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>
SCHEDULE 2.1(a)
1. Forest Glade Properties Inc.
2. SSA Coupon Limited (now known as Fetchomatic.com Online Inc. by
Certificate of Change of Name filed March 1, 2000)
<PAGE>
SCHEDULE 2.1(c)
1. The capitalization of the Company is as follows:
Total outstanding plus issued under 1999 Stock
Option Plan 41,900,000
Less: unexercised options 1,144,000
----------
Issued Stock 40,756,000
Less: restricted stock 27,770,000
----------
"Public" Stock 12,986,000
2. Under the provisions of the Company's 1999 Stock Option Plan, the
maximum number of shares issuable shall not exceed 5 million. As of
April 28, 2000, the Company granted 5,000,000 options at an exercise
price of $1.09 per share. Further and as of April 28, 2000, 3,856,000
options were exercised for total proceeds of $4,203,040.
3. The Company may be required to issue shares of the Company's common
stock pursuant to the terms of a Media Agreement between the Company
and Sivla Inc., dated March 30, 2000 (the "Media Agreement"),
including but not limited to shares issuable as a result of the
sponsorship agreement entered into on April 6, 2000 between the
Company and Venture Capital Media Inc. in furtherance of the Media
Agreement.
Further, and pursuant to letter dated February 18, 2000, the Company
is required to issue (i) 87,500 shares of common stock to Ira Terk,
and (ii) 87,500 shares of common stock to Next Millenium Capital
Holdings, LLC as additional compensation for providing services in
connection with the transaction between the Company and the
Purchasers.
<PAGE>
SCHEDULE 2.1(j)
1. The Company's Form l 0K-SB for the year ending July 31, 1999 was
required to be filed on or before October 29, 1999. On October 28,
1999, the Company filed Form 12b-25 to provide notice of its intention
to file a late annual report. The Company's Form l 0K-SB was filed on
December 17, 1999.
<PAGE>
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE 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. 1 $500,000
FOREST GLADE INTERNATIONAL, INC.
7% CONVERTIBLE DEBENTURE
DUE MAY 1, 2003
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Forest Glade International Inc., a Nevada corporation, having a
principal place of business at 444 Victoria Street, Suite 370, Prince George,
B.C., Canada V2L 2J7 (the "Company"), designated as its 7% Convertible
Debentures, due May 1, 2003, in the aggregate principal amount of Three Million
Five Hundred Thousand Dollars ($3,500,000) (the "Debentures"). All references to
$ (dollars) shall be to US$ (United States dollars).
FOR VALUE RECEIVED, the Company promises to pay to Collinson Road LLC,
or its registered assigns (the "Holder"), the principal sum of Five Hundred
Thousand Dollars ($500,000), on May 1, 2003 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date") and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 7% per
annum, payable on each Conversion Date (as defined herein), in cash or shares of
Common Stock (as defined in Section 6). 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 6) 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). 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 on a 360-day
year and shall accrue daily commencing on the Original Issue Date (as defined in
Section 6) 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
<PAGE>
6) in whose name this Debenture is registered on the records of the Company
regarding registration and transfers of Debentures (the "Debenture 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 Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of the Company may
treat the Person (as defined in Section 6) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
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 Debentures, free
of any claim of subordination, as and when 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 6), and such failure or breach shall not have been remedied
within five 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
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<PAGE>
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 other Debenture of 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 6), shall agree to sell or
dispose all or in excess of 33% 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 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 6));
(vii) an Underlying Shares Registration Statement (as
defined in Section 6) shall not have been declared effective by the
Commission (as defined in Section 6) on or prior to the 210th day
after the Original Issue Date;
(viii) if, during the Effectiveness Period (as
defined in the Registration Rights Agreement (as defined in Section
6)), the effectiveness of the Underlying Shares Registration Statement
lapses for any reason or the Holder shall not be permitted to resell
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<PAGE>
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for an aggregate of twenty or more 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 210th 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 (12th) 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 Debentures in accordance with the
terms hereof;
(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 deemed delivered hereunder; or
(xii) the Company shall fail for any reason to
legally effect its change of name as required by the Purchase
Agreement within sixty days following the Original Issue Date; or
(xiii) there shall have occurred a breach of the
Pledge Agreement which shall not have been remedied prior to the tenth
day following notice thereof.
