SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934
SPECTRE INDUSTRIES, INC
(Exact Name of Small Business Issuer Specified in Its Charter)
NEVADA 88-0223888
(State or Other Jurisdiction of Incorporation (IRS Employer Identification No.)
or Organization)
3992 Sunnycrest Drive, North Vancouver, British Columbia, Canada V7R 3C9
(Address, Including Zip Code of Principal Executive Offices)
Telephone Number:
(604) 984 0927
Securities to be Registered Pursuant to Section 12(b) of the Act:
NONE
Securities to be Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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SPECTRE INDUSTRIES, INC.
FORM 10-SB
TABLE OF CONTENTS
Page
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PART I
Item 1. Description of Business.......................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operation........ 12
Item 3. Description of Property.......................................... 14
Item 4. Security Ownership of Certain Beneficial Owners and Management... 15
Item 5. Directors, Executive Officers, Promoters and Control Persons..... 16
Item 6. Executive Compensation........................................... 17
Item 7. Certain Relationships and Related Transactions................... 19
Item 8. Description of Securities........................................ 20
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Stockholders Matters..................... 22
Item 2. Legal Proceedings................................................ 22
Item 3. Changes in and Disagreements With Accountants.................... 23
Item 4. Recent Sales of Unregistered Securities.......................... 23
Item 5. Indemnification of Directors and Officers........................ 26
PART F/S.................................................................. 27
PART III
Item 1. Index to Exhibits................................................ 28
Item 2. Description of Exhibits.......................................... 28
SIGNATURES................................................................ 29
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL.
Spectre Industries, Inc. ("the Company") was incorporated in the State of Nevada
on May 13, 1986 under the name Abercrombie, Inc. On June 6, 1995, the Company's
name was changed to Spectre Motor Cars, Inc. The Company changed its name to
Spectre Industries, Inc. on November 6, 1997, and through its wholly owned
subsidiaries, Spectre Supersports Ltd. and Spectre Cars UK Ltd., sought to
develop sports cars in the United Kingdom. In June of 1997, these subsidiaries
went into voluntary receivership, and on August 8, 1997, a newly formed company
controlled by an unrelated third party, Spectre Holdings Limited ("Spectre
Holdings"), acquired all of their assets. The Company initially received a 25%
interest in Spectre Holdings. Subsequently, the Company's interest was diluted
down to 19.2%. The Company has since written off its investment in Spectre
Holdings.
Through its wholly-owned subsidiary, Grant Automotive Group, Inc., an Ontario
corporation ("GAG"), the Company is engaged in the representation of
manufacturers and a e-commerce developer in the auto parts industry in the
wholesale market in Canada. The Company also intends to acquire interests in
small independent representatives in the United States automotive after-market
industry and has recently acquired the first such interest in a small
independent agency in Washington State. The Company will attempt to structure
such investments so that the purchase price can be paid out of the cash flow
generated by such agencies.
On January 1, 1999, the Company acquired all of the shares of GAG from Grant
Brothers Sales, Limited ("GBS"), a leading Canadian manufacturers'
representative of automotive parts. GBS previously agreed to transfer to GAG the
business conducted by its traditional automotive division and heavy duty
division, consisting of the representation of approximately 65 manufacturers of
parts used in the automotive after-market industry.
Under the agreements between the Company and GBS, the Company was required to
pay to GBS US $1,000,000, plus 400,000 shares of the Company's Common Stock (the
"Common Stock") as consideration for the shares of GAG. The purchase price for
the GAG shares was payable in installments. As security for the payment in full
of the purchase price, the Company granted GBS a security interest in the shares
of GAG, and such shares were placed in trust with GBS' counsel. The Company and
GBS also agreed that, until the Company paid the purchase price for the GAG
shares in full or a mutually acceptable alternative was found, GBS would be
relieved from completing the transfer of its traditional automotive and heavy
duty division contracts to GAG, and GBS would be entitled to all income
generated by that business. The Company did not pay the balance of the purchase
price when originally agreed upon in order to complete its due diligence to
verify the assets to be acquired as well as to enable it sufficient time to
raise the capital necessary to complete the purchase. Therefore, the Company and
GBS entered into negotiations regarding a restructuring of the transaction.
Eventually, the parties agreed to rescind the transaction, effective December
29, 1999. Simultaneously, the GAG shares held in trust by GBS' counsel were
released to GBS and the Common Stock previously issued by the Company to GBS was
returned to the Company.
Accordingly, the Company's due diligence was completed and the Company and GBS
then entered into a new Share Purchase Agreement, dated January 1, 2000,
pursuant to which the Company again acquired from GBS all of the shares of GAG
for a cash consideration of US $500,000, effective January 1, 2000. As part of
the new GAG acquisition, the Company entered into a Management Services
Agreement with GBS to provide managerial, sales and office support services to
GAG for a term of five years. Pursuant to this
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new Management Services Agreement, GBS has agreed to operate GAG's business in
exchange for a share of the net cash flow generated thereby and the issuance of
450,000 shares of Common Stock by the Company. See Part I, Item 7 "Certain
Relationships and Related Transactions."
The Company is primarily managed by Ian S. Grant under a Consulting Agreement
with I.S. Grant & Company, Ltd. ("Grant & Co."), dated June 1, 1998 (the
"Consulting Agreement"). Pursuant to the Consulting Agreement, Grant & Co. is
required to provide the services of Mr. Ian S. Grant to manage and direct the
Company's business for five years. Mr. Grant is the President and Chief
Executive Officer of the Company, as well as a director. In addition, Mr. Grant
is an officer, director and 20% shareholder of GBS. See Part I, Item 7 "Certain
Relationships and Related Transactions."
The principal offices of the Company are located at 3992 Sunnycrest Drive, North
Vancouver, British Columbia, Canada ,V7R 3C9 and its telephone number is (604)
984 0927.
BUSINESS STRATEGY.
The Company's strategy is to strengthen its position as a leading manufacturer's
representative in the Canadian automotive parts after-market. The Company
intends to accomplish this by continuing to seek out existing manufactuer's
representative agencies as candidates which would require minimal capital
expenditure that it believes are ripe for development through managerial
expertise provided through GAG and GBS. There is no assurance that such
acquisitions, as with the Company's recent acquisition of Bigoni-Stiner, Inc.
("Bigoni-Stiner"), will be available on the same or similar terms, nor is there
any assurance that the anticipated growth of such acquisitions will come to
fruition. See Part I, Item 2, "Management's Discussion and Analysis or Plan of
Operation."
The Company is also exploring representation opportunities in the e-commerce
aspect of the automotive after-market parts industry. Since April 1, 2000, GAG
has been representing Autovia Corporation, a software developer located in
Sacramento, California ("Autovia"), as Autovia's exclusive sales agent in Canada
for its auto parts distributor software product. Such representation is for a
term of three years.
MARKET AND INDUSTRY.
The North American Automotive After-market
The North American automotive after-market is made up of business to business
sales, including sales by manufacturers to wholesale distributors, as well as
business to retail. The Company's target customers include primarily wholesale
customers. In 1999, the automotive after-market benefited from a strong economy
in the United States, a larger vehicle population and more miles driven. Sales
in the automotive after-market (cars and light trucks) are estimated to total
approximately $160 billion for 1999 (including the service repair,
do-it-yourself (DIY) and tire markets). In 1999, sales in the United States
heavy duty vehicle after-market reached approximately $57 billion. Although the
automotive after-market continues to expand, inflation adjusted retail sales
growth rates are relatively flat and reflect the mature nature of this industry.
The automotive after-market is a significant sector of the United States
economy. It employs more than 5 million people. This industry encompasses all
products and services for light and heavy duty vehicles after the original
vehicle purchase including replacement parts, accessories, lubricants,
appearance products, service repairs as well as the tools and equipment
necessary to make the repair. The service repair market includes all parts,
chemicals and accessories as well as labor required for the repair or
maintenance of cars and light trucks. Also called the installed
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market, the service repair market accounts for over two-thirds of estimated 1999
automotive after-market retail sales.
The automotive after-market is an increasingly complex and competitive business
that is undergoing profound change. Industry consolidation over the past decade
has left fewer market players, while manufacturing improvements in parts quality
for new vehicles has contributed to flattening after-market sales growth.
During the time period from 1995 through 1999, automotive after-market industry
sales increased on average by 4.6% before inflation per year. Sales growth in
the installed market depends on the state of the economy, the size of the
vehicle park and the distances traveled by vehicle drivers, as well as the
number of vehicles in the 11 to 14 year old segment. Slower sales growth,
however, is expected in the DIY lubricant, motor oil and chemicals market.
Factors Affecting the Automotive After-market
The state of the U.S. economy directly impacts the automotive after-market.
During economic expansions, consumer demand increases for durable and
non-durable goods including automotive after-market products. However, in
recessionary periods, consumers delay vehicle purchases and postpone routine
maintenance for existing vehicles, which creates falling demand for after-market
products. During the then subsequent economic recovery, demand for after-market
products and services increases.
Consolidation is a continuing trend in the automotive after-market with mergers
and acquisitions occurring in all channels of the industry. With estimated total
deal value of $23 billion in 1998, manufacturers dominated automotive
after-market consolidation, accounting for over half of all transactions and 95%
of their reported dollar value.
Improvements in new vehicle technology and higher quality parts and components
have lengthened replacement cycles and contributed to slower growth in service
repair sales. The expertise, diagnostic tools and parts necessary to repair
computerized vehicles as well as closed systems used by vehicle manufacturers
have led to a shortage of automotive technicians and shifted some repairs away
from independent repair facilities to OEM-trained personnel at dealerships. New
vehicle technology and changing population demographics such as the aging,
wealth and time constraints of the population have decreased the number of
retail consumers capable of or willing to tackle heavy repairs and contributed
to a shift to light DIY repair.
The U.S. Environmental Protection Agency Clean Air requirement that cars be
fitted with high-tech on-board diagnostics (OBD) systems is a concern for the
after-market. This legislation has the potential to negatively impact the
after-market because some OEM vehicle manufacturers are not providing
after-market companies with the information necessary to service and repair
vehicle emission systems. In addition, some OEM vehicle manufacturers are not
providing compatible parts for such repairs.
The Automotive e-Commerce Market
The Company believes that the on-line services will become increasingly
important for the distribution of automotive parts. While the market is
currently fragmented, many of the companies in the business to business
distribution chain are already partially linked on-line. The Company intends to
explore that market's needs and potential e-commerce solutions.
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The Company believes that the automotive after-market is highly compatible for
on-line services. It is an existing and mature industry partially linked on-line
for the distribution of automotive parts. The industry is demanding a more
efficient method to distribute parts between the various segments, i.e.,
warehouse distributor, jobber, repair shops and consumers. The Company intends
to utilize its historical presence in the automotive after-market via GAG to
represent and sell selected Internet-based procurement systems such as the
products developed by Autovia.
Traditionally, repair shops have conducted the parts ordering process by
telephone, one supplier at a time. A few years ago, some distributors began
using dedicated proprietary terminals to connect electronically to their
customers. Although this approach worked better than the telephone, it still
limited parts sourcing efforts to a single supplier. However, most repair shops
expect to contact several suppliers to find the parts they need. The next
generation of systems are expected to be designed to permit a user to access
several sources simultaneously. The Autovia system, for example, is designed to
deliver simultaneous real-time parts availability, pricing, and delivery
scheduling from participating local and will-ship suppliers.
The Company intends to seek out manufacturers of on-line software solutions as
well as to use its expertise in the marketplace to investigate other on-line
solutions the industry needs. There is no assurance that any such on-line
products that the Company may find or develop, if any, will be successful in the
marketplace.
SALES AND MARKETING.
The Company has entered into a Management Services Agreement with GBS to manage
the business operations of GAG. See Part I, Item 7 "Certain Relationships and
Related Transactions." Pursuant to the Management Services Agreement, GBS is
required to utilize its sales employees and office support staff to continue the
operations of the sales representation business conducted by GAG. This includes
14 sales people and 8 office support staff.
The Company will continue its traditional sales and marketing activities, with
respect to advertising, trade show presence and direct sales calls. In addition,
the Company plans to market Internet related products such as the Autovia
e-commerce software.
CUSTOMERS.
GAG represents approximately 65 manufacturers and sells to approximately 1,000
wholesale customers located in Canada. No single manufacturer or customer
accounts for in excess of 10% of the Company's revenues.
COMPETITION.
The Company's competitors include other representative agencies in Canada and
the United States, as well as a variety of Internet based companies. The Company
expects competition from companies using the Internet as a marketing and
distribution tool in the automotive after-market to increase substantially in
the future. Direct on-line competitors include online parts sellers and vendors
of other component based products. Indirect competitors include companies who
may offer component parts as an extension to their existing product lines as
well as manufacturers and retail vendors of parts and accessories, including
large specialty parts sellers that have significant brand awareness, sales
volume and customer bases. For example, Toyota and Republic Industries have
recently announced their intention to devote resources to online
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commerce in the near future. HyundaiUSA.com has launched an Internet Web site to
sell auto parts online. Parts.com has begun locating a number of auto parts
through an online Web site for dealers. Additionally, traditional
"brick-and-mortar" companies like CSK Auto and Haun Automotive have built
e-commerce sites. Advance Auto parts and CSK Auto recently announced a joint
venture to launch an Internet web site.
RELATIONSHIPS WITH SUPPLIERS.
Through GAG, the Company represents approximately 65 manufacturers and service
providers in the automotive after-market. The agreements with such manufactured
service providers contain customary provisions with respect to commissions,
sales of competing products and termination. Typically, these agreements are
terminable by either party on notice on between 30 and 180 days, in accordance
with standard industry practices. The Company is not dependant on any one
supplier and believes that, in the event that its relationship with any one
supplier were to be terminated, that it would be able to replace that suppliers
products line rapidly without disruption to its customer base. There are no
minimum purchase commitment requirements or minimum inventory level requirements
with these vendors.
EMPLOYEES.
The Company has no direct employees. It is managed primarily by Ian S. Grant
pursuant to a Consulting Agreement with Grant & Co., a management consulting
business controlled by Mr. Grant. Under this agreement, Mr. Grant is obligated
to provide 80% of his business time to the business operations of the Company.
The operations of GAG, the Company's principal operating subsidiary, are
conducted by GBS under a Management Services Agreement. That agreement provides
the company with the use of GBS' sales and office support personnel, as well as
GBS' space and equipment. In the event the agreement is terminated, the Company
has the right to directly hire all GBS employees who have spent in excess of 85%
of their business time on GAG operations. None of these employees are
represented by a labor union or subject to a collective bargaining agreement.
The Company believes that GBS' relations with its employees is good.
SPECIAL CONSIDERATIONS.
The shares of the Company are highly speculative and involve an extremely high
degree of risk. Shareholders of the Company should consider the following
factors in evaluating the Company and its business.
LOSSES; REPORT OF INDEPENDENT ACCOUNTANTS.
As noted in the Report of the Company's Independent Certified Public
Accountants, the Company has experienced significant operating losses as well as
an accumulated deficit that raise substantial doubt about the Company's ability
to continue as a going concern. The Company incurred net losses of $2,801,681
and $12,342,053 for the fiscal year ended December 31, 1999 and the period from
inception on April 26, 1995 through December 31, 1999, respectively. At December
31, 1999, the Company had an accumulated deficit of $12,342,053.
The Company's financial statements do not include any adjustments that might
result from this uncertainty. See Part I, Item 2 "Management's Discussion and
Analysis or Plan of Operation" and the Company's Financial Statements and the
related notes.
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ADDITIONAL CAPITAL REQUIREMENTS.
The Company must raise additional capital in the near term to survive as a going
concern and to implement its business plan. Through GAG, the Company intends to
acquire small independent agents in the North American auto parts industry,
which may require additional capital either in the acquisition phase or in a
later operating phase. In addition, the new Management Services Agreement
between the Company and GBS provides an option for the Company to increase its
Net Cash Flow by payment of an additional $500,000. See Part I, Item 7 "Certain
Relationships and Related Transactions." The Company may not have sufficient
funds to cover such expenses and, therefore, substantial additional funds will
be required. The Company intends to raise additional capital through the
issuance of equity or debt offerings. There is no certainty that the Company
will be able to raise sufficient capital in a timely manner or on reasonable
terms. In light of the Company's limited resources and the competitive
environment in which it operates, any inability to obtain additional financing
may cause the Company to discontinue operations. Debt financing increases
expenses and must be paid regardless of operating results. Equity financing
could involve dilution to the interests of the Company's then-existing
stockholders.
LIMITED OPERATING HISTORY.
The Company has a limited operating history in the automotive after-market parts
business, and very limited experience in the e-commerce aspect of that business.
Its business and prospects must be considered in light of the risks, expenses
and difficulties that companies encounter in the early stages of development. As
the Company's competitors include on-line and e-commerce businesses, as well as
traditional industry competitors, many of whom have substantial capital and
operating resources, the competitive risks are great and include risks such as
customer and supplier satisfaction; expansion of supplier networks; the
limitations inherent in representative agreements as to duration and
termination; and the Company's ability to continue to identify, attract, retain
and motivate qualified personnel, directly and indirectly through GBS, which
provides management for the Company's principal operating subsidiary, GAG. There
can be no assurance that the Company will be able to operate successfully or
profitably. The Company has experienced significant operating losses and an
accumulated deficit which raise substantial doubt about the Company's ability to
continue as a going concern. See "Financial Statements."
CONFLICTS OF INTEREST MAY EXIST.
The Company is operated primarily by Ian S. Grant through a Consulting Agreement
with Grant & Co., a management consulting business controlled by Mr. Grant. Mr.
Grant is obligated under this agreement to provide 80% of his business time to
the business operations of the Company. As a result, there may be potential
conflicts of interest including, among other things, time and effort, which may
result from participation by Mr. Grant in other business ventures, including
without limitation, GBS. In addition, Mr. Grant also is a 20% shareholder and
director of GBS, which operates a substantial part of the Company's business.
Such conflicts will be resolved through the exercise by Mr. Grant of judgment
consistent with his respective fiduciary duties to the Company. Mr. Grant
intends to resolve such conflicts in the best interests of the Company.
Moreover, Mr. Grant will devote his time to the Company as directed in the above
agreement. See Part I, Item 6 "Executive Compensation-Employment Contracts and
Change in Control Agreements."
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FINANCIAL RESULTS MAY FLUCTUATE AND MAY BE DIFFICULT TO FORECAST.
The Company's operating results are affected by a wide variety of factors that
could adversely impact its net sales and operating results. These factors, many
of which are beyond the control of the Company, include the Company's ability to
attract and retain manufacturers and deal with its customers; its ability to
control gross margins; its ability to timely process orders and maintain
customer satisfaction; the availability and pricing of parts from suppliers; the
amount and timing of costs relating to expansion of operations; suppliers'
delays in shipments to customers as a result of computer systems failures,
strikes or other problems within or without such suppliers control; delays in
processing orders as a result of computer systems failures; and general economic
conditions. The Company's ability to increase its sales and marketing efforts to
stimulate customer demand and its ability to maintain customer satisfaction and
maintain satisfactory delivery schedules are important factors in its long-term
prospects. A slowdown in demand, general economic conditions, or other general
economic factors could adversely affect the Company's operating results.
NO ASSURANCE OF SUCCESSFUL ACQUISITIONS.
The Company intends to evaluate additional acquisitions of and alliances with
other companies, including small independent representatives in the automotive
after-market, that could complement and expand the Company's existing business.
There can be no assurance that suitable acquisition or joint venture candidates
can be identified or that, if identified, adequate and acceptable financing
sources will be available to the Company that would enable it to consummate such
transactions or expansions. Furthermore, there can be no assurance that the
Company will be able to integrate successfully such acquired companies into its
existing operations, to manage effectively the expanded operations, or to obtain
increased revenue opportunities and cost reductions that are expected to occur
as a result of anticipated synergies, all of which could increase the Company's
operating expenses in the short-term and materially and adversely affect the
Company's results of operations. Moreover, any acquisition by the Company may
result in potentially dilutive issuances of equity securities, the incurrence of
additional debt, and amortization of expenses related to goodwill and intangible
assets, all of which could adversely affect the Company's profitability.
Acquisitions involve numerous risks, such as the diversion of the attention of
the Company's management from other business concerns, unforeseen liabilities
that may arise in connection with the operation of acquired businesses, and the
potential loss of key employees of the acquired company, all of which could have
a material adverse effect on the Company's business, financial condition, and
results of operations.
MANUFACTURER RELATIONSHIPS ARE CRITICAL.
The Company is highly dependent upon its relationships with manufacturers and
service providers in the automotive after-market. Representative agreements with
such manufacturers and service providers are generally terminable on between 30
and 180 days notice, in accordance with standard industry practices. While the
Company believes that it generally can replace its suppliers with competitors,
there is no assurance that this can be accomplished in due course or on the same
or similar terms. The manufacturers and service providers which the Company
represents process and ship merchandise directly to other businesses and
customers. The Company has limited control over shipping procedures, and
shipments by these suppliers could be delayed by factors beyond the Company's
control. The Company will be significantly harmed if it is unable to develop and
maintain satisfactory relationships with suppliers on acceptable
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commercial terms, or if the quality of service provided by these suppliers falls
below a satisfactory standard.
THE COMPANY FACES INTENSE COMPETITION IN THE INDUSTRY.
The traditional automotive parts after-market is and always has been intensely
competitive. The Company competes with a number of large and small companies,
some of which have greater market recognition and substantially greater
financial, marketing, distribution, and other resources than the Company. The
Company currently competes principally on the basis of performance,
dependability, and prices of its products and its ability to deliver finished
products to its customers on a timely basis. The Company believes that its
reputation for delivering high-quality and dependable automotive parts
represents a significant advantage over its competitors in the automotive
after-market. The Company strives to develop and strengthen this reputation as a
barrier to entry by existing or potential competitors. The ability of the
Company to compete successfully depends on a number of factors both within and
outside its control, including the quality, prices and performance of its
suppliers products; the quality of its customer service; its efficiency in
filling customer orders; the ability of its suppliers to meet delivery
schedules; and general market and economic conditions. In addition, the
Company's competitors may establish cooperative relationships among themselves
or directly with suppliers to obtain exclusive or semi-exclusive sources of
parts. The Company anticipates that there will be consolidation in the industry.
Accordingly, it is possible that new competitors or alliances among competitors
and suppliers may emerge and rapidly acquire market share. In addition,
manufacturers may elect to sell their parts directly. If any of these things
occur, its business would be significantly harmed.
The e-commerce aspect of the automotive after-market is new, rapidly evolving
and intensely competitive, and the Company expects competition to intensify in
the future. This may have an adverse effect on the Company's competitive
position in its traditional marketing efforts as well. Barriers to e-commerce
entry are minimal, and competitors may develop and offer similar services to
those provided by the Company in the future. The Company could be severely
harmed if it is not able to compete successfully against current or future
competitors.
DEPENDENCE ON GBS AND OTHER THIRD PARTIES.
The Company relies on GBS to manage the operations of GAG, as well as to assist
the Company in locating additional agencies for acquisition. While the Company
has certain control over GBS with respect to its operations of GAG, through the
Management Services Agreement, it has no control over operations of GBS
unrelated to GAG. To the extent that GBS experiences difficulties in its
unrelated operations, that could have an adverse impact on the operations of
GAG. In addition, the Company also relies on its suppliers' to timely ship parts
that customers order. Although the Company believes that there are a number of
alternative suppliers' for each of the products, the Company's operations would
be adversely affected if it lost its relationship with any of its current
suppliers' or if its current suppliers' operations were disrupted or terminated
even for a relatively short period of time.
RELIANCE ON KEY PERSONNEL.
The Company's future performance depends substantially on the continued service
of its President and Chief Executive Officer, Ian S. Grant, the senior
management and other key personnel of GBS, as well as the management of any
independent agents acquired or to be acquired by the Company. The Company's
success will depend upon its ability to attract, retain and motivate qualified
personnel. The loss of services of Mr. Grant or any one or more of GBS'
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or such agents' senior management and key employees could have a material
adverse effect on the Company. The Company has no key person life insurance on
the life of Mr. Grant. To the best of the Company's knowledge, GBS has no key
person life insurance for its senior employees and other key personnel and the
Company does not anticipate that any independent agency acquired by the Company
has or will have key person life insurance for its senior management.
FUTURE SALES OF COMMON STOCK MAY ADVERSELY AFFECT MARKET PRICE.
The Company currently has 14,066,450 shares of its Common Stock issued and
outstanding. Of the 14,066,450 shares of the Company's Common Stock outstanding,
7,235,373 shares are free trading and 6,831,077 shares are restricted as that
term is defined in Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The Securities Act and Rule 144 promulgated
thereunder place certain prohibitions on the sale of such restricted securities.
Such restricted shares will not be eligible for sale in the open market without
registration except in reliance upon Rule 144 under the Securities Act. In
general, a person who has beneficially owned such shares in a non-public
transaction for at least one year, including persons who may have be deemed
"affiliates" of the Company as that term is defined under the Securities Act,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the then outstanding shares or the average
weekly trading volume on all national securities exchanges and through NASDAQ
during the four calendar weeks preceding such sale, provided that certain
current public information is then available. If a substantial number of the
shares owned by the existing shareholders were sold pursuant to Rule 144 or a
registered offering, the market price of the Company's Common Stock could be
adversely affected.
VOLATILITY OF STOCK PRICE.
The markets for equity securities have been volatile and the price of the
Company's Common Stock could be subject to wide fluctuations in response to
quarter to quarter variations in operating results, news announcements, trading
volume, sales of Common Stock by officers, directors and principal shareholders
of the Company, general trends, changes in the supply and demand for the
Company's shares, and other factors.
BROKER-DEALER SALES OF THE COMPANY'S COMMON STOCK.
The common shares of the Company are "penny stocks" under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Exchange Act and such
penny stock rules and regulations promulgated thereunder generally impose
additional sales practice and disclosure requirements upon broker-dealers who
sell the Company's Common Stock to persons other than "accredited investors"
(generally, defined as institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or an annual income exceeding
$200,000 ($300,000 jointly with a spouse)) or in transactions not recommended by
the broker-dealer.
For transactions covered by the penny stock rules, the broker-dealer must make a
suitability determination for each purchaser and receive the purchaser's written
agreement prior to the sale. In addition, the broker-dealer must make certain
mandated disclosures in penny stock transactions, including the actual sale or
purchase price and actual bid and offer quotations, the compensation to be
received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the Securities and Exchange Commission.
Consequently, the penny stock rules may affect the willingness of broker-dealers
to make a market in or trade the
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common shares of the Company and thus may also affect the ability of
shareholders of the Company's Common Stock to resell those shares in the public
markets.
LACK OF DIVIDENDS.
The Company has never paid any cash dividends on its Common Stock and does not
currently anticipate that it will pay dividends in the foreseeable future.
Instead, the Company intends to apply earnings to the expansion and development
of its business.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
Certain statements in this Report under "Item 1 - Description of Business," and
"Item 2 - "Management's Discussion and Analysis or Plan of Operation," regarding
the Company's estimates, present view of future circumstances or events and
statements containing words such as "estimates," "anticipates," "intends" and
"expects" or words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including, without limitation, statements regarding the Company's ability to
meet future working capital requirements and future cash requirements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Forward-looking statements speak only as of their
dates. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Risk factors include, among others, delays in expansion;
need for additional financing; general economic and business conditions;
competition; the loss of any significant customers; changes in business strategy
or development plans; quality and availability of personnel; and other factors
referenced in this Report. A more detailed description of these and other
factors are discussed elsewhere under this Part I, Item 1, "Description of
Business - Special Considerations."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company was incorporated in the State of Nevada on May 13, 1986 under the
name Abercrombie, Inc. On June 6, 1995, the Company's name was changed to
Spectre Motor Cars, Inc. The Company changed its name to Spectre Industries,
Inc. on November 6, 1997, and through two wholly owned subsidiaries was engaged
in the business of developing sports cars in the United Kingdom. In June of
1997, these subsidiaries went into receivership, and on August 8, 1997, a newly
formed company, Spectre Holdings, controlled by an unrelated third party,
acquired all of their assets. The Company initially received a 25% interest in
Spectre Holdings. Subsequently, the Company's interest was diluted down to
19.2%. The Company has since written off its investment in Spectre Holdings.
Through its wholly-owned subsidiary, GAG, the Company is engaged in the
representation of approximately 65 manufacturers and an e-commerce software
developer in the auto parts industry in the wholesale market in Canada. This
part of the Company's business is operated by GBS, a leading Canadian
representative of manufacturers' in the automotive after-market under a
Management Services Agreement. Under the Management Services Agreement, GBS is
entitled to a share of the net cash flow generated by the representation
business. See Part I, Item 7 "Certain Relationships and Related Transactions."
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The Company is primarily managed by Ian S. Grant under a Consulting Agreement
with Grant & Co., pursuant to which Grant & Co. is required to provide the
services of Mr. Ian S. Grant to manage and direct the Company's business for
five years. Mr. Grant is the President and Chief Executive Officer of the
Company, as well as a director. See Part I, Item 6 "Executive
Compensation-Employment Contracts and Change in Control Agreements."
Through GAG, the Company also plans to acquire small independent agents in the
North American auto parts industry, mainly in the United States. Recently, the
Company has acquired a controlling interest in Bigoni-Stiner, a small
independent manufacturers' representative in the automotive after-market,
located in Washington state.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
As noted in the Company's Report of Independent Certified Public Accountants,
the Company has experienced significant operating losses and an accumulated
deficit which raise substantial doubt about the Company's ability to continue as
a going concern. The Company incurred net losses of $2,801,681 and $12,342,053
for the fiscal year ended December 31, 1999 and the period from inception April
26, 1995 through December 31, 1999, respectively. At December 31, 1999, the
Company had an accumulated deficit of $12,342,053. Under the terms of the new
Management Services Agreement with GBS, GAG is entitled to the first $50,000 in
net cash flow generated by GAG's agency business in the automotive after-market
in Canada operated by GBS for each of the calendar years 2000 and 2001.
During the next 12 months, the Company expects to devote its resources to
increase GAG's sales volume and profitability. In addition, the Company will
continue its efforts to locate potential candidates for acquisition in the
automotive after-market parts business in the United States and Canada. It is
expected that such acquisitions will be of interests in agencies like
Bigoni-Stiner, which are small in size (both as to revenues and profitability)
and which will not require substantial capital expenditures. The Company expects
to be able to pay for such acquisitions primarily by using future earnings
generated from the acquired companies. As a consequence, it is expected that
such acquisitions will not have a material impact on the Company's revenues
and/or profitability until they have been turned around by the Company's
management. There is no assurance that the Company's efforts will be successful
or that the Company has, or will be able to acquire, the necessary management
resources to effect its business plan.
There are many events and factors in connection with the development of the
Company's business operations over which the Company has little or no control,
including, without limitation, marketing difficulties, lack of market acceptance
of new products we and/or companies which we represent may develop, superior
competitive products based on future technological innovation and continued
growth of e-commerce businesses. There can be no assurance that future
operations will be profitable or will satisfy future cash flow requirements.
The Company has convertible debentures outstanding in the aggregate principal
amount of $1,521,000. In general, these convertible debentures bear interest at
the rate of 10% per annum and have maturity dates within less than three years.
The Company has the right to force conversion into the Company's Common Stock
upon giving the holder 30 days prior notice in writing if the closing price of
the Common Stock has been at least $1.25 for 20 consecutive trading days during
the three month period immediately preceding such notice. $321,000 of these
convertible debentures will become due on December 1, 2000. That particular
convertible debenture may be repaid in shares of Common Stock of the Company.
However, $1,030,000 of the remaining $1,200,000 convertible debentures require
the payment in cash of the unpaid
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principal at maturity. Should the trading market for the Company's shares of
Common Stock fail to sustain the above trading level, this obligation will
become due and payable.
For more detail on these activities, see Part II, Item 4 "Recent Sales of
Unregistered Securities."
The ability of the Company to satisfy these obligations depends in part on its
ability to reach a profitable level of operations and secure both short and
long-term financing for the development and expansion of its business. The
Company will attempt to sell additional shares of Common Stock to meet its
current and future capital needs. There can be no assurance, however, that the
Company will be successful in obtaining any such additional financing.
Absent future capital contributions, the Company has sufficient cash reserves to
fund its operations through September, 2000.
Year 2000 Readiness Disclosure Statements. The Company has neither experienced
any significant problems as a result of the change of the calendar on January 1,
2000, nor did the Company incur any significant expenditures to make its
computer systems year 2000 compliant.
RESULTS OF OPERATIONS.
For the fiscal year ending December 31, 1999, the Company's net losses were
$2,801,681 compared to net losses of $6,995,911 for the same period ending
December 31, 1998. These losses were attributable primarily to the sale of
shares of Common Stock for cash and conversion of debt at prices below the then
current market price of the Company's shares of Common Stock. In addition, the
Company had to recognize losses in connection with its failed merger plans with
Dega Technology, Inc. ("Dega") and Dega's failure to repay loans made to it by
the Company in connection with the merger. In 1998, the Company loaned $510,000
to Dega, of which $210,000 was secured by the assets of Dega. As a result of
Dega's bankruptcy filing on November 30, 1999, which was granted on January 7,
2000, the Company's ability to recover its loans is in doubt. The trustee in
bankruptcy is in the process of collecting and evaluating Dega's assets for
liquidation purposes. To the Company's knowledge, it is the sole secured
creditor of Dega. However, the management of the Company deems it unlikely that
the Company will receive a material sum in settlement of its secured claim or
that it will recover any portion of its unsecured debt. See Part II, Item 2
"Legal Proceedings."
The Company does not believe that it currently is or in the foreseeable future
will be able to receive any funds through a public offering of its securities.
Accordingly, the Company will continue to seek financing from investors in
private placements in the United States and Europe in order to finance the
growth of its business. However, based upon the Company's current plan of
operation, the Company estimates that its existing financing resources together
with funds generated by GAG, will be sufficient to fund the Company's current
working capital requirements. However, there can be no assurance in that regard.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company utilizes office space in the offices of Grant & Co. without charge
located at 3992 Sunnycrest Drive, North Vancouver, British Columbia, Canada, V7R
3C9. The Company does not own or otherwise lease any real property. GAG operates
in the space leased by GBS located at #1-140 Wendell Avenue, North York,
Ontario, Canada, M9N 3R2. There is no charge to GAG for rent of such space other
than the management fees GBS receives pursuant to its
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Management Services Agreement with GAG. See Part I, Item 7 "Certain
Relationships and Related Transactions."
ITEM 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to beneficial
ownership of the Company's Common Stock as of April 28, 2000 by (i) each
director and executive officer of the Company, (ii) all directors and executive
officers of the Company as a group, and (iii) each other person known by the
Company to be the beneficial owner of more than five percent of the Common
Stock.
Shares Beneficially Owned (1)
-----------------------------
Name and Address Number Percent
of Beneficial Owner ------ -------
- -------------------
Directors and Executive Officers
- --------------------------------
Ian S. Grant 1,340,000(2)(3) 9.53%
3992 Sunnycrest Drive
North Vancouver, British Columbia
Canada V7R 3C9
Marco Baruch 5,000 0.03%
Residence Alexandra
Chateau # d'oex, Canton De Vaud
CH-1837 Switzerland
All Directors and Officers as a Group 1,345,000 9.56%
(1) Except as indicated, and subject to community property laws when
applicable, the persons named in the table have sole voting power and
investing power with respect to all shares of Common Stock shown as
beneficially owned by them. Except as otherwise indicated, each of such
persons may be reached through the Company at 3992 Sunnycrest Drive, North
Vancouver, British Columbia, Canada, V7R 3C9.
(2) Mr. Grant is the beneficial owner of 20% of the common shares of GBS which
holds an aggregate of 450,000 shares of the Company's Common Stock. The
shares referenced above include 90,000 shares attributable to Mr. Grant
indirectly through his ownership interest in GBS. Mr. Grant disclaims any
beneficial ownership in the remaining shares of the Company owned by GBS.
(3) On January 14, 2000, the Company awarded as a bonus 1,000,000 shares to
Mr. Grant in recognition of his services to the Company. Inclusion of the
issuance of those shares would result in an aggregate holding of 1,340,000
shares directly and indirectly by Mr. Grant representing 9.53% of the then
issued and outstanding shares.
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<PAGE>
ITEM 5.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS and CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
Name Age Position Held
- ---- --- -------------
Ian S. Grant 47 President, Chief Executive
Officer and Director
Marco Baruch 73 Director
Ian S. Grant has been President, Chief Executive Officer and a director of the
Company since January 1, 1999. Mr. Grant also is a director of GBS. He is also
the President of Grant & Co., which provides management services to the Company
under a Consulting Agreement dated June 1, 1998. Prior to this, from 1991 to
1995, Mr. Grant was President and CEO of Interactive Videosystems Inc., a
publicly traded company which designs, produces and distributes interactive
video and multimedia software products. In addition, Mr. Grant held several
positions in management and marketing with other major companies such as Labatt
Brewing Company and Colgate-Palmolive.
Marco Baruch has been a director of the Company since January 14, 2000. For the
past five years, Mr. Baruch has been a self-employed consultant.
At the present time, no family relationship exists among any of the named
directors and executive officers. No arrangement or understanding exists between
any such director or officer and any other persons pursuant to which any
director or executive officer was elected as a director or executive officer of
the Company. The directors of the Company are elected annually and serve until
their successors are elected and qualified, or until their death, resignation or
removal. The executive officers serve at the pleasure of the Board of Directors.
At the present time, no director or executive officer of the Company is or has
been involved in any legal proceeding concerning (i) any bankruptcy petition
filed by or against any business of which such person was a general partner or
executive officer either at the time of the bankruptcy or within two years prior
to that time; (ii) any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses) within the past five years; (iii) being subject to any order, judgment
or decree permanently or temporarily enjoining, barring, suspending or otherwise
limiting involvement in any type of business, securities or banking activity; or
(iv) being found by a court, the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law (and the judgment has not been reversed, suspended
or vacated).
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<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth all compensation for the fiscal years ended
December 31, 1999 and 1998 earned by the Company's Chief Executive Officer and
Directors for services rendered to the Company. The Company has no other
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
Other Securities
Fiscal Salary Bonus Annual Restricted Underlying Payouts
Year Ended ($) ($) Compen- Stock Options/ LTIP All Other
Name and Principal December sation Award(s) SARs Payouts Compensation
Position 31, ($) ($)(2) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ian S. Grant, 1999 $60,000 0 0 $296,750 0 0 0
President & Chief 1998 $60,000 0 0 0 0 0 0
Executive Officer,
Director (1),
Marco Baruch, 1999 0 0 0 0 0 0 0
Director (3) 1998 0 0 0 0 0 0 0
</TABLE>
(1) Mr. Grant was appointed President and Chief Executive Officer on January 1,
1999. He was elected to the Board of Directors on January 1, 1999
(2) Mr. Grant owns an aggregate of 1,250,000 shares of restricted Common Stock
valued at $577,750 received in consideration of his services to the Company. Of
the 1,250,000 shares, 1,000,000 were issued on January 14, 2000, in recognition
of his services valued at $281,000. The Company anticipates that dividends will
not be paid in the foreseeable future respecting such Common Stock. In addition,
Mr. Grant indirectly owns 90,000 shares of Common Stock by virtue of his
ownership of 20% of the common shares of GBS.
(3) Mr. Baruch was elected to the Company's Board of Directors on January 14,
2000.
The Company currently does not have a stock option plan or a long-term incentive
plan.
DIRECTORS' COMPENSATION.
On January 14, 2000, the Company issued 1,000,000 shares of restricted Common
Stock to Ian S. Grant valued at $281,000 as a bonus in recognition of his
services to the Company. The Company does not compensate its directors for their
attendance at board meetings. All directors, however, are reimbursed for their
expenses in attending board and committee meetings.
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BOARD COMMITTEES.
The board of directors currently consists of two members. The board has no
compensation committee. The board of directors currently makes all compensation
decisions.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS.
The Company entered into a Consulting Agreement with Grant & Co. dated June 1,
1998, pursuant to which Grant & Co. is required to provide the Company with the
services of Mr. Ian S. Grant. Mr. Grant is the President and Chief Executive
Officer of the Company, as well as a director. Under the Consulting Agreement,
which expires June 30, 2003, Grant & Co. is to provides the services of its
President, Ian S. Grant, to the Company to manage and direct the Company's
business for 80% of his business time. The base compensation to be paid to Grant
& Co. for the year ending June 30, 2000 will be $100,000; for the year ending
June 30, 2001 will be $110,000; for the year ending June 30, 2002 will be
$121,000; and for the year ending June 30, 2003 will be $133,000. In addition,
Grant & Co. will receive an annual bonus of 5% of the Company's consolidated net
cash flow before taxes, interest, amortization and depreciation, as well as a
monthly car allowance in the amount of $500.
Neither Mr. Grant nor Grant & Co., its officers, directors or employees, is
permitted to compete with the Company or own an interest in or manage, control
or otherwise participate in any enterprise in the automotive after-market
business during the term of the Consulting Agreement and for a one-year period
following the expiration of the Consulting Agreement, with the exception of any
interest in GBS.
In addition, the Company agreed to use its best efforts to cause Mr. Grant to be
elected as a director, as well as Chief Executive Officer and/or President of
the Company. The Consulting Agreement terminates upon the death or permanent
disability of Mr. Grant or for cause with or without notice. Termination for
cause requires the unanimous approval of the Board of Directors of the Company
with the exception of Mr. Grant. If such a termination is determined to be
without cause, the Company is required to make severance payments for a period
of one year in amount and kind identical to the compensation under the terms of
the Consulting Agreement.
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<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On January 1, 1999, the Company acquired all of the shares of GAG from GBS, a
leading Canadian manufacturers' representative of automotive parts. Ian S.
Grant, the Company's President, Chief Executive Officer, and director, also owns
20% of the issued and outstanding stock of GBS. GBS previously agreed to
transfer to GAG the business conducted by its traditional automotive division
and heavy duty division. GAG represents approximately 65 leading manufacturers
of parts used in the automotive after-market industry. In conjunction with the
purchase of GAG, GBS agreed to continue to operate the business conducted by GAG
under the terms of a Management Services Agreement between the Company and GBS.
Pursuant to the Management Services Agreement, GAG was entitled each year to the
first US $100,000 of net cash flow in excess of GBS's direct expenses incurred
in managing GAG, and GBS was entitled to the next US $100,000 of net cash flow.
Thereafter, any net cash flow of the business would be distributed 95% to GAG
and 5% to GBS.
The Share Purchase Agreement between the Company and GBS required the Company to
pay to GBS an aggregate consideration for the shares of GAG of US $1,000,000 in
installments, plus 400,000 shares of the Company's Common Stock. As security for
the payment in full of the purchase price the Company granted GBS a security
interest in the shares of GAG, and such shares were placed in trust with GBS'
counsel. The Company and GBS also agreed that, until the Company paid the
purchase price for the GAG shares in full or a mutually acceptable alternative
was found, GBS would be relieved from completing the transfer of its traditional
automotive and heavy duty division manufacturers' representation agreements to
GAG, and GBS would be entitled to all income from such representation
agreements. The Company did not pay the balance of the purchase price when
originally agreed upon in order to complete its due diligence to verify the
assets to be acquired as well as to enable it sufficient time to raise the
capital necessary to complete the purchase. Therefore, the Company and GBS
entered into negotiations regarding a restructuring of the transaction.
Eventually, the parties agreed to rescind the 1999 transaction, effective
December 29, 1999. Simultaneously, the GAG shares held in trust by GBS' counsel
were released to GBS and the Common Stock previously issued by the Company to
GBS was returned to the Company. Accordingly, the Company's due diligence was
completed and the Company and GBS then entered into a new Share Purchase
Agreement, dated January 1, 2000, pursuant to which the Company again acquired
from GBS all of the shares of GAG for a cash consideration of US $500,000,
effective January 1, 2000. As part of the restructured GAG acquisition, the
Company entered into a new Management Services Agreement with GBS to provide
managerial, sales and office support services to GAG for a term of five years,
in exchange for a share of the net cash flow generated thereby. In addition, GBS
is required to seek out new opportunities to complement the business operated by
GAG, including the introduction to GAG of potential acquisition opportunities.
