SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): February 28, 1997
ETS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Virginia 00019678 54-1414643
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1401 Municipal Road, NW
Roanoke, Virginia 24012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 265-0004
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 9. Sales of Equity Securities Pursuant to Regulation S.
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Pursuant to a Regulation S Convertible Debentures Purchase Agreement
dated as of February 28, 1997 (the "Debentures Purchase Agreement"), and a
Regulation S Warrants Purchase Agreement dated as of February 28, 1997 (the
"Warrants Purchase Agreement"), ETS International, Inc. (the "Company"), on
February 28, 1997 (the "Closing Date"), placed $750,000 of its 7% Convertible
Debentures due February 27, 2002 (the "Debentures") and issued warrants (the
"Warrants") to purchase 1,000,000 shares of Company Common Stock, no par
value. The offering was made under the Securities Act of 1933 (the "1933
Act"), as amended, in reliance on the exemption from registration set forth
in Regulation S under the 1933 Act to foreign institutional investors and/or
agents associated with the transaction.
The holder of the Debenture(s) is entitled to convert the Debenture(s)
initially issued to such holder beginning forty-five days after the Closing
Date, into that number of fully paid and nonassessable shares of the
Company's Common Stock, calculated in accordance with the following formula
(the "Conversion Rate"):
Number of shares issued upon conversion = (Principal + Interest)/Conversion
Price, where
I Principal = The Principal amount of the Debenture(s) to be
converted.
II Interest = Principal x (N/365) x .07, where
A. N = the number of days between (i) Closing Date, and
(ii) the applicable Date of Conversion for the
Debenture(s) for which conversion is being elected, and
B. Conversion Price = the lesser of (x) 100% of the
average Closing Bid Price, as that term is defined below,
of the Company's Common Stock for the five trading days
immediately preceding the Closing Date, or (y) 65% of the
average Closing Bid Price, as that term is defined below,
of the Company's Common Stock for the five trading days
immediately preceding the Date of Conversion.
The term "Closing Bid Price" means the closing bid price on the market
as reported by the OTC Bulletin Board or NASDAQ's National Market System or
Small Capitalization System ("NASDAQ"), or American Exchange Emerging Company
Marketplace, or if then traded on a different national securities exchange,
the closing sales price on the principal national securities exchange on
which it is so traded and if not available, the mean of the daily high and
low sales prices on such securities exchange on which it is traded, or, if
the actual Closing Bid Price is not available on any such day on the OTC
Bulletin Board or NASDAQ or such other exchange or market where traded, then
the Closing Bid Price on the immediately preceding reported date.
<PAGE>
Each of the Debentures that remains issued on the date which is five
years after the Closing Date automatically will be converted into shares of
Common Stock on such date at the Conversion Rate then in effect (calculated
in accordance with the formula above). The Conversion Price will be adjusted
in the event of a stock split, stock dividend, merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event
by the Company. The Company may in its sole option force conversion of the
Debentures, in whole at any time from and after one year from the Closing
Date, on not less than fifteen nor more than thirty days prior written notice
by the Company to the holder of the Debentures.
Each Warrant entitles the holder to purchase, in consideration of the
services performed by such purchaser or its affiliates or the securities
purchased by such purchaser in connection with the Company's offering of the
Debentures, 100,000 shares of Company Common Stock. The exercise price of
the Warrants is equal to 100% of the average Closing Bid Price of the
Company's Common Stock for the five days immediately preceding the Closing
Date, such Warrants to be exercised at any time from and after forty-five
days from the Closing Date and on or before February 27, 2002. The smallest
number of shares of Common Stock with respect to which a holder may exercise
a Warrant at a given time in accordance with the formula set forth above is
1,000 shares or such lesser amount held by the purchaser.
Item 7(c). Exhibits.
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Exhibit No. Description
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4(a) Form of 7% Convertible Debenture Due February 27, 2002
4(b) Form of Common Stock Purchase Warrant
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ETS INTERNATIONAL, INC.