(b) During the time that any portion of this Debenture
remains outstanding, if any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become, at the
Holder's election immediately due and payable in cash. 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 6) plus (ii) the product of (A) the
number of Underlying Shares issued in respect of conversions hereunder within
thirty (30) days of 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 6)
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 Debentures 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 enforce any and
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<PAGE>
all of its rights and remedies hereunder and all other remedies available to it
under applicable law. 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 Debenture
shall be convertible into shares of Common Stock at the option of the Holder, in
whole or in part at any time and from time to time, after the Original Issue
Date (subject to the limitations on conversion set forth in Section 4(a)(iii)
hereof). 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 Debenture to be converted
and (y) the Conversion Price (as defined herein), and (ii) the amount equal to
(I) the product of (x) the outstanding principal amount of this Debenture to be
converted and (y) the product of (1) the quotient obtained by dividing .07 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:
(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 6) 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 6), 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 for
trading on the OTC or on a Subsequent Market;
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<PAGE>
(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 Section 4(a)(iii),
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
Debentures to be converted on such Conversion Date and (b) the product of (x)
the quotient obtained by dividing .07 by 360 and (y) the number of days for
which such principal amount was outstanding.
(C) The Holder shall effect conversions by surrendering the
Debentures (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 Debentures
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 deemed to have been
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 deemed 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 Debenture(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 Debenture for such
principal amount as has not been converted.
(ii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Debentures 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 third 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
that the Holder is unable to resell Underlying Shares due to (a) the Common
Stock not being listed or granted 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
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<PAGE>
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.
(A) A Holder may not convert Debentures 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 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debentures 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 Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
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.
(B) A Holder may not convert Debentures 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 Debentures 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 that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a
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Conversion Notice for a principal amount of Debentures 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.
(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 Debentures (subject to the limitations set forth in Section
4(a)(iii) hereof), (ii) Debentures in a principal amount equal to the principal
amount of Debentures 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 Debentures until Debentures are delivered
for conversion to the Company, or the Holder notifies the Company that such
Debentures 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 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 Debentures 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, $2,500 for each of the seven
Trading Days after such third Trading Day and thereafter, $3,000 for each
Trading Day after such seventh 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 herein 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.
The exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversions of Debentures or as payment of interest thereon by the third Trading
Day after the Conversion Date,
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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 Debentures in
principal amount equal to the 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 Debentures 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 ofthe certificates resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in
effect on any Conversion Date shall be the lesser of (1) $2.295 (the "Initial
Conversion Price"), and (2) 80% of the average of the lowest three Per Share
Market Values (which need not occur on consecutive Trading Days) during the
twenty Trading Days immediately preceding the applicable Conversion Date (which
may include Trading Days prior to the Original Issue Date), provided, that such
twenty 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 either not effective, 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 Debentures
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
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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.
(iii) If the Company, at any time while any
Debentures 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 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 Debentures 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
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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
ofthis 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.
(v) If the Company, at anytime while Debentures 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 Debentures 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 Debenture 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 Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock
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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 Debenture 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
Debentures, 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.
No adjustments in either the Conversion Price or the Initial Conversion Price
shall be required if such adjustment is less than $0.01, provided, however, that
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 Debentures, 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, 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 Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
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(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 Debentures
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 Debentures 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 Debentures 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 Debenture (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 Debentures set forth herein and the agreements pursuant to which the
Debentures 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 Debentures and
payment of interest on the Debentures, 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 Debentures 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.
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(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.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures 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 Debentures 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, at 444 Victoria
Street, Suite 370, Prince George, B.C., Canada, V2L 2J7, Facsimile No.: (250)
377-3569, attention Chief Financial Officer, 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 to (other than for
Conversion Notices) Northern Business Consultants, Unit 431, 230-1210 Summit
Drive, Kamloops, BC, V2C 6M1(facsimile number (250) 377-3569), attention Robert
Munro and Camhy Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, NY
10019, attention: Willie E. Dennis, 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) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.
Section 5. Optional Prepayment.
(a) Subject to Section 5(b) below, the Company shall have the
right, exercisable at any time and from time to time after the Original Issue
Date, in accordance with the terms hereof
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and upon twenty Trading Days' prior written notice to the Holders to be prepaid
(an "Optional Prepayment Notice"), to prepay all or any portion of the
outstanding principal amount of the Debentures which has not previously been
repaid or for which Conversion Notices have not previously been delivered. The
prepayment price applicable to prepayments under this Section 5(a) shall equal
the Prepayment Price and shall be paid in cash. Any such prepayment shall be
free of any claim of subordination. The Holders shall have the right to tender,
and the Company shall honor, Conversion Notices delivered prior to the
expiration of the nineteenth Trading Day after receipt by the Holders of an
Optional Prepayment Notice for such Debentures (the twentieth Trading Day after
receipt by the Holders of an Optional Prepayment Notice is referred to herein as
the "Optional Prepayment Date")
(b) The Company shall not be entitled to deliver an Optional
Prepayment Notice to the Holder (and, if after delivery thereof and prior to the
Optional Prepayment Date, any of the following conditions shall cease to be met,
such notice, at the option of the Holders, shall be deemed no longer effective)
if: (i) the number of shares of Common Stock at the time authorized, unissued
and unreserved for all purposes is insufficient to satisfy the Company's
conversion obligations of the aggregate principal amount of Debentures then
outstanding, or (ii) there is neither an effective Underlying Shares
Registration Statement under which the Holders can 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 Debentures subject to an Optional
Prepayment Notice nor may all of such issued and issuable Underlying Shares be
sold by the Holders subject to such prepayment without volume restrictions
pursuant to Rule 144 promulgated under the Securities Act, 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 Holders and
such transfer agent, or (iii) the Common Stock is not then listed or quoted for
trading on the OTC or on a Subsequent Market.