GAG is entitled to terminate the Management Services Agreement if GBS does not
make at least two such introductions by January 1, 2001.
Pursuant to the Management Services Agreement, GAG is entitled each year to the
first US $50,000 of net cash flow in excess of GBS's direct expenses incurred in
managing GAG. During the years 2000 and 2001, GBS has agreed to prepay such
amount in two installments of $25,000 each, on June 30 and December 31 of the
foregoing years. GBS will then be entitled to the next US $100,000 of net cash
flow. Thereafter, any net cash flow remaining will be distributed 47.5% to GAG
and 52.5% to GBS. In the event that GAG pays to GBS the "Net Cash Flow Increase
Payment" on or prior to January 1, 2005, GAG's share of the remaining net cash
flow will be increased to 95%. The "Net Cash Flow Increase Payment" is an amount
equal to US $500,000 plus or minus the dollar amount by which GAG's sales for
the fiscal year ended December 31, 1999 exceeds or is less than $1,000,000, as
the case may be.
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If the Company becomes bankrupt or insolvent or seeks to effect a transfer of
its assets outside of the ordinary course of business, GBS is entitled to
repurchase all of GAG's assets in connection with the business previously
transferred to it by GBS for US $500,000. In addition, if the Company fails to
exercise its option to increase its net cash flow by failing to make the "Net
Cash Flow Increase Payment" on or before January 1, 2005, GBS will then be
entitled to acquire, during the first quarter of 2005, all of GAG's assets in
connection with the business previously transferred to it by GBS for the same
price, if notice of the exercise of this option has been given to the Company
prior to December 31, 2004.
As an additional incentive to GBS to manage GAG on a long term basis, the
Company issued an aggregate of 450,000 restricted shares of fully paid and
non-assessable Common Stock of the Company to GBS, free from all encumbrances.
In the event of a termination of the Management Services Agreement prior to
December 31, 2005, for reasons other than a bankruptcy of the Company, GBS will
be required to pay to the Company an amount equal to the value of such 450,000
shares of Common Stock.
GBS and GAG share certain representation contracts with manufacturers. GBS
represents such manufacturers for purposes of sales to mass merchandisers and
retail chains while GAG represents such manufacturers for purposes of sales to
wholesale distributors.
The Company entered into a Consulting Agreement with Grant & Co., dated June 1,
1998, pursuant to which Grant & Co. is required to provide the Company with the
services of Mr. Ian S. Grant to manage and direct the business of the Company
for a term of five years. Mr. Grant is the President of Grant & Co., and is also
the President, Chief Executive Officer and director of the Company. As
compensation for Grant & Co.'s services, they will receive an aggregate of
$100,000 for the year ending June 30, 2000; $110,000 for the year ending June
30, 2001; 121,000 for the year ending June 30, 2002; and 133,000 for the year
ending June 30, 2003. The Company has no other employment or other compensation
agreement with its other officers or directors.
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL.
The Company's authorized capital stock currently consists of 100,000,000 shares
of Common Stock, par value $.001 per share. On November 6, 1997, the Company
effected a reverse stock split on a 1-for-5 basis. As of April 28, 2000, there
are currently 14,066,450 shares of Common Stock which are issued and
outstanding. The outstanding shares of Common Stock are fully paid and
non-assessable.
COMMON STOCK.
The holders of shares of Common Stock are entitled to one vote for each share on
all matters submitted to a vote of stockholders of the Company and do not have
cumulative voting rights. Accordingly, the holders of a majority of the stock
entitled to vote in any election of directors may elect all of the directors
standing for election. A majority of the issued and outstanding Common Stock
constitutes a quorum at any meeting of stockholders and the vote by the holders
of a majority of the outstanding shares is required to effect certain
fundamental corporate changes such as liquidation, merger or an amendment to the
Articles of Incorporation. The holders of Common Stock are entitled to receive
dividends if, as and when, declared by the Board of Directors out of funds
legally available. Upon the liquidation, dissolution, or winding
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<PAGE>
up of the Company, the holders of Common Stock will be entitled to share ratably
in all assets of the Company that are legally available for distribution, after
payment of all debts and other liabilities. The holders of Common Stock have no
preemptive, subscription, redemption, or conversion rights.
REGISTRATION RIGHTS.
The Company issued in aggregate a total of $1,521,000 in convertible debentures
to certain European investors (the "Holders"). In general, these convertible
debentures bear interest at the rate of 10% per annum, have maturity dates
within less than three years, and are convertible into shares of Common Stock of
the Company at a conversion price of $.80 per share. The convertible debentures
are subject to the Company's right to force conversion upon giving the Holders
30 days prior notice in writing if the closing price of the Common Stock has
been at least $1.25 for 20 consecutive trading days during the three month
period immediately preceding such notice. See Part II, Item 4 "Recent Sales of
Unregistered Securities." In addition, the Holders of $170,000 of the
convertible debentures have entered into a registration rights agreement with
the Company pursuant to which the Holders have certain "demand" and "piggyback"
registration rights. In particular, in the event that the Company registers any
of its equity securities under the Securities Act, the Holders of the
convertible debentures will have the right to cause the Company to include in
such registration statement the number of shares of Common Stock so requested by
the Holders upon conversion of such convertible debentures. Registration of
shares of Common Stock pursuant to the exercise of "demand" or "piggyback"
registration rights under the Securities Act would result in such shares
becoming freely tradable without restriction immediately upon the effectiveness
of such registration.
CERTAIN PROVISIONS OF NEVADA GENERAL CORPORATION LAW.
The Company is governed by sections 78.411 through 78.444 of the Nevada General
Corporation Law (the "Nevada GCL") relating to "Combinations with Interested
Stockholders." In addition, the Company is governed by sections 78.378 through
78.3793 of the Nevada GCL relating to "Acquisition of a Controlling Interest."
Certain Charter Provisions. The Company's Amended Articles and ByLaws contain a
number of other provisions relating to corporate governance and to the rights of
stockholders. These provisions include the authority of the Board of Directors
to fill vacancies on the board. Among other things, these provisions could have
the result of delaying or preventing an acquirer from being able to elect a
majority of the Board of Directors, or otherwise obtain control of the Company.
TRANSFER AGENT AND REGISTRAR.
The transfer agent and registrar for the Common Stock is Alpha Tech Stock
Transfer in Draper, Utah.
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<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the National Quotation Bureau
Pink Sheets under the symbol STNDE. The following table set forth below presents
the range, on a quarterly basis, of the high and low closing sales prices per
share of the Company's Common Stock as reported for the last two fiscal years
and for the subsequent interim period ended March 31, 2000. The information is
obtained from the database of FinancialWeb.com. Such quotations reflect
inter-dealer prices, without retail markup, markdown or commission, and may not
represent actual transactions.
High Low
---- ---
1998:
Third Quarter .................................... 1.625 .750
Fourth Quarter ................................... 1.218 .687
1999:
First Quarter .................................... 1.562 .875
Second Quarter ................................... 1.031 .281
Third Quarter .................................... .750 .200
Fourth Quarter ................................... .480 .093
2000:
First Quarter .................................... .875 .250
As of April 28, 2000, there are 14,066,450 shares of Common Stock
outstanding held by approximately 83 holders of record.
The Company has not declared or paid any cash dividends on its Common
Stock and does not intend to declare or pay any cash dividends in the
foreseeable future. The Company intends to retain future earnings, if any, to
finance the development and expansion of its business. The payment of dividends,
if any, is within the discretion of the Board of Directors and will depend on
the Company's earnings, if any, its capital requirements and financial
condition, and such other factors as the Board of Directors may consider.
ITEM 2. LEGAL PROCEEDINGS.
There are no legal proceedings to which the Company is a party and the Company
has no knowledge of any actions, suits, orders, investigations or claims pending
or threatened against or affecting it. The Company, however, did participate in
filing an involuntary Chapter 7 bankruptcy petition against Dega Technology,
Inc.("Dega") d/b/a DTI Technology, Inc. ("DTI"), on November 30, 1999, in the
United States Bankruptcy Court for the Central District of California (the
"Bankruptcy Court"), which owed $510,000 to the Company under two promissory
notes. The first promissory note, dated July 21, 1998, was from DTI in the
amount of $300,000 and was unsecured. The second promissory note, dated December
9, 1998, was
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<PAGE>
from Dega in the amount of $210,000 and was secured by the assets of Dega. The
petition was granted by the Bankruptcy Court on January 7, 2000. The trustee in
bankruptcy is marshalling the assets of Dega and it is unclear what value, if
any, the assets of Dega will have. The promissory notes were made in
contemplation of a merger between the Company and Dega, which was abandoned on
May 7, 1999.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On August 11, 1997, the Company issued 42,800 shares of Common Stock to one
investor for services valued at $7,126. The Company's current executive officers
and directors have no direct knowledge regarding such issuance and no records
appear to exist with respect to such issuance. Based on information obtained
from the Company's previous management, it appears that these shares were issued
in reliance on Regulation D under the Securities Act.
On October 5, 1997, the Company issued an aggregate of 1,800,000 shares of
Common Stock to one accredited investor for the conversion of debt valued at
$300,000. The Company's current executive officers and directors have no direct
knowledge regarding such issuance and no records appear to exist with respect to
such issuance. Based on information obtained from the Company's previous
management, it appears that these shares were issued in reliance on Regulation S
under the Securities Act.
On January 7, 1998, the Company issued an aggregate of 4,444,444 shares of
Common Stock to ten investors for a total subscription price of $4,444, or
$0.001 per share. The Company's current executive officers and directors have no
direct knowledge regarding such issuance and no records appear to exist with
respect to such issuance. Based on information obtained from the Company's
previous management, it appears that these shares were issued in reliance on
Rule 504 of Regulation D under the Securities Act.
On September 3, 1998, the Company issued 1,390,000 shares of Common Stock to
three investors in conversion of a debt of $695,000 or $0.50 per share. These
shares were issued in reliance on the exemption from the registration
requirements under the Securities Act provided by Rule 504 of Regulation D under
the Securities Act.
On September 3, 1998, the Company issued 1,200,000 shares of Common Stock to a
company controlled by a financial advisor to the Company for services valued at
$1,650,000, or $1.375 per share. These shares were issued to an "accredited
investor" in reliance on the exemption from the registration requirements under
the Securities Act provided by Regulation D under the Securities Act.
On October 15, 1998, the Company issued convertible debentures in an aggregate
principal amount of $980,000 to ten European investors. Such convertible
debentures bear interest at the rate of 10% per annum, and have maturity dates
of October 15, 2001. These convertible debentures may be converted into shares
of Common Stock of the Company by the holder at any time at a conversion price
of $0.80 per share. The Company has the right to force the conversion of these
convertible debentures, in whole or in part (inclusive of accrued interest),
into shares of Common Stock at any time after April 15, 2000, upon giving the
holder thirty days prior notice in writing if the closing price of the Common
Stock has been at least $1.25 for 20 consecutive
23
<PAGE>
trading days during the three month period immediately preceding such notice.
Quantum Economic Development Ltd., a Zurich based financial advisor ("Quantum"),
acted as placement agent in connection with the issuance of such convertible
debentures. The Company paid Quantum a placement fee of $98,000 in connection
with such issuance. These convertible debentures were issued in reliance on the
exemption from the registration requirements under the Securities Act provided
by Regulation S under the Securities Act.
On December 1, 1998, the Company issued to a party affiliated with a financial
advisor of the Company a convertible debenture with a face amount of $321,000 in
consideration of services rendered by such financial advisor to the Company.
Such convertible debenture bears interest at the rate of 10% per annum and has a
maturity date of December 1, 2000. This convertible debenture may be converted
into shares of Common Stock of the Company by the holder at any time at a
conversion price of $.80 per share. The Company has the right to force the
conversion of this convertible debenture, in whole or in part (inclusive of
accrued interest), into shares of Common Stock at any time after April 1, 1999,
upon giving the holder thirty days prior notice in writing if the closing price
of the Common Stock has been at least $1.25 for twenty (20) consecutive trading
days during the three month period immediately preceding such notice. This
convertible debenture was issued in reliance on the exemption from the
registration requirements under the Securities Act provided by Regulation S
under the Securities Act.
On December 16, 1998, the Company issued 24,000 shares of Common Stock to three
investors, for services valued at $25,440, or $1.06 per share. These shares were
issued in reliance on the exemption from the registration requirements under the
Securities Act provided by Regulation S under the Securities Act.
On January 29, 1999, the Company issued convertible debentures in an aggregate
principal amount of $170,000 to European investors. Such convertible debentures
bear interest at the rate of 10% per annum, and have maturity dates of January
29, 2001. These convertible debentures may be converted into shares of Common
Stock of the Company by the holder at any time at a conversion price of $.80 per
share. The Company has the right to force the conversion of these convertible
debentures, in whole or in part (inclusive of accrued interest), into shares of
Common Stock at any time after July 29, 2000, upon giving the holder thirty days
prior notice in writing if the closing price of the Common Stock has been at
least $1.25 for 20 consecutive trading days during the three month period
immediately preceding such notice. Quantum acted as placement agent in
connection with the issuance of such convertible debentures. The Company paid
Quantum a placement fee of $3,400 in connection with such issuance. These
convertible debentures were issued in reliance on the exemption from the
registration requirements under the Securities Act.
On January 1, 1999 and on February 24, 1999, the Company issued 300,000 shares
of Common Stock and 100,000 shares of Common Stock, respectively, to GBS as part
of the amount payable under the Share Purchase Agreement between the Company and
GBS dated January 1, 1999 for the purchase of GAG. These shares are exempt from
the registration requirements under the Securities Act in reliance on Section
4(2) of the Securities Act. Such shares were returned to the Company in
connection with the recission of the orginal agreements between the Company and
GBS effective December 29, 1999.
24
<PAGE>
On February 23, 1999, the Company issued 250,000 shares of Common Stock to Ian
S. Grant, the Company's President, Chief Executive Officer and director, for
services valued at $296,750, or $1.187 per share. These shares were issued in
reliance on the exemption from the registration requirements under the
Securities Act provided by Regulation S under the Securities Act.
On February 25, 1999, the Company issued a convertible debenture in the
aggregate principal amount of $50,000 to a European investor. Such convertible
debenture bears interest at the rate of 10% per annum and has a maturity date of
February 25, 2001. This convertible debenture may be converted into shares of
Common Stock of the Company by the holder at any time at a conversion price of
$.80 per share. The Company has the right to force the conversion of this
convertible debenture, in whole or in part (inclusive of accrued interest), into
shares of Common Stock at any time after August 25, 2000, upon giving the holder
thirty days prior notice in writing if the closing price of the Common Stock has
been at least $1.25 for 20 consecutive trading days during the three month
period immediately preceding such notice. This convertible debenture was issued
in reliance on the exemption from the registration requirements under the
Securities Act provided by Regulation S under the Securities Act.
On April 6, 1999, the Company issued 200,000 shares of Common Stock to one
European investor, who had assumed obligations of the Company to a third party
for cash and services valued at $160,000, or $0.80 per share. These shares were
issued in reliance on the exemption from the registration requirements under the
Securities Act provided by Rule 504 of Regulation D under the Securities Act.
On May 10, 1999, the Company issued an aggregate of 1,900,000 shares of Common
Stock to certain European investors for a total subscription price of $190,000
or $0.10 per share. These shares were issued in reliance on the exemption from
the registration requirements under the Securities Act provided by Regulation S
under the Securities Act.
On January 1, 2000, the Company issued 450,000 shares of Common Stock to GBS for
the purchase of GAG valued at $112,500, or $0.25 per share. These shares were
exempt from the registration requirements under the Securities Act in reliance
on Section 4(2) of the Securities Act.
On January 14, 2000, the Company issued in aggregate a total of 1,210,000 shares
of Common Stock to three individuals for services valued at $340,010, or $0.281
per share. 1,200,000 shares were issued in reliance on the exemption from the
registration requirements under the Securities Act provided by Regulation S
under the Securities Act. The remaining 10,000 shares were issued in reliance on
the exemption from the registration requirements under the Securities Act
provided by Regulation D under the Securities Act.
On January 14, 2000, the Company issued 300,000 shares of Common Stock to
European investors for a total subscription price of $60,000, or $0.20 per
share. These shares were issued in reliance on the exemption from the
registration requirements under the Securities Act provided by Regulation S
under the Securities Act.
25
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
NEVADA LAW.
The Nevada GCL sections 78.7502 and 78.751 provides for indemnification of
directors and officers by a corporation.
The Company has entered into indemnification agreements with its directors and
officers.
26
<PAGE>
PART F/S
SPECTRE INDUSTRIES, INC.
Index to Financial Statements
Page
----
Independent Auditors' Report................................................F-1
Consolidated Balance Sheet as of December 31, 1999..........................F-2
Consolidated Statements of Operations for the Year
Ended December 31, 1999................................................F-3
Ended December 31, 1998................................................F-3
From Inception on April 26, 1995 through December 31, 1999.............F-3
Consolidated Statements of Stockholders' Equity for the Year
Ended December 31, 1999................................................F-4
Ended December 31, 1998................................................F-4
From Inception on April 26, 1995 through December 31, 1999.............F-4
Consolidated Statements of Cash Flows for the Year
Ended December 31, 1999................................................F-7
Ended December 31, 1998................................................F-7
From Inception on April 26, 1995 through December 31, 1999.............F-7
Notes to Consolidated Financial Statements..................................F-9
27
<PAGE>
PART III
Item 1. Index to Exhibits
The exhibits filed as part of this registration statement are listed below
and are attached to this registration statement as indicated.
Exhibit No.
3.1 Articles of Incorporation of Abercrombie, Inc.
3.2 Amended Articles of Incorporation of Abercrombie, Inc.
3.3 Amended Articles of Incorporation of Spectre Motor Cars, Inc.
3.4 Bylaws
4.1 Form of 10% Convertible Debenture due December 1, 2000
4.2 Form of 10% Convertible Debenture due January 29, 2001
4.3 Form of 10% Convertible Debenture due February 25, 2001
4.4 Form of 10% Convertible Debenture due October 15, 2001
4.5 Registration Rights Agreement dated January 29, 1999 between Barbara
Hutter, for herself and the holders, and Spectre Industries, Inc.
10.1 Consulting Agreement between Spectre Industries, Inc. and I.S. Grant
and Company Ltd. dated June 1, 1998
10.2 Asset Purchase Agreement between Grant Brothers Sales, Limited and
Grant Automotive Group Inc. dated January 1, 1999
10.3 Share Purchase Agreement between Grant Brothers Sales, Limited and
Spectre Industries, Inc. dated January 1, 1999
10.4 Management Services Agreement between Grant Brothers Sales, Limited
and Grant Automotive Group Inc. dated January 1, 1999
10.5 Interim Measures Agreement between Grant Brothers Sales, Limited,
Grant Automotive Group Inc., and Spectre Industries, Inc. dated
January 1, 1999
10.6 Share Purchase Agreement between Grant Brothers Sales, Limited and
Spectre Industries, Inc. dated January 1, 2000
10.7 Management Services Agreement among Grant Brothers Sales, Limited,
Grant Automotive Group Inc. and Spectre Industries, Inc. dated
January 1, 2000
10.8 Indemnification Agreement between the Spectre Industries, Inc. and
Ian S. Grant dated May 1, 2000.
10.9 Indemnification Agreement between the Spectre Industries, Inc. and
Marco Baruch dated May 1, 2000.
23 Consent of Accountant
27 Financial Data Schedule
Item 2. Description of Exhibits
The information required by this Item is contained in Part III, Item 1,
"Index to Exhibits".
28
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
SPECTRE INDUSTRIES, INC.
Date: May 8, 2000 By: /s/ Ian S. Grant
------------------------------------
Ian S. Grant
President, Chief Executive Officer
and Director
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Spectre Industries, Inc.
(A Development Stage Company)
Vancouver, British Columbia, Canada
We have audited the accompanying balance sheet of Spectre Industries, Inc. (a
development stage company) as of December 31, 1999 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
December 31, 1999 and 1998 and from inception on April 26, 1995 through December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of Spectre Industries, Inc. (a
development stage company) as of December 31, 1999 and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
and from inception on April 26,1995 through December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company is a development stage company with recurring
losses which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 6. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
March 3, 2000
F-1
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
------
December 31,
------------
1999
------------
CURRENT ASSETS
Cash $ 44,566
------------
Total Current Assets 44,566
------------
OTHER ASSETS
Note and interest receivable (net) (Note 5) --
------------
Total Other Assets --
------------
TOTAL ASSETS $ 44,566
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable - related party (Note 11) $ 337,200
Accrued expenses 102,960
Convertible debentures (Note 3) 321,000
------------
Total Current Liabilities 761,160
------------
LONG-TERM DEBT
Convertible debentures (Note 3) 1,200,000
------------
Total Long-Term Debt 1,200,000
------------
TOTAL LIABILITIES 1,961,160
------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value, 100,000,000 shares authorized,
12,106,450 shares issued and outstanding 12,106
Additional paid-in capital 10,413,353
Deficit accumulated during the development stage (12,342,053)
------------
Total Stockholders' Equity (Deficit) (1,916,594)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 44,566
============
F-2
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From
Inception on
For the Years Ended April 26, 1995,
December 31, Through
---------------------------- December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
Bad debt expense 45,375 523,166 568,541
General and administrative 2,382,036 4,688,380 7,171,566
------------ ------------ ------------
Total Expenses 2,427,411 5,211,546 7,740,107
------------ ------------ ------------
Loss from Operations (2,427,411) (5,211,546) (7,740,107)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 47,102 14,112 61,214
Interest expense (271,372) (1,377,542) (1,648,914)
Loss from equity subsidiary -- (120,935) (375,001)
Valuation reserve (Note 8) (150,000) (300,000) (450,000)
------------ ------------ ------------
Total Other Income (Expense) (374,270) (1,784,365) (2,412,701)
------------ ------------ ------------
LOSS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (2,801,681) (6,995,911) (10,152,808)
------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS - Net of zero tax benefit -- -- (2,189,245)
------------ ------------ ------------
NET LOSS $(2,801,681) $ (6,995,911) $(12,342,053)
============ ============ ============
BASIC LOSS PER SHARE $ (0.25) $ (0.89)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 11,340,149 7,902,611
============ ============
</TABLE>
F-3
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Currency During the
Common Stock Paid-in Translation Development
Shares Amount Capital Adjustment Stage
------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, at inception -- $ -- $ -- $ -- $ --
Common stock issued for
Spectre Motor Sports Ltd.
recorded at predecessor cost 630,000 630 (630) -- --
Common stock issued for cash
at $11.25 per share 51,000 51 573,699 -- --
Stock offering costs -- -- (57,375) -- --
Currency translation adjustment -- -- -- 367 --
Net loss from inception
through December 31, 1995 -- -- -- -- (503,384)
------- ------- ----------- ----------- -----------
Balance, December 31, 1995 681,000 681 515,694 367 (503,384)
Common stock issued
for cash at $11.25 per share 51,889 52 583,698 -- --
Common stock issued for
cash at $13.75 per share 72,727 73 999,927 -- --
Common stock issued for cash
at $10.00 per share 25,076 25 250,731 -- --
Stock offering costs -- -- (192,025) -- --
Additional shares issued under
recapitalization 8,511 8 (8) -- --
Currency translation adjustment -- -- -- (5,976) --
Net loss for the year
ended December 31, 1996 -- -- -- -- (1,732,866)
------- ------- ----------- ----------- -----------
Balance, December 31, 1996 839,203 $ 839 $ 2,158,017 $ (5,609) $(2,236,250)
======= ======= =========== =========== ===========
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Currency During the
Common Stock Paid-in Translation Development
Shares Amount Capital Adjustment Stage
------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 839,203 $ 839 $ 2,158,017 $(5,609) $(2,236,250)
Currency translation adjustment -- -- -- 5,609 --
Common stock issued for debt
at $.17 per share 1,800,000 1,800 298,200 -- --
Additional shares issued under
recapitalization 16,003 16 (16) -- --
Contribution of capital by
shareholder -- -- 158,264 -- --
Common Stock issued for
services valued at $.017 per share 42,800 43 7,083 -- --
Net loss for the year ended
December 31, 1997 -- -- -- -- (308,211)
--------- ------ ----------- ----- -----------
Balance, December 31, 1997 2,698,006 2,698 2,621,548 -- (2,544,461)
Common stock issued for debt
and interest at $1.37 per share 1,390,000 1,390 1,909,860 -- --
Common stock issued for
services valued at $1.37 per share 1,200,000 1,200 1,648,800 -- --
Common Stock issued for cash
and services valued at $.44 per
share 4,444,444 4,444 1,951,111 -- --
Common Stock issued for
services valued at $1.06 per share 24,000 24 25,464 -- --
Discount on debentures issued
below fair market value (Note 3) -- -- 137,980 -- --
Net loss for the year
ended December 31, 1998 -- -- -- -- (6,995,911)
--------- ------ ----------- ----- -----------
Balance, December 31, 1998 9,756,450 $9,756 $ 8,294,763 $ -- $(9,540,372)
========= ====== =========== ===== ===========
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Currency During the
Common Stock Paid-in Translation Development
Shares Amount Capital Adjustment Stage
------ ------ ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 9,756,450 $ 9,756 $ 8,294,763 $-- $ (9,540,372)
Common Stock issued for cash
and services valued at $.80 per
share 200,000 200 159,800 -- --
Common Stock issued for
services valued at $1.19 per share 250,000 250 296,500 -- --
Common Stock issued for
cash at $.81 per share 1,900,000 1,900 1,540,900 -- --
Discount on debentures issued
below fair market value Note 3 -- -- 121,390 -- --
Net loss for the year ended
December 31, 1999 -- -- -- -- (1,448,881)
---------- ------- ----------- --- ------------
Balance, December 31, 1999 12,106,450 $12,106 $10,413,353 $-- $(10,989,253)
========== ======= =========== === ============
</TABLE>
F-6
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
From
Inception on
For the Years Ended April 26, 1995,
December 31, Through
---------------------------- December 31,
1999 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,801,681) $(6,995,911) $(12,342,053)
Adjustments to reconcile net loss to net
cash used by operating activities:
Gain (loss) from discontinued operations -- -- (22,205)
Loss from equity subsidiary -- 120,935 375,001
Valuation reserve (Note 8) 150,000 300,000 450,000
Common stock issued for services and
interest 1,741,370 4,842,849 6,591,344
Bad debt expense 45,375 523,166 523,166
Issuance of debenture at less than fair
market value 121,390 137,980 259,370
Changes in operating assets and liabilities:
Increase in interest receivable (45,375) (13,166) (13,166)
Increase (decrease) in accrued expenses 42,555 18,123 102,961
Increase (decrease) in accounts payable
- related party 337,200 -- 337,200
----------- ----------- ------------
Net Cash Provided (Used) by Operating
Activities (409,166) (1,066,024) (3,738,382)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits for purchase of subsidiary (150,000) (300,000) (450,000)
Payments to equity investee -- -- (508,132)
Increase in notes receivable -- (510,000) (510,000)
----------- ----------- ------------
Net Cash Used by Investing Activities (150,000) (810,000) (1,468,132)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible debentures 220,000 1,301,000 1,521,000
Proceeds from issuance of stock 258,180 4,444 2,421,480
Repayment of payable - related party -- -- (74,555)
Proceeds from payable - related party -- 695,000 1,383,155
----------- ----------- ------------
Net Cash Provided by Financing Activities 478,180 2,000,444 5,251,080
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH (80,986) 124,420 44,566
CASH AT BEGINNING OF PERIOD 125,552 1,132 --
----------- ----------- ------------
CASH AT END OF PERIOD $ 44,566 $ 125,552 $ 44,566
=========== =========== ============
</TABLE>
F-7
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
Inception on
For the Years Ended April 26, 1995,
December 31, Through
------------------------- December 31,
1999 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
CASH PAID DURING THE YEAR FOR:
Interest $ 121,115 $ -- $ 121,115
Income taxes $ -- $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Common stock issued for debt $ -- $ 695,000 $ 995,000
Common stock issued for services $1,741,370 $3,626,599 $5,375,095
Convertible debentures issued below fair
market value $ 121,390 $ 137,980 $ 259,370
Common stock issued for interest expense $ -- $1,216,250 $1,216,250
</TABLE>
F-8
The accompanying notes are an integral part of these financial statements.
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Spectre Industries, Inc. (Spectre) was organized under the laws of the
State of Nevada on May 13, 1986. Spectre acquired its wholly-owned
subsidiaries Spectre Supersports, Ltd. and Spectre Cars UK, Ltd. (the
Subsidiaries) on April 26, 1995. The subsidiaries were put into
liquidation in 1997. The shareholders of the Subsidiaries controlled
Spectre after the acquisition. Accordingly, the transaction was accounted
for as a recapitalization of the Subsidiaries. The Company is accounted
for as a development stage enterprise. The Company plans to concentrate on
the development of sales of automotive after-market supplies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method
of accounting. The Company has elected a December 31 year end.
b. Basic Loss Per Share
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
--------------------------------------------------------------------------------------
Loss Shares Per Share Loss Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C>
$(2,801,681) 11,340,149 $(0.25) $(6,995,911) 7,902,611 $(0.89)
</TABLE>
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements. Fully diluted loss per share calculations are not
presented as any stock equivalents are antidilutive in nature.
c. Provision for Taxes
As of December 31, 1999, the Company had net operating loss carryforwards
of approximately $10,150,000 which will expire by 2019. No tax benefit has
been reported in the financial statements because the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of
the same amounts.
d. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-9
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Reverse Stock Split
On November 6, 1997, the Company effected a 1-for-5 stock split. All
references to common stock have been reflected retroactively back to
inception.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
g. Concentrations of Risk
Cash
----
At times the Company's funds exceed depository insurance limits in the
United States.
Notes Receivable
----------------
Credit losses have been provided for in the financial statements and are
based on management's expectations (Note 5).
h. Recent Accounting Pronouncements
In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value. Gains
or losses resulting from changes in the values those derivatives would be
accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management believes the adoption of this statement will have no material
impact on the Company's financial statements.
i. Revenue Recognition
The Company currently has no sources of revenues. Revenue recognition will
be determined when principal operations begin.
F-10
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 3 - CONVERTIBLE DEBENTURES
At December 31, 1999, the Company had the following convertible
debentures:
<TABLE>
<S> <C>
Ten (10) convertible debentures dated October 15, 1998, of amounts
from $30,000 to $340,000, bearing interest at 10% requiring
quarterly interest payments, due on October 15, 2001, convertible
into common stock at
$0.80 per share and unsecured. $980,000
Convertible debenture dated December 1, 1998, bearing interest at
10% requiring quarterly interest payments, due on December 1,
2000, convertible into common
stock at $0.80 per share and unsecured. 321,000
Six (6) convertible debentures dated January 29, 1999 for amounts
from $10,000 to $70,000, bearing interest at 10% requiring
quarterly interest payments, due on January 29, 2001. Convertible
into common stock at
$0.80 per share and unsecured. 170,000
Convertible debenture dated February 25, 1999 bearing interest at
10% requiring quarterly interest payments, due on February 25,
2001, convertible into common stock
at $0.80 per share and unsecured. 50,000
----------
1,521,000
Less current portion (321,000)
----------
Total Long-Term Convertible Debentures $1,200,000
==========
</TABLE>
Future maturities of the convertible debentures are as follows:
Year Ended
December 31, Amount
------------ -------------
2000 $ 321,000
2001 1,200,000
-------------
$ 1,521,000
=============
The Company recognized additional interest expense of $121,390 and
$137,980 for the years ended 1999 and 1998, respectively. This additional
expense was recognized to reflect the discount between the trading price
of the stock on the dates of the issuances of the convertible debentures
and conversion price.
F-11
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 4 - COMMON STOCK TRANSACTIONS
On May 10, 1999, the Company issued 1,900,000 shares of common stock at
$0.10 per share for cash consideration of $190,000. The Company recognized
an additional expense of $1,352,800 to reflect the discount from the
trading price of $0.81 per share.
On April 6, 1999, the Company issued 200,000 shares of common stock at
$0.80 per share for the consideration of cash and services valued at
$160,000.
On February 23, 1999, the Company issued 250,000 shares of common stock
for services valued at the trading price of $1.187 per share.
On December 16, 1998, the Company issued 24,000 shares of common stock for
services valued at the trading price of $1.06 per share.
On September 3, 1998, the Company issued 1,200,000 shares of common stock
for services valued at the trading price of $1.375 per share. The shares
were issued to a company controlled by a major shareholder of the Company.
On September 3, 1998, the Company issued 1,390,000 shares of common stock
for the conversion of $695,000 of debt. The Company recognized additional
interest expense of $1,216,250 to reflect the discount from the trading
price of $1.375 per share. These shares were issued to a major shareholder
of the Company.
On January 7, 1998, the Company issued 4,444,444 shares of common stock to
ten (10) shareholders for $4,444 of cash. Additionally, the Company
recognized $1,951,111 of additional expense to reflect the discount from
the trading price of $0.44 per share.
NOTE 5 - NOTE AND INTEREST RECEIVABLE
The Company had the following notes receivable at December 31, 1999:
<TABLE>
<S> <C>
Note receivable from DTI Technology, Inc. (DTI) dated July 21,
1998, bearing interest at 9.00%, due on July 31,
1999, and unsecured. $ 300,000
Note receivable from Dega Technology, Inc. (DEGA),
dated December 9, 1998, bearing interest at prime
plus 1% (8.75% at December 31, 1998), due on June 30,
1999, secured by assets of Dega. 210,000
------------
Total notes receivable 510,000
Less: allowance for bad debts (510,000)
------------
$ --
============
</TABLE>
F-12
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 5 - NOTE AND INTEREST RECEIVABLE (Continued)
The Company accrued interest of $45,375 on these notes during the year
ended December 31, 1999, accordingly, the total interest receivable due
from these notes at December 31, 1999 was $58,541.
On November 30, 1999, the Company filed a petition with the United States
Bankruptcy Court - Central District of California to force DEGA, dba DTI,
into Chapter 7 bankruptcy. Because of the doubtful nature of the
collection, the Company has established an allowance for the full amount
of the notes and interest receivable of $568,541.
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern that contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has incurred significant losses from its
inception through December 31, 1999. It has not established a source of
revenues to cover its operating costs and to allow it to continue as a
going concern. The Company plans to complete the purchase of approximately
50% of the net cash flow from Grant Automotive Group. Management believes
that this will enable the Company to concentrate on its new business plan
of developing an e-commerce website for the automotive after-market. In
the interim, management is seeking to raise capital through the issuance
of convertible debentures.
NOTE 7 - INVESTMENT IN EQUITY SUBSIDIARY
In 1997, the Company received a 25% interest in Spectre Holdings Limited
(SHL), a Channel Islands company. SHL owns 100% of Spectre Cars Limited, a
Channel Islands company. The Company received the interest for
transferring its knowledge and expertise in the automobile industry to
SHL. The investment is accounted for using the equity method of
accounting. In 1998, the investment was deemed to have no value because of
the recurring losses of SHL and the inability to sell the SHL shares.
Accordingly, the Company has recognized a loss from the equity subsidiary
of $120,935 for the year ended December 31, 1998.
NOTE 8 - VALUATION RESERVE
Through December 31, 1999, the Company had advanced an aggregate of
$500,000 to Grant Brother Sales, Limited ("GBS") in connection with the
purchase of Grant Automotive Group, Inc. ("GAG"). This agreement became
effective on January 1, 2000 (see Note 12). Accordingly, management
determined to record a valuation reserve for the $500,000 advanced to GBS
because of the limited operating history of GAG and doubts about the
recovery of future cash flows.
F-13
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 9 - WARRANTS
On September 31, 1998, the Company issued 200,000 warrants to a
corporation controlled by a related party that were exercisable at $1.50
per share. At the date of issue, the trading price of the Company's stock
was $1.375. Accordingly, no expense was recorded for the issuance of the
warrants. On December 31, 1999, these warrants expired unexercised.
NOTE 10 - LOSS FROM DISCONTINUED OPERATIONS
In early 1997, the former operating subsidiaries of the Company, Spectre
Supersports, Ltd. and Spectre Cars UK, Ltd. were put into liquidation.
Accordingly, all of the Company activity prior to then has been
reclassified as discontinued operations. The following is a summary of the
discontinued operations as required by APB 30.
From
Inception of the
Development
Stage on
April 26, 1995
Through
December 31,
1997
----------------
SALES $ 1,089,559
COST OF SALES 1,285,137
-----------
Gross Margin (195,578)
-----------
EXPENSES
Depreciation 41,977
Research and development 186,389
General and administrative 1,814,651
-----------
Total Expenses 2,043,017
-----------
Loss from Operations 2,238,595
-----------
OTHER INCOME
Interest income 2,345
-----------
Total Other Income 2,345
-----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY INCOME $ 2,236,250
-----------
F-14
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 10 - LOSS FROM DISCONTINUED OPERATIONS (Continued)
From
Inception of the
Development
Stage on
April 26, 1995
Through
December 31,
1997
----------------
EXTRAORDINARY INCOME
Gain on forgiveness of debt $ 47,005
-----------
Total Extraordinary Income 47,005
-----------
INCOME TAX EXPENSE --
-----------
NET INCOME (LOSS) $(2,189,245)
===========
No income tax benefit has been attributed to the loss from discontinued
operations.
NOTE 11 - ACCOUNTS PAYABLE - RELATED PARTIES
In 1999, a related party performed services which were valued at $337,200.
The Company issued 1,200,000 shares of Common Stock on January 14, 2000
for the conversion of this amount.
NOTE 12 - SUBSEQUENT EVENTS
On January 1, 2000, the Company issued 450,000 shares of common stock in
connection with the Management Services Agreement between the Company and
GBS. These shares will be valued at the trading price of $0.25 per share.
On January 14, 2000, the Company issued 1,210,000 shares of common stock
for services valued at $340,010 of which $337,200 was accrued at December
31, 1999. The shares have been valued at the trading price of $0.28 per
share.
In addition, on January 14, 2000, the Company authorized the issuance of
300,000 shares of common stock at an offering price of $0.20 per share for
a total consideration of $60,000.
On January 1, 2000, the Company entered into a share purchase agreement
with Grant Brothers Sales, Limited ("GBS") to acquire 100% of the issued
and outstanding shares of GBS's wholly-owned subsidiary Grant Automotive
Group, Inc. ("GAG"). GAG is a wholesale automotive business group
organized under the laws of Ontario, Canada. The Company gave $500,000
cash consideration in connection with the agreement.
F-15
<PAGE>
SPECTRE INDUSTRIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 12 - SUBSEQUENT EVENTS (Continued)
In conjunction with the purchase of GAG on January 1, 2000, the Company
also entered into a Management Services Agreement with GBS on January 1,
2000. This agreement dictates that GBS is to manage the operations of GAG
by providing personnel, office space, accounting services and other
similar services so that GAG can continue to operate the business and
maximize its benefits from operations. In consideration for these
services, GAG agrees to reimburse GBS for all of its costs associated
directly with its services provided under the agreement, as well as
provide GBS with a proportioned distribution of its net cash flows.
The distribution of the net cash flow of GAG between GAG and GBS has been
agreed upon as follows: The first $50,000 of the net cash flow of GAG for
any fiscal year is to be distributed to GAG. The second $100,000 of the
net cash flow of GAG is to be distributed to GBS. Any net cash flow of GAG
in excess of these yearly distributions is to be distributed 47.5% to GAG
and 52.5% to GBS, respectively.
In connection with this net cash flow distribution, GAG also holds the
option to purchase from GBS an increase in their net cash flow
distribution by paying GBS an approximate $500,000 (the actual amount
pending on the 1999 operating results of GAG). This option must be
exercised before January 1, 2005. If the option is exercised, the net cash
flow distribution (after the initial distributions of $50,000 and
$100,000, respectively) will change to 95% to GAG and 5% to GBS and will
become effective in the calendar year immediately following the year in
which the payment is made to GBS.
This Management Service Agreement became effective on January 1, 2000 and
will continue for five years. At the expiration of five years, the
agreement will automatically be renewed for successive one year periods
unless it is terminated by either GAG or GBS.
F-16
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ABERCROMBIE, INC.
KNOW ALL MENS BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under and by virtue of the
laws of the State of Nevada, and we do hereby state and clarify:
I
The name of the corporation is: Abercrombie, Inc.
II
The resident Agent of the corporation shall be Nancy Abercrombie, and the
location of the principal office of the corporation within the State of Nevada
shall be 2375 E. Tropicana, Suite 106, Las Vegas, Nevada 89119. Offices for the
transactions of any business for the corporation, and where the meetings of the
Board of Directors and of the stockholders may be held, may be established and
maintained in any other part of the State of Nevada, or in any other State,
territory or possession of the United States, or in a foreign country, as the
Board of Directors may from time to time determine.
III
This corporation is authorized to engage in any activity permitted by law.
IV
The total authorized capital stock for this corporation shall consist of Ten
Million (10,000,000) shares of common stock of a single class, each share having
par value of Twenty Five (0.0025) mills. All of the voting power of the capital
stock of this corporation shall reside in the common stock. No capital stock of
this corporation shall be subject to assessment.
V
The members of the governing board of this corporation shall be styled
directors, and pursuant to NRS 78.115, in cases where all the shares of the
corporation are owned beneficially and of record by either one or two
stockholders, then the number of directors may be less than three but not less
than the number of stockholders. The names and addresses of the persons who are
appointed to act as the first directors of this corporation are as follows:
1
<PAGE>
NAMES ADDRESSES
Nancy Abercrombie 3833 Cavalry Street
Las Vegas, Nevada 89121
Michael L. Summers 4543 Balfour Drive
Las Vegas, Nevada 89121
Thomas Burrows 4757 Koval, #1
Las Vegas, Nevada 89119
VI
This corporation is to have perpetual existence.
VII
The names and addresses of the incorporators of this corporation are as follows:
NAMES ADDRESSES
Nancy Abercrombie 3833 Cavalry Street
Las Vegas, Nevada 89121
Michael L. Summers 4543 Balfour Drive
Las Vegas, Nevada 89121
Thomas Burrows 457 Koval, #1
Las Vegas, Nevada 89119
VIII
Pursuant to authority granted by NRS 78.265, the shareholders shall have no
pre-emptive rights to acquire unissued shares, treasury shares or securities
convertible into such shares.
2
<PAGE>
IN WITNESS WHEREOF, THE UNDERSIGNED INCORPORATORS HAVE EXECUTED THESE ARTICLES
OF INCORPORATION OF ABERCROMBIE, INC.
On this 8th day of May, 1986.
/s/ Nancy Abercrombie
- -----------------------------------
Nancy Abercrombie
/s/ Michael L. Summers
- -----------------------------------
Michael L. Summers
/s/ Thomas Burrows
- -----------------------------------
Thomas Burrows
STATE OF NEVADA )
)ss
COUNTY OF CLARK )
Subscribed and sworn to before me this 8th day of May, 1986.
/s/ Patricia A. Hartley
- -----------------------------------
Notary Public in and for said County and State
3
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Abercrombie, Inc. File #3288-86
-----------------------------------------------------
We the undersigned Nancy Abercrombie, President and
- -----------------------------------------------------------------------------
President or Vice President
Michael D. Haynes, Secretary of Abercrombie, Inc.
- ---------------------------- -----------------
Secretary of Assistant Secretary Name of Corporation
do hereby certify:
That the board of Directors of said corporation at a meeting duly convened and
held on 24th day of November, 1993, adopted a resolution to amend the original
articles as follows:
Article IV is hereby amended to read as follows:
The total authorized capital stock shall consist of 50,000,000 shares of common
stock, $0.001 par value. All of the voting power of the capital stock of this
corporation shall reside in the common stock. No capital stock of this
corporation shall be subject to assessment.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 110,000: that the said change(s)
and amendment has been consented to and approved by majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to thereon.
/s/ Nancy Abercrombie, President
----------------------------------------
President or Vice President
/s/ Michael D. Haynes, Secretary
----------------------------------------
Secretary of Assistant Secretary
State of Nevada
Count of Clark
On 11-28-93 personally appeared before me, a Notary Public, , who
acknowledged that he/she executed the above document.
/s/ E.V. Stambro
----------------------------------------
Notary Public
1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Abercrombie, Inc.