By s/David F. Tompkins
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David F. Tompkins
Vice President
Date: March 11, 1997
<PAGE>
THIS DEBENTURE AND THE COMMON STOCK ("SHARES") ISSUABLE UPON CONVERSION OF
THIS DEBENTURE (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION
OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT
TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S ("REGULATION S")
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM
IS DEFINED IN REGULATION S) UNLESS THESE SECURITIES ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION REQUIREMENTS OF
THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Series 1 of 8 U.S. $100,000
ETS INTERNATIONAL, INC.
7% CONVERTIBLE DEBENTURE DUE FEBRUARY 27, 2002
THIS DEBENTURE is one of a duly authorized issue of Debentures of ETS
International, Inc., a corporation duly organized and existing under the laws
of Virginia ( the "Company"), designated as its 7% Convertible Debentures due
February 27, 2002, in an aggregate principal amount not exceeding Seven
Hundred Fifty Thousand U.S. Dollars (U.S. $ 750,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Purchaser, or any
subsequent registered holder hereof (the "Holder"), the principal sum of One
Hundred Thousand U.S. Dollars (U.S. $100,000), on or prior to February 27,
2002 (the "Maturity Date"), and to pay interest on the principal sum
outstanding on each Date of Conversion (as defined in Section 3(a) below) and
in arrears on the earlier of the Date of Conversion (as defined in Section
4(b)(iv) below) or the Maturity Date, at the rate of seven (7%) percent per
annum payable in U.S. currency. Accrual of interest on this Debenture shall
commence on the date the Company and/or the escrow agent first had in its
possession funds representing full payment for this Debenture, and shall
continue to accrue until payment in full of the principal sum has been made
or duly provided for, or until the Date of Conversion, whichever is earlier.
The interest so payable will be payable on the Maturity Date or the Date of
Conversion, as the case may be. Such interest shall be paid to the person
and at the address in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of the Debentures (the
"Debenture Register") on the business day immediately preceding the payment
date. The principal or, and any accrued interest on, this Debenture are
payable, if converted, at seven (7%) percent per annum in Shares to the
person and at the address in whose name this Debenture is registered on the
Debenture Register on the business day immediately preceding the payment
date. The forwarding of such payment shall constitute a payment of interest
hereunder and shall satisfy and discharge the liability for principal and
interest on this Debenture to the extent of the sum or Shares so paid.
<PAGE>
This Debenture is subject to the following additional provisions:
Section 1. Debenture Denominations. The Debentures are initially
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issuable in denominations of One Hundred Thousand Dollars ($100,000 U.S.) or
such lesser amount as mutually agreed upon by the parties. Upon conversion
of a portion, but less than all, of this Debenture in accordance with the
terms hereof, a new debenture or debentures may be issued to the Holder in a
denomination equal to the exact amount of the unconverted portion of this
Debenture. No service charge will be made for registration of transfer or
exchange.
Section 2. Sale, Transfer or Exchange. This Debenture has been issued
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based upon investment representations of the original Purchaser hereof and
may be transferred or exchanged only in compliance with the Act, including
Regulation S and any applicable state securities laws ("State Acts"). Any
Holder of this Debenture, by acceptance hereof, agrees to the
representations, warranties and covenants herein and in the Regulation S
Convertible Debentures Purchase Agreement of even date herewith. Prior to
due presentment to the Company for transfer of this Debenture, the Company
and any agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 3. Conversion. The record Holder of this Debenture shall have
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conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Rate. The record Holder of this
Debenture shall be entitled to convert the Debenture(s) initially issued to
such Holder beginning forty-five (45) days following the date of the closing
of the purchase and sale of all Debentures that occur pursuant to the
offering of the Debentures by the Company (the "Closing Date") and at any
time thereafter at the office of the Company or its designated transfer agent
for the Debentures (the "Transfer Agent"), into that number of fully-paid and
non-assessable Shares of the Company's common stock, no par value ("Common
Stock") calculated in accordance with the following formula (the "Conversion
Rate"):
Number of Shares issued upon conversion = (Principal + Interest)/
Conversion Price, where
I Principal = The Principal amount of the Debenture(s) to be converted.