(c) If any portion of the Prepayment Price shall not be paid
by the Company by the second (2nd) Trading Day following the Optional
Prepayment Date, the Prepayment Price shall be increased by 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
accrue daily from the date such interest is due hereunder through and including
the date of payment (which amount shall be paid as liquidated damages and not as
a penalty). In addition, if any portion of the Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal amount of Debentures for which the
Prepayment Price, plus accrued liquidated damages and accrued interest thereon,
has not been paid in full (the "Unpaid Prepayment Principal Amount"), in which
event the applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's written demand for conversion, or (y) invalidate ab
initio such optional prepayment, notwithstanding anything herein contained to
the contrary. If the Holder elects option (x) above, the Company shall, within
three Trading Days after such election is deemed delivered hereunder, deliver to
the Holder the shares of Common Stock issuable upon conversion of the Unpaid
Prepayment Principal Amount subject to such conversion demand and otherwise
perform its obligations hereunder with respect thereto. If the Holder elects
option (y) above, the Company shall promptly, and in any event not later than
three Trading Days from
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receipt of notice of such election, return to the Holder new Debentures for the
full Unpaid Prepayment Principal Amount and shall no longer have any prepayment
rights under this Debenture. If, upon an election under option (x) above, the
Company fails to deliver certificates representing the shares of Common Stock
issuable upon conversion of the Unpaid Prepayment Principal Amount within the
time period set forth in this Section, the Company shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $5,000 per day until the
Company delivers such certificates to the Holder.
Section 6. 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 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 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 33% 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, $.001 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Exchang-a 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.
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"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Per Share Market Value" 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 shares of Common Stock are 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 shares
of Common Stock are not then listed or quoted on a Subsequent Market, the
closing bid price for a share 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 shares of Common Stock are 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 shares of 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 in interest of the principal
amount of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Prepayment Price" for any Debentures shall equal the sum of
(i) the greater of (A) 120% of the principal amount of Debentures to be prepaid,
plus all accrued and unpaid interest thereon, and (B) the principal amount of
Debentures 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 due in respect of
such Debentures.
"Purchase Agreement" means the Convertible Debenture 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.
"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 shares of Common
Stock are traded on a Subsequent Market on which the shares of Common Stock are
then listed or quoted, or (b) if the shares of Common Stock are not listed on a
Subsequent Market, a day on which the shares of Common Stock are traded in the
over-the-counter market, as reported by the OTC, or (c) if the shares
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of Common Stock are not quoted on the OTC, a day on which the shares of Common
Stock are 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, that in the event that the shares
of Common Stock are not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except a Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures 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.
Section 7. Except as expressly provided herein, no provision of this
Debenture 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 Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as there are
Debentures 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 Debentures in accordance with Section 5 hereof.
Section 8. This Debenture 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 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 10. No indebtedness of the Company is senior to this Debenture
in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise.
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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 that is senior in any respect to the Company's obligations under the
Debentures.
Section 11. This Debenture shall be governed by and construed in
accordance with the laws of the State ofNew 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 12. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture 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 Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture 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 Debenture. Any waiver
must be in writing.
Section 13. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture 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 14. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
FOREST GLADE INTERNATIONAL, 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 Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, $.001 par value per share (the "Common Stock"), of Forest Glade
International, 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 Debentures to be Converted
----------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of May 1, 2000, among Forest Glade International, Inc., a
Nevada 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 Debenture
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 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 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, $.001 par
value, or such securities that such stock shall hereafter be reclassified into.
"Debentures" means the Company's Convertible Debentures in
the aggregate principal amount of $3,500,000 issued to the Purchasers in
accordance with the Purchase Agreement.
"Effectiveness Date" means the 100th 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.
<PAGE>
"Filing Date" means the 40th 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.
"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 Debentures 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.
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<PAGE>
"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 special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Warrants" shall mean the Common Stock purchase warrants
issued to the Purchasers pursuant to the Purchase Agreement.
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 such other appropriate form as the Holders may consent for the
registration of Registrable Securities contemplated by this Agreement) 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 Debentures, assuming all interest is paid in shares of Common
Stock, that the Debentures remain outstanding for three 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 Debentures) and (ii) the number of shares of Common
Stock issuable upon exercise in full of the Warrants.