----------------------------
Name of Corporation
We the undersigned Daniel P. Kesonen and
-------------------------------------------------
President or Vice President
Rene E. Kesonen of Abercrombie, Inc
- -------------------------------- --------------------------------
Secretary or Assistant Secretary Name of Corporation
Do hereby certify:
That the board of Directors of said corporation at a meeting duly convened and
held on the 1st day of June 1995, adopted a resolution to amend the original
articles as follows:
Article I is hereby amended to read as follows:
The name of the corporation is Spectre Motor Cars, Inc.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation are 2,200,000; that the said
change(s) and amendment has been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to thereon.
/s/ Daniel P. Kesonen
----------------------------------------
President or Vice President
/s/ Rene E. Kesonen
----------------------------------------
Secretary or Assistant Secretary
State of Nevada
County of Clark
June 5, 1999 personally appeared before me, a Notary Public, , who
acknowledged that he/she executed the above document.
/s/ Netta Girard
----------------------------------------
Notary Public
1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Spectre Motor Cars, Inc.
(the corporation)
We the undersigned, Daniel P. Kesonen (President) and Douglas Ansell
(Vice-President) of the Corporation do hereby certify:
That the board of Directors of the Corporation at a meeting duly convened
and held on the 5th day of October, 1997, adopted a resolution to amend
the original articles as follows:
Item I is hereby amended to read as follows:
"The name of the Corporation is (hereinafter known as the
corporation) is Spectre Industries, Inc."
Item IV is hereby amended to read as follows:
"The total authorized capital stock of the corporation shall consist of
One-Hundred-Million shares (100,000,000) shares of common stock of a
single class, each share having a par value of $0.001, all of which stock
shall be entitled to voting power. No capital stock of this corporation
shall be subject to assessment.
Additionally, the currently issued 13,490,014 shares are hereby reverse
split on a 5 for 1 basis making the currently issued and outstanding
shares of the corporation 2,698,002.8.
The number of shares of the Corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation are 13,490,014 that the
said change(s) and amendment has been consented to and approved by a
majority vote of the stockholders holding at least a majority of each
class of stock outstanding and entitled to vote thereon."
/s/ Daniel P. Kesonen /s/ Douglas Ansell
--------------------- ------------------
Daniel P. Kesonen Douglas Ansell
President Vice-President
State of Nevada }
} ss:
County of Clark }
The undersigned Notary Public certified, deposes and states that Daniel P.
Kesonen and Douglas Ansell, personally appeared before me and executed the
foregoing on behalf of the Corporation as its President and Vice-President
respectively, this 5th day of October 1997.
By: /s/ Bridget E. Richards
-----------------------------
Notary Public in and for said
County and State
1
EXHIBIT 3.4
BY-LAWS
OF
ABERCROMBIE, INC.
ARTICLE I. OFFICES
The principal office of the corporation in the State of Nevada shall be
located in the City of Las Vegas, County of Clark. The corporation may have such
other offices, either within or without the State of Nevada, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the 20th day in the month of May in each year, beginning with the year
1986, at the hour of 1:00 P.M., for the purpose of electing Directors and for
the transaction of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday in the State of
Nevada, such meeting shall be held on the next succeeding business day. If the
election of Directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than fifty-one per cent of all the
outstanding shares of the corporation entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada unless otherwise prescribed
by statute, as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any place either within
or without the State of Nevada, unless otherwise prescribed by statute, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of Nevada.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and in case of special meeting, the purpose or purposes for
which the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten nor more than thirty days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
or the Secretary, or the persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United
1
<PAGE>
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, ten days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than ten days and, in case of a meeting of shareholders, is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof. Such list shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by shareholder or his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
one month from the date of its execution, unless otherwise provided in the
proxy.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
2
<PAGE>
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledges, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided by
law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of directors of
the corporation shall be no less than one. Each director shall hold office until
the next annual meeting of shareholders and until his successor shall have been
elected and qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call
3
<PAGE>
special meetings of the Board of Directors may fix the place for holding any
special meeting of the Board of Directors called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at least
ten days previously thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. Quorum. A majority of the number of directors fixed by Section
2 of this Article III shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. Action Without a Meeting. Any action that may be taken by the
Board of Directors at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be signed before such
action by all of the Directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
Directors by the shareholders.
SECTION 10. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
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ARTICLE IV. OFFICERS
SECTION 1. Number. The officers of the corporation shall be a President, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors.
SECTION 2. Election and Term of Office. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgement, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. Vice-President. In the absence of the president or in the event
of his death, inability or refusal to act, the Vice-President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice-President shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal
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of the corporation is affixed to all documents the execution of which on behalf
of the corporation under its seal is duly authorized; (d) keep a register of the
post office addresses of each shareholder which shall be furnished to the
Secretary by such shareholder; (e) sign with the President, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of these By-Laws; and (c) in general perform
all of the duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. Checks, drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the
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Board of Directors so to do, and sealed with the corporate seal. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity to
the corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of January
and end on the 31st day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law and its articles of incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE X. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these By-Laws or under the provisions of the articles of incorporation or under
the provisions of the Business Corporation Act, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
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CERTIFICATE OF PRESIDENT
THIS IS TO CERTIFY that I am the duly elected, qualified and acting President of
ABERCROMBIE, INC.
and that the above and foregoing by-laws constituting a true original copy were
duly adopted as the by-laws of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand.
DATED: May 16, 1986
/s/ Nancy Abercrombie
- -----------------------------------
Nancy Abercrombie, President
EXHIBIT 4.1
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE NOTE DUE DECEMBER 1, 2000
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD TO ANY PERSON EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT: (1) IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
(A) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR ANOTHER THEN AVAILABLE EXEMPTION UNDER THE
SECURITIES ACT AND STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR
(D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH TO THE COMPANY OR THE
TRANSFER AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS, LEGAL OPINIONS, OR
OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
Certificate No. U.S. $___________
FOR VALUE RECEIVED, SPECTRE INDUSTRIES, INC., a corporation organized under the
laws of the State of Nevada (the "Company"), hereby promises to pay to_________,
a corporation organized under the laws of ________ and having an address at
_________________ or registered assigns, the principal sum of __________________
($____________) on December 1, 2000, and to pay interest thereon in the manner
set forth herein on such date at the rate of 10% per annum, payable annually on
December 1, commencing on December 1, 1999 (the "Interest Payment Date"), until
the principal hereof is paid or made available for payment in the manner set
forth herein.
1. ISSUANCE. This Note is duly authorized by the Company and designated
as its 10% Convertible Note, dated December 1, 1998.
2. INTEREST.
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(a) The Company promises to pay interest on the principal amount of this
Note at the rate of 10% per annum in cash or Common Stock having a Fair Market
Value (as determined pursuant to section 2(b) hereof) equal to the interest
payment on such Interest Payment Date. Interest on this Note will accrue from
the date the funds shall have been received by the Company, as confirmed by
written notice to the Holder (as defined) until payment in full of the principal
amount hereof has been made or duly provided for and will be based on the actual
number of days and months elapsed and computed on a 360-day year consisting of
twelve 30-day months. Interest shall be payable in arrears on the earlier to
occur of (i) the date of conversion to Common Stock (as defined in Section 4
below) as provided herein of all or a portion of this Note (if this Note shall
be converted in part, then interest only with respect to the portion of this
Note so converted shall be payable at such time) and (ii) with respect to any
unconverted portion of this Note, each Interest Payment Date on or prior to
December 1, 2000 (the "Maturity Date"). Interest on this Note is payable to the
holder of this Note registered on the books of the Company (the "Holder") at the
option of the Company in the form of either such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
(b) The "Fair Market Value" of a share of Common Stock shall be determined
as follows:
(1) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or
listed for trading on the NASDAQ system, the Fair Market Value shall
be the last reported sale price of the Common Stock on such exchange
or system on the last business day prior to the Interest Payment
Date of this Note or, if no such sale is make on such day, the
average closing bid and asked prices for such day on such exchange
or system; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the Fair Market Value shall be the mean of the
last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of
the Interest Payment Date; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
Fair Market Value shall be an amount not less than the book value
thereof as at the end of the most recent fiscal year of the Company
ending prior to the Interest Payment Date, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company.
3. PRINCIPAL. On the Maturity Date, upon surrender of this Note by the
Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts or in shares of Common Stock having a Fair Market Value equal to such
outstanding principal amount, together with accrued interest on such outstanding
principal amount as set forth in Section 2 above.
4. CONVERSION.
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(a) Conversion Right; Price. Subject to this Section 4,
(i) the Holder of this Note has the right to convert this Note, in
whole or in part in increments of $1,000 (inclusive of accrued interest
with respect thereto), into shares of common stock, par value .0001 per
share, of the Company (the "Common Stock") at any time prior to the
Maturity Date.
(ii) the Company has the right to force the conversion of this Note,
in whole or in part in increments of $1,000 (inclusive of accrued interest
with respect thereto), into Common Stock at any time after April 1, 1999
upon giving the Holder thirty (30) days prior notice in writing if the
closing price of the Common Stock has been at least $1.25 for twenty (20)
consecutive trading days during the three month period immediately
preceding such notice.
The price at which this Note (or any portion thereof) may be so converted
into shares of Common Stock (the "Conversion Price") shall be $.80. In
lieu of any fractional share of Common Stock to which the Holder would
otherwise be entitled upon conversion of this Note (or portion thereof),
the number of shares of Common Stock issuable upon conversion of this Note
shall be rounded up to the nearest whole number. In the case of a dispute
as to the calculation of the Conversion Price, the Holder's calculation
shall be deemed conclusive absent manifest error.
(b) Mechanics of Conversion. (i) To convert this Note (or a portion
thereof) the Holder must (i) complete and sign the Notice of Conversion set
forth as Exhibit A to this Note (the "Notice of Conversion") and deliver the
Notice of Conversion to the Company as herein provided and (ii) on or prior to
the date on which delivery of Common Stock is required to be made hereunder, (x)
deliver this Note, duly endorsed, to the Company and (y) pay any transfer or
similar tax if required. The Holder shall surrender this Note and the Notice of
Conversion to the Company (with an advance copy by facsimile of the Notice of
Conversion). The date on which Notice of Conversion is given (the "Date of
Conversion") shall be deemed to be the date of receipt by the Company of the
facsimile of the Notice of Conversion, provided that this Note is received by
the Company within five (5) business days thereafter. The Company shall not be
obligated to cause the transfer agent for the Common Stock (the "Transfer
Agent") to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless either this Note has been received by the Company
or, if this Note has been lost, stolen or destroyed, the Holder executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with this Note.
(ii) The Company shall cause the Transfer Agent to issue and deliver
within ten (10) business days after the actual delivery to the Company of this
Note to the Holder of this Note at the address of the Holder on the books of the
Company or as otherwise directed pursuant to the Notice of Conversion, a
certificate or certificates for the number of shares of Common Stock to which
such Holder shall be entitled as aforesaid. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. Notwithstanding that the Holder is
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required to deliver this Note, duly endorsed, within five (5) business days
after the Date of Conversion, if this Note is not received by the Company within
ten (10) business days after the Date of Conversion, the Notice of Conversion
shall become null and void.
(iii) Following conversion of this Note, or a portion thereof, the
principal amount so converted, will be deemed paid in full and satisfied, and
such principal amount will no longer be outstanding. In the event this Note is
converted in part, the Company will issue to the Holder a new Note in a
principal amount equal to the portion of this Note not converted.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock or shares of Common Stock held in treasury, or both, solely for
the purpose of effecting the conversion of this Note, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of this Note and all other securities of the Company convertible or exchangeable
into Common Stock.
(d) Adjustment to Conversion Price. (i) If, prior to the conversion of the
entire principal amount of this Note, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend of shares of Common Stock or
other shares of capital stock, reclassification or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares or other similar event, the Conversion Price shall be
proportionately increased, in each case, such that the Holder of this Note will
have the right to receive upon conversion of this Note the number of shares of
Common Stock (or other shares of Capital Stock) of the Company (notwithstanding
the limitation set forth in the third paragraph of Section 4(a)) which such
Holder would have been entitled to receive had the Holder converted this Note
immediately prior to such action.
(ii) If, prior to the conversion of the entire principal amount of this
Note, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event (a "Conversion
Reclassification Event"), as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
Company or the same or another class or classes of stock or securities of the
Company or another entity, then the Holder of this Note shall thereafter have
the right to receive upon conversion of this Note, upon the basis and the terms
and conditions specified herein, such shares of stock and/or securities as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore receivable upon the conversion of this Note
(irrespective of the limitations set forth in Section 4(a)) had such Conversion
Reclassification Event not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder
of this Note such that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of this Note) shall thereafter be applicable, as nearly
as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the conversion of this Note. The Company shall not
effect any Conversion Reclassification Event unless the resulting successor or
acquiring entity (if not the Company) assumes the obligation to deliver to the
Holder of this Note such shares of stock and/or securities as the Holder of this
Note is entitled to receive upon conversion in accordance with the foregoing.
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(iv) In the event that the Company shall at any time after the date of
this Agreement (i) issue shares of Common Stock without consideration (other
than in the form of a dividend) or at a price per share less than the Conversion
Price, or (ii) issue options, rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) without consideration
or at a price per share (or having a conversion price per share, if a security
convertible into Common Stock) less than the Conversion Price, the Conversion
Price to be in effect after the date of such issuance shall be adjusted by
multiplying the Conversion Price in effect immediately prior to the date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of such issuance plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be issued or the aggregate initial conversion price of the
convertible securities so to be issued would purchase at the Conversion Price
immediately prior to such issuance and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of such issuance plus
the number of additional shares of Common Stock to be issued (or into which the
convertible securities so to be issued are initially convertible). In case the
subscription price for such securities may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive. Such adjustment shall be made
successively whenever the date of such issuance is fixed and, in the event that
such shares or option, rights or warrants (or portions thereof) expire without
being issued, the Conversion Price shall again be adjusted to reflect such
occurrence.
(v) If any adjustment under this Section 4(d) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
5. REDEMPTION. The Note may be redeemed in whole or in part by the Company
100% of the principal plus accrued interest through and including the date of
redemption at any time by giving the Holder at least thirty (30) days prior
notice in writing. It being understood that the Holder's conversion right
pursuant to Section 4 hereof shall remain in full force and effect until the
fifth business day immediately preceding the effective date of such redemption.
6. SUBORDINATION.
(a) The Company, for itself, its successors and assigns, covenants and
agrees, and the Holder of this Note, by acceptance hereof, covenants and agrees,
that payment of the principal of and interest on this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Indebtedness. "Senior
Indebtedness" means the principal of, premium, if any, and unpaid interest on
(a) indebtedness of the Company (including indebtedness of others guaranteed by
the Company), other than this Note, whether outstanding on the date of original
issuance of this Note or hereafter created, incurred, assumed, or guaranteed,
(i) for money owing to banks, (ii) for money borrowed from other than banks or
(iii) arising under a lease of property, equipment or other assets, which
indebtedness, pursuant to generally accepted accounting principles then in
effect, is classified upon
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the balance sheet of the Company as a liability of the Company, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such indebtedness is not superior in right of
payment to this Note, and (b) renewals, extensions, modifications and refundings
of any such indebtedness.
(b) Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise the holders of all Senior Indebtedness shall be
entitled to receive payment in full of the principal thereof, premium, if any,
and the interest due thereon before the Holder of this Note is entitled to
receive any payment of principal or interest on this Note; and in the event
that, notwithstanding the foregoing, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
shall be received by the Holder of this Note before all Senior Indebtedness is
paid in full, such payment or distribution shall be paid over to the holders of
such Senior Indebtedness or their representative or to the trustee under any
indenture or agreement under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably as aforesaid, for application to the
payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
(c) Subject to the payment in full of all Senior Indebtedness, the Holder
of this Note shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of the Company applicable to
Senior Indebtedness until the principal of and interest on this Note shall be
paid in full and no such payments or distributions to the Holder of this Note of
cash, property or securities otherwise distributable to the Senior Indebtedness
shall, as between the Company, its creditors other than the holders of Senior
Indebtedness, and the Holder of this Note, be deemed to be a payment by the
Company to or on account of this Note. It is understood that the provisions of
this Section 5 are and are intended solely for the purpose of defining the
relative rights of the Holder of this Note and the holders of Senior
Indebtedness, on the other hand. Nothing contained in this Note is intended to,
or shall, impair, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the Holder of this Note, the obligation of the
Company, which is unconditional and absolute, to pay to the Holder of this Note
principal of and interest on this Note as and when the same shall become due and
payable in accordance with its terms, or to affect the relative rights of the
Holder of this Note and creditors of the Company other than the holders of
Senior Indebtedness, nor shall anything in this Note prevent the Holder of this
Note from exercising all remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if any, under this Section 5 of
the holders of Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
(d) If the Holder of this Note does not file a proper claim or proof of
debt in the form required in any proceeding referred to above prior to 30 days
before the expiration of the time to file such claim in such proceeding, then
the holder of any Senior Indebtedness is hereby authorized, and has the right,
to file an appropriate claim or claims for or on behalf of the Holder.
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(e) The Holder of this Note by its acceptance hereof agrees to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Section 5.
7. REGISTERED HOLDER. The Company may for all purposes treat the
registered holders on its books and records of this Note as the Holder.
8. DENOMINATIONS. Notes (and any Note issued in exchange, upon transfer or
upon conversion) may be issued in a minimum principal amount of $10,000 (or such
lesser amount upon a conversion in part of a Note provided such lesser amount
represents such Holder's entire holding of Notes).
9. EVENTS OF DEFAULT. -
(a) An "Event of Default" under this Note occurs if:
(i) the Company defaults in effecting a conversion of this Note in
accordance with the provisions hereof and such default continues for a
period of 10 business days;
(ii) the Company defaults in the payment of the principal of or
interest on this Note when the same becomes due and payable and, in the
case of a default in any interest payment, the same continues for a period
of 30 days;
(iii) the Company or any subsidiary pursuant to or within the
meaning of any federal or state bankruptcy, insolvency or other law for
the relief of debtors ("Bankruptcy Law"):
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law
(a "Custodian") of it or for any substantial part of its property;
or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to
insolvency; a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (I) is for relief against the
Company or any subsidiary in an involuntary case or proceeding; (II)
appoints a Custodian of the Company or any subsidiary or for any
substantial part of its property; or (III) orders the winding up or
liquidation of the Company or any subsidiary; or similar relief is
granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; or
(iv) any final judgment or decree for the payment of money in excess
of $1,000,000 (to the extent not covered by insurance) is rendered against
the Company or any subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by
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any creditor upon such judgment or decree or (B) there is a period of 60
days following such judgment during which such judgment or decree is not
discharged, waived or the execution thereof stayed and, in the case of
(B), such default continues for 10 days after the notice specified below.
The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is 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. A
default under clause (iii) or (iv) above is not an Event of Default until the
Holder of this Note notifies the Company of such default and the Company does
not cure such default within the time specified after receipt of such notice.
Such notice must specify the default, demand that it be remedied and state that
such notice is a "Notice of Default". Upon receipt of a Notice of Default, the
Company shall deliver to the Holder of this Note, within 30 days, written notice
of the status of such Event of Default and what action the Company is taking or
proposes to take with respect thereto.
(b) If an Event of Default (other than an Event of Default specified in
clauses (iii) above) occurs and is continuing, the Holder of this Note may
declare the principal of and accrued interest on this Note to be immediately due
and payable and upon such declaration, such principal and interest shall be due
and payable immediately. If an Event of Default specified in clause (iii) above
occurs, the principal of and interest on this Note shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Holder of this Note.
10. NO AMENDMENT. No provision of this Note may be amended, altered or
modified without the written agreement of the Holder and the Company.
11. NO VOTING RIGHTS. This Note shall not entitle the Holder hereof 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 attend any
meetings of stockholders or any other proceedings of the Company.
12. LOST OR DESTROYED NOTE. If this Note shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership thereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. The Holder of this Note, by
acceptance hereof, agrees that it will not offer, sell or otherwise dispose of
this Note or the shares of Common Stock issuable upon conversion hereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended (the "Securities Act"), including Regulation S promulgated
under the Securities Act, or any applicable state blue sky laws relating to the
sale of securities and the Holder agrees to provide the Company with such
documentation as the Company shall deem necessary in accordance with this Note
and the Securities Purchase
8
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Agreement to demonstrate that such offer, sale or disposition complies with
applicable securities laws.
14. ASSIGNMENT AND TRANSFER. Prior to effecting any assignment or transfer
of this Note, the Holder shall have delivered to the Company a completed
Certificate of Transfer, substantially in the form of Exhibit B hereto, and, if
required, a Seller Representation Letter, substantially in the form of Exhibit C
hereto. The Company shall not be required to register the transfer of any Note
unless and until it is in possession of such completed Certificate of Transfer
and, if required, Seller Representation Letter, and any assignment or transfer
of this Note not made in accordance with the terms hereof shall be null and void
and of no force or effect.
15. GOVERNING LAW. This Note shall be governed by, enforced under and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
16. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the City of
New York.
17. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given as provided herein or delivered against receipt
if to (i) the Company, having an address c/o Wuersch & Gering LLP, 11 Hanover
Square, 21st Floor, New York, NY 10005; facsimile no.: 212-509-9559, Attention:
Chief Executive Officer and (ii) the Holder of this Note, to such Holder at its
last address as shown on the Note register (or to such other address as any such
party shall have furnished to the other in writing from time to time). Except as
otherwise set forth herein, any notice or other communication mailed or
otherwise delivered shall be deemed given at the time of receipt thereof.
18. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder hereof to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
19. UNENFORCEABLE PROVISIONS. If any provision of this Note is invalid,
illegal or unenforceable, the remaining provisions of this Note shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
[signature page to follow]
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: December 1, 1998
SPECTRE INDUSTRIES, INC.
By:
Name:
Title:
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ASSIGNMENT:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
and irrevocably appoint _________________________________ as agent to transfer
this Note on the books of the Company. The agent may substitute another to act
for him.
Date:______________________________
___________________________________
(Sign exactly as your name appears on the face of this Note)
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EXHIBIT A
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE NOTES DUE DECEMBER 1, 2000
Notice of Conversion
(To be executed by the Holder in order to convert the Note or portion thereof)
The undersigned hereby irrevocably elects to convert (the entire principal
amount) ($____________ principal amount) of Note No.____ into shares of Common
Stock, $.0001 par value (the "Common Stock"), of Spectre Industries, Inc. (the
"Company") as of the Date of Conversion (which shall be the date of receipt by
facsimile by the Company of this Notice of Conversion). If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates as reasonably requested by the Company or its Transfer Agent.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Note shall be made in compliance with, pursuant to an
exemption from registration under the Securities Act. The undersigned represents
and warrants that it has made and will make any filings with the Securities and
Exchange Commission as may be required to be made by it from time to time.
If the stock certificate is to be made out in another person's name, fill in the
form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's U.S. social security or tax identification number, if any)
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Conversion calculation:
Date of Conversion: ---------------------------------
Applicable Conversion Price: ---------------------------------
Total number of shares: ---------------------------------
Accrued Interest: ---------------------------------
Name of Holder: ---------------------------------
By:________________________________
Name:
Title:
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EXHIBIT B
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE NOTES DUE DECEMBER 1, 2000
Certificate of Transfer
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Certificate of Transfer in connection with
the proposed transfer of Certificates No. ______________________________________
of the 10% Convertible Notes due December 1, 2000 (the "Notes") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Note, the
shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Notes are convertible. For purposes of this letter, the
term "Securities" shall mean the Notes or the Shares, as the case may be, that
are the subject of such proposed transfer.
The undersigned hereby confirms that:
(i) The undersigned is
CHECK ONE BOX BELOW
|_| (a) not a U.S. person within the meaning of Regulation S under the
Securities Act of 1933, as amended ("Regulation S") and the transfer of
the Securities has occurred outside of the United States in accordance
with the requirements of Regulation S; or
|_| (b) the undersigned is an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), an "Accredited Investor");
(ii) (A) the Securities have been acquired by the undersigned for the
undersigned's own account or for the account of one or more other Accredited
Investors for each of which the undersigned exercises sole investment discretion
or (B) the undersigned is a "bank", within the meaning of Section 3(a)(2) of the
Securities Act, or a "savings and loan association" or other institution
described in Section 3(a)(5)(A) of the Securities Act that is acquiring the
Securities as fiduciary for the account of one or more institutions for which
the undersigned exercises sole investment discretion;
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(iii) the undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of purchasing the Securities;
(iv) the undersigned is not acquiring the Securities with a view to the
distribution thereof or with any present intention of offering or reselling the
Securities, except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the undersigned is
acting as fiduciary shall remain at all times within its control; and
(v) all of the representations and warranties contained in that certain
Subscription Agreement between the Company and the original holder of the Notes,
a copy of which has heretofore been delivered or made available to the
undersigned (the "Subscription Agreement") are true and correct with respect to
the undersigned as of the date hereof and the date of transfer of the
Securities.
The undersigned agrees to be bound by all of the terms and conditions of the
Subscription Agreement.
The undersigned understands that the proposed transfer of the Securities does
not involve any public offering within the United States within the meaning of
the Securities Act and that such proposed transfer of the Securities has not
been registered under the Securities Act or any applicable state securities
laws, and the undersigned agrees, on its own behalf and on behalf of each
account for which the undersigned acquires any Securities, that such Securities
may be resold or otherwise transferred only (a) to the Company or any subsidiary
thereof, (b) inside the United States to an Institutional Accredited Investor
that, prior to such transfer furnishes to the Company a signed letter containing
the same representations and agreements relating to the restrictions on transfer
of such Securities set forth herein, (c) outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (d)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if applicable) or (e) pursuant to a registration statement which
has been declared effective under the Securities Act. The undersigned agrees
that any such transfer of Securities referred to in this paragraph shall be in
accordance with applicable securities laws of any State of the United States or
any other applicable jurisdiction and in accordance with the legends set forth
on the Securities. The undersigned further agrees to provide any person
purchasing any of the Securities from the undersigned a notice advising such
purchaser that resales of such Securities are restricted as stated herein. The
undersigned understands that the registrar and transfer agent for the Securities
(which in the case of the Notes shall be the Company) will not be required to
accept for registration or transfer any Securities, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. The undersigned further understands that any Securities
will be in the form of definitive physical certificates and that such
certificates will bear a legend or legends (unless the sale of the Securities
has been registered under the Securities Act) reflecting the substance of this
paragraph.
The undersigned acknowledges that the Company, others and you will rely upon the
undersigned's confirmations, acknowledgments and agreements set forth herein,
and the undersigned agrees to notify you promptly in writing if any of its
representations or warranties herein ceases to be accurate and complete.
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IN WITNESS WHEREOF, the undersigned has duly executed, or caused its duly
appointed representative to execute this Certificate of Transfer on the date
specified below.
___________________________________
(NAME OF TRANSFEREE)
By:________________________________
Name:______________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
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Exhibit C
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE NOTES DUE DECEMBER 1, 2000
Seller Representation Letter
(required only for resales into the United States)
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Seller Representation Letter in connection
with the proposed transfer of Certificates No.__________________________________
__________________________________________________________ of the 10%
Convertible Notes due December 1, 2000 (the "Notes") of Spectre Industries, Inc.
(the "Company") or, prior to the registration thereof under the United States
Securities Act of 1933 pursuant to that certain Registration Rights Agreement
between the Company and the initial holder of the Note, the shares of Common
Stock, par value $.0001 per share (the "Shares"), of the Company into which such
Notes are convertible. For purposes of this letter, the term "Securities" shall
mean the Notes or the Shares, as the case may be, that are the subject of such
proposed transfer.
In order to effect the transfer of the Securities by the undersigned (the
"Transferor") without registration under the U.S. Securities Act of 1933, as
amended (the "Securities Act") and to have the legend removed from the
Securities, the Transferor represents, warrants and acknowledges to the Company
that:
1. the Transferor has not been engaged as a distributor or dealer by the Company
or anyone else, and is not receiving a selling commission fee or other
remuneration, with respect to the Securities Purchase Agreement pursuant to
which the Notes were originally issued and sold (the "Securities Purchase
Agreement") or otherwise in connection with any purchase and/or sale of the
Securities;
2. neither the Transferor nor any person acting for the Transferor has conducted
any general solicitation relating to the offer and sale of the Securities in the
United States
3. the Transferor understands that the transfer of the Securities to the
Purchaser on the books of the Company is to be made in reliance on the specific
exemptions from the registration requirements of the United States federal
securities laws and any applicable state securities laws ("State Acts")
specified in the attachment hereto and that the Company is relying upon the
truth and accuracy of, and the Transferor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Transferor to sell, transfer or otherwise dispose of the
Securities;
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4. the Transferor is not transferring the Securities to settle any put option,
short position or other similar instrument or position with respect to the
Shares or securities of the same class as the Shares;
5. assuming that the Notes were originally issued in compliance with Regulation
S under the Securities Act, upon consultation with counsel, the Transferor
believes that the sale, transfer or other disposition of the Securities in
respect of which this letter is being provided is not in violation of the
Securities Act, the U.S. Securities Exchange Act of 1934, as amended, any
applicable State Acts or the rules and regulations of the U.S. Securities
Exchange Commission and any state securities commissions promulgated under any
of the foregoing; and
6. the representations and warranties made by the Transferor to the Company at
the time that the Transferor acquired the Securities are true and correct as of
the date hereof and as of the effective date of the transfer.
Transferor:
___________________________________
Dated:_____________________________
By:________________________________
Name:
Title:
EXHIBIT 4.2
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE JANUARY 29, 2001
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT (A) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (B) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR ANOTHER THEN-AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND
STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR (D) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER).
Certificate No. U.S. $___________
FOR VALUE RECEIVED, SPECTRE INDUSTRIES, INC., a corporation organized under the
laws of the State of Nevada (the "Company"), hereby promises to pay to _________
__________, or registered assigns, the principal sum of _____________________
($____________) on January 29, 2001, and to pay interest thereon in the manner
set forth herein from October 15, 2001 at the rate of 10% per annum, payable
semi-annually on July 29 and January 29, commencing on July 29, 1999 (each such
date, an "Interest Payment Date"), until the principal hereof is paid or made
available for payment in the manner set forth herein.
1. ISSUANCE. This Debenture is one of a duly authorized issue of
Debentures of the Company designated as its 10% Convertible Debentures, dated
January 29, 1999 in an aggregate principal amount of up to $ .
2. INTEREST.
(a) Interest Rate; Payment. The Company promises to pay interest on the
principal amount of this Debenture at the rate of 10% per annum. Interest on
this Debenture will accrue from the date the funds shall have been received by
the Company, as confirmed by written notice to the Holder (as defined) until
payment in full of the principal amount hereof has been made or duly provided
for and will be based on the actual number of days and months elapsed and
computed on a 360-day year consisting of twelve 30-day months. Interest shall be
payable in arrears on the earlier to occur of (i) the date of conversion to
Common Stock (as defined in Section 4 below) as provided herein of all or a
portion of this Debenture (if this Debenture shall be converted in part, then
interest only with respect to the portion of this Debenture so converted shall
be payable at such time) and (ii), with respect to any unconverted portion of
this Debenture, each Interest Payment Date on or prior to January 29, 2001 (the
"Maturity Date"). Interest on this Debenture is payable to
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the holder of this Debenture registered on the books of the Company (the
"Holder") at the option of the Company in the form of either such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
(b) Interest Reserve. The Company shall pay 10% of the principal amount of
this Debenture into a separate interest reserve account established in the name
of the Company with a reputable banking institution in New York City. The
Company shall keep in such account funds in an amount equal to 10% of the
unconverted principal amount of this Debenture at all times on or prior to July
29, 1999, and funds in an amount equal to 5% of the unconverted principal amount
of this Debenture at all times on or prior to January 29, 2000. Thereafter, the
Company shall no longer be required to keep any funds in such account. The funds
in such account may be invested in interest bearing securities issued by the
United States of America or any political subdivision thereof, a money market or
similar account or in comparable securities or mutual funds.
3. PRINCIPAL. On the Maturity Date, upon surrender of this Debenture by
the Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof (1) in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts or (2) in shares of common stock, par value $.0001 per share, of
the Company (the "Common Stock"), valued at the lower of (x) $.80 per share or
(y) the average closing price per share of Common Stock on the stock exchange or
automated quotation system on which the Common Stock is then listed or quoted,
as the case may be, and, if the Common Stock is listed or quoted on more than
one such exchange or automated quotation system, on such exchange or automated
quotation system as may be selected by the Board of Directors of the Company for
the purpose of establishing such average price, on the twenty (20) trading days
immediately preceding the payment date, in each case together with accrued
interest on such outstanding principal amount as set forth in Section 2.
4. CONVERSION.
(a) Conversion Right; Price. Subject to this Section 4,
(i) the Holder of this Debenture has the right to convert this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into shares of Common Stock at any
time prior to the Maturity Date
(ii) the Company has the right to force the conversion of this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into Common Stock at any time on
or after July 29, 2000 upon giving the Holder thirty (30) days prior
notice in writing if the closing price of the Common Stock has been at
least $1.25 for twenty (20) consecutive trading days during the three
month period immediately preceding such notice.
The price at which this Debenture (or any portion thereof) may be so
converted into shares of Common Stock (the "Conversion Price") shall be
$.80. In lieu of any fractional share of Common Stock to which the Holder
would otherwise be entitled upon conversion of this Debenture (or portion
thereof), the number of shares of Common Stock issuable upon
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conversion of this Debenture shall be rounded up to the nearest whole
number. In the case of a dispute as to the calculation of the Conversion
Price, the Holder's calculation shall be deemed conclusive absent manifest
error.
(b) Mechanics of Conversion. (i) To convert this Debenture (or a portion
thereof) the Holder must (i) complete and sign the Notice of Conversion set
forth as Exhibit A to this Debenture (the "Notice of Conversion") and deliver
the Notice of Conversion to the Company as herein provided and (ii) on or prior
to the date on which delivery of Common Stock is required to be made hereunder,
(x) deliver this Debenture, duly endorsed, to the Company and (y) pay any
transfer or similar tax if required. The Holder shall surrender this Debenture
and the Notice of Conversion to the Company (with an advance copy by facsimile
of the Notice of Conversion). The date on which Notice of Conversion is given
(the "Date of Conversion") shall be deemed to be the date of receipt by the
Company of the facsimile of the Notice of Conversion, provided that this
Debenture is received by the Company within five (5) business days thereafter.
The Company shall not be obligated to cause the transfer agent for the Common
Stock (the "Transfer Agent") to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless either this Debenture has been
received by the Company or, if this Debenture has been lost, stolen or
destroyed, the Holder executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with this
Debenture.
(ii) The Company shall cause the Transfer Agent to issue and deliver
within ten (10) business days after the actual delivery to the Company of this
Debenture to the Holder of this Debenture at the address of the Holder on the
books of the Company or as otherwise directed pursuant to the Notice of
Conversion, a certificate or certificates for the number of shares of Common
Stock to which such Holder shall be entitled as aforesaid. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. Notwithstanding that the Holder is required to
deliver this Debenture, duly endorsed, within five (5) business days after the
Date of Conversion, if this Debenture is not received by the Company within ten
(10) business days after the Date of Conversion, the Notice of Conversion shall
become null and void.
(iii) Following conversion of this Debenture, or a portion thereof, the
principal amount so converted, will be deemed paid in full and satisfied, and
such principal amount will no longer be outstanding. In the event this Debenture
is converted in part, the Company will issue to the Holder a new Debenture in a
principal amount equal to the portion of this Debenture not converted.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock or shares of Common Stock held in treasury, or both, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of this Debenture and all other securities of the Company convertible
or exchangeable into Common Stock.
(d) Adjustment to Conversion Price. (i) If, prior to the conversion of the
entire principal amount of this Debenture, the number of outstanding shares of
Common Stock is increased by a
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stock split, stock dividend of shares of Common Stock or other shares of capital
stock, reclassification or other similar event, the Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a combination or reclassification of shares or other similar
event, the Conversion Price shall be proportionately increased, in each case,
such that the Holder of this Debenture will have the right to receive upon
conversion of this Debenture the number of shares of Common Stock (or other
shares of Capital Stock) of the Company (notwithstanding the limitation set
forth in the third paragraph of Section 4(a)) which such Holder would have been
entitled to receive had the Holder converted this Debenture immediately prior to
such action.
(ii) If, prior to the conversion of the entire principal amount of this
Debenture, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event (a "Conversion
Reclassification Event"), as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
Company or the same or another class or classes of stock or securities of the
Company or another entity, then the Holder of this Debenture shall thereafter
have the right to receive upon conversion of this Debenture, upon the basis and
the terms and conditions specified herein, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore receivable upon the
conversion of this Debenture (irrespective of the limitations set forth in
Section 4(a)) had such Conversion Reclassification Event not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the Holder of this Debenture such that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of this Debenture)
shall thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the conversion of
this Debenture. The Company shall not effect any Conversion Reclassification
Event unless the resulting successor or acquiring entity (if not the Company)
assumes the obligation to deliver to the Holder of this Debenture such shares of
stock and/or securities as the Holder of this Debenture is entitled to receive
upon conversion in accordance with the foregoing.
(iv) In the event that the Company shall at any time after the date of
this Agreement (i) issue shares of Common Stock without consideration (other
than in the form of a dividend) or at a price per share less than the Conversion
Price, or (ii) issue options, rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) without consideration
or at a price per share (or having a conversion price per share, if a security
convertible into Common Stock) less than the Conversion Price, the Conversion
Price to be in effect after the date of such issuance shall be adjusted by
multiplying the Conversion Price in effect immediately prior to the date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of such issuance plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be issued or the aggregate initial conversion price of the
convertible securities so to be issued would purchase at the Conversion Price
immediately prior to such issuance and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of such issuance plus
the number of additional shares of Common Stock to be issued (or into which the
convertible securities so to be issued are initially convertible). In case the
subscription price for such securities may be paid in a consideration, part or
all of which shall be in a form other than cash, the value of such
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consideration shall be as determined in good faith by the Board of Directors of
the Company, whose determination shall be conclusive. Such adjustment shall be
made successively whenever the date of such issuance is fixed and, in the event
that such shares or options, rights or warrants (or portions thereof) expire
without being issued, the Conversion Price shall again be adjusted to reflect
such occurrence.
(v) If any adjustment under this Section 4(d) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
5. REDEMPTION. The Debenture may be redeemed in whole or in part by the
Company at 100% of the principal plus accrued interest through and including the
date of redemption at any time by giving the Holder at least thirty (30) days
prior notice in writing. It being understood that the Holder's conversion right
pursuant to Section 4 hereof shall remain in full force and effect until the
fifth business day immediately preceding the effective date of such redemption.
6. SUBORDINATION.
(a) The Company, for itself, its successors and assigns, covenants and
agrees, and the Holder of this Debenture, by acceptance hereof, covenants and
agrees, that payment of the principal of and interest on this Debenture is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all Senior
Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and
unpaid interest on (a) indebtedness of the Company (including indebtedness of
others guaranteed by the Company), other than this Debenture, whether
outstanding on the date of original issuance of this Debenture or hereafter
created, incurred, assumed, or guaranteed, (i) for money owing to banks, (ii)
for money borrowed from other than banks or (iii) arising under a lease of
property, equipment or other assets, which indebtedness, pursuant to generally
accepted accounting principles then in effect, is classified upon the balance
sheet of the Company as a liability of the Company, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such indebtedness is not superior in right of payment to this
Debenture, and (b) renewals, extensions, modifications and refundings of any
such indebtedness.
(b) Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise, the holders of all Senior Indebtedness shall be
entitled to receive payment in full of the principal thereof, premium, if any,
and the interest due thereon before the Holder of this Debenture is entitled to
receive any payment of principal or interest on this Debenture; and in the event
that, notwithstanding the foregoing, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
shall be received by the Holder of this Debenture before all Senior Indebtedness
is paid in full, such payment or distribution shall be paid over to the holders
of such Senior Indebtedness or their representative or to the trustee under any
indenture or agreement under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably
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as aforesaid, for application to the payment of all Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness.
(c) Subject to the payment in full of all Senior Indebtedness, the Holder
of this Debenture shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of the Company applicable to
Senior Indebtedness until the principal of and interest on this Debenture shall
be paid in full and no such payments or distributions to the Holder of this
Debenture of cash, property or securities otherwise distributable to the Senior
Indebtedness shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the Holder of this Debenture, be deemed to be a
payment by the Company to or on account of this Debenture. It is understood that
the provisions of this Section 5 are and are intended solely for the purpose of
defining the relative rights of the Holder of this Debenture and the holders of
Senior Indebtedness. Nothing contained in this Debenture is intended to, or
shall, impair, as between the Company, its creditors other than the holders of
Senior Indebtedness, and the Holder of this Debenture, the obligation of the
Company, which is unconditional and absolute, to pay to the Holder of this
Debenture principal of and interest on this Debenture as and when the same shall
become due and payable in accordance with its terms, or to affect the relative
rights of the Holder of this Debenture and creditors of the Company other than
the holders of Senior Indebtedness, nor shall anything in this Debenture prevent
the Holder of this Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Debenture, subject to the rights, if any,
under this Section 5 of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
(d) If the Holder of this Debenture does not file a proper claim or proof
of debt in the form required in any proceeding referred to above prior to 30
days before the expiration of the time to file such claim in such proceeding,
then the holder of any Senior Indebtedness is hereby authorized, and has the
right, to file an appropriate claim or claims for or on behalf of the Holder.
(e) The Holder of this Debenture by its acceptance hereof agrees to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Section 5.
7. REGISTERED HOLDER. The Company may for all purposes treat the
registered holders on its books and records of this Debenture as the Holder.
8. DENOMINATIONS. Debentures (and any Debenture issued in exchange, upon
transfer or upon conversion) may be issued in a minimum principal amount of
$10,000 (or such lesser amount upon a conversion in part of a Debenture provided
such lesser amount represents such Holder's entire holding of Debentures).
9. EVENTS OF DEFAULT.
(a) An "Event of Default" under this Debenture occurs if:
(i) the Company defaults in effecting a conversion of this Debenture
in accordance with the provisions hereof and such default continues for a
period of 10 business days;
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(ii) the Company defaults in the payment of the principal of or
interest on this Debenture when the same becomes due and payable and, in
the case of a default in any interest payment, the same continues for a
period of 30 days;
(iii) the Company or any subsidiary pursuant to or within the
meaning of any federal or state bankruptcy, insolvency or other law for
the relief of debtors ("Bankruptcy Law"):
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law
(a "Custodian") of it or for any substantial part of its property;
or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to
insolvency; a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (I) is for relief against the
Company or any subsidiary in an involuntary case or proceeding; (II)
appoints a Custodian of the Company or any subsidiary or for any
substantial part of its property; or (III) orders the winding up or
liquidation of the Company or any subsidiary; or similar relief is
granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; or
(iv) any final judgment or decree for the payment of money in excess
of $1,000,000 (to the extent not covered by insurance) is rendered against
the Company or any subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following such
judgment during which such judgment or decree is not discharged, waived or
the execution thereof stayed and, in the case of (B), such default
continues for 10 days after the notice specified below.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is 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. A
default under clauses (iii) or (iv) above is not an Event of Default until the
Holder of this Debenture notifies the Company of such default and the Company
does not cure such default within the time specified after receipt of such
notice. Such notice must specify the default, demand that it be remedied and
state that such notice is a "Notice of Default". Upon receipt of a Notice of
Default, the Company shall deliver to the Holder of this Debenture, within 30
days, written notice of the status of such Event of Default and what action the
Company is taking or proposes to take with respect thereto.
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<PAGE>
(b) If an Event of Default (other than an Event of Default specified in
clause (iii) above) occurs and is continuing, the Holder of this Debenture may
declare the principal of and accrued interest on this Debenture to be
immediately due and payable and upon such declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in clause (iii) above occurs, the principal of and interest on this Debenture
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Holder of this Debenture.
10. NO AMENDMENT. No provision of this Debenture may be amended, altered
or modified without the written agreement of the Holder and the Company.
11. NO VOTING RIGHTS. This Debenture shall not entitle the Holder hereof
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 attend any meetings of stockholders or any other proceedings of the Company.
12. LOST OR DESTROYED DEBENTURE. 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 thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. The Holder of this Debenture,
by acceptance hereof, agrees that it will not offer, sell or otherwise dispose
of this Debenture or the shares of Common Stock issuable upon conversion hereof
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), including Regulation
S promulgated under the Securities Act, or any applicable state blue sky laws
relating to the sale of securities and the Holder agrees to provide the Company
with such documentation as the Company shall deem necessary in accordance with
this Debenture to demonstrate that such offer, sale or disposition complies with
applicable securities laws.
14. ASSIGNMENT AND TRANSFER. Prior to effecting any assignment or transfer
of this Debenture, the Holder shall have delivered to the Company a completed
Certificate of Transfer, substantially in the form of Exhibit B hereto, and, if
required, a Seller Representation Letter, substantially in the form of Exhibit C
hereto. The Company shall not be required to register the transfer of any
Debenture unless and until it is in possession of such completed Certificate of
Transfer and, if required, Seller Representation Letter, and any assignment or
transfer of this Debenture not made in accordance with the terms hereof shall be
null and void and of no force or effect.
15. GOVERNING LAW. This Debenture shall be governed by, enforced under and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
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16. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the City of
New York.
17. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given as provided herein or delivered against receipt
if to (i) the Company, having an address c/o Wuersch & Gering LLP, 11 Hanover
Square, 21st Floor, New York, NY 10005; facsimile no.: 212-509-9559, Attention:
Chief Executive Officer and (ii) the Holder of this Debenture, to such Holder at
its last address as shown on the Debenture register (or to such other address as
any such party shall have furnished to the other in writing from time to time).
Except as otherwise set forth herein, any notice or other communication mailed
or otherwise delivered shall be deemed given at the time of receipt thereof.
18. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof 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 hereof 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.
19. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is
invalid, illegal or unenforceable, the remaining provisions 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.
[signature page to follow]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: January 29, 1999
SPECTRE INDUSTRIES, INC.
By:________________________________
Name:
Title:
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<PAGE>
ASSIGNMENT:
I or we assign and transfer this Debenture to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
and irrevocably appoint _________________________________ as agent to transfer
this Debenture on the books of the Company. The agent may substitute another to
act for him.
Date:______________________________
___________________________________
(Sign exactly as your name appears on the face of this Debenture)
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EXHIBIT A
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE January 29, 2001
Notice of Conversion
(To be executed by the Holder in order to convert the Debenture or portion
thereof)
The undersigned hereby irrevocably elects to convert (the entire principal
amount) ($____________ principal amount) of Debenture No.____ into shares of
Common Stock, $.0001 par value (the "Common Stock"), of Spectre Industries, Inc.
(the "Company") as of the Date of Conversion (which shall be the date of receipt
by facsimile by the Company of this Notice of Conversion). If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates as reasonably requested by the Company or its Transfer Agent.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Debenture shall be made in compliance with, pursuant to an
exemption from registration under the Securities Act. The undersigned represents
and warrants that it has made and will make any filings with the Securities and
Exchange Commission as may be required to be made by it from time to time.
If the stock certificate is to be made out in another person's name, fill in the
form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's U.S. social security or tax identification number, if any)
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Conversion calculation:
Date of Conversion: _____________________________
Applicable Conversion Price: _____________________________
Total number of shares: _____________________________
Accrued Interest: _____________________________
Name of Holder: _____________________________
By:________________________________
Name:
Title:
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EXHIBIT B
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE JANUARY 29, 2001
Certificate of Transfer
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Certificate of Transfer in connection with
the proposed transfer of Certificates No._______________________________________
_____________________________ of the 10% Convertible Debentures due January 29,
2001 (the "Debentures") of Spectre Industries, Inc. (the "Company") or, prior to
the registration thereof under the United States Securities Act of 1933 pursuant
to that certain Registration Rights Agreement between the Company and the
initial holder of the Debenture, the shares of Common Stock, par value $.0001
per share (the "Shares"), of the Company into which such Debentures are
convertible. For purposes of this letter, the term "Securities" shall mean the
Debentures or the Shares, as the case may be, that are the subject of such
proposed transfer.
The undersigned hereby confirms that:
(i) The undersigned is
CHECK ONE BOX BELOW
|_| (a) not a U.S. person within the meaning of Regulation S under the
Securities Act of 1933, as amended ("Regulation S") and the transfer of
the Securities has occurred outside of the United States in accordance
with the requirements of Regulation S; or
|_| (b) the undersigned is an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), an "Accredited Investor");
(ii) (A) the Securities have been acquired by the undersigned for the
undersigned's own account or for the account of one or more other Accredited
Investors for each of which the undersigned exercises sole investment discretion
or (B) the undersigned is a "bank", within the meaning of Section 3(a)(2) of the
Securities Act, or a "savings and loan association" or other institution
described in Section 3(a)(5)(A) of the Securities Act that is acquiring the
Securities as fiduciary for the account of one or more institutions for which
the undersigned exercises sole investment discretion;
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(iii) the undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of purchasing the Securities;
(iv) the undersigned is not acquiring the Securities with a view to the
distribution thereof or with any present intention of offering or reselling the
Securities, except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the undersigned is
acting as fiduciary shall remain at all times within its control; and
(v) all of the representations and warranties contained in that certain
Subscription Agreement between the Company and the original holder of the
Debentures, a copy of which has heretofore been delivered or made available to
the undersigned (the "Subscription Agreement") are true and correct with respect
to the undersigned as of the date hereof and the date of transfer of the
Securities.
The undersigned agrees to be bound by all of the terms and conditions of the
Subscription Agreement.
The undersigned understands that the proposed transfer of the Securities does
not involve any public offering within the United States within the meaning of
the Securities Act and that such proposed transfer of the Securities has not
been registered under the Securities Act or any applicable state securities
laws, and the undersigned agrees, on its own behalf and on behalf of each
account for which the undersigned acquires any Securities, that such Securities
may be resold or otherwise transferred only (a) to the Company or any subsidiary
thereof, (b) inside the United States to an Institutional Accredited Investor
that, prior to such transfer furnishes to the Company a signed letter containing
the same representations and agreements relating to the restrictions on transfer
of such Securities set forth herein, (c) outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (d)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if applicable) or (e) pursuant to a registration statement which
has been declared effective under the Securities Act. The undersigned agrees
that any such transfer of Securities referred to in this paragraph shall be in
accordance with applicable securities laws of any State of the United States or
any other applicable jurisdiction and in accordance with the legends set forth
on the Securities. The undersigned further agrees to provide any person
purchasing any of the Securities from the undersigned a notice advising such
purchaser that resales of such Securities are restricted as stated herein. The
undersigned understands that the registrar and transfer agent for the Securities
(which in the case of the Debentures shall be the Company) will not be required
to accept for registration or transfer any Securities, except upon presentation
of evidence satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. The undersigned further understands that any
Securities will be in the form of definitive physical certificates and that such
certificates will bear a legend or legends (unless the sale of the Securities
has been registered under the Securities Act) reflecting the substance of this
paragraph.
The undersigned acknowledges that the Company, others and you will rely upon the
undersigned's confirmations, acknowledgments and agreements set forth herein,
and the undersigned agrees to notify you promptly in writing if any of its
representations or warranties herein ceases to be accurate and complete.
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IN WITNESS WHEREOF, the undersigned has duly executed, or caused its duly
appointed representative to execute this Certificate of Transfer on the date
specified below.
___________________________________
(NAME OF TRANSFEREE)
By:________________________________
Name:______________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
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Exhibit C
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE JANUARY 29, 2001
Seller Representation Letter
(required only for resales into the United States)
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Seller Representation Letter in connection
with the proposed transfer of Certificates No._________________________________
__________________________________________________________ of the 10%
Convertible Debentures due January 29, 2001 (the "Debentures") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Debenture,
the shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Debentures are convertible. For purposes of this letter,
the term "Securities" shall mean the Debentures or the Shares, as the case may
be, that are the subject of such proposed transfer.
In order to effect the transfer of the Securities by the undersigned (the
"Transferor") without registration under the U.S. Securities Act of 1933, as
amended (the "Securities Act") and to have the legend removed from the
Securities, the Transferor represents, warrants and acknowledges to the Company
that:
1. the Transferor has not been engaged as a distributor or dealer by the Company
or anyone else, and is not receiving a selling commission fee or other
remuneration, with respect to the Securities Purchase Agreement pursuant to
which the Debentures were originally issued and sold (the "Securities Purchase
Agreement") or otherwise in connection with any purchase and/or sale of the
Securities;
2. neither the Transferor nor any person acting for the Transferor has conducted
any general solicitation relating to the offer and sale of the Securities in the
United States
3. the Transferor understands that the transfer of the Securities to the
Purchaser on the books of the Company is to be made in reliance on the specific
exemptions from the registration requirements of the United States federal
securities laws and any applicable state securities laws ("State Acts")
specified in the attachment hereto and that the Company is relying upon the
truth and accuracy of, and the Transferor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the availability of such
1
<PAGE>
exemptions and the eligibility of the Transferor to sell, transfer or otherwise
dispose of the Securities;
4. the Transferor is not transferring the Securities to settle any put option,
short position or other similar instrument or position with respect to the
Shares or securities of the same class as the Shares;
5. assuming that the Debentures were originally issued in compliance with
Regulation S under the Securities Act, upon consultation with counsel, the
Transferor believes that the sale, transfer or other disposition of the
Securities in respect of which this letter is being provided is not in violation
of the Securities Act, the U.S. Securities Exchange Act of 1934, as amended, any
applicable State Acts or the rules and regulations of the U.S. Securities
Exchange Commission and any state securities commissions promulgated under any
of the foregoing; and
6. the representations and warranties made by the Transferor to the Company at
the time that the Transferor acquired the Securities are true and correct as of
the date hereof and as of the effective date of the transfer.
Transferor:
___________________________________
Dated:_____________________________
By:________________________________
Name:
Title:
2
EXHIBIT 4.3
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE February 25, 2001
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD TO ANY PERSON EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT: (1) IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
(A) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR ANOTHER THEN AVAILABLE EXEMPTION UNDER THE
SECURITIES ACT AND STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR
(D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH TO THE COMPANY OR THE
TRANSFER AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS, LEGAL OPINIONS, OR
OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
Certificate No. U.S. $________
FOR VALUE RECEIVED, SPECTRE INDUSTRIES, INC., a corporation organized under the
laws of the State of Nevada (the "Company"), hereby promises to pay to _________
___________ or registered assigns, the principal sum of ___________ $________ on
February 25, 2001, and to pay interest thereon in the manner set forth herein
from February at the rate of 10% per annum, payable semi-annually on August 25,
and February 25, commencing on August 25, 1999 (each such date, an "Interest
Payment Date"), until the principal hereof is paid or made available for payment
in the manner set forth herein.
1. ISSUANCE. This Debenture is one of a duly authorized issue of
Debentures of the Company designated as its 10% Convertible Debentures, dated
February 25, 1999 in an aggregate principal amount of up to $50,000.
2. INTEREST.
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(a) The Company promises to pay interest on the principal amount of this
Debenture at the rate of 10% per annum. Interest on this Debenture will accrue
from the date the funds shall have been received by the Company, as confirmed by
written notice to the Holder (as defined) until payment in full of the principal
amount hereof has been made or duly provided for and will be based on the actual
number of days and months elapsed and computed on a 360-day year consisting of
twelve 30-day months. Interest shall be payable in arrears on the earlier to
occur of (i) the date of conversion to Common Stock (as defined in Section 4
below) as provided herein of all or a portion of this Debenture (if this
Debenture shall be converted in part, then interest only with respect to the
portion of this Debenture so converted shall be payable at such time) and (ii),
with respect to any unconverted portion of this Debenture, each Interest Payment
Date on or prior to February 25, 2001 (the "Maturity Date"). Interest on this
Debenture is payable to the holder of this Debenture registered on the books of
the Company (the "Holder") at the option of the Company in the form of either
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.
3. PRINCIPAL. On the Maturity Date, upon surrender of this Debenture by
the Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, together with accrued interest on such outstanding principal amount as
set forth in Section 2 above.
4. CONVERSION.
(a) Conversion Right; Price. Subject to this Section 4,
(i) the Holder of this Debenture has the right to convert this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into shares of common stock, par
value .0001 per share, of the Company (the "Common Stock") at any time
prior to the Maturity Date.
(ii) the Company has the right to force the conversion of this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into Common Stock at any time
after August 25, 2000 upon giving the Holder thirty (30) days prior notice
in writing if the closing price of the Common Stock has been at least
$1.25 for twenty (20) consecutive trading days during the three month
period immediately preceding such notice.
The price at which this Debenture (or any portion thereof) may be so
converted into shares of Common Stock (the "Conversion Price") shall be
$.80. In lieu of any fractional share of Common Stock to which the Holder
would otherwise be entitled upon conversion of this Debenture (or portion
thereof), the number of shares of Common Stock issuable upon conversion of
this Debenture shall be rounded up to the nearest whole number. In the
case of a dispute as to the calculation of the Conversion Price, the
Holder's calculation shall be deemed conclusive absent manifest error.
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<PAGE>
(b) Mechanics of Conversion. (i) To convert this Debenture (or a portion
thereof) the Holder must (i) complete and sign the Notice of Conversion set
forth as Exhibit A to this Debenture (the "Notice of Conversion") and deliver
the Notice of Conversion to the Company as herein provided and (ii) on or prior
to the date on which delivery of Common Stock is required to be made hereunder,
(x) deliver this Debenture, duly endorsed, to the Company and (y) pay any
transfer or similar tax if required. The Holder shall surrender this Debenture
and the Notice of Conversion to the Company (with an advance copy by facsimile
of the Notice of Conversion). The date on which Notice of Conversion is given
(the "Date of Conversion") shall be deemed to be the date of receipt by the
Company of the facsimile of the Notice of Conversion, provided that this
Debenture is received by the Company within five (5) business days thereafter.
The Company shall not be obligated to cause the transfer agent for the Common
Stock (the "Transfer Agent") to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless either this Debenture has been
received by the Company or, if this Debenture has been lost, stolen or
destroyed, the Holder executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with this
Debenture.
(ii) The Company shall cause the Transfer Agent to issue and deliver
within ten (10) business days after the actual delivery to the Company of this
Debenture to the Holder of this Debenture at the address of the Holder on the
books of the Company or as otherwise directed pursuant to the Notice of
Conversion, a certificate or certificates for the number of shares of Common
Stock to which such Holder shall be entitled as aforesaid. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. Notwithstanding that the Holder is required to
deliver this Debenture, duly endorsed, within five (5) business days after the
Date of Conversion, if this Debenture is not received by the Company within ten
(10) business days after the Date of Conversion, the Notice of Conversion shall
become null and void.
(iii) Following conversion of this Debenture, or a portion thereof, the
principal amount so converted, will be deemed paid in full and satisfied, and
such principal amount will no longer be outstanding. In the event this Debenture
is converted in part, the Company will issue to the Holder a new Debenture in a
principal amount equal to the portion of this Debenture not converted.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock or shares of Common Stock held in treasury, or both, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of this Debenture and all other securities of the Company convertible
or exchangeable into Common Stock.
(d) Adjustment to Conversion Price. (i) If, prior to the conversion of the
entire principal amount of this Debenture, the number of outstanding shares of
Common Stock is increased by a stock split, stock dividend of shares of Common
Stock or other shares of capital stock, reclassification or other similar event,
the Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares or other similar event, the Conversion Price shall be
proportionately
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<PAGE>
increased, in each case, such that the Holder of this Debenture will have the
right to receive upon conversion of this Debenture the number of shares of
Common Stock (or other shares of Capital Stock) of the Company (notwithstanding
the limitation set forth in the third paragraph of Section 4(a)) which such
Holder would have been entitled to receive had the Holder converted this
Debenture immediately prior to such action.
(ii) If, prior to the conversion of the entire principal amount of this
Debenture, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event (a "Conversion
Reclassification Event"), as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
Company or the same or another class or classes of stock or securities of the
Company or another entity, then the Holder of this Debenture shall thereafter
have the right to receive upon conversion of this Debenture, upon the basis and
the terms and conditions specified herein, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore receivable upon the
conversion of this Debenture (irrespective of the limitations set forth in
Section 4(a)) had such Conversion Reclassification Event not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the Holder of this Debenture such that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of this Debenture)
shall thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the conversion of
this Debenture. The Company shall not effect any Conversion Reclassification
Event unless the resulting successor or acquiring entity (if not the Company)
assumes the obligation to deliver to the Holder of this Debenture such shares of
stock and/or securities as the Holder of this Debenture is entitled to receive
upon conversion in accordance with the foregoing.
(iv) In the event that the Company shall at any time after the date of
this Agreement (i) issue shares of Common Stock without consideration (other
than in the form of a dividend) or at a price per share less than the Conversion
Price, or (ii) issue options, rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) without consideration
or at a price per share (or having a conversion price per share, if a security
convertible into Common Stock) less than the Conversion Price, the Conversion
Price to be in effect after the date of such issuance shall be adjusted by
multiplying the Conversion Price in effect immediately prior to the date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of such issuance plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be issued or the aggregate initial conversion price of the
convertible securities so to be issued would purchase at the Conversion Price
immediately prior to such issuance and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of such issuance plus
the number of additional shares of Common Stock to be issued (or into which the
convertible securities so to be issued are initially convertible). In case the
subscription price for such securities may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive. Such adjustment shall be made
successively whenever the date of such issuance is fixed and, in the event that
such shares or option, rights or warrants (or
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<PAGE>
portions thereof) expire without being issued, the Conversion Price shall again
be adjusted to reflect such occurrence.
(v) If any adjustment under this Section 4(d) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
5. REDEMPTION. The Debenture may be redeemed in whole or in part by the
Company 100% of the principal plus accrued interest through and including the
date of redemption at any time by giving the Holder at least thirty (30) days
prior notice in writing. It being understood that the Holder's conversion right
pursuant to Section 4 hereof shall remain in full force and effect until the
fifth business day immediately preceding the effective date of such redemption.
6. SUBORDINATION.
(a) The Company, for itself, its successors and assigns, covenants and
agrees, and the Holder of this Debenture, by acceptance hereof, covenants and
agrees, that payment of the principal of and interest on this Debenture is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all Senior
Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and
unpaid interest on (a) indebtedness of the Company (including indebtedness of
others guaranteed by the Company), other than this Debenture, whether
outstanding on the date of original issuance of this Debenture or hereafter
created, incurred, assumed, or guaranteed, (i) for money owing to banks, (ii)
for money borrowed from other than banks or (iii) arising under a lease of
property, equipment or other assets, which indebtedness, pursuant to generally
accepted accounting principles then in effect, is classified upon the balance
sheet of the Company as a liability of the Company, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such indebtedness is not superior in right of payment to this
Debenture, and (b) renewals, extensions, modifications and refundings of any
such indebtedness.
(b) Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise the holders of all Senior Indebtedness shall be
entitled to receive payment in full of the principal thereof, premium, if any,
and the interest due thereon before the Holder of this Debenture is entitled to
receive any payment of principal or interest on this Debenture; and in the event
that, notwithstanding the foregoing, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
shall be received by the Holder of this Debenture before all Senior Indebtedness
is paid in full, such payment or distribution shall be paid over to the holders
of such Senior Indebtedness or their representative or to the trustee under any
indenture or agreement under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably as aforesaid, for application to the
payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
5
<PAGE>
(c) Subject to the payment in full of all Senior Indebtedness, the Holder
of this Debenture shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of the Company applicable to
Senior Indebtedness until the principal of and interest on this Debenture shall
be paid in full and no such payments or distributions to the Holder of this
Debenture of cash, property or securities otherwise distributable to the Senior
Indebtedness shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the Holder of this Debenture, be deemed to be a
payment by the Company to or on account of this Debenture. It is understood that
the provisions of this Section 5 are and are intended solely for the purpose of
defining the relative rights of the Holder of this Debenture and the holders of
Senior Indebtedness, on the other hand. Nothing contained in this Debenture is
intended to, or shall, impair, as between the Company, its creditors other than
the holders of Senior Indebtedness, and the Holder of this Debenture, the
obligation of the Company, which is unconditional and absolute, to pay to the
Holder of this Debenture principal of and interest on this Debenture as and when
the same shall become due and payable in accordance with its terms, or to affect
the relative rights of the Holder of this Debenture and creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything in this
Debenture prevent the Holder of this Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Debenture, subject
to the rights, if any, under this Section 5 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
(d) If the Holder of this Debenture does not file a proper claim or proof
of debt in the form required in any proceeding referred to above prior to 30
days before the expiration of the time to file such claim in such proceeding,
then the holder of any Senior Indebtedness is hereby authorized, and has the
right, to file an appropriate claim or claims for or on behalf of the Holder.
(e) The Holder of this Debenture by its acceptance hereof agrees to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Section 5.
7. REGISTERED HOLDER. The Company may for all purposes treat the
registered holders on its books and records of this Debenture as the Holder.
8. DENOMINATIONS. Debentures (and any Debenture issued in exchange, upon
transfer or upon conversion) may be issued in a minimum principal amount of
$10,000 (or such lesser amount upon a conversion in part of a Debenture provided
such lesser amount represents such Holder's entire holding of Debentures).
9. EVENTS OF DEFAULT. -
(a) An "Event of Default" under this Debenture occurs if:
(i) the Company defaults in effecting a conversion of this Debenture
in accordance with the provisions hereof and such default continues for a
period of 10 business days;
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<PAGE>
(ii) the Company defaults in the payment of the principal of or
interest on this Debenture when the same becomes due and payable and, in
the case of a default in any interest payment, the same continues for a
period of 30 days;
(iii) the Company or any subsidiary pursuant to or within the
meaning of any federal or state bankruptcy, insolvency or other law for
the relief of debtors ("Bankruptcy Law"):
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law
(a "Custodian") of it or for any substantial part of its property;
or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to
insolvency; a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (I) is for relief against the
Company or any subsidiary in an involuntary case or proceeding; (II)
appoints a Custodian of the Company or any subsidiary or for any
substantial part of its property; or (III) orders the winding up or
liquidation of the Company or any subsidiary; or similar relief is
granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; or
(iv) any final judgment or decree for the payment of money in excess
of $1,000,000 (to the extent not covered by insurance) is rendered against
the Company or any subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following such
judgment during which such judgment or decree is not discharged, waived or
the execution thereof stayed and, in the case of (B), such default
continues for 10 days after the notice specified below.
The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is 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. A
default under clause (iii) or (iv) above is not an Event of Default until the
Holder of this Debenture notifies the Company of such default and the Company
does not cure such default within the time specified after receipt of such
notice. Such notice must specify the default, demand that it be remedied and
state that such notice is a "Notice of Default". Upon receipt of a Notice of
Default, the Company shall deliver to the Holder of this Debenture, within 30
days, written notice of the status of such Event of Default and what action the
Company is taking or proposes to take with respect thereto.
(b) If an Event of Default (other than an Event of Default specified in
clauses (iii) above) occurs and is continuing, the Holder of this Debenture may
declare the principal of and accrued
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<PAGE>
interest on this Debenture to be immediately due and payable and upon such
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in clause (iii) above occurs, the principal of
and interest on this Debenture shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Holder of
this Debenture.
10. NO AMENDMENT. No provision of this Debenture may be amended, altered
or modified without the written agreement of the Holder and the Company.
11. NO VOTING RIGHTS. This Debenture shall not entitle the Holder hereof
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 attend any meetings of stockholders or any other proceedings of the Company.
12. LOST OR DESTROYED DEBENTURE. 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 thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. The Holder of this Debenture,
by acceptance hereof, agrees that it will not offer, sell or otherwise dispose
of this Debenture or the shares of Common Stock issuable upon conversion hereof
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), including Regulation
S promulgated under the Securities Act, or any applicable state blue sky laws
relating to the sale of securities and the Holder agrees to provide the Company
with such documentation as the Company shall deem necessary in accordance with
this Debenture and the Securities Purchase Agreement to demonstrate that such
offer, sale or disposition complies with applicable securities laws.
14. ASSIGNMENT AND TRANSFER. Prior to effecting any assignment or transfer
of this Debenture, the Holder shall have delivered to the Company a completed
Certificate of Transfer, substantially in the form of Exhibit B hereto, and, if
required, a Seller Representation Letter, substantially in the form of Exhibit C
hereto. The Company shall not be required to register the transfer of any
Debenture unless and until it is in possession of such completed Certificate of
Transfer and, if required, Seller Representation Letter, and any assignment or
transfer of this Debenture not made in accordance with the terms hereof shall be
null and void and of no force or effect.
15. GOVERNING LAW. This Debenture shall be governed by, enforced under and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
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16. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the City of
New York.
17. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given as provided herein or delivered against receipt
if to (i) the Company, having an address c/o Wuersch & Gering LLP, 11 Hanover
Square, 21st Floor, New York, NY 10005; facsimile no.: 212-509-9559, Attention:
Chief Executive Officer and (ii) the Holder of this Debenture, to such Holder at
its last address as shown on the Debenture register (or to such other address as
any such party shall have furnished to the other in writing from time to time).
Except as otherwise set forth herein, any notice or other communication mailed
or otherwise delivered shall be deemed given at the time of receipt thereof.
18. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof 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 hereof 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.
19. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is
invalid, illegal or unenforceable, the remaining provisions 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.
[signature page to follow]
9
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: February 25, 1999
SPECTRE INDUSTRIES, INC.
By:________________________________
Name:
Title:
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<PAGE>
ASSIGNMENT:
I or we assign and transfer this Debenture to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
and irrevocably appoint _________________________________ as agent to transfer
this Debenture on the books of the Company. The agent may substitute another to
act for him.
Date:______________________________
___________________________________
(Sign exactly as your name appears on the face of this Debenture)
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EXHIBIT A
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE FEBRUARY 25, 2001
Notice of Conversion
(To be executed by the Holder in order to convert the Debenture or portion
thereof)
The undersigned hereby irrevocably elects to convert (the entire principal
amount) ($____________ principal amount) of Debenture No.____ into shares of
Common Stock, $.0001 par value (the "Common Stock"), of Spectre Industries, Inc.
(the "Company") as of the Date of Conversion (which shall be the date of receipt
by facsimile by the Company of this Notice of Conversion). If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates as reasonably requested by the Company or its Transfer Agent.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Debenture shall be made in compliance with, pursuant to an
exemption from registration under the Securities Act. The undersigned represents
and warrants that it has made and will make any filings with the Securities and
Exchange Commission as may be required to be made by it from time to time.
If the stock certificate is to be made out in another person's name, fill in the
form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's U.S. social security or tax identification number, if any)
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Conversion calculation:
Date of Conversion: ___________________________
Applicable Conversion Price: ___________________________
Total number of shares: ___________________________
Accrued Interest: ___________________________
Name of Holder: ___________________________
By:________________________________
Name:
Title:
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<PAGE>
EXHIBIT B
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE FEBRUARY 25, 2001
Certificate of Transfer
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Certificate of Transfer in connection with
the proposed transfer of Certificates No. ______________________________________
________________________________________________________________ of the 10%
Convertible Debentures due February 25, 2001 (the "Debentures") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Debenture,
the shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Debentures are convertible. For purposes of this letter,
the term "Securities" shall mean the Debentures or the Shares, as the case may
be, that are the subject of such proposed transfer.
The undersigned hereby confirms that:
(i) The undersigned is
CHECK ONE BOX BELOW
|_| (a) not a U.S. person within the meaning of Regulation S under the
Securities Act of 1933, as amended ("Regulation S") and the transfer of
the Securities has occurred outside of the United States in accordance
with the requirements of Regulation S; or
|_| (b) the undersigned is an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), an "Accredited Investor");
(ii) (A) the Securities have been acquired by the undersigned for the
undersigned's own account or for the account of one or more other Accredited
Investors for each of which the undersigned exercises sole investment discretion
or (B) the undersigned is a "bank", within the meaning of Section 3(a)(2) of the
Securities Act, or a "savings and loan association" or other institution
described in Section 3(a)(5)(A) of the Securities Act that is acquiring the
Securities as fiduciary for the account of one or more institutions for which
the undersigned exercises sole investment discretion;
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<PAGE>
(iii) the undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of purchasing the Securities;
(iv) the undersigned is not acquiring the Securities with a view to the
distribution thereof or with any present intention of offering or reselling the
Securities, except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the undersigned is
acting as fiduciary shall remain at all times within its control; and
(v) all of the representations and warranties contained in that certain
Subscription Agreement between the Company and the original holder of the
Debentures, a copy of which has heretofore been delivered or made available to
the undersigned (the "Subscription Agreement") are true and correct with respect
to the undersigned as of the date hereof and the date of transfer of the
Securities.
The undersigned agrees to be bound by all of the terms and conditions of the
Subscription Agreement.
The undersigned understands that the proposed transfer of the Securities does
not involve any public offering within the United States within the meaning of
the Securities Act and that such proposed transfer of the Securities has not
been registered under the Securities Act or any applicable state securities
laws, and the undersigned agrees, on its own behalf and on behalf of each
account for which the undersigned acquires any Securities, that such Securities
may be resold or otherwise transferred only (a) to the Company or any subsidiary
thereof, (b) inside the United States to an Institutional Accredited Investor
that, prior to such transfer furnishes to the Company a signed letter containing
the same representations and agreements relating to the restrictions on transfer
of such Securities set forth herein, (c) outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (d)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if applicable) or (e) pursuant to a registration statement which
has been declared effective under the Securities Act. The undersigned agrees
that any such transfer of Securities referred to in this paragraph shall be in
accordance with applicable securities laws of any State of the United States or
any other applicable jurisdiction and in accordance with the legends set forth
on the Securities. The undersigned further agrees to provide any person
purchasing any of the Securities from the undersigned a notice advising such
purchaser that resales of such Securities are restricted as stated herein. The
undersigned understands that the registrar and transfer agent for the Securities
(which in the case of the Debentures shall be the Company) will not be required
to accept for registration or transfer any Securities, except upon presentation
of evidence satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. The undersigned further understands that any
Securities will be in the form of definitive physical certificates and that such
certificates will bear a legend or legends (unless the sale of the Securities
has been registered under the Securities Act) reflecting the substance of this
paragraph.
The undersigned acknowledges that the Company, others and you will rely upon the
undersigned's confirmations, acknowledgments and agreements set forth herein,
and the undersigned agrees to notify you promptly in writing if any of its
representations or warranties herein ceases to be accurate and complete.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed, or caused its
duly appointed representative to execute this Certificate of Transfer on the
date specified below.
___________________________________
(NAME OF TRANSFEREE)
By:________________________________
Name:______________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
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<PAGE>
Exhibit C
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE FEBRUARY 25, 2001
Seller Representation Letter
(required only for resales into the United States)
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Seller Representation Letter in connection
with the proposed transfer of Certificates No. _________________________________
__________________________________________________________ of the 10%
Convertible Debentures due February 25, 2001 (the "Debentures") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Debenture,
the shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Debentures are convertible. For purposes of this letter,
the term "Securities" shall mean the Debentures or the Shares, as the case may
be, that are the subject of such proposed transfer.
In order to effect the transfer of the Securities by the undersigned (the
"Transferor") without registration under the U.S. Securities Act of 1933, as
amended (the "Securities Act") and to have the legend removed from the
Securities, the Transferor represents, warrants and acknowledges to the Company
that:
1. the Transferor has not been engaged as a distributor or dealer by the Company
or anyone else, and is not receiving a selling commission fee or other
remuneration, with respect to the Securities Purchase Agreement pursuant to
which the Debentures were originally issued and sold (the "Securities Purchase
Agreement") or otherwise in connection with any purchase and/or sale of the
Securities;
2. neither the Transferor nor any person acting for the Transferor has conducted
any general solicitation relating to the offer and sale of the Securities in the
United States
3. the Transferor understands that the transfer of the Securities to the
Purchaser on the books of the Company is to be made in reliance on the specific
exemptions from the registration requirements of the United States federal
securities laws and any applicable state securities laws ("State Acts")
specified in the attachment hereto and that the Company is relying upon the
truth and accuracy of, and the Transferor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the availability of such
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exemptions and the eligibility of the Transferor to sell, transfer or otherwise
dispose of the Securities;
4. the Transferor is not transferring the Securities to settle any put option,
short position or other similar instrument or position with respect to the
Shares or securities of the same class as the Shares;
5. assuming that the Debentures were originally issued in compliance with
Regulation S under the Securities Act, upon consultation with counsel, the
Transferor believes that the sale, transfer or other disposition of the
Securities in respect of which this letter is being provided is not in violation
of the Securities Act, the U.S. Securities Exchange Act of 1934, as amended, any
applicable State Acts or the rules and regulations of the U.S. Securities
Exchange Commission and any state securities commissions promulgated under any
of the foregoing; and
6. the representations and warranties made by the Transferor to the Company at
the time that the Transferor acquired the Securities are true and correct as of
the date hereof and as of the effective date of the transfer.
Transferor:
___________________________________
Dated:_____________________________
By:________________________________
Name:
Title:
2
EXHIBIT 4.4
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE OCTOBER 15, 2001
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD TO ANY PERSON EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT: (1) IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT
(A) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR ANOTHER THEN AVAILABLE EXEMPTION UNDER THE
SECURITIES ACT AND STATE SECURITIES LAWS, (C) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR
(D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH TO THE COMPANY OR THE
TRANSFER AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS, LEGAL OPINIONS, OR
OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
Certificate No. U.S. $________
FOR VALUE RECEIVED, SPECTRE INDUSTRIES, INC., a corporation organized under the
laws of the State of Nevada (the "Company"), hereby promises to pay to _________
______________________________________________________________________________,
or registered assigns, the principal sum of _________ ($_______ ) on October 15,
2001, and to pay interest thereon in the manner set forth herein from October
15, 2001 at the rate of 10% per annum, payable semi-annually on April 15 and
October 15, commencing on April 15, 1999 (each such date, an "Interest Payment
Date"), until the principal hereof is paid or made available for payment in the
manner set forth herein.
1. ISSUANCE. This Debenture is one of a duly authorized issue of
Debentures of the Company designated as its 10% Convertible Debentures, dated
October 15, 1998 in an aggregate principal amount of up to $10,000,000.
2. INTEREST.
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(a) Interest Rate; Payment. The Company promises to pay interest on the
principal amount of this Debenture at the rate of 10% per annum. Interest on
this Debenture will accrue from October 15, 1998 until payment in full of the
principal amount hereof has been made or duly provided for and will be based on
the actual number of days and months elapsed and computed on a 360-day year
consisting of twelve 30-day months. Interest shall be payable in arrears on the
earlier to occur of (i) the date of conversion to Common Stock (as defined in
Section 4 below) as provided herein of all or a portion of this Debenture (if
this Debenture shall be converted in part, then interest only with respect to
the portion of this Debenture so converted shall be payable at such time) and
(ii), with respect to any unconverted portion of this Debenture, each Interest
Payment Date on or prior to October 15, 2001 (the "Maturity Date"). Interest on
this Debenture is payable to the holder of this Debenture registered on the
books of the Company (the "Holder") at the option of the Company in the form of
either such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
(b) Interest Reserve. The Company shall pay 10% of the principal amount of
this Debenture into a separate interest reserve account established in the name
of the Company with a reputable banking institution in New York City. The
Company shall keep in such account funds in an amount equal to 10% of the
unconverted principal amount of this Debenture at all times on or prior to April
15, 1999, and funds in an amount equal to 5% of the unconverted principal amount
of this Debenture at all times on or prior to October 15, 1999. Thereafter, the
Company shall no longer be required to keep any funds in such account. The funds
in such account may be invested in interest bearing securities issued by the
United States of America or any political subdivision thereof, a money market or
similar account or in comparable securities or mutual funds.
3. PRINCIPAL. On the Maturity Date, upon surrender of this Debenture by
the Holder to the Company, the Company shall pay to the Holder the outstanding
principal amount hereof in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, together with accrued interest on such outstanding principal amount as
set forth in Section 2 above.
4. CONVERSION.
(a) Conversion Right; Price. Subject to this Section 4,
(i) the Holder of this Debenture has the right to convert this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into shares of common stock, par
value .0001 per share, of the Company (the "Common Stock") at any time
prior to the Maturity Date
(ii) the Company has the right to force the conversion of this
Debenture, in whole or in part in increments of $1,000 (inclusive of
accrued interest with respect thereto), into Common Stock at any time
after April 15, 2000 upon giving the Holder thirty (30) days prior notice
in writing if the closing price of the Common Stock has been at least
$1.25 for twenty (20) consecutive trading days during the three month
period immediately preceding such notice.
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The price at which this Debenture (or any portion thereof) may be so
converted into shares of Common Stock (the "Conversion Price") shall be
$.80. In lieu of any fractional share of Common Stock to which the Holder
would otherwise be entitled upon conversion of this Debenture (or portion
thereof), the number of shares of Common Stock issuable upon conversion of
this Debenture shall be rounded up to the nearest whole number. In the
case of a dispute as to the calculation of the Conversion Price, the
Holder's calculation shall be deemed conclusive absent manifest error.
(b) Mechanics of Conversion. (i) To convert this Debenture (or a portion
thereof) the Holder must (i) complete and sign the Notice of Conversion set
forth as Exhibit A to this Debenture (the "Notice of Conversion") and deliver
the Notice of Conversion to the Company as herein provided and (ii) on or prior
to the date on which delivery of Common Stock is required to be made hereunder,
(x) deliver this Debenture, duly endorsed, to the Company and (y) pay any
transfer or similar tax if required. The Holder shall surrender this Debenture
and the Notice of Conversion to the Company (with an advance copy by facsimile
of the Notice of Conversion). The date on which Notice of Conversion is given
(the "Date of Conversion") shall be deemed to be the date of receipt by the
Company of the facsimile of the Notice of Conversion, provided that this
Debenture is received by the Company within five (5) business days thereafter.
The Company shall not be obligated to cause the transfer agent for the Common
Stock (the "Transfer Agent") to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless either this Debenture has been
received by the Company or, if this Debenture has been lost, stolen or
destroyed, the Holder executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with this
Debenture.
(ii) The Company shall cause the Transfer Agent to issue and deliver
within ten (10) business days after the actual delivery to the Company of this
Debenture to the Holder of this Debenture at the address of the Holder on the
books of the Company or as otherwise directed pursuant to the Notice of
Conversion, a certificate or certificates for the number of shares of Common
Stock to which such Holder shall be entitled as aforesaid. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. Notwithstanding that the Holder is required to
deliver this Debenture, duly endorsed, within five (5) business days after the
Date of Conversion, if this Debenture is not received by the Company within ten
(10) business days after the Date of Conversion, the Notice of Conversion shall
become null and void.
(iii) Following conversion of this Debenture, or a portion thereof, the
principal amount so converted, will be deemed paid in full and satisfied, and
such principal amount will no longer be outstanding. In the event this Debenture
is converted in part, the Company will issue to the Holder a new Debenture in a
principal amount equal to the portion of this Debenture not converted.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock or shares of Common Stock held in treasury, or both, solely for
the purpose of effecting the conversion of this Debenture, such number of shares
of Common Stock as shall from time to time be sufficient to
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effect the conversion of this Debenture and all other securities of the Company
convertible or exchangeable into Common Stock.
(d) Adjustment to Conversion Price. (i) If, prior to the conversion of the
entire principal amount of this Debenture, the number of outstanding shares of
Common Stock is increased by a stock split, stock dividend of shares of Common
Stock or other shares of capital stock, reclassification or other similar event,
the Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares or other similar event, the Conversion Price shall be
proportionately increased, in each case, such that the Holder of this Debenture
will have the right to receive upon conversion of this Debenture the number of
shares of Common Stock (or other shares of Capital Stock) of the Company
(notwithstanding the limitation set forth in the third paragraph of Section
4(a)) which such Holder would have been entitled to receive had the Holder
converted this Debenture immediately prior to such action.
(ii) If, prior to the conversion of the entire principal amount of this
Debenture, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event (a "Conversion
Reclassification Event"), as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
Company or the same or another class or classes of stock or securities of the
Company or another entity, then the Holder of this Debenture shall thereafter
have the right to receive upon conversion of this Debenture, upon the basis and
the terms and conditions specified herein, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore receivable upon the
conversion of this Debenture (irrespective of the limitations set forth in
Section 4(a)) had such Conversion Reclassification Event not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of the Holder of this Debenture such that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of this Debenture)
shall thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the conversion of
this Debenture. The Company shall not effect any Conversion Reclassification
Event unless the resulting successor or acquiring entity (if not the Company)
assumes the obligation to deliver to the Holder of this Debenture such shares of
stock and/or securities as the Holder of this Debenture is entitled to receive
upon conversion in accordance with the foregoing.
(iv) In the event that the Company shall at any time after the date of
this Agreement (i) issue shares of Common Stock without consideration (other
than in the form of a dividend) or at a price per share less than the Conversion
Price, or (ii) issue options, rights or warrants to subscribe for or purchase
Common Stock (or securities convertible into Common Stock) without consideration
or at a price per share (or having a conversion price per share, if a security
convertible into Common Stock) less than the Conversion Price, the Conversion
Price to be in effect after the date of such issuance shall be adjusted by
multiplying the Conversion Price in effect immediately prior to the date of such
issuance by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of such issuance plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be issued or the aggregate initial conversion price of the
convertible securities so to be issued would
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purchase at the Conversion Price immediately prior to such issuance and of which
the denominator shall be the number of shares of Common Stock outstanding on the
date of such issuance plus the number of additional shares of Common Stock to be
issued (or into which the convertible securities so to be issued are initially
convertible). In case the subscription price for such securities may be paid in
a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive. Such
adjustment shall be made successively whenever the date of such issuance is
fixed and, in the event that such shares or option, rights or warrants (or
portions thereof) expire without being issued, the Conversion Price shall again
be adjusted to reflect such occurrence.
(v) If any adjustment under this Section 4(d) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
5. REDEMPTION. The Debenture may be redeemed in whole or in part by the
Company 100% of the principal plus accrued interest through and including the
date of redemption at any time by giving the Holder at least thirty (30) days
prior notice in writing. It being understood that the Holder's conversion right
pursuant to Section 4 hereof shall remain in full force and effect until the
fifth business day immediately preceding the effective date of such redemption.
6. SUBORDINATION.
(a) The Company, for itself, its successors and assigns, covenants and
agrees, and the Holder of this Debenture, by acceptance hereof, covenants and
agrees, that payment of the principal of and interest on this Debenture is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all Senior
Indebtedness. "Senior Indebtedness" means the principal of, premium, if any, and
unpaid interest on (a) indebtedness of the Company (including indebtedness of
others guaranteed by the Company), other than this Debenture, whether
outstanding on the date of original issuance of this Debenture or hereafter
created, incurred, assumed, or guaranteed, (i) for money owing to banks, (ii)
for money borrowed from other than banks or (iii) arising under a lease of
property, equipment or other assets, which indebtedness, pursuant to generally
accepted accounting principles then in effect, is classified upon the balance
sheet of the Company as a liability of the Company, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such indebtedness is not superior in right of payment to this
Debenture, and (b) renewals, extensions, modifications and refundings of any
such indebtedness.
(b) Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, whether
in bankruptcy, insolvency, reorganization or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Company or otherwise the holders of all Senior
Indebtedness shall be entitled to receive payment in full of the principal
thereof, premium, if any, and the interest due thereon before the Holder of this
Debenture is entitled to receive any payment of principal or interest on this
Debenture; and in the event that, notwithstanding the foregoing, any
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<PAGE>
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Holder of this
Debenture before all Senior Indebtedness is paid in full, such payment or
distribution shall be paid over to the holders of such Senior Indebtedness or
their representative or to the trustee under any indenture or agreement under
which any instruments evidencing any of such Senior Indebtedness may have been
issued, ratably as aforesaid, for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have been
paid in full, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
(c) Subject to the payment in full of all Senior Indebtedness, the Holder
of this Debenture shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of the Company applicable to
Senior Indebtedness until the principal of and interest on this Debenture shall
be paid in full and no such payments or distributions to the Holder of this
Debenture of cash, property or securities otherwise distributable to the Senior
Indebtedness shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the Holder of this Debenture, be deemed to be a
payment by the Company to or on account of this Debenture. It is understood that
the provisions of this Section 5 are and are intended solely for the purpose of
defining the relative rights of the Holder of this Debenture and the holders of
Senior Indebtedness, on the other hand. Nothing contained in this Debenture is
intended to, or shall, impair, as between the Company, its creditors other than
the holders of Senior Indebtedness, and the Holder of this Debenture, the
obligation of the Company, which is unconditional and absolute, to pay to the
Holder of this Debenture principal of and interest on this Debenture as and when
the same shall become due and payable in accordance with its terms, or to affect
the relative rights of the Holder of this Debenture and creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything in this
Debenture prevent the Holder of this Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Debenture, subject
to the rights, if any, under this Section 5 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
(d) If the Holder of this Debenture does not file a proper claim or proof
of debt in the form required in any proceeding referred to above prior to 30
days before the expiration of the time to file such claim in such proceeding,
then the holder of any Senior Indebtedness is hereby authorized, and has the
right, to file an appropriate claim or claims for or on behalf of the Holder.