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(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, or if such Registration Statement shall have
been filed against the objections of the Holders which may be given in
accordance with 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 ten 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, the Nasdaq National
Market or the Nasdaq SmallCap Market (each, a "Subsequent Market") for more than
five days (which need not be consecutive days), or (f) the conversion rights of
the Holders pursuant to the Debentures are suspended for any reason, or (g) an
amendment to a Registration Statement is not filed by the Company with the
Commission within ten 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 10 Business
Day-period is exceeded, or for purposes of clause (e) the date on which such
five day-period is exceeded, being referred to as "Event Date"), then, on the
Event Date, 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. If the applicable Event has not been cured by the
first month anniversary following the Event Date, then on such anniversary and
each monthly anniversary thereafter until the applicable Event is cured, the
Company shall pay to each Holder 3.0% of the purchase price paid by such Holder
pursuant to the Purchase Agreement, in cash, as liquidated damages and not as a
penalty. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven (7) 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 first were incurred until such amounts,
plus all such interest thereon, are paid in full. The liquidated 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
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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, 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.
Notwithstanding anything to the contrary contained herein, the parties agree
that if (1) the Holders or their Special Counsel shall fail to provide comments
to the Company or their counsel to a proposed Registration Statement by the
expiration of the fifth Business Day following the date on which they received
the same for review, or (2) the Holders or their Special Counsel shall fail to
provide comments to the Company or its counsel to a proposed amendment or
supplement to a Registration Statement hereunder by the expiration of the second
Business Day following the date on which they receive the same for review, then
a number of days equal to the number of Business Days in excess of such periods
shall be added to the definitions of Filing Date and Effectiveness Date for
purposes of Section 2(c) hereof.
(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 days to file and ninety days to have declared effective such additional
Registration Statements after notice of such requirement 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 five 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
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<PAGE>
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
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
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<PAGE>
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 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.
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) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, (v) Securities Act liability insurance, if
the Company so desires such insurance, and (vi) 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.
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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 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
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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).
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<PAGE>
(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 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
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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) Beneficial Ownership of Common Stock. 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.
(f) 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 Sections
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.
(g) 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 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.
(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
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<PAGE>
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: Forest Glade International, Inc.
444 Victoria Street, Suite 370
Prince George, B.C.
Canada V2L 2J7
Facsimile No.: (250) 377-3569
Attn: Chief Financial Officer
With copies to: Northern Business Consultants
Unit 431
230-1210 Summit Drive
Kamloops, BC V2C 6M1
Facsimile No.: (250) 377-3569
Attn: Robert Munro
and
Camhy, Karlinsky & Stein, LLP
1740 Broadway
16th Floor
New York, NY 10019
Facsimile No.: (212) 977-8389
Attn: Willie E. Dennis, 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:
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<PAGE>
To the address of such Holder as it appears
in the stock transfer books of the Company
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.
(1) 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.
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<PAGE>
(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 no 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 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.
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SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
FOREST GLADE INTERNATIONAL, INC.
By:
-------------------------------------
Name;
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASER TO FOLLOW]
<PAGE>
COLLINSON ROAD LLC
By:
-------------------------------------
Name:
Title:
Address for Notice:
Collinson Road LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
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>
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 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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<PAGE>
Schedule 6(b) to Registration Rights Agreement
1. The Company may be required to issue shares of the Company's common
stock pursuant to the terms of a Media Agreement between the Company
and Sivla Inc., dated March 30, 2000 (the "Media Agreement"),
including but not limited to shares issuable as a result of the
sponsorship agreement entered into on April 6, 2000 between the
Company and Venture Capital Media Inc. in furtherance of the Media
Agreement.
2. Pursuant to letter dated February 18, 2000, the Company is required to
issue (i) 87,500 shares of common stock to Ira Terk, and (ii) 87,500
shares of common stock to Next Millenium Capital Holdings, LLC as
additional compensation for providing services in connection with the
transaction between the Company and the Purchasers. Such shares are
entitled to piggy-back registration rights, which rights are on the
same terms and conditions as set forth in the Registration Rights
Agreement.
<PAGE>
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.
FOREST GLADE INTERNATIONAL, INC.
WARRANT
Warrant No. l Dated: May 1, 2000
Forest Glade International, Inc., a Nevada corporation (the
"Company"), hereby certifies that, for value received, Collison Road LLC or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 521,765 shares of common
stock, $.001 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 $2.295 per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), at any time and from time to time
from and after the date hereof and through and including May 1, 2005 (the
"Expiration Date"), and subject to the following terms and conditions: All
references to $ (dollars) shall be to US$ (United States Dollars).
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) 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 its address for notice set forth in Section
12. 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"),
<PAGE>
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 at its address for notice set
forth in Section 12 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. Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 6:30 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 6:30 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. Prior to the Expiration Date, the Company may not call or otherwise
redeem this Warrant without the prior written consent of the Holder.
(b) 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 12 and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the 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 3 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. The Company shall, upon request of the Holder, if available,
use its best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions.