(e) The Holder of this Debenture by its acceptance hereof agrees to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Section 5.
7. REGISTERED HOLDER. The Company may for all purposes treat the
registered holders on its books and records of this Debenture as the Holder.
8. DENOMINATIONS. Debentures (and any Debenture issued in exchange, upon
transfer or upon conversion) may be issued in a minimum principal amount of
$10,000 (or such lesser amount upon a conversion in part of a Debenture provided
such lesser amount represents such Holder's entire holding of Debentures).
9. EVENTS OF DEFAULT.
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(a) An "Event of Default" under this Debenture occurs if:
(i) the Company defaults in effecting a conversion of this Debenture
in accordance with the provisions hereof and such default continues for a
period of 10 business days;
(ii) the Company defaults in the payment of the principal of or
interest on this Debenture when the same becomes due and payable and, in
the case of a default in any interest payment, the same continues for a
period of 30 days;
(iii) the Company or any subsidiary pursuant to or within the
meaning of any federal or state bankruptcy, insolvency or other law for
the relief of debtors ("Bankruptcy Law"):
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding;
(C) consents to the appointment of any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law
(a "Custodian") of it or for any substantial part of its property;
or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to
insolvency; a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (I) is for relief against the
Company or any subsidiary in an involuntary case or proceeding; (II)
appoints a Custodian of the Company or any subsidiary or for any
substantial part of its property; or (III) orders the winding up or
liquidation of the Company or any subsidiary; or similar relief is
granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; or
(iv) any final judgment or decree for the payment of money in excess
of $1,000,000 (to the extent not covered by insurance) is rendered against
the Company or any subsidiary and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following such
judgment during which such judgment or decree is not discharged, waived or
the execution thereof stayed and, in the case of (B), such default
continues for 10 days after the notice specified below.
The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is 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. A
default under clause (iii) or (iv) above is not an Event of Default until the
Holder of this Debenture notifies the Company of such default and the Company
does not cure such default within the time specified after receipt of such
notice. Such notice must specify the default, demand that it be remedied and
state that such notice is a "Notice of Default". Upon receipt of a
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Notice of Default, the Company shall deliver to the Holder of this Debenture,
within 30 days, written notice of the status of such Event of Default and what
action the Company is taking or proposes to take with respect thereto.
(b) If an Event of Default (other than an Event of Default specified in
clauses (iii) above) occurs and is continuing, the Holder of this Debenture may
declare the principal of and accrued interest on this Debenture to be
immediately due and payable and upon such declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in clause (iii) above occurs, the principal of and interest on this Debenture
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Holder of this Debenture.
10. NO AMENDMENT. No provision of this Debenture may be amended, altered
or modified without the written agreement of the Holder and the Company.
11. NO VOTING RIGHTS. This Debenture shall not entitle the Holder hereof
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 attend any meetings of stockholders or any other proceedings of the Company.
12. LOST OR DESTROYED DEBENTURE. 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 thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. The Holder of this Debenture,
by acceptance hereof, agrees that it will not offer, sell or otherwise dispose
of this Debenture or the shares of Common Stock issuable upon conversion hereof
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), including Regulation
S promulgated under the Securities Act, or any applicable state blue sky laws
relating to the sale of securities and the Holder agrees to provide the Company
with such documentation as the Company shall deem necessary in accordance with
this Debenture and the Securities Purchase Agreement to demonstrate that such
offer, sale or disposition complies with applicable securities laws.
14. ASSIGNMENT AND TRANSFER. Prior to effecting any assignment or transfer
of this Debenture, the Holder shall have delivered to the Company a completed
Certificate of Transfer, substantially in the form of Exhibit B hereto, and, if
required, a Seller Representation Letter, substantially in the form of Exhibit C
hereto. The Company shall not be required to register the transfer of any
Debenture unless and until it is in possession of such completed Certificate of
Transfer and, if required, Seller Representation Letter, and any assignment or
transfer of this Debenture not made in accordance with the terms hereof shall be
null and void and of no force or effect.
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15. GOVERNING LAW. This Debenture shall be governed by, enforced under and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
16. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the City of
New York.
17. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be given as provided herein or delivered against receipt
if to (i) the Company, having an address c/o Wuersch & Gering LLP, 11 Hanover
Square, 21st Floor, New York, NY 10005; facsimile no.: 212-509-9559, Attention:
Chief Executive Officer and (ii) the Holder of this Debenture, to such Holder at
its last address as shown on the Debenture register (or to such other address as
any such party shall have furnished to the other in writing from time to time).
Except as otherwise set forth herein, any notice or other communication mailed
or otherwise delivered shall be deemed given at the time of receipt thereof.
18. WAIVER.
(a) The Company hereby waives presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default hereunder, the
Company agrees to pay all costs of collection, including reasonable attorneys'
fees.
(b) Any waiver by the Company or the Holder hereof 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 hereof 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.
19. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is
invalid, illegal or unenforceable, the remaining provisions 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.
[signature page to follow]
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: October 15, 1998
SPECTRE INDUSTRIES, INC.
By:________________________________
Name:
Title:
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ASSIGNMENT:
I or we assign and transfer this Debenture to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
and irrevocably appoint _________________________________ as agent to transfer
this Debenture on the books of the Company. The agent may substitute another to
act for him.
Date:______________________________
___________________________________
(Sign exactly as your name appears on the face of this Debenture)
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EXHIBIT A
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE OCTOBER 15, 2001
Notice of Conversion
(To be executed by the Holder in order to convert the Debenture or portion
thereof)
The undersigned hereby irrevocably elects to convert (the entire principal
amount) ($____________ principal amount) of Debenture No._____ into shares of
Common Stock, $.0001 par value (the "Common Stock"), of Spectre Industries, Inc.
(the "Company") as of the Date of Conversion (which shall be the date of receipt
by facsimile by the Company of this Notice of Conversion). If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates as reasonably requested by the Company or its Transfer Agent.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Debenture shall be made in compliance with, pursuant to an
exemption from registration under the Securities Act. The undersigned represents
and warrants that it has made and will make any filings with the Securities and
Exchange Commission as may be required to be made by it from time to time.
If the stock certificate is to be made out in another person's name, fill in the
form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's U.S. social security or tax identification number, if any)
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Conversion calculation:
Date of Conversion: _______________________________
Applicable Conversion Price: _______________________________
Total number of shares: _______________________________
Accrued Interest: _______________________________
Name of Holder: _______________________________
By:________________________________
Name:
Title:
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EXHIBIT B
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE OCTOBER 15, 2001
Certificate of Transfer
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Certificate of Transfer in connection with
the proposed transfer of Certificates No. ______________________________________
________________________________________________________________ of the 10%
Convertible Debentures due October 15, 2001 (the "Debentures") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Debenture,
the shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Debentures are convertible. For purposes of this letter,
the term "Securities" shall mean the Debentures or the Shares, as the case may
be, that are the subject of such proposed transfer.
The undersigned hereby confirms that:
(i) The undersigned is
CHECK ONE BOX BELOW
|_| (a) not a U.S. person within the meaning of Regulation S under the
Securities Act of 1933, as amended ("Regulation S") and the transfer of
the Securities has occurred outside of the United States in accordance
with the requirements of Regulation S; or
|_| (b) the undersigned is an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), an "Accredited Investor");
(ii) (A) the Securities have been acquired by the undersigned for the
undersigned's own account or for the account of one or more other Accredited
Investors for each of which the undersigned exercises sole investment discretion
or (B) the undersigned is a "bank", within the meaning of Section 3(a)(2) of the
Securities Act, or a "savings and loan association" or other institution
described in Section 3(a)(5)(A) of the Securities Act that is acquiring the
Securities as fiduciary for the account of one or more institutions for which
the undersigned exercises sole investment discretion;
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(iii) the undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of purchasing the Securities;
(iv) the undersigned is not acquiring the Securities with a view to the
distribution thereof or with any present intention of offering or reselling the
Securities, except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the undersigned is
acting as fiduciary shall remain at all times within its control; and
(v) all of the representations and warranties contained in that certain
Subscription Agreement between the Company and the original holder of the
Debentures, a copy of which has heretofore been delivered or made available to
the undersigned (the "Subscription Agreement") are true and correct with respect
to the undersigned as of the date hereof and the date of transfer of the
Securities.
The undersigned agrees to be bound by all of the terms and conditions of the
Subscription Agreement.
The undersigned understands that the proposed transfer of the Securities does
not involve any public offering within the United States within the meaning of
the Securities Act and that such proposed transfer of the Securities has not
been registered under the Securities Act or any applicable state securities
laws, and the undersigned agrees, on its own behalf and on behalf of each
account for which the undersigned acquires any Securities, that such Securities
may be resold or otherwise transferred only (a) to the Company or any subsidiary
thereof, (b) inside the United States to an Institutional Accredited Investor
that, prior to such transfer furnishes to the Company a signed letter containing
the same representations and agreements relating to the restrictions on transfer
of such Securities set forth herein, (c) outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (d)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if applicable) or (e) pursuant to a registration statement which
has been declared effective under the Securities Act. The undersigned agrees
that any such transfer of Securities referred to in this paragraph shall be in
accordance with applicable securities laws of any State of the United States or
any other applicable jurisdiction and in accordance with the legends set forth
on the Securities. The undersigned further agrees to provide any person
purchasing any of the Securities from the undersigned a notice advising such
purchaser that resales of such Securities are restricted as stated herein. The
undersigned understands that the registrar and transfer agent for the Securities
(which in the case of the Debentures shall be the Company) will not be required
to accept for registration or transfer any Securities, except upon presentation
of evidence satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. The undersigned further understands that any
Securities will be in the form of definitive physical certificates and that such
certificates will bear a legend or legends (unless the sale of the Securities
has been registered under the Securities Act) reflecting the substance of this
paragraph.
The undersigned acknowledges that the Company, others and you will rely upon the
undersigned's confirmations, acknowledgments and agreements set forth herein,
and the undersigned agrees to notify you promptly in writing if any of its
representations or warranties herein ceases to be accurate and complete.
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IN WITNESS WHEREOF, the undersigned has duly executed, or caused its duly
appointed representative to execute this Certificate of Transfer on the date
specified below.
___________________________________
(NAME OF TRANSFEREE)
By:________________________________
Name:______________________________
Title:_____________________________
Address:___________________________
___________________________________
___________________________________
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Exhibit C
SPECTRE INDUSTRIES, INC.
10% CONVERTIBLE DEBENTURES DUE OCTOBER 15, 2001
Seller Representation Letter
(required only for resales into the United States)
To: Spectre Industries, Inc.
Attn. Chief Executive Officer
Ladies and Gentlemen:
The undersigned is delivering this Seller Representation Letter in connection
with the proposed transfer of Certificates No. ________________________________
__________________________________________________________ of the 10%
Convertible Debentures due October 15, 2001 (the "Debentures") of Spectre
Industries, Inc. (the "Company") or, prior to the registration thereof under the
United States Securities Act of 1933 pursuant to that certain Registration
Rights Agreement between the Company and the initial holder of the Debenture,
the shares of Common Stock, par value $.0001 per share (the "Shares"), of the
Company into which such Debentures are convertible. For purposes of this letter,
the term "Securities" shall mean the Debentures or the Shares, as the case may
be, that are the subject of such proposed transfer.
In order to effect the transfer of the Securities by the undersigned (the
"Transferor") without registration under the U.S. Securities Act of 1933, as
amended (the "Securities Act") and to have the legend removed from the
Securities, the Transferor represents, warrants and acknowledges to the Company
that:
1. the Transferor has not been engaged as a distributor or dealer by the Company
or anyone else, and is not receiving a selling commission fee or other
remuneration, with respect to the Securities Purchase Agreement pursuant to
which the Debentures were originally issued and sold (the "Securities Purchase
Agreement") or otherwise in connection with any purchase and/or sale of the
Securities;
2. neither the Transferor nor any person acting for the Transferor has conducted
any general solicitation relating to the offer and sale of the Securities in the
United States
3. the Transferor understands that the transfer of the Securities to the
Purchaser on the books of the Company is to be made in reliance on the specific
exemptions from the registration requirements of the United States federal
securities laws and any applicable state securities laws ("State Acts")
specified in the attachment hereto and that the Company is relying upon the
truth and accuracy of, and the Transferor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Transferor to sell, transfer or otherwise dispose of the
Securities;
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4. the Transferor is not transferring the Securities to settle any put option,
short position or other similar instrument or position with respect to the
Shares or securities of the same class as the Shares;
5. assuming that the Debentures were originally issued in compliance with
Regulation S under the Securities Act, upon consultation with counsel, the
Transferor believes that the sale, transfer or other disposition of the
Securities in respect of which this letter is being provided is not in violation
of the Securities Act, the U.S. Securities Exchange Act of 1934, as amended, any
applicable State Acts or the rules and regulations of the U.S. Securities
Exchange Commission and any state securities commissions promulgated under any
of the foregoing; and
6. the representations and warranties made by the Transferor to the Company at
the time that the Transferor acquired the Securities are true and correct as of
the date hereof and as of the effective date of the transfer.
Transferor:
___________________________________
Dated:_____________________________
By:________________________________
Name:
Title:
2
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT, dated as of this 29th day of January,
1999 (This "Agreement") between Barbara Hutter, for herself and the holders set
forth on the signature page hereof, ("Subscriber") and Spectre Industries Inc.,
a Nevada corporation (the "Company").
WHEREAS, pursuant to that certain Subscription Agreement, dated as
of January 29, 1999 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Purchase Agreement"), between Subscriber and
the Company and subject to the terms thereof simultaneously with the execution
and delivery of this Agreement, Subscriber is purchasing from the Company $
170,000.00 principal amount of the Company's 10% Convertible Debentures dated
January 29, 1999 convertible into shares (the "Shares") of common stock of the
Company, $.0001 par value (the "Company Common Stock").
WHEREAS Subscriber and the Company desire to enter into this
Agreement to provide certain registration rights with respect to the Shares.
Accordingly, the parties hereto agree as follows:
1. Certain Definitions.
Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Purchase Agreement. As used in this Agreement, the
following terms shall have the meanings ascribed to them below:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.
"Demand Registration Request" shall have the meaning set forth in
Section 2.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at any time.
"Holder" or "Holders" shall mean Subscriber and/or any party who
shall hereafter acquire Registrable Securities from Subscriber in accordance
with the Purchase Agreement and to whom Subscriber assigns rights under this
Agreement.
"Person" shall mean any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
"Purchase Agreement" shall have the meaning set forth in the
recitals of this Agreement.
"Registrable Securities" shall mean any shares of Common Stock
acquired pursuant to the Purchase Agreement (and any shares issued upon any
subdivision, combination or reclassification of such shares or any stock
dividend in respect of any of such shares).
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"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at any time.
2. Registration under Securities Act
2.1. Registration.
(a) Registration by Company. The Company agrees to file a
registration statement under the Securities Act covering the Registrable
Securities as soon as commercially reasonable after the date of issuance
of the Debentures and to use its best efforts to effect the registration
under the Securities Act of such Registrable Securities.
(b) Registration Statement Form. Registrations under this Agreement
shall be on such appropriate registration form of the Commission as shall
be reasonably selected by the Company.
(c) Expenses. The Company will pay the registration expenses in
connection with any registration requested pursuant to this Agreement.
(d) Selection of Underwriters. The managing underwriter, underwriter
or underwriters, if any, of each offering of the Registrable Securities so
to be registered shall be reasonably selected by the Company.
2.2. Piggyback Registrations.
(a) If, at any time, the Company proposes or is required to register
any of its equity securities (which term as used in this Agreement shall not be
deemed to include debt securities which are convertible into or exchangeable
for, or which carry warrants or rights to subscribe for or purchase, an equity
security) under the Securities Act (other than registrations solely of
securities in connection with an employee benefit plan or dividend reinvestment
plan or a merger or consolidation) pursuant to a registration statement on Form
S-1, Form S-2 or Form S-3 (or an equivalent general registration form then in
effect), whether or not for its own account, and the Registrable Securities are
not then registered pursuant to Section 2.1 hereof, the Company shall give
prompt written notice of its intention to do so to each of the Holders of record
of Registrable Securities. Upon the written request of any Holder, made within
15 days following the receipt of any such written notice (which request shall
specify the maximum number of Registrable Securities intended to be disposed of
by such Holder and the intended method of distribution thereof), the Company
shall, subject to Sections 2.2(b), 2.3 and 2.6 hereof, use its commercially
reasonable efforts to cause all such Registrable Securities, the Holders of
which have so requested the registration thereof, to be registered under the
Securities Act (with the securities which the Company at the time proposes to
register) to permit the sale or other disposition by the Holders (in accordance
with the intended method of distribution thereof) of the Registrable Securities
to be so registered. No registration effected under this Section 2.2(a) shall
relieve the Company of its obligations to effect Demand Registrations upon
request under Section 2.1.
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(b) If, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such abandoned
registration, without prejudice, however, to the rights of Holders under Section
2.1, and (ii) in case of a determination to delay such registration of its
equity securities, shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities.
(c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 2.2 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
2.3. Limitations on Registration. The Company shall not be required to
effect any registration of Registrable Securities pursuant to Section 2.1 or 2.2
hereof if it shall deliver to the Holder an opinion of counsel (which opinion
and counsel shall be reasonably satisfactory to the Holder) to the effect that
all Registrable Securities held by the Holder may be sold immediately in the
public market without registration under the Securities Act and any applicable
state securities laws.
2.4. Cooperation.
(a) Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Holder will give their full cooperation to the
Company, its underwriters, if any, and their respective counsel and accountants
in preparing such registration statement, each prospectus and amendment related
thereto, including access to books and records (to the extent customarily given
to underwriters) and such opportunities to discuss any factual matters as shall
be deemed necessary by the Company to conduct a reasonable investigation within
the meaning of the Securities Act.
(b) Further Assurances. Each Holder shall immediately notify the Company
upon discovery that the prospectus included in a registration statement includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made. At the
request of the Company each Holder shall take any and all further action, or
refrain from any specified action, as the case may be, so that in the sole
judgment of the Company such prospectus shall not include 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 not misleading in the light of the
circumstances under which they were made.
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2.5. Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless the Holders and their respective
directors, officers, partners, agents and affiliates and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls any Holder or any such underwriter
within the meaning of the Securities Act, insofar as losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and the Company will reimburse the Holders and
each such director, officer, partner, agent or affiliate, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument executed by or on behalf of the Holders or underwriter, as the case
may be, specifically stating that it is for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus so
long as such final prospectus, and any amendments or supplements thereto, have
been furnished to such underwriter. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Holders
or any such director, officer, partner, agent or affiliate or controlling Person
and shall survive the transfer of such securities by the Holders.
(b) Indemnification by the Holders. As a condition to including any
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from the Holders, to indemnify and
hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.5) the Company, and each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was
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made in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by the Holders specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of the Holders under this
Section 2.5(b) shall be limited to the amount of proceeds received by the
Holders in the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by the Holders.
(c) Contribution. If the indemnification provided for in this Section 2.5
shall for any reason be held by a court to be unavailable to an indemnified
party under subparagraph (a) or (b) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the Holders, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Company
and the Holder from the offering of the securities covered by such registration
statement. 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. In addition,
no Person shall be obligated to contribute hereunder any amounts in payment for
any settlement of any action or claim effected without such Person's consent,
which consent shall not be unreasonably withheld.
(e) Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 2.5 (with
appropriate modifications) shall be given by the Company and the Holder with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
required by this Section 2.5 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred. In any case in which
it shall be judicially determined that a party is not entitled to
indemnification or contribution, any payments previously received by such party
hereunder shall be promptly reimbursed.
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3. Additional Provisions
(a) Subscriber and the Holders may assign their respective rights and
obligations under this Agreement to any other Persons provided that notice of
such assignment is provided to the Company within a reasonable period of time of
such assignment.
(b) The provisions contained in Sections 6, 7, 11, 12 and 13 of the
Purchase Agreement are herein incorporated by reference, and each reference
therein to the Purchase Agreement shall, for purposes of this Agreement, be
interpreted to refer to each of the Purchase Agreement and this Registration
Rights Agreement, with full force and effect as if fully set forth herein. In
addition, with respect to notices, all notices or communications to Holders
shall be delivered in accordance with the information such Persons provide the
Company from time to time.
[signature page to follow]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
SPECTRE INDUSTRIES INC.
By: /s/ Ian S. Grant
-------------------------------------
Name:
Title:
SUBSCRIBER: /s/ Barbara Hutter
By:
-------------------------------------
Name:
Title:
List of Holders
Barbara Hutter
Gianni Garzoli
Borut Marincek
Elisabeth Garzoli
Bettina Hutter
Katja Hutter
7
EXHIBIT 10.1
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of June, 1998 by and
between SPECTRE Industries, Inc., a corporation formed under the laws of the
State of Nevada (hereinafter referred to as ("SPECTRE") , and I.S. Grant and
Company Ltd., a British Columbia Corporation (hereinafter referred to as
("Consulting Company") and Ian S. Grant (hereinafter referred to as "Grant").
RECITALS
A. SPECTRE wishes to contract the Consulting Company and be assured of its
right to Consulting Company services upon the terms and conditions
hereinafter set forth;
B. Consulting Company is in the business of providing on-site management
and marketing services to its clients and is willing to be contracted by
SPECTRE upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the recitals, the promises, covenants,
conditions and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed as follows:
1. Contract for Service: SPECTRE hereby contracts Consulting Company to
provide said services. In this capacity, Consulting Company is charged
with the following duties and responsibilities:
a) Responsibility to manage and direct the business of SPECTRE with
respect to specific management objectives as set out by SPECTRE
management and agreed to by Consulting Company.
b) Responsibility to direct the corporate management group with respect
to matters such as strategic planning, capital structure, new
business development and cost base management.
c) Booking additional opportunities for SPECTRE .
d) Consulting Company will be responsible to SPECTRE's appointed
representative.
2. Contract Term: SPECTRE hereby contracts the Consulting Company and the
Consulting Company hereby agrees to serve SPECTRE pursuant to the terms
and conditions of the Agreement commencing upon the execution hereof and
terminating June 30, 2003. This Contract Agreement shall terminate only
pursuant to the provisions of Sections 8 hereof. Hereinafter such period
of service is referred to as the "Contract Term".
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3. Acceptance of Contract and Extent and Place of Service: Consulting Company
hereby agrees that it will provide certain employees to provide said
services for SPECTRE during the Contract Term for the compensation set
forth herein, and that it will well and faithfully perform the duties and
responsibilities of such contract. Consulting Company further agrees that
it will devote such business hours to the business of SPECTRE as are
required. For the duration of the Contract Term, SPECTRE shall cause the
appointment and election of Grant as a director of SPECTRE and any of its
subsidiaries and /or joint venture companies and shall cause annually
Grant to be elected as Chief Executive Officer and/or President. SPECTRE's
obligations pursuant to this agreement shall be borne directly or
indirectly by any of its affiliated or subsidiary companies.
4. Consulting Fees: As compensation for the services to SPECTRE during the
Contract Term, the Consulting Company shall receive an aggregate annual
base fee per year as follows:
Year ending:
June 30,1999 - $90,000
June 30, 2000 - $100,000
June 30, 2001 - $110,000
June 30, 2002 - $121,000
June 30, 2003 - $133,000
All references to compensation and expenses are herein expressed in United
States dollars.
5. Performance Bonus: In addition to the above base fee compensation,
Consulting Company shall be entitled to receive an annual bonus of an
amount equal to five per cent (5%) of SPECTRE's consolidated net cash flow
calculated before deductions for interest, taxes, amortization and
depreciation.
6. Benefits:
Following June 30, 1998, Consulting Company shall be entitled to a monthly
car allowance of Five Hundred dollars ($500);
Consulting Company shall be entitled paid leave of four (4) weeks per
year.
7. Expenses During the Contract Term: SPECTRE shall reimburse Consulting
Company for expenses reasonably incurred on behalf of SPECTRE in
connection with the performance of its services thereunder, provided the
same are supported by sufficient documentation as to allow SPECTRE to
expense the same on its federal income tax return. All such expense
reports will be submitted to SPECTRE 's representative to review and
approve such expense reports.
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Consulting Company shall be entitled to participate in SPECTRE's stock
incentive program due to Grant's service as an Officer and Director. Said
participation shall be in accordance with fair and reasonable standards
for a Company's President and Chief Executive Officer.
8. Confidentiality: Consulting Company shall hold in confidence, and shall
not disclose to any third party or use any confidential information of
SPECTRE (other than in respect of the good faith performance of Consulting
Company's duties under this Agreement) where such information was obtained
by Consulting Company in the course of providing services to SPECTRE under
this agreement, except as required by law (including any applicable
securities laws or the rules of any applicable securities commission) or
legal process.
9. Non-Competition: None of Consulting Company or its directors, officers, or
employees or Ian Grant shall directly or indirectly (through and affiliate
or otherwise) own, manage, operate, join, control or otherwise participate
in, whether as a partner, shareholder or otherwise, any enterprise in the
business of representing manufacturers in the sale of spare parts in the
automotive wholesale market or the development, sale or distribution of
software for automotive or other spare parts in Canada or the United
States during the term of this agreement and during the one year period
following the termination or expiration of this agreement. Any interest in
Grant Brothers Sales, Ltd., held by the Consulting Company or its
directors, officers, or employees, including Ian S. Grant, is specifically
excluded from the provisions of this paragraph.
Without the consent of SPECTRE, none of Consulting Company or its
directors, officers or employees or Ian Grant shall solicit for employment
or employ any employee of SPECTRE during the term of this Agreement and
during the one year period following the termination or expiration of this
Agreement.
10. Termination: This agreement and the Contract Term shall be terminated by:
a. The death and/or permanent disability of certain employees of
Consulting Company which renders the Consulting Company unable to
perform the services contemplated hereby in the absolute discretion
of the Board of Directors of the Company upon the advice of a
physician of their choice;
b.. Termination for cause may occur without prior notice to Consulting
Company; and shall occur only upon the unanimous approval of all the
Directors with the exception of Grant.
If the Consulting Company's contract is terminated pursuant to paragraph
10a or 10b, the Consulting Company and Grant hereby consent to resign any
and all positions as an officer and/or director of SPECTRE forthwith.
SPECTRE shall have no further obligations to the Consulting Company
hereunder and all of SPECTRE's obligations shall be deemed to have been
fulfilled. In the event of termination by SPECTRE pursuant 8b and 8c,
SPECTRE shall pay to consulting Company or its personal
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representatives the full compensation due pursuant to this agreement
through the date of termination.
If the Consulting Company's contract is terminated without just cause, the
Consulting Company will be entitled to severance including consulting fee,
benefits, car allowance, bonus and stock options for the twelve months
following termination.
11. Controlling Law: This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia.
12. Amendment: This Agreement embodies the entire Agreement of the parties
respecting the matter within its scope, supersedes all previous
agreements, if any, oral or written, may be modified only in writing, and
shall be binding upon the parties hereto, their heirs, executors,
administrators or successors.
13. Notices: Any notices or other communications required or permitted
hereunder shall be deemed given when deposited in registered or certified
mail, postage prepaid, and if to the Consulting Company, addressed to I.S.
Grant & Company Ltd., 3992 Sunnycrest Drive, North Vancouver, British
Columbia, V7R 3C9, except as shall have been specified in writing by
either party to the other.
14. Severability of Provisions: If any of the provisions of this Agreement
shall be held invalid, the remainder of this Agreement shall not be
affected thereby.
15. Descriptive Headings: Descriptive headings of the several sections of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
IN WITNESS WHEREOF, SPECTRE has caused this Agreement to be executed on its
behalf by its Director and attested to by its Secretary, each of whom has been
duly authorized and its corporate seal to be affixed hereto, and the Consulting
Company has hereunto signed the Agreement, all as of the date and year first
written above.
SPECTRE INDUSTRIES, INC. I.S. GRANT & COMPANY LTD.
Ian S. Grant
/s/ Olof Hildebrand /s/ Ian S. Grant
- ----------------------------------- ----------------------------------------
By: By: Ian S. Grant
Title
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EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
This Agreement is made as of January 1, 1999, between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada (the "Vendor"),
and
GRANT AUTOMOTIVE GROUP INC., a corporation existing
under the laws of Ontario (the "Purchaser").
RECITALS
A. The Vendor operates a wholesale automotive business group consisting of the
traditional automotive division and the heavy duty division.
B. The Vendor has agreed to sell and the Purchaser has agreed to purchase
certain assets of the Vendor relating to the Business on the terms set out in
this Agreement.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Accounts Receivable has the meaning given to it in section 2.1(a).
(b) Agreement means this asset purchase agreement including any recitals and
schedules to this asset purchase agreement, as amended, supplemented or restated
from time to time.
(c) Business means the business carried on by the Vendor in respect of its
wholesale automotive business group which consists of the Vendor's traditional
automotive division and heavy duty division.
(d) Closing Time means the first moment in time on the date of this Agreement.
(e) Contracts has the meaning given to it in section 2.1(b).
(f) Encumbrances has the meaning given to it in section 4.4.
(g) Permitted Liens has the meaning given to it in section 4.4
(h) Purchase means the transaction of purchase and sale contemplated by this
Agreement.
(i) Purchase Price has the meaning given to it in section 3.1.
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(j) Purchased Assets has the meaning given to it in section 2.1.
(k) Shared Contracts has the meaning given to it in section 2.4(a).
(l) Taxes means all taxes, including any interest, penalties or other additions
to tax, which the Vendor is required to pay, withhold or collect (including all
income or profits taxes, payroll and employee withholding taxes, unemployment
insurance, social security or welfare taxes, sales and use taxes, ad valorem
taxes, value-added taxes, excise taxes, surcharges, franchise taxes, gross
receipts taxes, business license taxes, occupation taxes, real and personal
property taxes, environmental taxes, transfer taxes, worker's compensation and
other governmental charges and similar obligations.)
1.2 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.3 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation" and the term "includes" has a similar meaning.
1.4 Schedules. The following Schedules are attached to and form part of this
Agreement:
Schedule 2.1(b) Contracts
Schedule 2.1(d) Customer List
Schedule 2.4(b) Product Lines Under Shared Contracts
SECTION 2 - PURCHASE AND SALE
2.1 Purchased Assets. On the terms of this Agreement, as at the Closing Time,
the Vendor hereby sells, assigns, conveys and delivers to the Purchaser free and
clear of all Encumbrances (except for Permitted Liens) and the Purchaser hereby
purchases, assumes and acquires, all of Vendor's right, title and interest in,
to and under the following property, assets, rights and interests of the Vendor
relating to the Business (collectively, the "Purchased Assets").
(a) Accounts Receivable. All accounts receivable and notes receivable in respect
of the Contracts, to the extent that such receivables relate exclusively to the
Business at the Closing Time, and any security arrangements and collateral
securing the payment of the foregoing and any correspondence relating to the
foregoing (collectively, the "Accounts Receivable").
(b) Contracts. All of the Vendor's right, title and interest in and to all
contracts to which the Vendor is a party, to the extent that such contracts
relate exclusively to the Business as conducted at the Closing Time, and which
are described in Schedule 2.1(b) (collectively, the "Contracts").
(c) Goodwill. The goodwill of the Vendor, to the extent that such goodwill
relates exclusively to the Business at the Closing Time, including the right to
represent the Purchaser as carrying on the Business in continuation of, and in
succession to, the Vendor.
(d) Customer Information. All customer files, customer lists and customer data,
to the extent that such information relates exclusively to the Business at the
Closing Time. Schedule 2.1(d) lists all of the customers of the Business, where
such customers were responsible for
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commission payments to the Vendor in excess of $25,000 as shown on the
year-to-date customer listing as at October 31, 1998.
(e) Rights. All causes of action, demands, judgments, claims (including
insurance claims), indemnity rights or other rights relating exclusively to the
Purchased Assets.
2.2 Assumed Liabilities. On the terms of this Agreement, as at the Closing Time,
the Purchaser hereby assumes and undertakes to discharge and perform when due
the liabilities and obligations of the Vendor arising out of the Contracts after
the Closing Time to the extent such liabilities and obligations relate to the
Business after the Closing Time.
2.3 Certain Contracts Not Assigned But Held in Trust.
(a) No Assignment. Notwithstanding any term in section 2.1, this Agreement shall
not constitute an actual or attempted sale, assignment or conveyance of any
Contract or part of any Contract contemplated to be sold, assigned or conveyed
to the Purchaser hereunder and which is:
(1) not assignable without the consent of another party and such consent
has not been obtained; or
(2) in respect of which the remedies for the enforcement thereof
available to the Vendor would not pass to the Purchaser.
In respect of each such Contract, until the date on which a Contract (to the
extent it relates exclusively to the Business) is either assigned to the
Purchaser in accordance with the terms of the applicable Contract or terminated
(and no claims are outstanding or otherwise arise between the parties to such
Contract), the Vendor shall hold each such Contact (to the extent it relates
exclusively to the Business) in trust for the Purchaser, and the Vendor shall,
at the request and under the reasonable direction of the Purchaser, in the name
of the Vendor, take all such action and do or cause to be done all such things
as are, in the opinion of the Purchaser, acting reasonably, necessary or proper
in order to preserve in a reasonable manner the value of such Contracts and that
any moneys received by the Vendor in respect of such Contracts (to the extent
they relate exclusively to the Business) are paid to the Purchaser.
(b) Steps to Obtain Assignment. Subject to section 2.4(d), the Vendor shall use
commercially reasonable efforts to obtain the consent of all parties necessary
to assign to the Purchaser each Contract (to the extent it relates exclusively
to the Business) which is subject to section 2.3(a). In no circumstance,
however, is the Vendor obliged:
(1) to pay or otherwise compensate any party to obtain any such consent;
or
(2) to attempt to obtain any such consent if, in the Vendor's reasonable
judgment, such attempt would jeopardize the benefit derived by the
Purchaser from any such Contract.
2.4 Shared Contracts.
(a) Sharing of Original Shared Contracts. The Contracts marked with an asterisk
in Schedule 2.1(b) are applicable both to the Business and to a business of the
Vendor outside of the Business (such Contracts being referred to as the "Shared
Contracts"). The Vendor shall retain the original signed copy of each of the
Shared Contracts. The Vendor shall deliver to the
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Purchaser a photocopy of each of the Shared Contracts, except to the extent that
any schedules or appendices in any Shared Contract have no application to the
Business. If the Purchaser, acting reasonably, considers it desirable in
connection with any contemplated, threatened or actual dispute or disagreement
with any customer to obtain the original of any applicable Shared Contract, the
Vendor shall deliver such original to the Purchaser for such period of time as
the Shared Contract is reasonably required by the Purchaser for such purpose.
If, however, at the same time or a later time the Vendor considers it desirable
in connection with any contemplated, threatened or actual dispute or
disagreement with the same customer to retain the original of the applicable
Shared Contract, the parties shall cooperate to satisfy their respective
interests by sharing such original in an equitable manner. Once the Shared
Contract is no longer reasonably required by the Purchaser, such contract shall
be promptly returned to the Vendor.
(b) Product Lines Under Shared Contracts. The product lines covered by the
Shared Contracts which form part of the Business are set out on Schedule 2.4(b).
With respect to the Shared Contracts, the Purchaser shall only be entitled to
the benefits arising with respect to the product lines listed on Schedule 2.4(b)
and the Vendor's obligations set out in section 2.2 shall apply only with
respect to such product lines.
(c) Amounts Under Shared Contracts. Whether expenses are chargeable under a
Shared Contract by a party or whether moneys are payable under a Shared Contract
to the Vendor (due to sales outside of the Business) or to the Purchaser (due to
sales of the Business after the Closing Date), shall be determined by the
parties acting reasonably, based on historical practices, manufacturer reports
and sales to final customers. If the parties are unable to so agree in respect
of any such matter, the President of each of the parties shall meet (including
by telephone) to settle the matter conclusively.
(d) Steps to Obtain Separate Contracts. The Vendor shall use commercially
reasonable efforts to obtain the agreement of each party to a Shared Contract
necessary to create separate agreements (on terms no less favourable to the
Purchaser than those contained in the Shared Contracts) for the product lines
set out in Schedule 2.4(b). In no circumstance, however, is the Vendor obliged:
(1) to pay or otherwise compensate any party to obtain any such
agreement; or
(2) to attempt to obtain any such agreement if, in the Vendor's
reasonable judgment, such attempt would jeopardize the benefit
derived by either party from any such Shared Contract.
SECTION 3 - PURCHASE PRICE
3.1 Purchase Price. The purchase price payable by the Purchaser to the Vendor
for the Purchased Assets (the "Purchase Price") is equal to the amount of the
"Purchase Price" as that term is defined in the share purchase agreement of even
date between the Vendor and Spectre Industries, Inc.
3.2 Payment of the Purchase Price. The Purchaser shall satisfy the Purchase
Price on the date of this Agreement by issuing to the Vendor 9,999 common shares
of the Vendor as fully paid and non-assessable.
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3.3 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Purchased Assets in the manner set out below:
(a) Accounts Receivable is equal to the amount confirmed by the audit
thereon conducted in accordance with the share purchase agreement of
even date between the Vendor and Spectre Industries, Inc.; and
(b) Contracts, goodwill, customer information and rights is equal to the
Purchase Price, less the amount attributed to the Accounts
Receivable in accordance with section 3.3(a).
The values so attributed to the Purchased Assets are the respective fair market
values thereof and each party shall file in mutually agreeable form all returns
and elections required or desirable under the Income Tax Act (Canada) in a
manner consistent with the foregoing allocations.
3.4 Income Tax Act (Canada) Election. The parties shall, as soon as possible
after the determination of the amount attributable to the Accounts Receivable,
jointly execute an election under section 22 of the Income Tax Act (Canada) with
respect to the sale of the Accounts Receivable and shall designate therein the
portion of the Purchase Price allocated to the Accounts Receivable as the
consideration paid by the Purchaser for the Accounts Receivable. The parties
shall each file such elections forthwith after the execution thereof (and, in
any event, with their respective income tax returns for the taxation year which
includes the date of this Agreement).
SECTION 4 -- REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as stated below
and acknowledges that the Purchaser is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
4.1 Corporate Matters
(a) Status and Capacity of Vendor. The Vendor is a subsisting corporation under
the laws of Canada, and has the corporate power and capacity to execute and
deliver this Agreement and to consummate the Purchase.
(b) Authorization of Purchase. The execution and delivery of this Agreement and
the consummation of the Purchase have been validly authorized by the Vendor.
(c) Enforceability. This Agreement has been validly executed and delivered by
the Vendor and is a legally binding obligation of the Vendor enforceable against
the Vendor, subject, as to enforcement, to bankruptcy, insolvency and other laws
affecting creditors' rights generally and to general principles of equity.
Except for the assignment of the Contracts, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or
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commitment of the Vendor, except for violations or defaults that
would not have a material adverse effect on the Business.
(d) Residence. The Vendor is not a non-resident of Canada within the meaning of
the Income Tax Act (Canada).
4.2 Taxes. All Taxes which could constitute or give rise to an Encumbrance on
any Purchased Asset with respect to periods prior to the date of this Agreement
and, to the extent payable by the Vendor, after the date of this Agreement will
paid by the Vendor prior to delinquency.
4.3 Contracts. All Contracts are in full force and no event, failure, condition
or act has occurred which, with the passage of time or the giving of notice,
would result in a default or breach by the Vendor, or to the knowledge of any
officer of the Vendor, any other party under any Contract, except, in each case,
for any failure to be in full force, or any such default or breach which would
not have a material adverse effect on the Business.
4.4 Title to Assets. Immediately prior to the execution and delivery of this
Agreement, the Vendor owned the Purchased Assets free and clear of all options,
pledges, mortgages, security interests, liens, charges, adverse claims, rights,
restrictions, burdens and encumbrances whatsoever (collectively, the
"Encumbrances"), except for any Encumbrance for Taxes not yet due and payable
and other statutory Encumbrances and Encumbrances that do not materially detract
from the value of the Purchased Assets or materially interfere with the use
thereof for the Business (collectively, the "Permitted Liens").
4.5 Customers. Except as set out on Schedule 2.1(d), to the knowledge of the
officers of the Vendor, none of such customers of the Business has threatened to
cease or materially alter its business relationship with the Business after the
date of this Agreement.
4.6 Permits. There are no government permits or consents relating to the
Business which are transferable to the Purchaser.
4.7 Compliance With Laws. The Vendor is in compliance with all applicable laws,
rules (having the force of law), regulations and ordinances applicable to the
Purchased Assets and the Business, except for any non-compliance which would not
have a material adverse effect on the Business. The Vendor is not in violation
of, or in default under any judgment, order, injunction, settlement agreement or
decree of, or any permit, license or other authority from, any court, agency or
instrumentality which binds the Purchased Assets or the Business, except for any
violation or default which would not have a material adverse effect on the
Business.
4.8 Litigation. There are no suits, arbitrations, or legal, administrative or
other proceedings or audits, inquiries or investigations pending, or to the
knowledge of the officers of the Vendor, threatened against or affecting the
Business or the Purchased Assets that would have a material adverse effect on
the Business or the Purchased Assets, as the case may be.
4.9 Product Liability. To the knowledge of the officers of the Vendor, since
December 1, 1997 there has been no claim, notice of claim, demand or
investigation concerning any alleged design, engineering or safety defect of any
product represented by the Vendor as part of the Business for which the Vendor
has been named a defendant or potential defendant.
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SECTION 5 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as stated below
and acknowledges that the Vendor is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
5.1 Status. The Purchaser is a subsisting corporation under the laws of Ontario,
and has the corporate power and capacity to execute and deliver this Agreement
and to consummate the Purchase.
5.2 Due Authorization. The execution and delivery of this Agreement and the
consummation of the Purchase have been validly authorized by the Purchaser.
5.3 Enforceability. This Agreement has been validly executed and delivered by
the Purchaser and is a legally binding agreement of the Purchaser enforceable
against the Purchaser, subject, as to enforcement, to bankruptcy, insolvency and
other laws affecting creditors' rights generally and to general principles of
equity. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or commitment of the Vendor.
5.4 Share Capital. The authorized capital of the Purchaser consists of an
unlimited number of common shares, of which, immediately following the closing
10,000 common shares, will be duly issued and outstanding as fully paid and
non-assessable. All such shares will be issued to, and registered in the name
of, the Vendor, free from all Encumbrances or restrictions whatsoever, except in
accordance with the articles of the Purchaser and applicable law.
SECTION 6 -- SURVIVAL AND INDEMNIFICATION
6.1 Survival. The representations and warranties contained in sections 4 and 5
shall survive the closing for a period of one year and the undertakings and
agreements to be performed after the date of this agreement shall survive the
closing indefinitely unless otherwise specified in this Agreement.
Notwithstanding the foregoing, any representation, warranty, undertaking or
agreement that survives the closing but would otherwise terminate in accordance
with this section 6.1 will continue to survive to the extent notice of any claim
has been given on or prior to the termination of such survival until the related
claim for indemnity has been satisfied or otherwise resolved as provided in this
section 6.
6.2 Indemnity for Purchaser. The Vendor shall, subject to the other terms of
this Agreement, indemnify the Purchaser and save and hold the Purchaser harmless
from, against, for and in respect of any and all damages (including amounts paid
in settlement with the Vendor's consent), losses, obligations, liabilities,
liens, deficiencies, costs and expenses, including reasonable attorneys' fees
and other reasonable costs and expenses incident to any suit, action,
investigation, claim or proceeding net of any amounts recoverable under
insurance policies, suffered, sustained, incurred or required to be paid by the
Purchaser by reason of:
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(a) any representation or warranty made by the Vendor in this Agreement
which is untrue or incorrect in any material respect;
(b) any material failure by the Vendor to observe or perform its
undertakings and agreements set out in this Agreement; or
(c) any failure by the Vendor to satisfy and discharge any other
liability or obligation (including any liability for Taxes) arising
out of the operation of the Business prior to the date of this
Agreement or the conduct of the Vendor's business after the date of
this Agreement.