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.
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(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.
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.
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 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,
but not additionally filed registration statements in respect of such
securities) 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
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. 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.
6. 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, 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.
7. 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 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon
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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.
8. 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 8. Upon each such adjustment of
the Exercise Price pursuant to this Section 8, 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 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.
(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 8(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 8(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
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<PAGE>
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 examines the financial statements of the Company (an
"Appraiser").
(d) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while this Warrant is outstanding, 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 to acquire shares of Common Stock at a price per share less
than the Exercise 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 Exercise Price, such issuance shall be deemed to have occurred for less
than the Exercise Price), then the Exercise 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 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 Exercise 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 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, if any such Common Stock Equivalents shall
expire and shall not have been exercised, 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.
(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 book value basis) in one or a series
of related transactions, the Holder shall have the right thereafter to 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. The terms of any such merger, sale or consolidation shall include such
terms so as continue to give
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<PAGE>
the Holder 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.
(f) For the purposes of this Section 8, 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 8 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 8(c) above, the Holder, 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
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<PAGE>
(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, 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.
9. Payment of Exercise Price. The Holder shall pay the
Exercise Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
available funds; or
(b) Cashless Exercise. 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.
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<PAGE>
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.
10. Certain Exercise Restrictions and Limitations.
(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 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 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, 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 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, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant 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) 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 and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares 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 9.999% of the then outstanding shares of Common
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<PAGE>
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 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, 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 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, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant 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.
11. 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.
12. 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
444 Victoria Street, Suite 370, Prince George, B.C., Canada V2L 2J7, facsimile:
(250) 377-3569, attention Chief Financial Officer, with a copy to Camhy,
Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, NY 10019, facsimile:
(212) 977-8389, attention: Willie E. Dennis, 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.
13. 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
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<PAGE>
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.
14. 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 14(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.
(c) The corporate laws of the State of Nevada 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. The Company
and the Holder hereby irrevocably submit 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.
(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) 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.
FOREST GLADE INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
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<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 Forest Glade International, 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, $.001 par value per share, of Forest Glade International, 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 Forest Glade International, Inc. to which the
within Warrant relates and appoints attorney to transfer said right on
the books of Forest Glade International, 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:
- -----------------------------
<PAGE>
Collinson Road LLC
c/o Citco Trustees (Cayman)
Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
May 1, 2000
Forest Glade International, Inc.
444 Victoria Street, Suite 370
Prince George
British Columbia, Canada V2L 2J7
Attention: President
Re: Forest Glade International, Inc. (the "Company").
-------------------------------------------------
Gentlemen:
Reference is made to the Convertible Debenture Purchase Agreement (the
"Purchase Asreement"), of even date hereof, between the Company and the
undersigned the "Purchasers"), pursuant to which the Company will issue and sell
to the Purchasers an aggregate principal amount of $3,500,000 of the Company's
7% Convertible Debentures due May 1, 2003 (the "Initial Debentures") and Common
Stock purchase warrants, each in the form of Exhibit D to the Purchase
Agreement, pursuant to which the Purchasers shall have the right to acquire
shares of Common Stock at an exercise price per share of 120% of the average
closing bid price for the Common Stock for the five Trading Days immediately
preceding the date of issuance (the "Initial Warrants"). All references in this
letter to $ (dollars) shall be to US$ (United States dollars). Capitalized terms
used and not otherwise defined in this letter that are defined in the Purchase
Agreement shall have the meanings set forth in the Purchase Agreement. The
Initial Warrants and the Initial Debentures are sometimes collectively referred
to herein as the "Initial Securities."
Each Purchaser hereby, severally and not jointly, commits, subject to
and upon the terms and conditions hereof, to purchase from the Company, and the
Company shall sell to the Purchasers (A) on the First Additional Closing Date
(as defined herein): (i) the principal amount of the Company's 7% Convertible
Debentures, due three years from the date of their issuance, set forth below
such Purchaser's name on the signature page of this letter (the "First
Additional Debentures")
<PAGE>
and (ii) additional warrants pursuant to which the holders thereof shall have
the right at any time and from time to time thereafter through the fifth
anniversary of the First Additional Closing Date to acquire a number of shares
of Common Stock equal to 20% of the principal amount of the First Additional
Debentures (the "First Additional Warrants" and together with the First
Additional Debentures, the "First Additional Securities"), for an aggregate
purchase price of $3,250,000 (the "First Additional Purchase Price") and (B) on
the Second Additional Closing Date (as defined herein): (i) the principal amount
of the Company's 7% Convertible Debentures, due three years from the date of
their issuance, set forth below such Purchaser's name on the signature page of
this letter (the "Second Additional Debentures" and together with the First
Additional Debentures, the "Additional Debentures") and (ii) additional warrants
pursuant to which the holders thereof shall have the right at any time and from
time to time thereafter through the fifth anniversary of the Second Additional
Closing Date to acquire a number of shares of Common Stock equal to 20% of the
principal amount of the Second Additional Debentures (the "Second Additional
Warrants" and together with the First Additional Warrants, the "Additional
Warrants") (the Second Additional Debentures and the Second Additional Warrants
are collectively, the "Second Additional Securities"), for an aggregate purchase
price of $3,250,000 (the "Second Additional Purchase Price").