6.3 Indemnity for Vendor. The Purchaser shall, subject to the other terms of
this Agreement, indemnify the Vendor and save and hold the Vendor harmless from,
against, for and in respect of any and all damages (including amounts paid in
settlement with the Purchaser's consent), losses, obligations, liabilities,
claims, deficiencies, costs and expenses, including reasonable attorneys' fees
and other reasonable costs and expenses incident to any suit, action,
investigation, claim or proceeding net of any amounts recoverable under
insurance policies, suffered, sustained, incurred or required to be paid by the
Vendor by reason of:
(a) any representation or warranty made by the Purchaser in this
Agreement which is untrue or incorrect in any material respect;
(b) any material failure by the Purchaser to observe or perform its
undertakings and agreements set out in this Agreement; or
(c) any failure by the Purchaser to satisfy and discharge any Assumed
Liability or any liability relating to the Purchased Assets or the
Business resulting from the Purchaser's operation of the Business
after the Closing Time or the Purchaser's ownership or use of the
Purchased Assets after the Closing Time.
6.4 Right to Defend. Upon receipt of a notice of a claim under this section 6 (a
"Claim Notice"), the party obliged to provide an indemnity under this Agreement
(the "Indemnifying Party") shall promptly assume the defense of, and contest or
otherwise protect against, such suit, action investigation, claim or proceeding
at its own cost and expense. The other party (the "Indemnified Party") shall
have the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of its own choosing, but the Indemnifying Party shall
be entitled to control the defense unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular matter or in
the event set out in the next sentence. In the event the Indemnifying Party
shall fail to defend, contest or otherwise protect within 10 days of the receipt
of a Claim Notice against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
to defend, contest or otherwise protect against the same and, with the prior
written approval of the Indemnifying Party, make any compromise or settlement
thereof and subject to the limitations set out in sections 6.2 or 6.3, as the
case may be, recover the entire cost thereof from the Indemnifying Party
including all amounts paid as a result of such suit, action, investigation,
claim or proceeding or the compromise or settlement thereof which was approved
by the Indemnifying Party. However, if the Indemnifying Party undertakes the
defense of such matters, the Indemnified party shall not be entitled to recover
from the Indemnifying Party any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense
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thereof other than the reasonable costs of investigation undertaken by the
Indemnified Party with the prior written consent of the Indemnifying Party.
SECTION 7 -- ARBITRATION
7.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 7.
7.2 Appointment of Arbitrators. A party desiring arbitration under this section
7 shall give a notice of arbitration to the other party containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by either party.
7.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
7.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrator shall be final and binding upon the parties in respect of all matters
relating to the arbitration, the conduct of the parties during the proceedings,
and the final determination of the issues in the arbitration.
7.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
7.6 Costs of Arbitration. The costs of any arbitration under this section 7
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
7.7 Rules. Insofar as they do not conflict with this section 7, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 7 shall be applicable to the arbitration, and the Arbitrator
shall have jurisdiction to take such action and make such orders as are
contemplated in such rules.
7.8 Condition Precedent. Submission to arbitration under this section 7 shall be
a condition precedent to bringing any action with respect to this Agreement.
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SECTION 8 -- GENERAL
8.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
If to the Vendor: Grant Brothers Sales, Limited
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
If to the Purchaser: Grant Automotive Group Inc.
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
with a copy to: Mr. Daniel Wuersch
Wuersch & Gering LLP
Attorneys At Law
11 Hanover Square
21st Floor
New York, New York
USA 10005
Fax No: (212) 509-9559
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to have been given on that business day,
and if transmitted by fax after 3:00 p.m. (Toronto time) on a business day, will
be deemed to have been given on the next business day.
8.2 Time. Time shall be of the essence of this Agreement.
8.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
8.4 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
8.5 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
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8.6 Assignment and Enurement. No party may assign this Agreement without the
prior written consent of the other party (except to an affiliate of such party),
which consent may not be unreasonably withheld or delayed. This Agreement enures
to the benefit of and binds the parties and their respective successors and
permitted assigns.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
Name:
Title:
By: /s/ Ian S. Grant
------------------------------
Name:
Title:
GRANT AUTOMOTIVE GROUP INC.
By: /s/ David Nunn
-------------------------------------
David Nunn
President
11
EXHIBIT 10.3
SHARE PURCHASE AGREEMENT
This Agreement is made as of January 1, 1999 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada (the "Vendor"),
and
SPECTRE INDUSTRIES, INC., a corporation existing under the
laws of Nevada (the "Purchaser").
RECITALS
A. The Vendor is the registered and beneficial owner of the Purchased Shares.
B. The Purchaser wishes to purchase and the Vendor wishes to sell the Purchased
Shares on the terms of this Agreement.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Agreement means this share purchase agreement including any recitals and
schedules to this share purchase agreement, as amended, supplemented or restated
from time to time.
(b) Closing Time means the first moment of time following the completion of the
transactions on the date of this Agreement contemplated by the asset purchase
agreement of even date between the Vendor and the Corporation.
(c) Common Stock means common shares, par value of US$.0001, of the Purchaser.
(d) Corporation means Grant Automotive Group Inc., a corporation existing under
the laws of Ontario.
(e) Encumbrances means all options, pledges, mortgages, security interests,
liens, charges, adverse claims, rights, restrictions, burdens and encumbrances
whatsoever.
(f) Purchase means the transaction of purchase and sale contemplated by this
Agreement.
(g) Purchase Price has the meaning given to it in section 2.1.
(h) Purchased Shares means all the common shares issued and outstanding in the
capital of the Corporation as at the Closing Time.
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(i) Securities Act means the United States Securities Act of 1933, as amended.
1.2 Other Defined Terms. Each capitalized term not otherwise defined in this
Agreement has the meaning given to it in the asset purchase agreement of even
date between the Vendor and the Corporation.
1.3 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.4 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation" and the term "includes" has a similar meaning.
SECTION 2 - PURCHASE, SALE AND PLEDGE
2.1 Purchased Shares. On the terms of this Agreement, as at the Closing Time,
the Vendor hereby sells to the Purchaser free and clear of all Encumbrances and
the Purchaser hereby purchases all of Vendor's right, title and interest in and
to the Purchased Shares for a purchase price equal to the aggregate value of
US$1,000,000, as adjusted in accordance with section 2.4, plus the market value
of the 400,000 shares of the Purchaser, calculated as at the dates on which such
shares are to be issued to the Vendor (collectively, the "Purchase Price").
2.2 Payment of the Purchase Price. The Purchaser shall satisfy the Purchase
Price:
(a) by paying at the Closing Time US$300,000 to the Vendor by wire
transfer in immediately available funds;
(b) by paying on or before March 1, 1999 US$200,000 (together with
interest calculated at the annual rate of 7.75% for the period from
January 1, 1999 to the date of payment) to the Vendor by wire
transfer in immediately available funds;
(c) subject to section 2.4, by paying on or before August 2, 1999
US$500,000 (together with interest calculated at the annual rate of
7.75% for the period from January 1, 1999 to the date of payment) to
the Vendor by wire transfer in immediately available funds;
(d) by delivering at the Closing Time 300,000 Common Stock to the
Vendor; and
(e) by delivering on or before February 1, 1999 100,000 Common Stock to
the Vendor.
2.3 Audit. Promptly following the date of this Agreement, the parties shall
retain the Vendor's auditor upon such terms as the parties agree (including as
to a quotation on price and a requirement to deliver a written report to the
parties upon completion). The parties shall request the auditor to conduct an
audit to confirm the amount of:
(a) the total revenues attributable to the Business for 1998, expressed
in US dollars and assuming an exchange rate in which one Canadian
dollar is equal to US 68(cent); and
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(b) the Accounts Receivable determined as at the close of business on
December 31, 1998.
The auditor shall provide the parties with a draft audit report on which to
comment. The parties shall have 10 days to provide their comments and then the
auditor shall finalize its report. The audit report shall be final and binding
on the parties. The Purchaser shall pay for all auditing costs attributable to
the audit of the total revenues for 1998 and the Vendor shall pay for all
auditing costs attributable to the audit of the Accounts Receivable.
2.4 Adjustment of Purchase Price. If the total revenues attributable to the
Business for 1998 set out in the audit prepared in accordance with section 2.3
exceeds US$1,000,000, then the amount of the payment referred to in section
2.2(c) shall be increased by the difference in those two amounts. If the total
revenues attributable to the Business for 1998 set out in the audit prepared in
accordance with section 2.3 is less than US$1,000,000, then the amount of the
payment referred to in section 2.2(c) shall be decreased by the difference in
those two amounts.
2.5 Pledge of Purchased Shares. As continuing collateral security for the timely
payment in full when due of all payments and deliveries of shares referred to in
section 2.2, the Purchaser hereby pledges to the Vendor, and grants to the
Vendor a security interest in, the Purchased Shares (including all share
certificates evidencing the Purchased Shares), together with any substitutions
therefor and accretions thereto, and all dividends, income, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of, or in substitution for, or in addition to,
or in exchange for any or all of the foregoing (collectively, the "Pledged
Collateral"). The Purchaser hereby delivers the Purchased Shares to the Vendor.
Prior to the release of the security interest pursuant to section 2.8, the
Common Stock delivered to the Vendor pursuant to section 2.2(d) and the
Purchased Shares shall be deposited with Vendor's counsel. The Purchaser shall
deliver all other Pledged Collateral, if any, to the Vendor as soon as possible.
Except for the pledge and grant of security interest set out in this section
2.5, the Purchaser shall not, without the prior written consent of the Vendor,
sell, assign, transfer, pledge or otherwise encumber any of its rights in or to
the Pledged Collateral.
2.6 Defaults and Remedies. If the Purchaser fails to make a payment or a
delivery of shares referred to in section 2.2 in full when due, the parties will
have 60 days to discuss the matter and to agree on an acceptable alternative,
including payment or delivery of shares in full at a later date. If the
Purchaser then fails to satisfy all the terms of such acceptable alternative or
if the parties fail to reach any agreement on an acceptable alternative within
such 60 day period, then:
(a) the Vendor may exercise any and all rights of sale, conversion,
exchange, subscription or any other rights, privileges or options
pertaining to the Pledged Collateral as if the Vendor were the
absolute owner thereof; and
(b) the Purchaser hereby irrevocably constitutes and appoints any
officer of the Vendor the true and lawful attorney of the Purchaser,
with full power of substitution, to do, make and execute all such
statements, assignments, documents, acts, matters or things with the
right to use the name of the Purchaser
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whenever and wherever such officer may deem necessary or advisable
and from time to time to exercise all rights and powers and to
perform all acts of ownership with respect to the Pledged
Collateral.
The Vendor shall then, within a reasonable period of time, purchase the Pledged
Collateral in accordance with section 2.7 or sell the Pledged Collateral,
whether in connection with a sale made under the power of sale herein contained
or pursuant to judicial proceedings or otherwise. If the Pledged Collateral is
not freely distributable to the public without the filing of a prospectus or
registration under applicable securities laws at the time of any proposed sale,
then the Vendor is not required to effect such filing of a prospectus or
registration or cause the same to be effected but, in the Vendor's discretion
(subject only to applicable law), may require that any sale hereunder (including
a sale at auction) be conducted on such terms and subject to restrictions as the
Vendor may determine, acting reasonably. The Purchaser acknowledges that any
private sale (conducted in the manner set out above) of the Pledged Collateral
may result in prices and other terms less favourable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. The Purchaser will not interfere with any right, power and remedy of the
Vendor provided for in respect of the pledge of the Pledged Collateral now or
hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Vendor of any one or more of such
rights, powers, or remedies.
2.7 Application of Proceeds. After payment of all direct and indirect expenses
respecting the sale of the Pledged Collateral, together with a deduction of all
damages incurred by the Vendor before or after the date of this Agreement, by
reason of the Purchaser's failure to satisfy its obligations under section 2.2
(net of the proceeds, if any, from the sale of the Common Stock delivered to the
Vendor pursuant to section 2.2(e)), any amount held by the Vendor in respect of
the sale by the Vendor of the Pledged Collateral shall be applied by the Vendor
to satisfy any outstanding payment and share delivery obligations referred to in
section 2.2 and if any surplus amount remains, it shall be paid to the
Purchaser. For greater certainty, the Vendor shall remain liable for the payment
of obligations and the delivery of shares referred to in section 2.2 to the
extent that they remain owing to the Vendor after application of all cash
proceeds following any sale of the Pledged Collateral. Notwithstanding the
foregoing, the Vendor may, as an alternative, purchase the Pledged Collateral.
If the Vendor so purchases the Pledged Collateral, the Vendor shall return to
the Purchaser the Common Stock delivered to the Vendor pursuant to section
2.2(d) and the amounts received by the Vendor in accordance with section 2.2,
after deducting therefrom:
(a) all direct and indirect expenses respecting any contemplated or
attempted sale of the Pledged Collateral;
(b) all direct and indirect expenses respecting the carrying out of the
purchase of the Pledged Collateral; and
(c) all damages incurred by Vendor before or after the date of this
Agreement, by reason of Purchaser's failure to satisfy its
obligations under section 2.2 (net of the proceeds, if any, from the
sale of the Common Stock delivered to the Vendor pursuant to section
2.2(e)).
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<PAGE>
Once such shares are delivered to the Purchaser and such payment is made to the
Purchaser, this Agreement shall terminate and neither party will have any
obligation to the other party hereunder.
2.8 Release of Security. Once the Purchaser has fulfilled all of its payment and
share delivery obligations in accordance with section 2.2 or in accordance with
an acceptable alternative agreed by the parties under section 2.6, the Vendor
shall promptly deliver the Pledged Collateral in its possession or control to
the Purchaser.
SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as stated below
and acknowledges that the Purchaser is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
3.1 Corporate Matters
(a) Status and Capacity of Vendor. The Vendor is a subsisting corporation under
the laws of Canada, and has the corporate power and capacity to execute and
deliver this Agreement and to consummate the Purchase.
(b) Authorization of Purchase. The execution and delivery of this Agreement and
the consummation of the Purchase have been validly authorized by the Vendor.
(c) Enforceability. This Agreement has been validly executed and delivered by
the Vendor and is a legally binding obligation of the Vendor enforceable against
the Vendor, subject, as to enforcement, to bankruptcy, insolvency and other laws
affecting creditors' rights generally and to general principles of equity.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or commitment of the Vendor.
(d) Residence. The Vendor is not a non-resident of Canada within the meaning of
the Income Tax Act (Canada).
3.2 The Corporation.
(a) Status of Corporation. The Corporation has been duly incorporated and
organized and is a subsisting corporation under the laws of Ontario. The
Corporation is a "private company" within the meaning of the Securities Act
(Ontario).
(b) Authorized and Issued Share Capital. The authorized capital of the
Corporation consists of an unlimited number of common shares, of which 10,000
common shares have been duly issued and are outstanding as fully paid and
non-assessable shares in the capital of the Corporation. The Corporation has not
issued or authorized the issue of any shares except the Purchased Shares.
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<PAGE>
(c) Title to Shares. The Vendor legally and beneficially owns and controls all
of the Purchased Shares with a good and marketable title thereto free of any
Encumbrances, other than Encumbrance contained in laws of general application.
(d) No Other Agreements. Except for the asset purchase agreement dated even date
between the Vendor and the Corporation, a copy of which has been delivered to
the Purchaser, the Corporation has not entered into any agreement with any other
party, except for any business banking agreement with the bankers to the
Corporation. The Corporation has no employees, nor has it ever employed an
employee.
3.3 Common Stock.
(a) Nature and Characteristics of Common Stock. The Vendor understands that the
Common Stock will be issued without registration under the Securities Act, in
reliance upon exemptions from registration under the Securities Act. The Vendor
also understands that such exemptions depend in part upon, and such shares will
be issued in reliance on, the representations and warranties made by the Vendor
in this section 3.3. Accordingly, the Vendor represents and warrants to
Purchaser, as of the date of this Agreement as follows:
(1) the Vendor will acquire the Common Stock for the Vendor's own
account for investment purposes only and not with a view to resale
or other distribution thereof, in whole or in part in violation of
the Securities Act and the Vendor will not assign, sell, hypothecate
or otherwise transfer any of the Common Stock in the United States
unless,
(A) a registration statement is in effect under the Securities Act
and all applicable state securities laws with respect to the
Common Stock, or
(B) a written opinion of counsel reasonably acceptable to
Purchaser is obtained to the effect that no such registration
is required.
(2) the Vendor acknowledges, agrees and is aware that,
(A) no federal, state or any foreign agency has passed upon the
accuracy, validity or completeness of any materials provided
to the Vendor relating to the Purchaser and the Common Stock
or made any finding or determinations to the fairness of an
investment in the Common Stock,
(B) the Common Stock has not been registered under the Securities
Act or under the securities laws of any other jurisdiction in
the United States,
(C) in the absence of registration under the Securities Act, an
offer or sale of any of the Common Stock by Vendor in the
United States will require the availability of an exemption
thereunder,
(D) the following restrictive legend shall be placed on the
certificates representing the Common Stock,
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL SECURITIES LAWS OF
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THE UNITED STATES OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE UNITED STATES AT
ANY TIME WHATSOEVER, EXCEPT UPON SUCH REGISTRATION OR UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY
TO THE BOARD OF DIRECTORS OF THE COMPANY THAT REGISTRATION IS
NOT REQUIRED FOR SUCH TRANSFER AND/OR SUBMISSION TO THE BOARD
OF DIRECTORS OF THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO THE BOARD OF DIRECTORS OF THE COMPANY TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE
SECURITIES LAWS IN THE UNITED STATES AND ANY RULES OR
REGULATIONS PROMULGATED THEREUNDER. UPON ANY TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ON THE LONDON STOCK
EXCHANGE, ALL LEGENDS WILL BE REMOVED WITHOUT THE NEED TO
DELIVER ANY OPINION OF COUNSEL.
(b) Acknowledgments. The Vendor acknowledges that:
(1) the Vendor has been given the opportunity to ask questions of, and
receive answers from, the Purchaser and its officers and employees
concerning the terms and conditions of the Vendor's acquisition of
the Common Stock and other matters pertaining to an investment in
the Common Stock, has been given the opportunity to obtain such
additional information necessary to evaluate the merits and risks of
acquiring the Common Stock to the extent the Purchaser possesses
such information, and has received all documents and information
that the Vendor has requested relating to an investment in the
Common Stock;
(2) the Vendor is familiar with the nature of and risks attendant to
investments in the business of the Purchaser and securities in
general and has carefully considered and has, to the extent the
Vendor believes such discussion necessary, discussed with the
Vendor's professional legal, financial and tax advisers the
suitability of an investment in the Common Stock for the Vendor's
particular financial and tax situation and has determined that the
Common stock is a suitable investment for Vendor;
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(3) the Vendor has not relied upon any representations or other
information (whether oral or written) from the Purchaser or its
directors, officers or affiliates, or from any other persons, other
than the representations and warranties made in this Agreement and
publicly available information with respect to the Purchaser, and
(4) the Vendor has made, and is solely responsible for making, the
Vendor's own independent evaluation of the economic and other risks
involved in the Vendor's investment in the Common Stock and the
Vendor's own independent decision to make such investment.
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as stated below
and acknowledges that the Vendor is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
4.1 Status. The Purchaser is a subsisting corporation under the laws of Nevada,
and has the corporate power and capacity to execute and deliver this Agreement
and to consummate the Purchase.
4.2 Due Authorization. The execution and delivery of this Agreement and the
consummation of the Purchase have been validly authorized by the Purchaser.
4.3 Enforceability. This Agreement has been validly executed and delivered by
the Purchaser and is a legally binding agreement of the Purchaser enforceable
against the Purchaser, subject, as to enforcement, to bankruptcy, insolvency and
other laws affecting creditors' rights generally and to general principles of
equity. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or commitment of the Vendor.
4.4 Common Stock. The Common Stock is fully paid and non-assessable and the
Vendor, on the date of this Agreement, will be registered as the holder of
300,000 Common Stock, free from all Encumbrances, except pursuant to the
Securities Act and the rules and regulations promulgated by the Securities and
Exchange Commission thereunder. As of the date of this Agreement, the authorized
capital stock of the Purchaser consists of 100 million shares of common stock,
of which 9,732,450 shares of common stock are outstanding as of the date hereof.
4.5 Exemption from Registration and Restrictions on Offer and Sale of Same or
Similar Securities. Assuming the representations and warranties of the Vendor
set out in section 3.3 are true and correct, the offer and sale of the Common
Stock made pursuant to this Agreement is exempt from the registration
requirements of the Securities Act and applicable state securities or "blue sky"
laws. Neither the Purchaser nor any person authorized to act on Purchaser's
behalf has, in connection with the offering of the Common Stock, engaged in:
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(a) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 501(c) under the
Securities Act);
(b) any action involving a public offering within the meaning of section
4(2) of the Securities Act; or
(c) any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock or that would
violate applicable state securities or "blue sky" laws.
Neither the Purchaser nor any person acting on behalf of Purchaser has made,
directly or indirectly, any offer or sale of Common Stock or of securities of
the same or a similar class as the Common Stock that, if as a result of the
offer and sale of the Common Stock contemplated hereby, could fail to be
entitled to exemption from the registration requirements of the Securities Act.
As used herein, the terms "offer" and "sale" have the meanings specified in
section 2(3) of the Securities Act.
4.6 Sale of Common Stock. Notwithstanding any other term in this Agreement, the
Vendor may assign, sell, hypothecate or otherwise transfer any of the 300,000
Common Stock in the United States at any time after the expiry of one year
following the date of this Agreement and this representation and warranty shall
survive the closing of the Purchase for a period of five years after the date of
this Agreement.
SECTION 5 -- SURVIVAL AND INDEMNIFICATION
5.1 Survival. The representations and warranties contained in sections 3 and 4
shall survive the closing for a period of one year and the undertakings and
agreements to be performed after the date of this agreement shall survive the
closing indefinitely unless otherwise specified in this Agreement.
Notwithstanding the foregoing, any representation, warranty, undertaking or
agreement that survives the closing but would otherwise terminate in accordance
with this section 5.1 will continue to survive to the extent notice of any claim
has been given on or prior to the termination of such survival until the related
claim for indemnity has been satisfied or otherwise resolved as provided in this
section 5.
5.2 Indemnity for Purchaser. The Vendor shall, subject to the other terms of
this Agreement, indemnify the Purchaser and save and hold the Purchaser harmless
from, against, for and in respect of any and all damages (including amounts paid
in settlement with the Vendor's consent), losses, obligations, liabilities,
liens, deficiencies, costs and expenses, including reasonable attorneys' fees
and other reasonable costs and expenses incident to any suit, action,
investigation, claim or proceeding net of any amounts recoverable under
insurance policies, suffered, sustained, incurred or required to be paid by the
Purchaser by reason of:
(a) any representation or warranty made by the Vendor in this Agreement
which is untrue or incorrect in any material respect; or
(b) any material failure by the Vendor to observe or perform its
undertakings and agreements set out in this Agreement.
5.3 Indemnity for Vendor. The Purchaser shall, subject to the other terms of
this Agreement, indemnify the Vendor and save and hold the Vendor harmless from,
against, for and
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in respect of any and all damages (including amounts paid in settlement with the
Purchaser's consent), losses, obligations, liabilities, claims, deficiencies,
costs and expenses, including reasonable attorneys' fees and other reasonable
costs and expenses incident to any suit, action, investigation, claim or
proceeding net of any amounts recoverable under insurance policies, suffered,
sustained, incurred or required to be paid by the Vendor by reason of:
(a) any representation or warranty made by the Purchaser in this
Agreement which is untrue or incorrect in any material respect;
(b) any material failure by the Purchaser to observe or perform its
undertakings and agreements set out in this Agreement.
5.4 Right to Defend. Upon receipt of a notice of a claim under this section 5 (a
"Claim Notice"), the party obliged to provide an indemnity under this Agreement
(the "Indemnifying Party") shall promptly assume the defense of, and contest or
otherwise protect against, such suit, action investigation, claim or proceeding
at its own cost and expense. The other party (the "Indemnified Party") shall
have the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of its own choosing, but the Indemnifying Party shall
be entitled to control the defense unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular matter or in
the event set out in the next sentence. In the event the Indemnifying Party
shall fail to defend, contest or otherwise protect within 10 days of the receipt
of a Claim Notice against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
to defend, contest or otherwise protect against the same and, with the prior
written approval of the Indemnifying Party, make any compromise or settlement
thereof and subject to the limitations set out in sections 5.2 or 5.3, as the
case may be, recover the entire cost thereof from the Indemnifying Party
including all amounts paid as a result of such suit, action, investigation,
claim or proceeding or the compromise or settlement thereof which was approved
by the Indemnifying Party. However, if the Indemnifying Party undertakes the
defense of such matters, the Indemnified party shall not be entitled to recover
from the Indemnifying Party any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
SECTION 6 -- ARBITRATION
6.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 6.
6.2 Appointment of Arbitrators. A party desiring arbitration under this section
6 shall give a notice of arbitration to the other party containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by either party.
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6.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
6.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrator shall be final and binding upon the parties in respect of all matters
relating to the arbitration, the conduct of the parties during the proceedings,
and the final determination of the issues in the arbitration.
6.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
6.6 Costs of Arbitration. The costs of any arbitration under this section 6
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
6.7 Rules. Insofar as they do not conflict with this section 6, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 6 shall be applicable to the arbitration, and the Arbitrator
shall have jurisdiction to take such action and make such orders as are
contemplated in such rules.
6.8 Condition Precedent. Submission to arbitration under this section 6 shall be
a condition precedent to bringing any action with respect to this Agreement.
SECTION 7 -- GENERAL
7.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
If to the Vendor: Grant Brothers Sales, Limited
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
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If to the Purchaser: Spectre Industries, Inc.
c/o Ian Grant, Chief Executive Officer
3992 Sunnycrest Drive
North Vancouver, B.C.
Canada V7R 3C9
with a copy to:
Mr. Daniel Wuersch
Wuersch & Gering LLP
Attorneys At Law
11 Hanover Square
21st Floor
New York, New York
USA 10005
Fax No: (212) 509-9559
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to have been given on that business day,
and if transmitted by fax after 3:00 p.m. (Toronto time) on a business day, will
be deemed to have been given on the next business day.
7.2 Time. Time shall be of the essence of this Agreement.
7.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
7.4 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
7.5 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
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7.6 Assignment and Enurement. No party may assign this Agreement without the
prior written consent of the other party (except to an affiliate of such party),
which consent may not be unreasonably withheld or delayed. This Agreement enures
to the benefit of and binds the parties and their respective successors and
permitted assigns.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
Name:
Title:
By: /s/ Ian S. Grant
-----------------------------
Name:
Title:
SPECTRE INDUSTRIES, INC.
By: /s/ Olof Hildebrand
-------------------------------------
Name: Olof Hildebrand
Title: Chairman
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EXHIBIT 10.4
MANAGEMENT SERVICES AGREEMENT
This Agreement is made as of January 1, 1999 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada ("Grant Brothers"),
and
GRANT AUTOMOTIVE GROUP INC., a corporation existing
under the laws of Ontario ("Grant Auto").
RECITALS
A. Grant Brothers, under the Asset Purchase Agreement, transferred its wholesale
automotive business group, consisting of its traditional automotive division and
the heavy duty division to Grant Auto.
B. On the date of this Agreement, under a share purchase agreement, Grant
Brothers sold all of the issued and outstanding shares of Grant Auto to Spectre
Industries, Inc., a corporation existing under the laws of Nevada.
C. Grant Auto wishes to have Grant Brothers provide certain services to Grant
Auto so that Grant Auto can continue to operate the Business and to maximize
Grant Auto's benefits from the operation of the Business.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Agreement means this management services agreement including any recitals
and schedules to this management services agreement, as amended, supplemented or
restated from time to time.
(b) Asset Purchase Agreement means the asset purchase agreement of even date
between Grant Brothers and Grant Auto.
(c) Business means the business transferred to Grant Auto under the Asset
Purchase Agreement, as it changes from time to time thereafter.
(d) Joint Account is defined in section 2.4.
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(e) Management Committee means the management committee established in
accordance with section 2.5(a).
(f) Monthly Base Expenses means the amount of Grant Brothers' monthly operating
expenses jointly established by the parties before the date hereof with respect
to the first fiscal year of the term of this Agreement and by the Management
Committee with respect to any subsequent fiscal year, before the beginning of
such fiscal year (and as may be adjusted by the Management Committee during any
fiscal year).
(g) Net Cash Flow of the Business means the net cash flow of the Business
determined for any particular period in accordance with generally accepted
accounting principles in effect in Canada from time to time, including the
accounting recommendations published in the Handbook of the Canadian Institute
of Chartered Accountants.
1.2 Other Defined Terms. Each capitalized term not otherwise defined in this
Agreement has the meaning given to it in the Asset Purchase Agreement.
1.3 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.4 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation".
1.5 Currency. All amounts to be paid under this Agreement are to be paid in US
dollars.
SECTION 2 - SERVICES AND FEES
2.1 Services. Subject to the terms of this Agreement, Grant Brothers shall
provide the following services to Grant Auto:
(a) Supply of Personnel. Grant Brothers shall make available to the Business
such personnel as are reasonably required to operate the Business substantially
in the manner that the Business was conducted before the date of this Agreement
and subject to any changes in the operation of the Business as are agreed on
from time to time by the Management Committee and with a view to meeting the
various sales targets in the various territories agreed by the Management
Committee from time to time. Grant Brothers may also introduce such changes as
they desire from time to time to the extent that Grant Brothers believes that
the changes will improve the operations of the Business.
(b) Provision of Office Space. Grant Brothers shall provide the necessary office
space, office equipment and office supplies for its personnel to carry out the
activities referred to in section 2.1(a).
(c) Strategic Advice. Grant Brothers shall provide all reasonable assistance to
management of Grant Auto's ultimate parent company, Spectre Industries, Inc., in
respect of strategic planning for, the capital structure of, new business
development for, and cost base management in connection with, the Business.
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(d) New Opportunities. Grant Brothers shall consider new opportunities for the
Business that would complement the Business (including the identification of
potential acquisitions and the making of introductions to potential
acquisitions). Grant Brothers shall communicate the result of such
considerations in a timely manner to Grant Auto from time to time. To this end,
Grant Brothers shall cause its Chief Operating Officer and its Chief Financial
Officer to devote at least 15% of their time to the foregoing duties. Grant Auto
shall reimburse Grant Brothers for all reasonably incurred costs directly
attributable to the identification of potential acquisitions and the making of
introductions to potential acquisitions.
(e) Monthly Reporting. Grant Brothers shall deliver to Grant Auto within 45 days
of the end of each calendar month a report in respect of the Business for such
month containing:
(1) a profit and loss statement for such month;
(2) a balance sheet as at the end of such month;
(3) a cash flow statement for such month, including a line analysis in
respect of each manufacturer; and
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
month.
(f) Quarterly Reporting. Grant Brothers shall deliver to Grant Auto within 45
days of the end of each calendar quarter a report in respect of the Business for
such quarter containing:
(1) a profit and loss statement for such quarter;
(2) a balance sheet as at the end of such quarter;
(3) a cash flow statement for such quarter, including a line analysis in
respect of each manufacturer;
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
quarter; and
(5) a financial forecast for the next three calendar quarters, including
projected profit and loss and projected cash flow for each such
quarter.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre Industries, Inc. at a mutually
agreeable time during the 60 day period following the delivery to Grant Auto of
the quarterly report to discuss the contents of that report.
(g) Annual Reporting. Grant Brothers shall deliver to Grant Auto within three
months of the end of each year under this Agreement a report in respect of the
Business for such year containing:
(1) financial statements, reviewed by the Grant Brothers' outside
accountants, for such year (containing a profit and loss statement
and a balance sheet for such year);
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(2) a financial forecast and business plan for the next two years under
this Agreement; and
(3) a detailed financial budget for the then current year under this
Agreement.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre Industries, Inc. at a mutually
agreeable time during the 60 day period following the delivery to Grant Auto of
the annual report to discuss the contents of that report. During the 180 day
period following the delivery of the annual report Grant Brothers shall provide
to Grant Auto access to the financial records which Grant Brothers maintains in
connection with the Business, including all materials used in the preparation of
the annual financial statements and all documents prepared by Grant Brothers'
outside accountants in respect of their review of such statements.
(h) Other Services. Grant Brothers shall provide to Grant Auto such other
services as the parties may agree from time to time.
2.2 Authorized Representative. To assist in fulfilling the obligations of Grant
Brothers set out in section 2.1(a), Grant Auto hereby appoints Grant Brothers as
its authorized representative to act in Grant Auto's name to carry on the
Business, including with the power to sign any agreements on behalf of Grant
Auto. Grant Auto shall ensure that its by-laws or other corporate documents
specifically authorizes such signing of documents by Grant Brothers. All new
contracts respecting the Business shall be entered into in the name of Grant
Auto.
2.3 Reimbursements, Fees and Bonuses. Grant Auto shall pay Grant Brothers the
following amounts at the times set out below.
(a) Reimbursements. By the 15th day of each month under this Agreement, Grant
Auto shall pay to Grant Brothers an amount to reimburse Grant Brothers for all
of its costs associated directly with its services provided under this
Agreement, including all amounts paid to or in respect of employees of Grant
Brothers, plus agreed overhead for such employees and all amounts reimbursed by
Grant Brothers to any of its employees in respect of services provided under
this Agreement on behalf of Grant Auto, including all amounts to be reimbursed
in accordance with section 2.1(d).
(b) Net Cash Flow Distribution. With respect to any fiscal year, the Net Cash
Flow of the Business shall be distributed between Grant Auto and Grant Brothers
as follows.
(1) The first US$100,000 of the Net Cash Flow of the Business shall be
distributed to Grant Auto.
(2) The second US$100,000 of the Net Cash Flow of the Business shall be
distributed to Grant Brothers.
(3) Any Net Cash Flow of the Business in excess thereof shall be
distributed 95% to Grant Auto and 5% to Grant Brothers.
(c) Distribution Mechanics.
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(1) General. In respect of any fiscal year during the term hereof, at
the end of each month Grant Auto shall be entitled to receive out of
the Joint Account any excess funds remaining after all costs and
expenses with respect to such month, including amounts payable under
section 2.3(a), have been paid until Grant Auto shall have received
US$100,000 (the "Grant Auto Base Compensation") in respect of such
year. Thereafter, Grant Brothers shall be entitled to receive at the
end of each month in respect of such year out of the Joint Account
any excess funds remaining after all costs and expenses with respect
to such month, including amounts payable under section 2.3(a), have
been paid until Grant Brothers shall have received US$100,000 (the
"Grant Brothers Base Compensation") in respect of such year.
Thereafter, at the end of each month in respect of such year, an
amount equal to 95% of the excess over any costs and expenses with
respect to such month, including amounts payable under section
2.3(a), shall be paid to Grant Auto (the "Grant Auto Bonus") and an
amount equal to 5% of such excess shall be paid to Grant Brothers
(the "Grant Brothers Bonus").
(2) Negative Cash Balance. If at any time in any fiscal year during the
term hereof, there shall be a negative cash balance in the Joint
Account, funds shall be contributed to the Joint Account by the
parties as follows until any such shortfall shall be covered:
(A) by Grant Brothers up to an amount equal to the aggregate Grant
Brothers Bonus paid to Grant Brothers through such date;
(B) by Grant Auto up to an amount equal to the aggregate Grant
Auto Bonus paid to Grant Auto through such date;
(C) by Grant Brothers up to an amount equal to the aggregate Grant
Brothers Base Compensation paid to Grant Brothers through such
date;
(D) by Grant Auto up to an amount equal to the aggregate Grant
Auto Base Compensation paid to Grant Auto through such date;
and
(E) by Grant Brothers.
In such event, prior to making any distribution pursuant to section
2.3(c)(1) during such fiscal year, the parties shall be entitled to
receive an amount equal to their contributions pursuant to this
section 2.3(c)(2) in the reverse order in which such contributions
were made.
(3) Year End Reconciliation. Within 10 business days of the receipt of
the audited financial statements for Grant Auto for the previous
fiscal year, the Management Committee shall determine the definitive
Net Cash Flow Distribution in accordance with section 2.3(c)(1). To
the extent any party shall have received an amount in excess of the
amount to which such party would be entitled pursuant to such
determination, such party shall pay to the other an amount equal to
such excess within 30 days of such determination.
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2.4 Joint Account. Grant Auto and Grant Brothers shall establish a joint bank
account (the "Joint Account") with a reputable financial institution in Toronto.
Any and all cash received from the accounts receivables transferred to Grant
Auto pursuant to the Asset Purchase Agreement shall be deposited in the Joint
Account. The Joint Account shall be administered by the Management Committee.
Except as otherwise set forth herein, any disposition of funds out of the Joint
Account shall require the signature of one Grant Auto representative and one
Grant Brothers representative on the Management Committee. During the term of
this Agreement, any and all amounts received by either party with respect to the
Business (other than any Net Cash Flow distribution pursuant to section
2.3(c)(1)) shall be deposited in the Joint Account and any and all expenses with
respect to the Business shall be paid out of funds available in the Joint
Account. On or prior to the 15th day of each month during the term of this
Agreement, an amount equal to the Monthly Base Expenses shall be paid to Grant
Brothers out of funds available in the Joint Account and, in the event such
amount is not so paid, each Grant Brothers representative on the Management
Committee shall be entitled to transfer from the Joint Account an amount equal
to any due and unpaid Monthly Base Expenses to Grant Brothers.
2.5 Management Committee.
(a) Purpose and Membership. A Management Committee consisting of up to two
representatives from Grant Auto (each, an "Grant Auto Representative") and up to
two representatives from Grant Brothers (each a "Grant Brothers Representative")
shall be established for the purpose of overseeing the operation of the Business
during the term of this Agreement. A party may change its representatives from
time to time by delivering a notice to this effect to the other party.
(b) Rights and Duties. The Management Committee shall:
(1) administer the Joint Account;
(2) approve the payment of any expenses to Grant Brothers in excess of
the Monthly Base Expenses;
(3) determine or amend the annual budget, the amount of the overhead
referred to in section 2.3(a) and Monthly Base Expenses; and
(4) perform such other functions as the parties may delegate to it from
time to time.
In addition, the Management Committee shall be consulted prior to any material
decision by Grant Brothers affecting (or being likely to affect) the Business or
the expansion thereof contemplated hereby, including prior to the hiring or
firing of any member of senior management of the Grant Brothers division
administering the Business or of any other employees thereof other than in the
ordinary course of business. The Management Committee shall meet in person or by
telephone conference at such times and places as shall be necessary to perform
its function, but at least once a month.
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SECTION 3 - TERM, RENEWAL AND TERMINATION
3.1 Term and Renewal. The term of this Agreement shall commence on the date
hereof and continue for three years. At the expiration of such three-year
period, this Agreement shall automatically be renewed for successive one-year
periods unless it is terminated by either party giving the other at least six
months prior written notice effective on the last day of such three-year or
one-year period, as the case may be.
3.2 Termination. Notwithstanding section 3.1, a party may terminate this
Agreement at any time on the occurrence of any of the following events:
(a) the other party fails to pay any amount when due and fails to pay
such amount within five days of receipt of a notice indicating the
non-payment;
(b) the other party breaches any of its obligations under this Agreement
and such breach is not rectified within 30 days of receipt of a
notice indicating the breach;
(c) a proceeding in bankruptcy, receivership, insolvency,
reorganization, liquidation or winding-up of the other party is
instituted by or against such other party;
(d) the other party makes a general assignment for the benefit of its
creditors; or
(e) the other party ceases to carry on business as a going concern for
more than five business days.
The expiration or termination of this Agreement shall not relieve or release a
party from any of its obligations to pay any amount due and payable or to
perform any obligation which by its nature shall survive such expiration or
termination (including the obligations set out in sections 3.5, 4.3, 5 and 6). A
party which terminates this Agreement in accordance with this section 3.2 shall
not be liable to the other party for any loss or damage of any kind whatsoever,
arising directly or indirectly from the termination of this Agreement.
3.3 Early Termination by Grant Auto. Grant Auto may terminate this Agreement if
Grant Brothers does not, within the first 12 months of this Agreement, introduce
Grant Auto to at least two reasonable potential acquisitions, as required by
section 2.1(d).
3.4 Performance of Certain Contracts. Upon the termination of this Agreement, if
any Contracts (including any Shared Contracts) remain subject to the terms of
the section in the Asset Purchase Agreement entitled "Certain Contracts Not
Assigned But Held in Trust", Grant Auto shall, from the date of the termination
of this Agreement cause all of the obligations of Grant Brothers to be satisfied
under those Contracts (except that in respect of Shared Contracts, Grant Auto
shall only be obliged to fulfil such obligations to the extent that they relate
to the Business). Grant Brothers shall, from the date of the termination of this
Agreement cause all of the obligations of Grant Brothers to be satisfied under
the Shared Contracts, but only to the extent that such obligations arise under
Shared Contracts and relate to matters not related to the Business. Except as
provided by the foregoing, the section in the Asset Purchase Agreement entitled
"Certain Contracts Not Assigned But Held in Trust" shall continue to apply to
all Contracts to which that section relates. Grant Auto shall reimburse Grant
Brothers for all direct
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expenses incurred in carrying out any obligations under that section of the
Asset Purchase Agreement.
3.5 Transfer of Business. As soon as commercially reasonable after the date
hereof, but in any event before the expiration of the term of this Agreement,
Grant Brothers shall use all commercially reasonable efforts to assign and/or
otherwise transfer to Grant Auto any and all Contracts not heretofore assigned
to Grant Auto and to obtain separate agreements for those parts of the Shared
Contracts which have been transferred to Grant Auto pursuant to the terms of the
Asset Purchase Agreement. Grant Brothers shall report semi-annually to the
Management Committee as to the progress of its efforts hereunder. To the extent
the Management Committee determines, with respect to a particular Contract, not
to seek the assignment or transfer thereof to Grant Auto or to obtain separate
agreements, the parties shall enter into an appropriate contractual relationship
which provides Grant Auto otherwise with the benefits of such Contract.
SECTION 4 - FORCE MAJEURE, LIABILITY AND INDEMNITY
4.1 Force Majeure. Neither party shall be liable to the other for any failure to
perform any obligation under this Agreement, to the extent that such failure is
beyond the reasonable control of such party (aside from lack of funds). A party
which is not able to so perform an obligation under this Agreement shall
promptly provide a notice in respect of such failure to the other party and take
all commercially reasonable steps to mitigate the effects of such failure. In
such cases, the party so failing to perform shall not be responsible to the
other party for any loss or damage of any kind whatsoever which may be incurred
by the other party or any third parties as a result of any such failure.
4.2 Liability. A party's liability to the other party under this Agreement shall
be limited to any direct loss or damage to such other party caused by the first
party's negligence or wilful misconduct. Notwithstanding the foregoing, no term
in this section 4.2 shall operate so as to limit the liability of Grant Brothers
in respect of any of its actions or failures to act, to the extent that Grant
Brothers would have been liable in respect of such actions or failures to act
had such taken place before the date of this Agreement when Grant Brothers owned
and operated the Business.
4.3 Indemnity. Subject to the limitation imposed by section 4.2, Grant Brothers
shall indemnify and save harmless Grant Auto on its behalf and as trustee for
its officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Brothers under this
Agreement. Subject to the limitation imposed by section 4.2, Grant Auto shall
indemnify and save harmless Grant Brothers on its behalf and as trustee for its
officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Auto under this Agreement.
SECTION 5 -- CONFIDENTIALITY AND COMPETITION
5.1 Confidential Information. Grant Brothers shall hold in confidence, and shall
not disclose to any third party or use any confidential information of Grant
Auto (other than in
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respect of the good faith performance of Grant Brothers' duties under this
Agreement) where such information was obtained by Grant Brothers in the course
of providing services to Grant Auto under this Agreement, except as required by
law (including any applicable securities laws or the rules of any applicable
securities commission) or legal process.