The commitment set forth in this letter is subject to the
terms, conditions and qualifications set forth below.
1. Form of Additional Debentures. The Additional Debentures
shall be identical to the Initial Debentures, mutatis mutandis, and shall rank
pari passu with the Initial Debentures except that the Initial Conversion Price
(as defined in the Initial Debentures) applicable to conversion of (i) the First
Additional Debentures shall equal 120% of the average of the Per Share Market
Values for the five Trading Days preceding the First Additional Closing Date and
(ii) the Second Additional Debentures shall equal 120% of the average of the Per
Share Market Values for the five Trading Days preceding the First Additional
Closing Date.
2. Form of Additional Warrants. The Additional Warrants shall
be identical to the Initial Warrants, except that the Exercise Price (as defined
in the Initial Warrants) applicable to (i) the First Additional Warrants, shall
be equal to 120% of the average of the Per Share Market Values for the five
Trading Days immediately preceding the First Additional Closing Date and (ii)
the Second Additional Warrants, shall be equal to 120% of the average of the Per
Share Market Values for the five Trading Days immediately preceding the Second
Additional Closing Date.
3. First Additional Documentation. In order to effectuate a
purchase and sale of the First Additional Securities, prior to their issuance,
the Company and the Purchasers shall enter into the following agreements: (a) a
convertible debenture purchase agreement substantially identical to the Purchase
Agreement, mutatis mutandis and shall include updated Schedules (the "First
Additional Purchase Agreement"), (b) a registration rights agreement
substantially identical to the Registration Rights Agreement, mutatis mutandis
and shall include updated Schedules (the "First Additional Registration Rights
Agreement") and (c) a Pledge Agreement substantially identical to the Pledge
Agreement, mutatis mutandis (the "First Additional Pledge Agreement" and
together with the First Additional Purchase Agreement, the First Additional
Registration Rights Agreement and
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the First Additional Warrants, collectively the "First Additional Transaction
Documents"). The Purchasers shall prepare the First Additional Transaction
Documents.
4. Second Additional Documentation. In order to effectuate a
purchase and sale of the Second Additional Securities, prior to their issuance,
the Company and the Purchasers shall enter into the following agreements: (a) a
convertible debenture purchase agreement substantially identical to the Purchase
Agreement, mutatis mutandis and shall include updated Schedules (the "Second
Additional Purchase Agreement"), (b) a registration rights agreement
substantially identical to the Registration Rights Agreement, mutatis mutandis
and shall include updated Schedules (the "Second Additional Registration Rights
Agreement") and (c) a Pledge Agreement substantially identical to the Pledge
Agreement, mutatis mutandis (the "Second Additional Pledge Agreement" and
together with the Second Additional Purchase Agreement, the Second Additional
Registration Rights Agreement and the Second Additional Warrants, collectively
the "Second Additional Transaction Documents"). The Purchasers shall prepare the
Second Additional Transaction Documents.
5. The First Additional Closing. (i) Subject to the terms and
conditions set forth in this letter, the Purchasers and the Company shall each
have the right to deliver a written notice to the other (the "First Additional
Financing Notice") requiring such other party to either sell or buy (severally
and not jointly), as the case may be, the First Additional Securities for the
First Additional Purchase Price. The First Additional Financing Notice may be
delivered no earlier than 120 days following the date the Underlying Shares
Registration Statement is declared effective by the Commission (such date of
effectiveness, the "First Target Date"), provided, that such 120th day following
the First Target Date shall at the Purchasers' option be extended for the number
of days during which the prospectus included in the Underlying Shares
Registration Statement may not be used by the Purchasers for the resale of
Registrable Securities (as defined in the Registration Rights Agreement), and no
later than the 200th day following the Target Date (plus such additional days)
described in the immediately preceding clause of that sentence or as otherwise
agreed to by the parties hereto. The closing of the purchase and sale of the
First Additional Securities (the "First Additional Closing") shall take place at
the offices of Robinson Silverman, 1290 Avenue of the Americas, New York, New
York 10104, on the fifth (5th) Business Day after the First Additional Financing
Notice is received by the Purchasers or the Company, as the case may be, or on
such other date as otherwise agreed to by the parties hereto; provided, that in
no case shall the First Additional Closing take place unless and until all of
the conditions listed in Section 7 of this letter shall have been satisfied by
the Company or waived by the Purchasers (it being understood that each Purchaser
may elect to waive or enforce such conditions in its own discretion). The date
of the First Additional Closing is hereinafter referred to as the ("First
Additional Closing Date"). Notwithstanding anything to the contrary contained in
this letter, each of the Purchasers may designate an Affiliate thereof to
acquire the Additional Securities.