5.2 Non-Competition. Grant Brothers shall not directly or indirectly (through an
affiliate or otherwise) own, manage, operate, join, control or otherwise
participate in, whether as a partner, shareholder or otherwise, any enterprise
in the business of representing manufacturers in the sale of spare parts in the
automotive wholesale market (the "Competitive Activities"), in Canada during the
currency of this Agreement and (except where Grant Brothers terminates this
Agreement under section 3.2 other than by providing six months' notice or where
Grant Auto terminates this Agreement under section 3.2 by providing six months'
notice) during the one year period following the termination of this Agreement,
except that, notwithstanding the foregoing, such non-competition period shall
not terminate prior to the fifth anniversary of the date hereof.
5.3 Non-Solicitation. Without the consent of Grant Brothers, Grant Auto shall
not solicit for employment or employ any employee of Grant Brothers during the
currency of this Agreement and (except where Grant Auto terminates this
Agreement under section 3.2 other than by providing six months' notice) during
the one year period following the termination of this Agreement. Without the
consent of Grant Auto, Grant Brothers shall not solicit for employment or employ
any employee of Grant Auto during the currency of this Agreement and during the
one year period following the termination of this Agreement.
SECTION 6 -- ARBITRATION
6.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 6.
6.2 Appointment of Arbitrators. A party desiring arbitration under this section
6 shall give a notice of arbitration to the other party containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by either party.
6.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
6.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The
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decision of the Arbitrator shall be final and binding upon the parties in
respect of all matters relating to the arbitration, the conduct of the parties
during the proceedings, and the final determination of the issues in the
arbitration.
6.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
6.6 Costs of Arbitration. The costs of any arbitration under this section 6
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
6.7 Rules. Insofar as they do not conflict with this section 6, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 6 shall be applicable to the arbitration, and the Arbitrator
shall have jurisdiction to take such action and make such orders as are
contemplated in such rules.
6.8 Condition Precedent. Submission to arbitration under this section 6 shall be
a condition precedent to bringing any action with respect to this Agreement.
SECTION 7 -- GENERAL
7.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
If to Grant Brothers: Grant Brothers Sales, Limited
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
If to Grant Auto: Grant Automotive Group Inc.
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
with a copy to: Mr. Daniel Wuersch
Wuersch & Gering LLP
Attorneys At Law
11 Hanover Square
21st Floor
New York, New York
USA 10005
Fax No: (212) 509-9559
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to
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have been given on that business day, and if transmitted by fax after 3:00 p.m.
(Toronto time) on a business day, will be deemed to have been given on the next
business day.
7.2 Time. Time shall be of the essence of this Agreement.
7.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
7.4 No Set-Off. Payments made under this Agreement shall be made without set-off
or counterclaim.
7.5 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
7.6 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
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7.7 Assignment and Benefit. No party may assign this Agreement without the prior
written consent of the other party, which consent may not be unreasonably
withheld or delayed. This Agreement enures to the benefit of and binds the
parties and their respective successors and permitted assigns.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
Name:
Title:
By: /s/ Ian S. Grant
-------------------------------------
Name:
Title:
GRANT AUTOMOTIVE GROUP INC.
By: /s/ David Nunn
-------------------------------------
David Nunn
President
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INDEMNITY
All defined terms in this Indemnity have the meanings given to them in the
foregoing Management Services Agreement (the "Management Services Agreement") to
which this Indemnity is attached.
In consideration of Grant Brothers entering into the Management Services
Agreement with Grant Auto, a wholly-owned subsidiary of the undersigned, the
undersigned hereby agrees to indemnify and save harmless Grant Brothers on its
behalf and as trustee for its officers, directors, shareholders, employees and
agents against all costs, damages, claims and other liabilities (including legal
fees and expenses) arising out of any breach of an obligation of Grant Auto set
out in the Management Services Agreement. Notwithstanding the foregoing, the
undersigned is not liable under this Indemnity for any amount that Grant Auto
would not be liable for under the Management Services Agreement. Accordingly,
section 4.2 of the Management Services Agreement operates to limit the
undersigned's liability under this Indemnity in the same manner that it operates
to limit Grant Auto's liability.
This Indemnity is governed by, and shall be construed and interpreted in
accordance with, the laws of Ontario and the laws of Canada applicable in
Ontario. For the purpose of all legal proceedings, this Indemnity shall be
deemed to have been performed in Ontario and the courts of Ontario shall have
the non-exclusive jurisdiction to entertain any action arising hereunder.
SPECTRE INDUSTRIES, INC.
By: /s/ Olof Hildebrand
-------------------------------------
Name: Olof Hildebrand
Title: Chairman
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EXHIBIT 10.5
INTERIM MEASURES AGREEMENT
This Agreement is made as of January 1, 1999 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada ("Grant Brothers"),
and
GRANT AUTOMOTIVE GROUP INC., a corporation existing
under the laws of Ontario ("Grant Auto")
and
SPECTRE INDUSTRIES, INC., a corporation existing under the
laws of Nevada ("Spectre Industries").
RECITALS
A. Grant Brothers and Grant Auto entered into an asset purchase agreement of
even date (the "Asset Purchase Agreement"). Then Grant Brothers and Spectre
Industries entered into a share purchase agreement of even date (the "Share
Purchase Agreement") under which Spectre Industries purchased all the shares of
Grant Auto. Satisfaction of part of the Purchase Price has been deferred and, as
a result, Spectre Industries has pledged the Purchased Shares to Grant Brothers
pending full satisfaction of the Purchase Price.
B. Then Grant Brothers and Grant Auto entered into a management services
agreement of even date (the "Management Services Agreement") under which Grant
Brothers is obliged to provide certain services to Grant Auto and to take
certain actions.
C. The purpose of this Agreement is (1) to oblige Grant Auto and Spectre
Industries to refrain from taking certain actions, and (2) to relieve Grant
Brothers from certain obligations under the Management Services Agreement and
the Asset Purchase Agreement, until Spectre Industries has made full
satisfaction in respect of the Purchase Price.
For value received, the parties agree as follows.
1. Incorporated Terms. Sections 1, 6 and 7 of the Share Purchase Agreement are
hereby incorporated into this Agreement, with such modifications as the
circumstances require. Any notice to Grant Auto under this Agreement must be
made in the manner set out in the Management Services Agreement.
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2. Conflicts. If there is a conflict between any term of this Agreement and any
term of the Asset Purchase Agreement, the Share Purchase Agreement or the
Management Services Agreement, the relevant term of this Agreement is to
prevail.
3. Interim Relief from Obligations. Until such time as Spectre Industries has
fulfilled all of its payment and share delivery obligations in accordance with
section 2.2 of the Share Purchase Agreement or in accordance with an acceptable
alternative agreed by Grant Brothers and Spectre Industries under section 2.6 of
the Share Purchase Agreement:
(a) Grant Brothers is not required to take any action under section 3.5
of the Management Services Agreement; and
(b) Grant Brothers is not required to take any action under sections
2.3(b) or 2.4(d) of the Asset Purchase Agreement.
4. No Payments to Spectre Industries. Until such time as Spectre Industries has
fulfilled all of its payment and share delivery obligations in accordance with
section 2.2 of the Share Purchase Agreement or in accordance with an acceptable
alternative agreed by Grant Brothers and Spectre Industries under section 2.6 of
the Share Purchase Agreement, Grant Auto shall not, and Spectre Industries shall
ensure that Grant Auto shall not, without the prior written consent of Grant
Brothers, pay, deliver or remit anything of value to Spectre Industries,
including any cash, dividends, assets, instruments or other property or
proceeds.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
Name:
Title:
By: /s/ Ian S. Grant
-------------------------------------
Name:
Title:
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GRANT AUTOMOTIVE GROUP INC.
By: /s/ David Nunn
-------------------------------------
Name: David Nunn
Title: President
SPECTRE INDUSTRIES, INC.
By: /s/ Olof Hildebrand
-------------------------------------
Name: Olof Hildebrand
Title: Chairman
3
EXHIBIT 10.6
SHARE PURCHASE AGREEMENT
This Agreement is made as of January 1, 2000 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada (the "Vendor"),
and
SPECTRE INDUSTRIES, INC., a corporation existing under the
laws of Nevada (the "Purchaser").
RECITALS
A. The Vendor is the registered and beneficial owner of the Purchased Shares.
B. The Purchaser wishes to purchase and the Vendor wishes to sell the Purchased
Shares on the terms of this Agreement.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Agreement means this share purchase agreement including any recitals and
schedules to this share purchase agreement, as amended, supplemented or restated
from time to time.
(b) Corporation means Grant Automotive Group Inc., a corporation existing under
the laws of Ontario.
(c) Encumbrances means all options, pledges, mortgages, security interests,
liens, charges, adverse claims, rights, restrictions, burdens and encumbrances
whatsoever.
(d) Management Services Agreement means the management services agreement dated
the date of this agreement between the Purchaser, the Vendor and the
Corporation.
(e) Purchase means the transaction of purchase and sale contemplated by this
Agreement.
(f) Purchase Price has the meaning given to it in section 2.1.
(g) Purchased Shares means all the common shares issued and outstanding in the
capital of the Corporation as at the date of this Agreement.
(h) Securities Act means the United States Securities Act of 1933, as amended.
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1.2 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.3 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation" and the term "includes" has a similar meaning.
SECTION 2 - PURCHASE, SALE AND PLEDGE
2.1 Purchased Shares. On the terms of this Agreement, as at the date of this
Agreement, the Vendor hereby sells to the Purchaser free and clear of all
Encumbrances and the Purchaser hereby purchases all of Vendor's right, title and
interest in and to the Purchased Shares for a purchase price equal to the
aggregate value of US$500,000 (the "Purchase Price").
2.2 Payment of the Purchase Price. The Purchaser shall satisfy the Purchase
Price by paying on or before the date of this Agreement US$500,000 to the Vendor
by cheque;
2.3 Accounting Matters.
(a) Review. Promptly following the date of this Agreement, the parties shall
retain the Vendor's independent accountants to conduct a review of the financial
statements of the Corporation for the year ending December 31, 1999 (the "1999
Financial Statements"). The 1999 Financial Statements shall be prepared in
accordance with generally accepted accounting principles in effect in Canada
from time to time, including the accounting recommendations published in the
Handbook of the Canadian Institute of Chartered Accountants and on a consistent
basis with those accounting principles used by the Vendor in preparing its
December 31, 1998 financial statements which were reviewed by the Vendor's
independent accountants.
(b) Currency Conversion Schedule. Based on the 1999 Financial Statements, the
Vendor shall direct the Vendor's independent accountants to prepare a schedule
(the "Currency Conversion Schedule") setting out the total revenues attributable
to the Business, as that term is defined in the Management Services Agreement,
for the 1999 fiscal year as at December 31, 1999 expressed in US dollars and
using an exchange rate in which one Canadian dollar is equal to US$0.68.
(c) Draft Documents. The Vendor shall direct the Vendor's independent
accountants to provide the parties with:
(1) a draft review engagement 1999 Financial Statements, including a
draft review engagement report thereon; and
(2) a draft Currency Conversion Schedule, together with a draft report
thereon indicating that the schedule has been prepared in accordance
with this Agreement.
(d) Review and Comment. The parties shall have 10 days to provide their comments
and then the independent accountants shall finalize the 1999 Financial
Statements and the Currency Conversion Schedule. The finalized 1999 Financial
Statements and the Currency Conversion Schedule shall be final and binding on
the parties. The Vendor shall pay the independent accountants' costs for the
review of the 1999 Financial Statements and the preparation of the Currency
Conversion Schedule.
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SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as stated below
and acknowledges that the Purchaser is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
3.1 Corporate Matters
(a) Status and Capacity of Vendor. The Vendor is a subsisting corporation under
the laws of Canada, and has the corporate power and capacity to execute and
deliver this Agreement and to consummate the Purchase.
(b) Authorization of Purchase. The execution and delivery of this Agreement and
the consummation of the Purchase have been validly authorized by the Vendor.
(c) Enforceability. This Agreement has been validly executed and delivered by
the Vendor and is a legally binding obligation of the Vendor enforceable against
the Vendor, subject, as to enforcement, to bankruptcy, insolvency and other laws
affecting creditors' rights generally and to general principles of equity.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or commitment of the Vendor.
(d) Residence. The Vendor is not a non-resident of Canada within the meaning of
the Income Tax Act (Canada).
3.2 The Corporation.
(a) Status of Corporation. The Corporation has been duly incorporated and
organized and is a subsisting corporation under the laws of Ontario. The
Corporation is a "private company" within the meaning of the Securities Act
(Ontario).
(b) Authorized and Issued Share Capital. The authorized capital of the
Corporation consists of an unlimited number of common shares, of which 10,000
common shares have been duly issued and are outstanding as fully paid and
non-assessable shares in the capital of the Corporation. The Corporation has not
issued or authorized the issue of any shares except the Purchased Shares.
(c) Title to Shares. The Vendor legally and beneficially owns and controls all
of the Purchased Shares with a good and marketable title thereto free of any
Encumbrances, other than Encumbrance contained in laws of general application.
(d) No Employees. The Corporation has no employees, nor has it ever employed an
employee.
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SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as stated below
and acknowledges that the Vendor is relying on the accuracy of each such
representation and warranty in entering into this Agreement and completing the
Purchase.
4.1 Status. The Purchaser is a subsisting corporation under the laws of Nevada,
and has the corporate power and capacity to execute and deliver this Agreement
and to consummate the Purchase.
4.2 Due Authorization. The execution and delivery of this Agreement and the
consummation of the Purchase have been validly authorized by the Purchaser.
4.3 Enforceability. This Agreement has been validly executed and delivered by
the Purchaser and is a legally binding agreement of the Purchaser enforceable
against the Purchaser, subject, as to enforcement, to bankruptcy, insolvency and
other laws affecting creditors' rights generally and to general principles of
equity. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will:
(1) require any consent, authorization, approval or other action of any
government authority; or
(2) violate or constitute a default under the articles or by-laws of the
Vendor or any note, indenture, mortgage, deed of trust or other
contract, agreement or commitment of the Vendor.
SECTION 5 -- SURVIVAL AND INDEMNIFICATION
5.1 Survival. The representations and warranties contained in sections 3 and 4
shall survive the closing for a period of one year and the undertakings and
agreements to be performed after the date of this agreement shall survive the
closing indefinitely unless otherwise specified in this Agreement.
Notwithstanding the foregoing, any representation, warranty, undertaking or
agreement that survives the closing but would otherwise terminate in accordance
with this section 5.1 will continue to survive to the extent notice of any claim
has been given on or prior to the termination of such survival until the related
claim for indemnity has been satisfied or otherwise resolved as provided in this
section 5.
5.2 Indemnity for Purchaser. The Vendor shall, subject to the other terms of
this Agreement, indemnify the Purchaser and save and hold the Purchaser harmless
from, against, for and in respect of any and all damages (including amounts paid
in settlement with the Vendor's consent), losses, obligations, liabilities,
liens, deficiencies, costs and expenses, including reasonable attorneys' fees
and other reasonable costs and expenses incident to any suit, action,
investigation, claim or proceeding net of any amounts recoverable under
insurance policies, suffered, sustained, incurred or required to be paid by the
Purchaser by reason of:
(a) any representation or warranty made by the Vendor in this Agreement
which is untrue or incorrect in any material respect; or
(b) any material failure by the Vendor to observe or perform its
undertakings and agreements set out in this Agreement.
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5.3 Indemnity for Vendor. The Purchaser shall, subject to the other terms of
this Agreement, indemnify the Vendor and save and hold the Vendor harmless from,
against, for and in respect of any and all damages (including amounts paid in
settlement with the Purchaser's consent), losses, obligations, liabilities,
claims, deficiencies, costs and expenses, including reasonable attorneys' fees
and other reasonable costs and expenses incident to any suit, action,
investigation, claim or proceeding net of any amounts recoverable under
insurance policies, suffered, sustained, incurred or required to be paid by the
Vendor by reason of:
(a) any representation or warranty made by the Purchaser in this
Agreement which is untrue or incorrect in any material respect;
(b) any material failure by the Purchaser to observe or perform its
undertakings and agreements set out in this Agreement.
5.4 Right to Defend. Upon receipt of a notice of a claim under this section 5 (a
"Claim Notice"), the party obliged to provide an indemnity under this Agreement
(the "Indemnifying Party") shall promptly assume the defense of, and contest or
otherwise protect against, such suit, action investigation, claim or proceeding
at its own cost and expense. The other party (the "Indemnified Party") shall
have the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of its own choosing, but the Indemnifying Party shall
be entitled to control the defense unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular matter or in
the event set out in the next sentence. In the event the Indemnifying Party
shall fail to defend, contest or otherwise protect within 10 days of the receipt
of a Claim Notice against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
to defend, contest or otherwise protect against the same and, with the prior
written approval of the Indemnifying Party, make any compromise or settlement
thereof and subject to the limitations set out in sections 5.2 or 5.3, as the
case may be, recover the entire cost thereof from the Indemnifying Party
including all amounts paid as a result of such suit, action, investigation,
claim or proceeding or the compromise or settlement thereof which was approved
by the Indemnifying Party. However, if the Indemnifying Party undertakes the
defense of such matters, the Indemnified party shall not be entitled to recover
from the Indemnifying Party any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
SECTION 6 -- REPURCHASE OF PURCHASED SHARES
6.1 On Insolvency or Bankruptcy of Purchaser. In the event that the Purchaser
becomes technically insolvent, files for bankruptcy, is forced into involuntary
bankruptcy, or seeks to effect a transfer of assets outside of the ordinary
course of business in order to satisfy creditor obligations, the Vendor shall
have the right:
(a) to purchase all of the assets attributable to or otherwise used in
the Business, as that term is defined in the Management Services
Agreement, by paying the Purchaser an amount equal to US$500,000 in
cash; or
(b) to terminate the Management Services Agreement and any remaining
obligations under this Agreement, all without penalty. In the event
the Management Services
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agreement is terminated, then the option referenced in paragraph 6.2
below shall simultaneously be terminated.
6.2 On Failure to Exercise Option. In the event that the Corporation fails to
exercise its right under section 2.3(b)(3) of the Management Services Agreement
and to pay the amount required to the Vendor, then the Vendor, if having given
notice of its intent to re-purchase the Business no later than December 31,
2004, shall have the right at any time in the first quarter of 2005 (but not
thereafter) to purchase all of the assets attributable to or otherwise used in
the Business, as that term is defined in the Management Services Agreement, by
paying the Purchaser an amount equal to US$500,000 in cash.
SECTION 7 -- ARBITRATION
7.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 7.
7.2 Appointment of Arbitrators. A party desiring arbitration under this section
7 shall give a notice of arbitration to the other party containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by either party.
7.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
7.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrator shall be final and binding upon the parties in respect of all matters
relating to the arbitration, the conduct of the parties during the proceedings,
and the final determination of the issues in the arbitration.
7.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
7.6 Costs of Arbitration. The costs of any arbitration under this section 7
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
7.7 Rules. Insofar as they do not conflict with this section 7, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 7 shall be applicable to the
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arbitration, and the Arbitrator shall have jurisdiction to take such action and
make such orders as are contemplated in such rules.
7.8 Condition Precedent. Submission to arbitration under this section 7 shall be
a condition precedent to bringing any action with respect to this Agreement.
SECTION 8 -- GENERAL
8.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
If to the Vendor: Grant Brothers Sales, Limited
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
If to the Purchaser: Spectre Industries, Inc.
c/o Ian Grant, Chief Executive Officer
3992 Sunnycrest Drive
North Vancouver, B.C.
Canada V7R 3C9
with a copy to:
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to have been given on that business day,
and if transmitted by fax after 3:00 p.m. (Toronto time) on a business day, will
be deemed to have been given on the next business day.
8.2 Time. Time shall be of the essence of this Agreement.
8.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
8.4 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
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8.5 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
8.6 Assignment and Enurement. No party may assign this Agreement without the
prior written consent of the other party (except to an affiliate of such party),
which consent may not be unreasonably withheld or delayed. This Agreement enures
to the benefit of and binds the parties and their respective successors and
permitted assigns.
8.7 Counterparts and Fax Delivery. This Agreement and any amendment, supplement,
restatement or termination of any term of this Agreement may be executed and
delivered in any number of counterparts, each of which when executed and
delivered is an original but all of which taken together constitute one and the
same instrument. A party may deliver this Agreement and any amendment,
supplement, restatement or termination of any term of this Agreement by fax.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
John D. Grant
Chief Operating Officer
By: /s/ Ken Grant
-------------------------------------
Kenneth Grant
Vice President
SPECTRE INDUSTRIES, INC.
By: /s/ Olof Hildebrand
--------------------------------------
Name: Olof Hildebrand
Title: Chairman
EXHIBIT 10.7
MANAGEMENT SERVICES AGREEMENT
This Agreement is made as of January 1, 2000 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada ("Grant Brothers"),
and
GRANT AUTOMOTIVE GROUP INC., a corporation existing
under the laws of Ontario ("Grant Auto"),
and
SPECTRE INDUSTRIES, INC., a corporation existing under the
laws of Nevada ("Spectre").
RECITALS
A. As at January 1, 1999, Grant Brothers, under the Asset Purchase Agreement,
transferred its wholesale automotive business group, consisting of its
traditional automotive division and the heavy duty division to Grant Auto.
B. As at the date of this Agreement, under a share purchase agreement, Grant
Brothers sold to Spectre all of the issued and outstanding shares of Grant Auto.
C. Grant Auto wishes to have Grant Brothers provide certain services to Grant
Auto so that Grant Auto can continue to operate the Business and to maximize
Grant Auto's benefits from the operation of the Business.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Agreement means this management services agreement including any recitals
and schedules to this management services agreement, as amended, supplemented or
restated from time to time.
(b) Asset Purchase Agreement means the asset purchase agreement dated as of
January 1, 1999 between Grant Brothers and Grant Auto.
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(c) Business means the business transferred to Grant Auto under the Asset
Purchase Agreement, as it has changed to the date of this Agreement and as it
changes from time to time after the date of this Agreement, but which, for
greater certainty, does not include the business of any other agency which is
subsequently acquired by Grant Auto, whether by acquisition of shares or assets.
(d) Contracts has the meaning given to that term in the Asset Purchase
Agreement.
(e) Joint Account is defined in section 2.4.
(f) Management Committee means the management committee established in
accordance with section 2.5(a).
(g) Monthly Base Expenses means the amount of Grant Brothers' monthly operating
expenses jointly established by the parties before the date hereof with respect
to the first fiscal year of the term of this Agreement and by the Management
Committee with respect to any subsequent fiscal year, before the beginning of
such fiscal year (and as may be adjusted by the Management Committee during any
fiscal year).
(h) Net Cash Flow Increase Payment means the amount which is equal to
US$500,000:
(1) plus the amount, if any, by which the total gross income
attributable to the Business for 1999, as set out in the finalized
Currency Conversion Schedule referred to in the share purchase
agreement dated as of January 1, 2000 between Grant Brothers and
Spectre, exceeds US$1,000,000; or
(2) minus the amount, if any, by which the total gross income
attributable to the Business for 1999, as set out in the finalized
Currency Conversion Schedule referred to in the share purchase
agreement dated as of January 1, 2000 between Grant Brothers and
Spectre, is less than US$1,000,000.
(i) Net Cash Flow of the Business means the net cash flow of the Business
determined for any particular period in accordance with generally accepted
accounting principles in effect in Canada from time to time, including the
accounting recommendations published in the Handbook of the Canadian Institute
of Chartered Accountants and on a consistent basis with the preceding period.
(j) Shared Contracts has the meaning given to that term in the Asset Purchase
Agreement.
1.2 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.3 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation".
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1.4 Currency. All amounts to be paid under this Agreement are to be paid in US
dollars.
SECTION 2 - SERVICES AND FEES
2.1 Services. Subject to the terms of this Agreement, Grant Brothers shall
provide the following services to Grant Auto:
(a) Supply of Personnel. Grant Brothers shall make available to the Business
such personnel as are reasonably required to operate the Business substantially
in the manner that the Business was conducted before the date of this Agreement
and subject to any changes in the operation of the Business as are agreed on
from time to time by the Management Committee and with a view to meeting the
various sales targets in the various territories agreed by the Management
Committee from time to time. Grant Brothers may also introduce such changes as
they desire from time to time to the extent that Grant Brothers believes that
the changes will improve the operations of the Business as approved by the
Management Committee.
(b) Provision of Office Space. Grant Brothers shall provide the necessary office
space, office equipment and office supplies for its personnel to carry out the
activities referred to in section 2.1(a).
(c) Strategic Advice. Grant Brothers shall provide all reasonable assistance to
management of Spectre in respect of strategic planning for, the capital
structure of, new business development for, and cost base management in
connection with, the Business.
(d) New Opportunities. Grant Brothers shall consider new opportunities for the
Business that would complement the Business (including the identification of
potential acquisitions and the making of introductions to potential
acquisitions). Grant Brothers shall communicate the result of such
considerations in a timely manner to Grant Auto from time to time. To this end,
Grant Brothers shall cause its Chief Operating Officer and its Vice President,
Finance to devote at least 15% of their time to the foregoing duties. Grant Auto
shall reimburse Grant Brothers for all reasonably incurred costs directly
attributable to the identification of potential acquisitions and the making of
introductions to potential acquisitions, such as travel and other similar
out-of-pocket expenses.
(e) Monthly Reporting. Grant Brothers shall deliver to Grant Auto within 30 days
of the end of each calendar month a report in respect of the Business for such
month containing:
(1) a profit and loss statement for such month;
(2) a balance sheet as at the end of such month;
(3) a cash flow statement for such month, including a line analysis in
respect of each manufacturer; and
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
month.
(f) Quarterly Reporting. Grant Brothers shall deliver to Grant Auto within 30
days of the end of each calendar quarter a report in respect of the Business for
such quarter containing:
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(1) a profit and loss statement for such quarter;
(2) a balance sheet as at the end of such quarter;
(3) a cash flow statement for such quarter, including a line analysis in
respect of each manufacturer;
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
quarter; and
(5) a financial forecast for the next three calendar quarters, including
projected profit and loss and projected cash flow for each such
quarter.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre at a mutually agreeable time
during the 60 day period following the delivery to Grant Auto of the quarterly
report to discuss the contents of that report.
(g) Annual Reporting. Grant Brothers shall deliver to Grant Auto within three
months of the end of each year under this Agreement a report in respect of the
Business for such year containing:
(1) financial statements reviewed by the Grant Brothers' independent
accountants, for such year (containing a profit and loss statement
and a balance sheet for such year);
(2) a financial forecast and business plan for the next two years under
this Agreement; and
(3) a detailed financial budget for the then current year under this
Agreement.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre at a mutually agreeable time
during the 60 day period following the delivery to Grant Auto of the annual
report to discuss the contents of that report. During the 180 day period
following the delivery of the annual report Grant Brothers shall provide to
Grant Auto access to the financial records which Grant Brothers maintains in
connection with the Business, including all materials used in the preparation of
the annual financial statements and all documents prepared by Grant Brothers'
independent accountants in respect of their review of such statements.
(h) Other Services. Grant Brothers shall provide to Grant Auto such other
services as the parties may agree from time to time.
2.2 Authorized Representative. To assist in fulfilling the obligations of Grant
Brothers set out in section 2.1(a), Grant Auto hereby appoints Grant Brothers as
its authorized representative to act in Grant Auto's name to carry on the
Business in its ordinary course, including with the power to sign any agreements
entered into in the ordinary course of business on behalf of Grant Auto. Copies
of any and all documents signed by GBS on behalf of GAG shall be delivered to
GAG at the earliest possible opportunity. Grant Auto shall ensure that its
by-laws or other corporate documents specifically authorize such signing of
documents by Grant Brothers. All new contracts respecting the Business shall be
entered into in the name of Grant Auto.
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2.3 Reimbursements, Fees and Bonuses. Grant Auto shall pay Grant Brothers the
following amounts at the times set out below.
(a) Reimbursements. By the 15th day of each month under this Agreement, Grant
Auto shall pay to Grant Brothers an amount to reimburse Grant Brothers for all
of its costs of that month associated directly with its services provided under
this Agreement, including all amounts paid to or in respect of employees of
Grant Brothers, plus agreed overhead for such employees and all amounts
reimbursed by Grant Brothers to any of its employees in respect of services
provided under this Agreement on behalf of Grant Auto, including all amounts to
be reimbursed in accordance with section 2.1(d). Prior to any initial payment to
Grant Brothers pursuant to this sub- paragraph shall be due upon the approval by
Grant Auto of the schedule of monthly base expense reimbursement to be prepared
by Grant Brothers no later than February 15. Approval of said schedule shall be
made by Grant Auto as soon as practicable after receipt of same.
(b) Net Cash Flow Distribution. With respect to any fiscal year, the Net Cash
Flow of the Business shall be distributed between Grant Auto and Grant Brothers
as follows.
(1) The first US$50,000 of the Net Cash Flow of the Business shall be
distributed to Grant Auto. Grant Brothers shall ensure that this
amount will be paid to Grant Auto for the fiscal periods ended
December 31, 2000 and December 31, 2001 (and in this respect Grant
Brothers will cause to be paid US$25,000 to Grant Auto on each of
June 30, 2000, December 31, 2000, June 30, 2001 and December 31,
2001 as a pre-payment of such distribution and failure to cause such
a distribution to be made shall require payment of penalty interest
by Grant Brothers to Grant Auto in the amount of 1.5% per month on
the outstanding payment).
(2) The second US$100,000 of the Net Cash Flow of the Business shall be
distributed to Grant Brothers.
(3) Any Net Cash Flow of the Business in excess thereof shall be
distributed 47.5% to Grant Auto and 52.5% to Grant Brothers. Grant
Auto shall have the right at any time before January 1, 2005 (but
not thereafter), upon payment to Grant Brothers of the Net Cash Flow
Increase Payment, to revise this section 2.3(b)(3) so that the first
sentence reads "Any Net Cash Flow of the Business in excess thereof
shall be distributed 95% to Grant Auto and 5% to Grant Brothers" and
to make the corresponding revision in section 2.3(c)(1). Any such
change in allocation will become effective only in the calendar year
immediately following the year in which the payment is made by Grant
Auto to Grant Brothers.
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(c) Distribution Mechanics.
(1) General. In respect of each fiscal year during the term hereof, as
at June 30 (and payable within 60 days thereafter) and December 31
(and payable within three business days of the determination of the
Management Committee under section 2.3(c)(3)) Grant Auto shall be
entitled to receive out of the Joint Account any excess funds
remaining after all costs and expenses with respect to such six
month period ending on June 30 or the 12 month period ending on
December 31, as applicable, including amounts payable under section
2.3(a), have been paid until Grant Auto shall have received
US$50,000 (the "Grant Auto Base Compensation") in respect of such
year. Thereafter, in respect of each fiscal year during the term
hereof as at each June 30 (and payable within 60 days thereafter)
and December 31 (and payable within three business days of the
determination of the Management Committee under section 2.3(c)(3))
Grant Brothers shall be entitled to receive out of the Joint Account
any excess funds remaining after all costs and expenses with respect
to such six month period ending on June 30 or the 12 month period
ending on December 31, as applicable, including amounts payable
under section 2.3(a), have been paid until Grant Brothers shall have
received US$100,000 (the "Grant Brothers Base Compensation") in
respect of such year. Thereafter, in respect of each fiscal year
during the term hereof as at each June 30 (and payable within 60
days thereafter) and December 31 (and payable within three business
days of the determination of the Management Committee under section
2.3(c)(3)) Grant Auto shall be entitled to receive out of the Joint
Account 47.5% of any excess funds remaining after all costs and
expenses with respect to such six month period ending on June 30 or
the 12 month period ending on December 31, as applicable, including
amounts payable under section 2.3(a) (the "Grant Auto Bonus") in
respect of such year, and Grant Brothers shall be entitled to
receive out of the Joint Account 52.5% of any excess funds remaining
after all costs and expenses with respect to such six month period
ending on June 30 or the 12 month period ending on December 31, as
applicable, including amounts payable under section 2.3(a) (the
"Grant Brothers Bonus") in respect of such year.
(2) Negative Cash Balance. If at any time in any fiscal year during the
term hereof, there shall be a negative cash balance in the Joint
Account, Grant Brothers will loan funds, on an interest-free basis,
to Grant Auto to eliminate the negative cash balance for such period
as the loan is required. Grant Auto will repay the loan to Grant
Brothers as soon as reasonably practicable. In such event, prior to
making any distribution pursuant to section 2.3(c)(1) during such
fiscal year (except regarding the required distributions to Grant
Auto for the fiscal periods ended December 31, 2000 and December 31,
2001), the Grant Brothers loan must be repaid in full before any
distribution is made under section 2.3(c). Grant Brothers will
forgive that portion of any loan advanced to Grant Auto which it is
not repaid within the one year period following the date on which
any loan is advanced.
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(3) Year End Reconciliation. Based on the annual financial statements,
GBS shall direct Grant Auto's independent accountants to prepare a
schedule (the Net Cash Flow Schedule") setting out Net Cash Flow of
the Business for such year setting out the distribution thereof in
accordance with this Agreement together with a report from the
independent accountant stating that the Net Cash Flow Schedule has
been prepared in accordance with this Agreement. Within 10 business
days of the receipt of the financial statements for Grant Auto
reviewed by the independent accountants for the previous fiscal year
and the Net Cash Flow Schedule, the Management Committee shall
determine the definitive Net Cash Flow distribution in accordance
with section 2.3(c)(1). To the extent any party shall have received
an amount in excess of the amount to which such party would be
entitled pursuant to such determination, such party shall pay to the
other an amount equal to such excess within 30 days of such
determination.
(d) Stock Incentive. As an additional incentive to GBS to manage GAG on a long
term basis, Spectre shall issue an aggregate of 450,000 shares of fully paid and
non-assessable Common Stock of Spectre to GBS free from all encumbrances, except
pursuant to the Securities Act and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder. As of the date of this Agreement,
the authorized capital stock of Spectre consists of 100 million shares of common
stock, of which 12,496,450 shares of common stock are outstanding as of the date
hereof.
(1) Nature and Characteristics of Common Stock. GBS understands that the
Common Stock is or will be issued without registration under the Securities Act,
in reliance upon exemptions from registration under the Securities Act. GBS also
understands that such exemptions depend in part upon, and such shares will be
issued in reliance on, the representations and warranties made by the GBS in
this section 3.3. Accordingly, the GBS represents and warrants to Spectre, as of
the date of this Agreement as follows:
(i) GBS will acquire Spectre common stock for its own account for
investment purposes only and not with a view to resale or other
distribution thereof, in whole or in part in violation of the
Securities Act and GBS will not assign, sell, hypothecate or
otherwise transfer any of the common stock in the United States
unless,
(A) a registration statement is in effect under the Securities Act
and all applicable state securities laws with respect to the
common stock, or
(B) a written opinion of counsel reasonably acceptable to Spectre
is obtained to the effect that no such registration is
required.
(ii) GBS acknowledges, agrees and is aware that,
(A) no federal, state or any foreign agency has passed upon the
accuracy, validity or completeness of any materials provided
to GBS relating to Spectre and the Common Stock or made any
finding or determinations to the fairness of an investment in
the Common Stock,
(B) the Common Stock has not been registered under the Securities
Act or under the securities laws of any other jurisdiction in
the United States,
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(C) in the absence of registration under the Securities Act, an
offer or sale of any of the Common Stock by GBS in the United
States will require the availability of an exemption
thereunder,
(D) the following restrictive legend shall be placed on the
certificates representing the Common Stock,
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL SECURITIES LAWS OF THE UNITED
STATES OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE UNITED STATES AT
ANY TIME WHATSOEVER, EXCEPT UPON SUCH REGISTRATION OR UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY
TO THE BOARD OF DIRECTORS OF THE COMPANY THAT REGISTRATION IS
NOT REQUIRED FOR SUCH TRANSFER AND/OR SUBMISSION TO THE BOARD
OF DIRECTORS OF THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO THE BOARD OF DIRECTORS OF THE COMPANY TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE
SECURITIES LAWS IN THE UNITED STATES AND ANY RULES OR
REGULATIONS PROMULGATED THEREUNDER.
(iii) Acknowledgments. GBS acknowledges that:
(A) GBS has been given the opportunity to ask questions of, and receive
answers from, Spectre and its officers and employees concerning the
terms and conditions of GBS's acquisition of the Common Stock and
other matters pertaining to an investment in the Common Stock, has
been given the opportunity to obtain such additional information
necessary to evaluate the merits and risks of acquiring the Common
Stock to the extent Spectre possesses such information, and has
received all documents and information that GBS has requested
relating to an investment in the Common Stock;
(B) GBS is familiar with the nature of and risks attendant to
investments in the business of Spectre and securities in general and
has carefully considered and has, to the extent GBS believes such
discussion necessary, discussed with GBS's professional legal,
financial and tax advisers the suitability of an investment in the
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Common Stock for GBS's particular financial and tax situation and
has determined that the Common stock is a suitable investment for
GBS;
(C) GBS has not relied upon any representations or other information
(whether oral or written) from Spectre or its directors, officers or
affiliates, or from any other persons, other than the
representations and warranties made in this Agreement and publicly
available information with respect to Spectre; and
(D) GBS has made, and is solely responsible for making, GBS's own
independent evaluation of the economic and other risks involved in
GBS's investment in the Common Stock and GBS's own independent
decision to make such investment.
(2) Exemption from Registration and Restrictions on Offer and Sale of Same
or Similar Securities. Assuming the representations and warranties of GBS set
out in section 3.3 are true and correct, the offer and sale of the Common Stock
made pursuant to this Agreement is exempt from the registration requirements of
the Securities Act and applicable state securities or "blue sky" laws. Neither
Spectre nor any person authorized to act on Spectre's behalf has, in connection
with the offering of the Common Stock, engaged in:
(a) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 501(c) under the
Securities Act);
(b) any action involving a public offering within the meaning of section
4(2) of the Securities Act; or
(c) any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock or that would
violate applicable state securities or "blue sky" laws.
Neither Spectre nor any person acting on behalf of Spectre has made, directly or
indirectly, any offer or sale of Common Stock or of securities of the same or a
similar class as the Common Stock that, if as a result of the offer and sale of
the Common Stock contemplated hereby, could fail to be entitled to exemption
from the registration requirements of the Securities Act. As used herein, the
terms "offer" and "sale" have the meanings specified in section 2(3) of the
Securities Act.
(3) Sale of Common Stock. Notwithstanding any other term in this
Agreement, GBS may assign, sell, hypothecate or otherwise transfer any of the
450,000 Common Stock in the United States at any time after the expiry of one
year following the date of this Agreement and this representation and warranty
shall survive the closing of the Purchase for a period of five years after the
date of this Agreement so long as such sales are made pursuant to an applicable
exemption from the registration requirements of the Securities Act.
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(4) Exemption from Registration and Restrictions on Offer and Sale of Same
or Similar Securities. Assuming the representations and warranties of GBS set
out in section 3.3 are true and correct, the offer and sale of the Common Stock
made pursuant to this Agreement is exempt from the registration requirements of
the Securities Act and applicable state securities or "blue sky" laws. Neither
Spectre nor any person authorized to act on Spectre's behalf has, in connection
with the offering of the Common Stock, engaged in:
(a) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 501(c) under the
Securities Act);
(b) any action involving a public offering within the meaning of section
4(2) of the Securities Act; or
(c) any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock or that would
violate applicable state securities or "blue sky" laws.
Neither Spectre nor any person acting on behalf of Spectre has made, directly or
indirectly, any offer or sale of Common Stock or of securities of the same or a
similar class as the Common Stock that, if as a result of the offer and sale of
the Common Stock contemplated hereby, could fail to be entitled to exemption
from the registration requirements of the Securities Act. As used herein, the
terms "offer" and "sale" have the meanings specified in section 2(3) of the
Securities Act.
(5) In the event this agreement is terminated prior to December 31,
2005, other than as a result of the bankruptcy of Spectre, and that
option referenced in Paragraph 6.2 of the Share Purchase Agreement
by and between GBS and Spectre of even date herewith, in favor of
GBS is exercised by GBS, then in addition to the $500,000 referenced
therein for the repurchase of the Business as defined therein, GBS
shall pay to Spectre an additional amount equal to 450,000 shares of
Spectre.
2.4 Joint Account. Grant Auto and Grant Brothers shall establish a joint bank
account (the "Joint Account") with a reputable financial institution in Toronto.
Any and all cash received from the accounts receivables of Grant Auto in respect
of the Business after January 1, 2000 shall be deposited in the Joint Account.
The Joint Account shall be administered by the Management Committee. Except as
otherwise set forth herein, any disposition of funds out of the Joint Account
shall require the signature of one Grant Auto representative and one Grant
Brothers representative on the Management Committee. During the term of this
Agreement, any and all amounts received by any party with respect to the
Business (other than any Net Cash Flow distribution pursuant to section
2.3(c)(1) or a repayment of a loan advanced under section 2.3(c)) shall be
deposited in the Joint Account and any and all expenses with respect to the
Business shall be paid out of funds available in the Joint Account. On or prior
to the 15th day of each month during the term of this Agreement (commencing on
or prior to January 15, 2000), an amount equal to the Monthly Base Expenses
shall be paid to Grant Brothers out of funds available in the Joint Account and,
in the event such amount is not so paid, each Grant Brothers representative on
the Management Committee shall be entitled to transfer from the Joint Account an
amount equal to any due and unpaid Monthly Base Expenses to Grant Brothers.
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2.5 Management Committee.
(a) Purpose and Membership. A Management Committee consisting of up to two
representatives from Grant Auto (each, an "Grant Auto Representative") and up to
two representatives from Grant Brothers (each a "Grant Brothers Representative")
shall be established for the purpose of overseeing the operation of the Business
during the term of this Agreement. A party may change its representatives from
time to time by delivering a notice to this effect to the other applicable
party.
(b) Rights and Duties. The Management Committee shall:
(1) administer the Joint Account;
(2) approve the payment of any expenses to Grant Brothers in excess of
the Monthly Base Expenses;
(3) determine or amend the annual budget, the amount of the overhead
referred to in section 2.3(a) and Monthly Base Expenses; and
(4) perform such other functions as the parties may delegate to it from
time to time.
In addition, the Management Committee shall be consulted prior to any material
decision by Grant Brothers affecting (or being likely to affect) the Business or
the expansion thereof contemplated hereby, including prior to the hiring or
firing of any member of senior management of the Grant Brothers division
administering the Business or of any other employees thereof other than in the
ordinary course of business. The Management Committee shall meet in person or by
telephone conference at such times and places as shall be necessary to perform
its function, but at least once a month.
SECTION 3 - TERM, RENEWAL AND TERMINATION
3.1 Term and Renewal. The term of this Agreement shall commence on the date
hereof and continue for five (5) years. At the expiration of such five-year
period, this Agreement shall automatically be renewed for successive one-year
periods unless it is terminated by any party giving the other parties at least
six months prior written notice effective on the last day of such five-year or
one-year period, as the case may be.
3.2 Termination. Notwithstanding section 3.1, Grant Brothers or Grant Auto, as
the case may be, may terminate this Agreement at any time on the occurrence of
any of the following events:
(a) the other party fails to pay any amount when due and fails to pay
such amount within five days of receipt of a notice indicating the
non-payment;
(b) the other party breaches any of its obligations under this Agreement
and such breach is not rectified within 30 days of receipt of a
notice indicating the breach;
(c) a proceeding in bankruptcy, receivership, insolvency,
reorganization, liquidation or winding-up of the other party is
instituted by or against such other party;
(d) the other party makes a general assignment for the benefit of its
creditors; or
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(e) the other party ceases to carry on business as a going concern for
more than five business days.
The expiration or termination of this Agreement shall not relieve or release a
party from any of its obligations to pay any amount due and payable or to
perform any obligation which by its nature shall survive such expiration or
termination (including the obligations set out in sections 3.5, 4.3, 5 and 6). A
party which terminates this Agreement in accordance with this section 3.2 shall
not be liable to any other party for any loss or damage of any kind whatsoever,
arising directly or indirectly from the termination of this Agreement.
3.3 Early Termination by Grant Auto. Grant Auto may terminate this Agreement if
Grant Brothers does not, within the first 12 months of this Agreement, introduce
Grant Auto to at least two reasonable potential acquisitions, as required by
section 2.1(d).
3.4 Performance of Certain Contracts. Upon the termination of this Agreement, if
any Contracts (including any Shared Contracts) remain subject to the terms of
the section in the Asset Purchase Agreement entitled "Certain Contracts Not
Assigned But Held in Trust", Grant Auto shall, from the date of the termination
of this Agreement cause all of the obligations of Grant Brothers to be satisfied
under those Contracts (except that in respect of Shared Contracts, Grant Auto
shall only be obliged to fulfil such obligations to the extent that they relate
to the Business). Grant Brothers shall, from the date of the termination of this
Agreement cause all of the obligations of Grant Brothers to be satisfied under
the Shared Contracts, but only to the extent that such obligations arise under
Shared Contracts and relate to matters not related to the Business. Except as
provided by the foregoing, the section in the Asset Purchase Agreement entitled
"Certain Contracts Not Assigned But Held in Trust" shall continue to apply to
all Contracts to which that section relates. Grant Auto shall reimburse Grant
Brothers for all direct expenses incurred in carrying out any obligations under
that section of the Asset Purchase Agreement.
3.5 Transfer of Business. As soon as commercially reasonable after the date
hereof, but in any event before the expiration of the term of this Agreement,
Grant Brothers shall use all commercially reasonable efforts to assign and/or
otherwise transfer to Grant Auto any and all Contracts not heretofore assigned
to Grant Auto and to obtain separate agreements for those parts of the Shared
Contracts which have been transferred to Grant Auto pursuant to the terms of the
Asset Purchase Agreement. Grant Brothers shall report semi-annually to the
Management Committee as to the progress of its efforts hereunder. To the extent
the Management Committee determines, with respect to a particular Contract, not
to seek the assignment or transfer thereof to Grant Auto or to obtain separate
agreements, the parties shall enter into an appropriate contractual relationship
which provides Grant Auto otherwise with the benefits of such Contract.
SECTION 4 - FORCE MAJEURE, LIABILITY AND INDEMNITY
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4.1 Force Majeure. No party shall be liable to another for any failure to
perform any obligation under this Agreement, to the extent that such failure is
beyond the reasonable control of such party (aside from lack of funds). A party
which is not able to so perform an obligation under this Agreement shall
promptly provide a notice in respect of such failure to the other parties and
take all commercially reasonable steps to mitigate the effects of such failure.
In such cases, the party so failing to perform shall not be responsible to the
other parties for any loss or damage of any kind whatsoever which may be
incurred by the other parties or any third parties as a result of any such
failure.
4.2 Liability. A party's liability to the other parties under this Agreement
shall be limited to any direct loss or damage to such other parties caused by
the first party's negligence or wilful misconduct. Notwithstanding the
foregoing, no term in this section 4.2 shall operate so as to limit the
liability of Grant Brothers in respect of any of its actions or failures to act,
to the extent that Grant Brothers would have been liable in respect of such
actions or failures to act had such taken place before the date of this
Agreement when Grant Brothers owned and operated the Business.
4.3 Indemnity. Subject to the limitation imposed by section 4.2, Grant Brothers
shall indemnify and save harmless Grant Auto on its behalf and as trustee for
its officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Brothers under this
Agreement. Subject to the limitation imposed by section 4.2, Grant Auto shall
indemnify and save harmless Grant Brothers on its behalf and as trustee for its
officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Auto under this Agreement.
SECTION 5 -- CONFIDENTIALITY, COMPETITION AND NEW AGENCIES
5.1 Confidential Information. Grant Brothers shall hold in confidence, and shall
not disclose to any third party or use any confidential information of Grant
Auto (other than in respect of the good faith performance of Grant Brothers'
duties under this Agreement) where such information was obtained by Grant
Brothers in the course of providing services to Grant Auto under this Agreement,
except as required by law (including any applicable securities laws or the rules
of any applicable securities commission) or legal process.
5.2 Non-Competition. Grant Brothers shall not directly or indirectly (through an
affiliate or otherwise) own, manage, operate, join, control or otherwise
participate in, whether as a partner, shareholder or otherwise, any enterprise
in the business of representing manufacturers in the sale of spare parts in the
automotive wholesale market (the "Competitive Activities"), in Canada during the
currency of this Agreement and (except where Grant Brothers terminates this
Agreement under section 3.2 other than by providing six months' notice or where
Grant Auto terminates this Agreement under section 3.2 by providing six months'
notice) during the one year period following the termination of this Agreement,
except that, notwithstanding the foregoing, such non-competition period shall
not terminate prior to the fifth anniversary of the date hereof. In addition,
Grant Brothers will not engage in e-commerce, to the extent that involves the
sale of auto parts, during the currency of this Agreement and (except where
Grant Brothers terminates
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this Agreement under section 3.2 other than by providing six months' notice or
where Grant Auto terminates this Agreement under section 3.2 by providing six
months' notice) during the one year period following the termination of this
Agreement.
5.3 Non-Solicitation. Without the consent of Grant Brothers, Grant Auto shall
not solicit for employment or employ any employee of Grant Brothers during the
currency of this Agreement and (except where Grant Auto terminates this
Agreement under section 3.2 other than by providing six months' notice) during
the one year period following the termination of this Agreement, except that on
the termination of this Agreement Grant Auto may offer employment to all, but
not less than all, Grant Brothers employees, at least 80% of whose business time
in the prior 12 months is allocable to the provision of services to Grant Auto
and any additional acquired agencies. Where Grant Auto makes any such offer of
employment, such offer must contain terms of employment that are no less
favourable to each such employee who is so offered employment when compared to
the terms of employment existing immediately prior to the making of the offer.
Without the consent of Grant Auto, Grant Brothers shall not solicit for
employment or employ any employee of Grant Auto during the currency of this
Agreement and during the one year period following the termination of this
Agreement.
5.4 Conflict of Interest. In the event a business opportunity, including changes
in representative agreements, raises a conflict of interest between the Grant
Brothers and Grant Auto, the Management Committee, less the representatives of
Grant Brothers, shall determine, acting reasonably and in good faith, the
resolution which shall bind the parties, except that nothing in this section 5.4
will affect in any manner the Shared Contracts and the terms applicable thereto
under the Asset Purchase Agreement and this Agreement.
5.5 New Agencies. In the event that any additional agency is acquired by
Spectre, directly or indirectly, Grant Brothers shall have the right of first
refusal to match any management services agreement offered by a third party to
manage such additional agency. In the event that no third party management
service is offered in respect of the new agency, Grant Brothers shall provide
(or in the case of any agency that Grant Brothers did not introduce to Spectre,
Grant Brothers may provide) such services for 5% of the Net Cash Flow of that
agency. Further in the event that an opportunity is located by Grant Brothers to
acquire 50% or more of a new agency in a transaction whereby such new agency can
be acquired over time with the purchase price payable solely from future
revenues, in addition to the right of first refusal referenced herein, Grant
Brothers shall have the right to participate in 50% of the ownership interest
acquired, directly or indirectly, by Spectre on the same terms and conditions as
Spectre.
5.6 Spectre's Indemnity. Spectre shall indemnify and save harmless Grant
Brothers on its behalf and as trustee for its officers, directors, shareholders,
employees and agents against all costs, damages, claims and other liabilities
(including legal fees and expenses) arising out of any breach of an obligation
of Grant Auto set out in the Management Services Agreement. Notwithstanding the
foregoing, Spectre is not liable under this section 5.6 for any amount that
Grant Auto would not be liable for under this Agreement. Accordingly, section
4.2 operates to limit Spectre's liability under this section 5.6 in the same
manner that it operates to limit Grant Auto's liability.
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SECTION 6 -- ARBITRATION
6.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 6.
6.2 Appointment of Arbitrators. A party desiring arbitration under this section
6 shall give a notice of arbitration to the other parties containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by any party.
6.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
6.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrator shall be final and binding upon the parties in respect of all matters
relating to the arbitration, the conduct of the parties during the proceedings,
and the final determination of the issues in the arbitration.
6.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
6.6 Costs of Arbitration. The costs of any arbitration under this section 6
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
6.7 Rules. Insofar as they do not conflict with this section 6, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 6 shall be applicable to the arbitration, and the Arbitrator
shall have jurisdiction to take such action and make such orders as are
contemplated in such rules.
6.8 Condition Precedent. Submission to arbitration under this section 6 shall be
a condition precedent to bringing any action with respect to this Agreement.
SECTION 7 -- GENERAL
7.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
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If to Grant Brothers: Grant Brothers Sales, Limited
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
If to Grant Auto: Grant Automotive Group Inc.
140 Wendell Avenue, Unit #1
North York, Ontario M9N 3R2
Attention: President
Fax No: (416) 249-5864
with a copy to:
If to Spectre: Spectre Industries, Inc.
c/o Ian Grant, Chief Executive Officer
3992 Sunnycrest Drive
North Vancouver, B.C.
Canada V7R 3C9
with a copy to:
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to have been given on that business day,
and if transmitted by fax after 3:00 p.m. (Toronto time) on a business day, will
be deemed to have been given on the next business day.
7.2 Time. Time shall be of the essence of this Agreement.
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7.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
7.4 No Set-Off. Payments made under this Agreement shall be made without set-off
or counterclaim.
7.5 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
7.6 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
7.7 Assignment and Benefit. No party may assign this Agreement without the prior
written consent of the other parties, which consent may not be unreasonably
withheld or delayed. This Agreement enures to the benefit of and binds the
parties and their respective successors and permitted assigns.
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7.8 Counterparts and Fax Delivery. This Agreement and any amendment, supplement,
restatement or termination of any term of this Agreement may be executed and
delivered in any number of counterparts, each of which when executed and
delivered is an original but all of which taken together constitute one and the
same instrument. A party may deliver this Agreement and any amendment,
supplement, restatement or termination of any term of this Agreement by fax.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ John D. Grant
-------------------------------------
John D. Grant
Chief Operating Officer
By: /s/ Ken Grant
-------------------------------------
Kenneth Grant
Vice President
GRANT AUTOMOTIVE GROUP INC.
By: /s/ John D. Grant
-------------------------------------
John D. Grant
President
SPECTRE INDUSTRIES, INC.
By: /s/ Olof Hildebrand
-------------------------------------
Name: Olof Hildebrand
Title: Chairman
18
Exhibit 10.8
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of May 1, 2000, by and between
SPECTRE INDUSTRIES, INC., a Nevada corporation (the "Company"), and the director
and/or officer whose name appears on the signature page of this Agreement
("Indemnitee").
RECITALS
A. Highly competent persons are becoming more reluctant to serve as
directors or officers or in other capacities unless they are provided with
reasonable protection through insurance or indemnification against risks of
claims and actions against them arising out of their service to and activities
on behalf of the corporations.
B. The Board of Directors of the Company (the "Board" or the "Board
of Directors") has determined that the Company should act to assure its
directors and officers that there will be increased certainty of such protection
in the future.
C. It is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.
D. Indemnitee is willing to serve, to continue to serve and to take
on additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified.
AGREEMENT
In consideration of the premises and the covenants contained herein,
the Company and Indemnitee do hereby covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any corporation, partnership, joint
venture, trust or other enterprise in respect of which the Indemnitee is or was
or will be serving as a director, officer, advisory director or Board Committee
member at the request of the Company, and including, but not limited to, any
employee benefit plan of the Company or any of the foregoing.
(b) "Disinterested Director" shall mean a director of the Company
who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.
(c) "Expenses" shall include all attorneys' fees and costs,
retainers, court costs, transcripts, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses incurred
in connection with asserting or defending claims.
1
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(d) "Independent Counsel" shall mean a law firm or lawyer that
neither is presently nor in the past five years has been retained to represent:
(i) the Company or Indemnitee in any matter material to any such party or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any firm or person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing any of the Company or Indemnitee in an action to determine
Indemnitee's right to indemnification under this Agreement. All Expenses of the
Independent Counsel incurred in connection with acting pursuant to this
Agreement shall be borne by the Company.
(e) "Losses" shall mean all losses, claims, liabilities, judgments,
fines, penalties and amounts paid in settlement in connection with any
Proceeding.
(f) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative; provided,
however, that the term "Proceeding" shall include any action instituted by an
Indemnitee (other than an action to enforce indemnification rights under this
Agreement) only if such action is authorized by the Board of Directors.
2. Service by Indemnitee. Indemnitee agrees to begin or continue to serve
the Company or an Affiliate as a director and/or officer. Notwithstanding
anything contained herein, this Agreement shall not create a contract of
employment between the Company and Indemnitee, and the termination of
Indemnitee's relationship with the Company or an Affiliate by either party
hereto shall not be restricted by this Agreement.
3. Indemnification. The Company agrees to indemnify Indemnitee for, and
hold Indemnitee harmless from and against, any Losses or Expenses at any time
incurred by or assessed against Indemnitee arising out of or in connection with
the service of Indemnitee as a director, advisory director, Board Committee
member, officer, employee or agent of the Company or of an Affiliate
(collectively referred to as an "Officer or Director of the Company or of an
Affiliate"), whether the basis of such proceeding is alleged action in an
official capacity or in any other capacity while serving as an Officer or
Director of the Company or of an Affiliate, to the fullest extent permitted by
the laws of the State of Nevada in effect on the date hereof or as such laws may
from time to time hereafter be amended to increase the scope of such permitted
indemnification. Without diminishing the scope of the indemnification provided
by this Section 3, the rights of indemnification of Indemnitee provided
hereunder shall include but shall not be limited to those rights set forth
hereinafter.
4. Action or Proceeding Other Than an Action by or in the Right of the
Company. Indemnitee may be entitled to the indemnification rights provided
herein if Indemnitee is a person who was or is made a party or is threatened to
be made a party to any pending, completed or threatened Proceeding, other than
an action by or in the right of the Company, by reason of (a) the fact that
Indemnitee is or was an Officer or Director of the Company or of an Affiliate or
(b) anything done or not done by Indemnitee in any such capacity. Pursuant to
this Section, Indemnitee may be indemnified against Losses or Expenses incurred
by Indemnitee or on Indemnitee's behalf in connection with any Proceeding, if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
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5. Actions by or in the Right of the Company. Indemnitee may be entitled
to the indemnification rights provided herein if Indemnitee is a person who was
or is made a party or is threatened to be made a party to any pending, completed
or threatened Proceeding brought by or in the right of the Company to procure a
judgment in its favor by reason of (a) the fact that Indemnitee is or was an
Officer or Director of the Company or of an Affiliate or (b) anything done or
not done by Indemnitee in any such capacity. Pursuant to this Section,
Indemnitee may be indemnified against Losses or Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection with any
Proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company. Notwithstanding the foregoing provisions of this Section, no such
indemnification shall be made in respect of any claim, issue or matter as to
which Nevada law expressly prohibits such indemnification by reason of an
adjudication of liability of Indemnitee to the Company; provided, however, that
in such event such indemnification shall nevertheless be made by the Company to
the extent that the court in which such action or suit was brought shall
determine equitable under the circumstances.
6. Indemnification for Losses and Expenses of Party Who is Wholly or
Partly Successful. Notwithstanding any provision of this Agreement, to the
extent that Indemnitee has been wholly successful on the merits or otherwise
absolved in any Proceeding on any claim, issue or matter, Indemnitee shall be
indemnified against all Losses or Expenses actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Company agrees to indemnify Indemnitee, to the maximum extent
permitted by law, against all Losses and Expenses incurred by Indemnitee in
connection with each successfully resolved claim, issue or matter. In any review
or Proceeding to determine the extent of indemnification, the Company shall bear
the burden of proving any lack of success and which amounts sought in indemnity
are allocable to claims, issues or matters which were not successfully resolved.
For purposes of this Section and without limitation, the termination of any such
claim, issue or matter by dismissal with or without prejudice shall be deemed to
be a successful resolution as to such claim, issue or matter.
7. Payment for Expenses of a Witness. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of the fact that
Indemnitee is or was an Officer or Director of the Company or of an Affiliate, a
witness in any Proceeding, the Company agrees to pay to Indemnitee all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith.
8. Advancement of Expenses and Costs. All Expenses incurred by or on
behalf of Indemnitee (or reasonably expected by Indemnitee to be incurred by
Indemnitee within three months) in connection with any Proceeding shall be paid
promptly by the Company, and in any event in advance of the final disposition of
such Proceeding within sixty days after the receipt by the Company of a
statement or statements from Indemnitee requesting from time to time such
advance or advances, whether or not a determination to indemnify has been made
under Section 9. Such statement or statements shall evidence such Expenses
incurred (or reasonably expected to be incurred) by Indemnitee in connection
therewith and shall include or be accompanied by a written undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified therefor pursuant to the terms
of this Agreement. The right to indemnification of advances as granted by this
3
<PAGE>
Section 8 shall be enforceable by the director or officer in any court of
competent jurisdiction, if the Company denies such request, in whole or in part,
or if no disposition thereof is made within 60 days. Such person's costs and
expenses incurred in connection with successfully establishing his/her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Company. It shall be a defense to any such action seeking an
adjudication or award in arbitration pursuant to this Agreement (other than an
action brought to enforce a claim for the advance of costs, charges and expenses
under this Section 8 where the required undertaking, if any, has been received
by the Company) that the claimant has not met the standard of conduct set forth
in the Nevada General Corporation Law ("NGCL"), as the same exists or hereafter
may be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Company to provide broader indemnification rights
than said law permitted the Company to provide prior to such amendment), but the
burden of proving such defense shall be on the Company. Neither the failure of
the Company (including its Board of Directors, its independent legal counsel and
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he/she has met the applicable standard of conduct set forth in the NGCL,
as the same exists or hereafter may be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights that said law permitted the Company to provide
prior to such amendment), nor the fact that there has been an actual
determination by the Company (including its Board of Directors, its independent
legal counsel and its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
9. Procedure for Determination of Entitlement to Indemnification. (a) When
seeking indemnification under this Agreement (which shall not include in any
case the right of Indemnitee to receive payments pursuant to Section 7 and
Section 8 hereof, which shall not be subject to this Section 9), Indemnitee
shall submit a written request for indemnification to the Company. Such request
shall include documentation or information which is reasonably necessary for the
Company to make a determination of Indemnitee's entitlement to indemnification
hereunder and which is reasonably available to Indemnitee. Determination of
Indemnitee's entitlement to indemnification shall be made promptly, but in no
event later than 60 days after receipt by the Company of Indemnitee's written
request for indemnification. The Secretary of the Company shall, promptly upon
receipt of Indemnitee's request for indemnification, advise the Board that
Indemnitee has made such request for indemnification.
(b) The entitlement of Indemnitee to indemnification under this
Agreement in respect of any pending, contemplated or threatened Proceeding shall
be determined in the specific case by (a) the Board of Directors by a majority
vote of a quorum consisting of those directors who were not party to such
Proceeding, or (b) if such a quorum is not obtainable, or if a quorum of
disinterested directors so directs, by Independent Counsel in a written opinion,
or (c) by the stockholders.
(c) In the event the determination of entitlement is to be made by
Independent Counsel, such Independent Counsel shall be selected by the Board and
approved by Indemnitee. Upon failure of the Board and the Board of Directors to
so select such Independent Counsel or upon failure of Indemnitee to so approve,
such Independent Counsel shall be selected by the President of the Bar of the
State of Nevada.
4
<PAGE>
(d) If the determination made pursuant to Section 9(b) is that
Indemnitee is not entitled to indemnification to the full extent of Indemnitee's
request, Indemnitee shall have the right to seek entitlement to indemnification
in accordance with the procedures set forth in Section 10 hereof.
(e) If the person or persons empowered pursuant to Section 9(b)
hereof to make a determination with respect to entitlement to indemnification
shall have failed to make the requested determination within 60 days after
receipt by the Company of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be absolutely entitled to such indemnification, absent (i)
misrepresentation by Indemnitee of a material fact in the request for
indemnification or (ii) a final judicial determination that all or any part of
such indemnification is expressly prohibited by law.
(f) The termination of any Proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, adversely affect the rights of Indemnitee to indemnification
hereunder, except as may be specifically provided herein, or create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company or create a presumption that (with respect to any criminal action or
Proceeding) Indemnitee had reasonable cause to believe that Indemnitee's conduct
was unlawful.
(g) For purposes of any determination of good faith hereunder,
Indemnitee shall be deemed to have acted in good faith if in taking an action
Indemnitee relied on the records or books of account of the Company or an
Affiliate, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or an Affiliate in the course of their
duties, or on the advice of legal counsel for the Company or an Affiliate or on
information or records given or reports made to the Company or an Affiliate by
an independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Company or an Affiliate. The Company shall
have the burden of establishing the absence of good faith. The provisions of
this Section 9(g) shall not be deemed to be exclusive or to limit in any way the
other circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Agreement.
(h) The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Company or an Affiliate shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.
10. Remedies in Cases of Determination Not to Indemnify or to Advance
Expenses. (a) In the event that (i) a determination is made that Indemnitee is
not entitled to indemnification hereunder, (ii) advances are not made pursuant
to Section 8 hereof or (iii) payment has not been timely made following a
determination of entitlement to indemnification pursuant to Section 9 hereof,
Indemnitee shall be entitled to seek an adjudication in an appropriate court of
the State of Nevada or any other court of competent jurisdiction as to
Indemnitee's entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance with
the procedures set forth in Section 9 hereof, in whole or in part, that
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in paragraph (a) of this Section 10 shall be de novo and
Indemnitee shall not be prejudiced by reason of any such prior
5
<PAGE>
determination that Indemnitee is not entitled to indemnification, and the
Company shall bear the burdens of proof specified in paragraphs 6 and 9 hereof
in such proceeding.
(c) If a determination is made or deemed to have been made pursuant
to the terms of Section 9 or 10 hereof that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration in the absence of (i) a misrepresentation of
a material fact by Indemnitee or (ii) a final judicial determination that all or
any part of such indemnification is expressly prohibited by law.
(d) The Company and Indemnitee agree that they shall be precluded
from asserting that the procedures and presumptions of this Agreement are not
valid, binding and enforceable. The Company and Indemnitee further agree to
stipulate in any such court that the Company and Indemnitee are bound by all of
the provisions of this Agreement and are precluded from making any assertion to
the contrary.
(e) To the extent deemed appropriate by the court, interest shall be
paid by the Company to Indemnitee at a reasonable interest rate for amounts
which the Company indemnifies or is obliged to indemnify the Indemnitee for the
period commencing with the date on which Indemnitee requested indemnification
(or reimbursement or advance of an Expense) and ending with the date on which
such payment is made to Indemnitee by the Company.
11. Expenses Incurred by Indemnitee to Enforce this Agreement. All
expenses incurred by Indemnitee in connection with the preparation and
submission of Indemnitee's request for indemnification hereunder shall be borne
by the Company. In the event that Indemnitee is a party to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at issue
or seeks an adjudication to enforce Indemnitee's rights under, or to recover
damages for breach of, this Agreement, Indemnitee, if Indemnitee prevails in
whole in such action, shall be entitled to recover from the Company, and shall
be indemnified by the Company against, any Expenses incurred by Indemnitee. If
it is determined that Indemnitee is entitled to indemnification for part (but
not all) of the indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably prorated among
the claims, issues or matters for which the Indemnitee is entitled to
indemnification and for claims, issues or matters for which the Indemnitee is
not so entitled.
12. Non-Exclusivity. The rights of indemnification and to receive advances
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under or by reason of applicable
law, any certificate of incorporation or by-laws, any agreement, any vote of
stockholders or any resolution of directors or otherwise. To the extent
Indemnitee would be prejudiced thereby, no amendment, alteration, rescission or
replacement of this Agreement or any provision hereof shall be effective as to
Indemnitee with respect to any action taken or omitted by such Indemnitee in
Indemnitee's position with the Company or an Affiliate or any other entity which
Indemnitee is or was serving at the request of the Company prior to such
amendment, alteration, rescission or replacement.
13. Duration of Agreement. This Agreement shall apply to any claim
asserted and any Losses and Expenses incurred in connection with any claim
asserted on or after the effective date of this Agreement and shall continue
until and terminate upon the later of: (a) 10 years after Indemnitee has ceased
to occupy any of the positions or have any of the relationships described in
Sections 3, 4 or 5 of this Agreement; or (b) one year after the final
termination of all pending or threatened Proceedings of the kind described
herein with respect to Indemnitee. This
6
<PAGE>
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Indemnitee and Indemnitee's spouse, assigns,
heirs, devisee, executors, administrators or other legal representatives.
14. Severability. Should any part, term or condition hereof be declared
illegal or unenforceable or in conflict with any other law, the validity of the
remaining portions or provisions of this Agreement shall not be affected
thereby, and the illegal or unenforceable portions of the Agreement shall be and
hereby are redrafted to conform with applicable law, to provide the maximum
indemnification benefits allowable in accordance with the intention of the
parties hereto, while leaving the remaining portions of this Agreement intact.
15. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
16. Headings. Section headings are for convenience only and do not control
or affect meaning or interpretation of any terms or provisions of this
Agreement.
17. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by each of the
parties hereto.
18. No Duplicative Payment. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
(net of Expenses incurred in collecting such payment) under this Agreement, any
insurance policy, contract, agreement or otherwise.
19. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in a registered or certified postpaid envelope in any general or branch office
of the United States Postal Service, or sent by Federal Express or other similar
overnight courier service, addressed to the address of the parties stated below
or to such changed address as such party may have fixed by notice or, if given
by telecopier, when such telecopy is transmitted and the appropriate answer back
is received.
(a) If to Indemnitee, to the address appearing on the signature page
hereof.
(b) If to the Company to:
Spectre Industries, Inc.
3992 Sunnycrest Drive
North Vancouver, B.C. Canada V7R 3C9
Attention: President
Phone: (604) 984-0927
Fax: (604) 990-0927
20. GOVERNING LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEVADA WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
7
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21. Entire Agreement. Subject to the provisions of Section 12 hereof, this
Agreement constitutes the entire understanding between the parties and
supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter of this Agreement. This Agreement may not
be amended or otherwise modified except in writing duly executed by all of the
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.
[Signature Page to follow]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SPECTRE INDUSTRIES, INC.
By /s/ Ian S. Grant
--------------------------------------
Name: Ian S. Grant
Title: President, Chief Executive and
Director
INDEMNITEE:
/s/ Ian S. Grant
----------------------------------------
Name: Ian S. Grant
Title: President, Chief Executive
Officer and Director
Address:
Ian S. Grant
3992 Sunnycrest Drive
North Vancouver, B.C. Canada V7R 3C9
9
Exhibit 10.9
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of May 1, 2000, by and between
SPECTRE INDUSTRIES, INC., a Nevada corporation (the "Company"), and the director
and/or officer whose name appears on the signature page of this Agreement
("Indemnitee").
RECITALS
A. Highly competent persons are becoming more reluctant to serve as
directors or officers or in other capacities unless they are provided with
reasonable protection through insurance or indemnification against risks of
claims and actions against them arising out of their service to and activities
on behalf of the corporations.
B. The Board of Directors of the Company (the "Board" or the "Board
of Directors") has determined that the Company should act to assure its
directors and officers that there will be increased certainty of such protection
in the future.
C. It is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.
D. Indemnitee is willing to serve, to continue to serve and to take
on additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified.
AGREEMENT
In consideration of the premises and the covenants contained herein,
the Company and Indemnitee do hereby covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any corporation, partnership, joint
venture, trust or other enterprise in respect of which the Indemnitee is or was
or will be serving as a director, officer, advisory director or Board Committee
member at the request of the Company, and including, but not limited to, any
employee benefit plan of the Company or any of the foregoing.
(b) "Disinterested Director" shall mean a director of the Company
who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.
(c) "Expenses" shall include all attorneys' fees and costs,
retainers, court costs, transcripts, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses incurred
in connection with asserting or defending claims.
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(d) "Independent Counsel" shall mean a law firm or lawyer that
neither is presently nor in the past five years has been retained to represent:
(i) the Company or Indemnitee in any matter material to any such party or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any firm or person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing any of the Company or Indemnitee in an action to determine
Indemnitee's right to indemnification under this Agreement. All Expenses of the
Independent Counsel incurred in connection with acting pursuant to this
Agreement shall be borne by the Company.
(e) "Losses" shall mean all losses, claims, liabilities, judgments,
fines, penalties and amounts paid in settlement in connection with any
Proceeding.
(f) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative; provided,
however, that the term "Proceeding" shall include any action instituted by an
Indemnitee (other than an action to enforce indemnification rights under this
Agreement) only if such action is authorized by the Board of Directors.
2. Service by Indemnitee. Indemnitee agrees to begin or continue to serve
the Company or an Affiliate as a director and/or officer. Notwithstanding
anything contained herein, this Agreement shall not create a contract of
employment between the Company and Indemnitee, and the termination of
Indemnitee's relationship with the Company or an Affiliate by either party
hereto shall not be restricted by this Agreement.
3. Indemnification. The Company agrees to indemnify Indemnitee for, and
hold Indemnitee harmless from and against, any Losses or Expenses at any time
incurred by or assessed against Indemnitee arising out of or in connection with
the service of Indemnitee as a director, advisory director, Board Committee
member, officer, employee or agent of the Company or of an Affiliate
(collectively referred to as an "Officer or Director of the Company or of an
Affiliate"), whether the basis of such proceeding is alleged action in an
official capacity or in any other capacity while serving as an Officer or
Director of the Company or of an Affiliate, to the fullest extent permitted by
the laws of the State of Nevada in effect on the date hereof or as such laws may
from time to time hereafter be amended to increase the scope of such permitted
indemnification. Without diminishing the scope of the indemnification provided
by this Section 3, the rights of indemnification of Indemnitee provided
hereunder shall include but shall not be limited to those rights set forth
hereinafter.
4. Action or Proceeding Other Than an Action by or in the Right of the
Company. Indemnitee may be entitled to the indemnification rights provided
herein if Indemnitee is a person who was or is made a party or is threatened to
be made a party to any pending, completed or threatened Proceeding, other than
an action by or in the right of the Company, by reason of (a) the fact that
Indemnitee is or was an Officer or Director of the Company or of an Affiliate or
(b) anything done or not done by Indemnitee in any such capacity. Pursuant to
this Section, Indemnitee may be indemnified against Losses or Expenses incurred
by Indemnitee or on Indemnitee's behalf in connection with any Proceeding, if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
2
<PAGE>
5. Actions by or in the Right of the Company. Indemnitee may be entitled
to the indemnification rights provided herein if Indemnitee is a person who was
or is made a party or is threatened to be made a party to any pending, completed
or threatened Proceeding brought by or in the right of the Company to procure a
judgment in its favor by reason of (a) the fact that Indemnitee is or was an
Officer or Director of the Company or of an Affiliate or (b) anything done or
not done by Indemnitee in any such capacity. Pursuant to this Section,
Indemnitee may be indemnified against Losses or Expenses actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection with any
Proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company. Notwithstanding the foregoing provisions of this Section, no such
indemnification shall be made in respect of any claim, issue or matter as to
which Nevada law expressly prohibits such indemnification by reason of an
adjudication of liability of Indemnitee to the Company; provided, however, that
in such event such indemnification shall nevertheless be made by the Company to
the extent that the court in which such action or suit was brought shall
determine equitable under the circumstances.
6. Indemnification for Losses and Expenses of Party Who is Wholly or
Partly Successful. Notwithstanding any provision of this Agreement, to the
extent that Indemnitee has been wholly successful on the merits or otherwise
absolved in any Proceeding on any claim, issue or matter, Indemnitee shall be
indemnified against all Losses or Expenses actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Company agrees to indemnify Indemnitee, to the maximum extent
permitted by law, against all Losses and Expenses incurred by Indemnitee in
connection with each successfully resolved claim, issue or matter. In any review
or Proceeding to determine the extent of indemnification, the Company shall bear
the burden of proving any lack of success and which amounts sought in indemnity
are allocable to claims, issues or matters which were not successfully resolved.
For purposes of this Section and without limitation, the termination of any such
claim, issue or matter by dismissal with or without prejudice shall be deemed to
be a successful resolution as to such claim, issue or matter.
7. Payment for Expenses of a Witness. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of the fact that
Indemnitee is or was an Officer or Director of the Company or of an Affiliate, a
witness in any Proceeding, the Company agrees to pay to Indemnitee all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith.
8. Advancement of Expenses and Costs. All Expenses incurred by or on
behalf of Indemnitee (or reasonably expected by Indemnitee to be incurred by
Indemnitee within three months) in connection with any Proceeding shall be paid
promptly by the Company, and in any event in advance of the final disposition of
such Proceeding within sixty days after the receipt by the Company of a
statement or statements from Indemnitee requesting from time to time such
advance or advances, whether or not a determination to indemnify has been made
under Section 9. Such statement or statements shall evidence such Expenses
incurred (or reasonably expected to be incurred) by Indemnitee in connection
therewith and shall include or be accompanied by a written undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified therefor pursuant to the terms
of this Agreement. The right to indemnification of advances as granted by this
3
<PAGE>
Section 8 shall be enforceable by the director or officer in any court of
competent jurisdiction, if the Company denies such request, in whole or in part,
or if no disposition thereof is made within 60 days. Such person's costs and
expenses incurred in connection with successfully establishing his/her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Company. It shall be a defense to any such action seeking an
adjudication or award in arbitration pursuant to this Agreement (other than an
action brought to enforce a claim for the advance of costs, charges and expenses
under this Section 8 where the required undertaking, if any, has been received
by the Company) that the claimant has not met the standard of conduct set forth
in the Nevada General Corporation Law ("NGCL"), as the same exists or hereafter
may be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Company to provide broader indemnification rights
than said law permitted the Company to provide prior to such amendment), but the
burden of proving such defense shall be on the Company. Neither the failure of
the Company (including its Board of Directors, its independent legal counsel and
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he/she has met the applicable standard of conduct set forth in the NGCL,
as the same exists or hereafter may be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights that said law permitted the Company to provide
prior to such amendment), nor the fact that there has been an actual
determination by the Company (including its Board of Directors, its independent
legal counsel and its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
9. Procedure for Determination of Entitlement to Indemnification. (a) When
seeking indemnification under this Agreement (which shall not include in any
case the right of Indemnitee to receive payments pursuant to Section 7 and
Section 8 hereof, which shall not be subject to this Section 9), Indemnitee
shall submit a written request for indemnification to the Company. Such request
shall include documentation or information which is reasonably necessary for the
Company to make a determination of Indemnitee's entitlement to indemnification
hereunder and which is reasonably available to Indemnitee. Determination of
Indemnitee's entitlement to indemnification shall be made promptly, but in no
event later than 60 days after receipt by the Company of Indemnitee's written
request for indemnification. The Secretary of the Company shall, promptly upon
receipt of Indemnitee's request for indemnification, advise the Board that
Indemnitee has made such request for indemnification.
(b) The entitlement of Indemnitee to indemnification under this
Agreement in respect of any pending, contemplated or threatened Proceeding shall
be determined in the specific case by (a) the Board of Directors by a majority
vote of a quorum consisting of those directors who were not party to such
Proceeding, or (b) if such a quorum is not obtainable, or if a quorum of
disinterested directors so directs, by Independent Counsel in a written opinion,
or (c) by the stockholders.
(c) In the event the determination of entitlement is to be made by
Independent Counsel, such Independent Counsel shall be selected by the Board and
approved by Indemnitee. Upon failure of the Board and the Board of Directors to
so select such Independent Counsel or upon failure of Indemnitee to so approve,
such Independent Counsel shall be selected by the President of the Bar of the
State of Nevada.
4
<PAGE>
(d) If the determination made pursuant to Section 9(b) is that
Indemnitee is not entitled to indemnification to the full extent of Indemnitee's
request, Indemnitee shall have the right to seek entitlement to indemnification
in accordance with the procedures set forth in Section 10 hereof.
(e) If the person or persons empowered pursuant to Section 9(b)
hereof to make a determination with respect to entitlement to indemnification
shall have failed to make the requested determination within 60 days after
receipt by the Company of such request, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be absolutely entitled to such indemnification, absent (i)
misrepresentation by Indemnitee of a material fact in the request for
indemnification or (ii) a final judicial determination that all or any part of
such indemnification is expressly prohibited by law.
(f) The termination of any Proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, adversely affect the rights of Indemnitee to indemnification
hereunder, except as may be specifically provided herein, or create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company or create a presumption that (with respect to any criminal action or
Proceeding) Indemnitee had reasonable cause to believe that Indemnitee's conduct
was unlawful.
(g) For purposes of any determination of good faith hereunder,
Indemnitee shall be deemed to have acted in good faith if in taking an action
Indemnitee relied on the records or books of account of the Company or an
Affiliate, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or an Affiliate in the course of their
duties, or on the advice of legal counsel for the Company or an Affiliate or on
information or records given or reports made to the Company or an Affiliate by
an independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Company or an Affiliate. The Company shall
have the burden of establishing the absence of good faith. The provisions of
this Section 9(g) shall not be deemed to be exclusive or to limit in any way the
other circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Agreement.
(h) The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Company or an Affiliate shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.
10. Remedies in Cases of Determination Not to Indemnify or to Advance
Expenses. (a) In the event that (i) a determination is made that Indemnitee is
not entitled to indemnification hereunder, (ii) advances are not made pursuant
to Section 8 hereof or (iii) payment has not been timely made following a
determination of entitlement to indemnification pursuant to Section 9 hereof,
Indemnitee shall be entitled to seek an adjudication in an appropriate court of
the State of Nevada or any other court of competent jurisdiction as to
Indemnitee's entitlement to such indemnification or advance.
(b) In the event a determination has been made in accordance with
the procedures set forth in Section 9 hereof, in whole or in part, that
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration referred to in paragraph (a) of this Section 10 shall be de novo and
Indemnitee shall not be prejudiced by reason of any such prior
5
<PAGE>
determination that Indemnitee is not entitled to indemnification, and the
Company shall bear the burdens of proof specified in paragraphs 6 and 9 hereof
in such proceeding.
(c) If a determination is made or deemed to have been made pursuant
to the terms of Section 9 or 10 hereof that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration in the absence of (i) a misrepresentation of
a material fact by Indemnitee or (ii) a final judicial determination that all or
any part of such indemnification is expressly prohibited by law.
(d) The Company and Indemnitee agree that they shall be precluded
from asserting that the procedures and presumptions of this Agreement are not
valid, binding and enforceable. The Company and Indemnitee further agree to
stipulate in any such court that the Company and Indemnitee are bound by all of
the provisions of this Agreement and are precluded from making any assertion to
the contrary.
(e) To the extent deemed appropriate by the court, interest shall be
paid by the Company to Indemnitee at a reasonable interest rate for amounts
which the Company indemnifies or is obliged to indemnify the Indemnitee for the
period commencing with the date on which Indemnitee requested indemnification
(or reimbursement or advance of an Expense) and ending with the date on which
such payment is made to Indemnitee by the Company.
11. Expenses Incurred by Indemnitee to Enforce this Agreement. All
expenses incurred by Indemnitee in connection with the preparation and
submission of Indemnitee's request for indemnification hereunder shall be borne
by the Company. In the event that Indemnitee is a party to or intervenes in any
proceeding in which the validity or enforceability of this Agreement is at issue
or seeks an adjudication to enforce Indemnitee's rights under, or to recover
damages for breach of, this Agreement, Indemnitee, if Indemnitee prevails in
whole in such action, shall be entitled to recover from the Company, and shall
be indemnified by the Company against, any Expenses incurred by Indemnitee. If
it is determined that Indemnitee is entitled to indemnification for part (but
not all) of the indemnification so requested, Expenses incurred in seeking
enforcement of such partial indemnification shall be reasonably prorated among
the claims, issues or matters for which the Indemnitee is entitled to
indemnification and for claims, issues or matters for which the Indemnitee is
not so entitled.
12. Non-Exclusivity. The rights of indemnification and to receive advances
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under or by reason of applicable
law, any certificate of incorporation or by-laws, any agreement, any vote of
stockholders or any resolution of directors or otherwise. To the extent
Indemnitee would be prejudiced thereby, no amendment, alteration, rescission or
replacement of this Agreement or any provision hereof shall be effective as to
Indemnitee with respect to any action taken or omitted by such Indemnitee in
Indemnitee's position with the Company or an Affiliate or any other entity which
Indemnitee is or was serving at the request of the Company prior to such
amendment, alteration, rescission or replacement.
13. Duration of Agreement. This Agreement shall apply to any claim
asserted and any Losses and Expenses incurred in connection with any claim
asserted on or after the effective date of this Agreement and shall continue
until and terminate upon the later of: (a) 10 years after Indemnitee has ceased
to occupy any of the positions or have any of the relationships described in
Sections 3, 4 or 5 of this Agreement; or (b) one year after the final
termination of all pending or threatened Proceedings of the kind described
herein with respect to Indemnitee. This
6
<PAGE>
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Indemnitee and Indemnitee's spouse, assigns,
heirs, devisee, executors, administrators or other legal representatives.
14. Severability. Should any part, term or condition hereof be declared
illegal or unenforceable or in conflict with any other law, the validity of the
remaining portions or provisions of this Agreement shall not be affected
thereby, and the illegal or unenforceable portions of the Agreement shall be and
hereby are redrafted to conform with applicable law, to provide the maximum
indemnification benefits allowable in accordance with the intention of the
parties hereto while leaving the remaining portions of this Agreement intact.
15. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
16. Headings. Section headings are for convenience only and do not control
or affect meaning or interpretation of any terms or provisions of this
Agreement.
17. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by each of the
parties hereto.
18. No Duplicative Payment. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
(net of Expenses incurred in collecting such payment) under this Agreement, any
insurance policy, contract, agreement or otherwise.
19. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in a registered or certified postpaid envelope in any general or branch office
of the United States Postal Service, or sent by Federal Express or other similar
overnight courier service, addressed to the address of the parties stated below
or to such changed address as such party may have fixed by notice or, if given
by telecopier, when such telecopy is transmitted and the appropriate answer back
is received.
(a) If to Indemnitee, to the address appearing on the signature page
hereof.
(b) If to the Company to:
Spectre Industries, Inc.
3992 Sunnycrest Drive
North Vancouver, B.C. Canada V7R 3C9
Attention: President
Phone: (604) 984-0927
Fax: (604) 990-0927
20. GOVERNING LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEVADA WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
7
<PAGE>
21. Entire Agreement. Subject to the provisions of Section 12 hereof, this
Agreement constitutes the entire understanding between the parties and
supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter of this Agreement. This Agreement may not
be amended or otherwise modified except in writing duly executed by all of the
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.
[Signature Page to follow]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SPECTRE INDUSTRIES, INC.
By /s/ Ian S. Grant
--------------------------------------
Name: Ian S. Grant
Title: President, Chief Executive and
Director
INDEMNITEE:
/s/ Marco Baruch
----------------------------------------
Name: Marco Baruch
Title: Director
Address:
Marco Baruch
Residence Alexandra
Chateau # d'oex, Canton De Vaud
CH-1837 Switzerland
9
EXHIBIT 23
JONES, JENSEN
& COMPANY, LLC
---------------------
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
CONSENT OF INDEPENDENT AUDITORS'
We hereby consent to the use of our audit report dated March 3, 2000 in this
Form 10-SB of Spectre Industries, Inc. for the year ended December 31, 1999,
which is a part of this Form 10-SB and all references to our firm included in
this Form 10-SB.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
May 8, 2000
50 South Main Street
Suite 1450
Salt Lake City, Utah 84144
Phone (801) 328-4408
Facsimile (801) 328-4461
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's financial statements for the period ending December 31, 1999, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 44,566
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,566
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,566
<CURRENT-LIABILITIES> 761,160
<BONDS> 1,200,000
0
0
<COMMON> 12,106
<OTHER-SE> (1,928,700)
<TOTAL-LIABILITY-AND-EQUITY> 44,566
<SALES> 0
<TOTAL-REVENUES> 47,102
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (2,577,411)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (271,372)
<INCOME-PRETAX> (2,801,681)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,801,681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,801,681)
<EPS-BASIC> (.25)
<EPS-DILUTED> 0
</TABLE>