(ii) At the First Additional Closing, the parties
shall deliver or shall cause to be delivered the following: (a) the Company
shall deliver to (x) each Purchaser or its designated Affiliate: (1) the First
Additional Debentures in the aggregate principal amount equal to such
Purchasers's pro rata portion of the First Additional Purchase Price, registered
in the name of such Purchaser or its designated Affiliate; (2) a First
Additional Warrant registered in the name of such Purchaser or its designated
Affiliate, entitling the holder thereof to purchase the aggregate number
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of shares of Common Stock set forth below such Purchaser's name on the signature
page of this letter, (3) a legal opinion in form and substance acceptable to
such Purchaser, and (4) executed First Additional Transaction Documents and the
Transfer Agent Instructions relating to the First Additional Securities, and (y)
Robinson Silverman, $10,000 as reimbursement of the legal fees and expenses
incurred by the Purchasers to prepare the First Additional Transaction Documents
and First Additional Debentures, which amount shall be deducted by the
Purchasers from the First Additional Purchase Price and shall be paid directly
to Robinson Silverman and (b) each Purchaser shall deliver to the Company (1)
the pro rata portion of the First Additional Purchase Price, in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose prior to the First Additional Closing
Date and (2) the executed First Additional Transaction Documents.
6. The Second Additional Closing. (i) Subject to the terms
and conditions set forth in this letter, the Purchasers and the Company shall
each have the right to deliver a written notice to the other (the "Second
Additional Financing Notice") requiring such other party to either sell or buy
(severally and not jointly), as the case may be, the Second Additional
Securities for the Second Additional Purchase Price. The Second Additional
Financing Notice may be delivered (i) after the First Additional Closing Date
and (ii) no earlier than 120 days following the date the registration statement
meeting the requirements of the First Additional Registration Rights Agreement
entered into with respect to the First Additional Securities (the "First
Additional Securities Underlying Shares Registration Statement") is declared
effective by the Commission (such date of effectiveness, the "Second Target
Date"), provided, that such 120th day following the Second Target Date shall at
the Purchasers' option be extended for the number of days during which the
prospectus included in the First Additional Securities Underlying Shares
Registration Statement may not be used by the Purchasers for the resale of
registrable securities thereunder and no later than the 200th day following the
Second Target Date (plus such additional days) described in the immediately
preceding clause of that sentence or as otherwise agreed to by the parties
hereto. The closing of the purchase and sale of the Second Additional Securities
(the "Second Additional Closing") shall take place at the offices of Robinson
Silverman, 1290 Avenue of the Americas, New York, New York 10104, on the fifth
(5th) Business Day after the Second Additional Financing Notice is received by
the Purchasers or the Company, as the case may be, or on such other date as
otherwise agreed to by the parties hereto; provided, that in no case shall the
Second Additional Closing take place unless and until all of the conditions
listed in Section 8 of this letter shall have been satisfied by the Company or
waived by the Purchasers (it being understood that each Purchaser may elect to
waive or enforce such conditions in its own discretion). The date of the Second
Additional Closing is hereinafter referred to as the ("Second Additional Closing
Date"). Notwithstanding anything to the contrary contained in this letter, each
of the Purchasers may designate an Affiliate thereof to acquire the Additional
Securities.
(ii) At the Second Additional Closing, the parties
shall deliver or shall cause to be delivered the following: (a) the Company
shall deliver to (x) each Purchaser or its designated Affiliate: (1) the Second
Additional Debentures in the aggregate principal amount equal to such
Purchasers's pro rata portion of the Second Additional Purchase Price,
registered in the name of such Purchaser or its designated Affiliate; (2) a
Second Additional Warrant registered in the name of such Purchaser or its
designated Affiliate, entitling the holder thereof to purchase the aggregate
number
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of shares of Common Stock set forth below such Purchaser's name on the signature
page of this letter, (3) a legal opinion in form and substance acceptable to
such Purchaser, and (4) executed Second Additional Transaction Documents and the
Transfer Agent Instructions relating to the Second Additional Securities, and
(y) Robinson Silverman, $10,000 as reimbursement of the legal fees and expenses
incurred by the Purchasers to prepare the Second Additional Transaction
Documents and Second Additional Debentures, which amount shall be deducted by
the Purchasers from the Second Additional Purchase Price and shall be paid
directly to Robinson Silverman and (b) each Purchaser shall deliver to the
Company (1) the pro rata portion of the Second Additional Purchase Price, in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose prior to the
Second Additional Closing Date and (2) the executed Second Additional
Transaction Documents.
7. Conditions precedent to the First Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to acquire the First Additional Securities is subject
to the satisfaction or waiver by the Purchasers of each of the following
conditions:
(a) Closing of Initial Securities. The Closing of the
purchase and sale of the Initial Securities shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the First
Additional Closing Date as though made on and as of the First Additional Closing
Date (other than representations and warranties which relate to a specific date
(which shall not include representations and warranties relating to the "date
hereof") which representations and warranties shall be true as of such specific
date);
(c) Performance by the Company. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the First Additional Closing
Date and no Event (as defined in the Registration Rights Agreement) shall have
occurred which has not been cured to the satisfaction of the Purchasers;
(d) Underlying Shares Registration Statement. The Underlying
Shares Registration Statement shall have been declared effective under the
Securities Act by the Commission and shall have remained effective at all times,
not subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Additional Closing Date.
(e) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the First Additional Transaction Documents or makes
impracticable the transactions contemplated thereby;
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(f) Adverse Changes. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the OTC
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company) at any time since
the Closing Date;
(h) Listing of Common Stock. The Common Stock shall have been
at all times since the Closing Date quoted on the OTC;
(i) Purchasers' Beneficial Ownership. The Purchasers shall
not beneficially own in excess of 9.999% of the outstanding shares of Common
Stock;
(j) Performance of Conversion/Exercise Obligations. The
Company shall have timely complied with its conversion and delivery obligations
under the Initial Securities and shall have timely complied with its exercise
and delivery requirements under the Initial Warrants;
(k) Closing Threshold. For the ten (10) Trading Days
immediately preceding the date of the Additional Financing Notice, the average
daily trading volume of the Common Stock on the OTC shall be at least 150,000
shares and the average of the Per Share Market Value for such ten (10) Trading
Day period shall be greater than $1.75 (subject to equitable adjustments for
stock splits, recombinations and similar events);
8. Conditions precedent to the Second Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to acquire the Second Additional Securities is subject
to the satisfaction or waiver by the Purchasers of each of the following
conditions:
(a) Closing of First Additional Securities. The First
Additional Closing shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the
Second Additional Closing Date as though made on and as of the Second Additional
Closing Date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents and the First Additional Closing
Transaction Documents to be performed, satisfied or complied with by the Company
between the Closing Date and the Second Additional Closing Date and no Event of
Default (as defined in the Convertible Debenture) whether or not declared, shall
have occurred with respect to the Initial Securities or the First Additional
Securities;
(d) Registration Statements. The Underlying Shares
Registration Statement and the First Additional Securities Underlying Share
Registration Statement shall each have been
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declared effective under the Securities Act by the Commission and shall have
remained effective at all times, not subject to any actual or threatened stop
order or subject to any actual or threatened suspension at any time prior to
the Second Additional Closing Date;
(e) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Second Additional Transaction Documents or
makes impracticable the transactions contemplated thereby;
(f) Adverse Changes. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the OTC
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company) at any time since
the Closing Date;
(h) Listing of Common Stock. The Common Stock shall have been
at all times since the Closing Date quoted on the OTC;
(i) Purchasers' Beneficial Ownership. The Purchasers shall
not beneficially own in excess of 9.999% of the outstanding shares of Common
Stock;
(j) Performance of Conversion/Exercise Obligations. The
Company shall have timely complied with its conversion and delivery obligations
under the Initial Debentures and the First Additional Debentures and shall have
timely complied with its exercise and delivery requirements under the Initial
Warrants and the First Additional Warrants;
(k) Closing Threshold. For the ten (10) Trading Days
immediately preceding the date of the Second Additional Financing Notice, the
average daily trading volume of the Common Stock on the OTC shall be at least
150,000 shares and the average of the Per Share Market Value for such ten (10)
Trading Day period shall be greater than $1.75 (subject to equitable adjustments
for stock splits, recombinations and similar events);
9. Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of the other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Additional Closing, and no action taken by any
Purchaser pursuant hereto or 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
this letter. Each Purchaser shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this
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letter or out of the Additional Transaction Documents, and it shall not be
necessary for the other Purchaser to be joined as an additional party in any
proceeding for such purpose.
10. Governing Law. This letter 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.
11. Execution. This letter 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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Please indicate your agreement with the foregoing by executing a
countersigned copy of this letter and returning the same to our attention,
whereupon effective immediately thereafter this letter shall become a legally
valid and binding agreement among the Purchasers and the Company.
We look forward to our continuing relationship.
Sincerely,
COLLINSON ROAD LLC
By:
---------------------------
Name:
Title:
Principal Amount of First Additional Debentures $3,250,000
Principal Amount of Second Additional Debentures $3,250,000
Agreed and accepted
May 1, 2000
FOREST GLADE INTERNATIONAL, INC.
By:
--------------------------
Name:
Title:
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