II Interest = Principal x (N/365) x .07, where
A. N = the number of days between (i) the date that, in connection
with the consummation of the initial purchase of this Debenture
from the Company, the escrow agent first had in its possession
funds representing full payment for this Debenture, and (ii) the
applicable Date of Conversion for the Debenture(s) for which
conversion is being elected, and
<PAGE>
B. Conversion Price = the lesser of (x) 100% of the average
Closing Bid Price, as that term is defined below, of the Company's
Shares for the five (5) trading days immediately preceding the
Closing Date, as defined below (the "Fixed Conversion Price"), or
(y) 65% of the average Closing Bid Price, as that term is defined
below, of the Company's Shares for the five (5) trading days
immediately preceding the Date of Conversion, as defined below
(the "Variable Conversion Price").
For purposes hereof, the term "Closing Bid Price" shall mean the closing
bid price on the market as reported by OTC Bulletin Board or NASDAQ's
National Market System or Small Capitalization System ("NASDAQ"), or American
Exchange Emerging Company Marketplace or if then traded on a different
national securities exchange, the closing sales price on the principal
national securities exchange on which it is so traded and if not available,
the mean of the daily high and low sales prices on such securities exchange
on which it is traded, or, if the actual Closing Bid Price is not available
on any such day on OTC Bulletin Board or NASDAQ or such other exchange or
market where traded, then the Closing Bid Price on the immediately preceding
reported date.
(b) Mechanics of Conversion. In order to convert the Debentures
into Shares, the Holder shall (i) fax a copy of the fully executed notice of
conversion in the form attached hereto as Exhibit C ("Notice of Conversion")
to the Company at the office of the Company, which notice shall specify the
principal amount of Debentures to be converted and shall contain a
calculation of the Conversion Rate (together with a copy of the first page of
each Debenture to be converted) on or prior to 11:59 p.m., New York City time
(the "Conversion Notice Deadline") on the Date of Conversion specified on the
Notice of Conversion and (ii) surrender the original Debenture(s) being
converted to a common courier for delivery to the office of the Company;
provided, however, that the Company shall not be obligated to issue
certificates evidencing the Shares issuable upon such conversion unless
either the original Debentures are delivered to the Company, or the Holder
notifies the Company that such Debenture(s) have been lost, stolen or
destroyed and the Holder has complied with Section 3(c) below. Upon receipt
by Company of a facsimile copy of a Notice of Conversion, Company shall
immediately send, via facsimile, confirmation of receipt of the Notice of
Conversion to Holder which shall specify that the Notice of Conversion has
been received and the name of a contact person at the Company whom the Holder
should contact regarding information related to the conversion. In the case
of a dispute as to the calculation of the Conversion Rate, the Company shall
promptly issue the number of Shares that are not disputed. Company shall
submit the disputed calculations to its outside accountant via facsimile
within two (2) business days of receipt of Holder's Notice of Conversion.
The Company shall cause the accountant to perform the calculations and notify
Company and Holder of the results no later than two (2) business days from
the time such accountant receives the disputed calculations. Accountant's
calculation shall be deemed conclusive absent manifest error.
(c) Lost or Stolen Debentures. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of this Debenture, and
(in case of loss, theft or destruction) indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of the
Debentures, if mutilated, the Company shall execute and deliver new
Debenture(s) of like tenor and date without charge to Holder.
<PAGE>
(d) Delivery of Shares upon Conversion. As provided in the
Debentures Purchase Agreement between the Holder and the Company related to
the purchase of the Debentures (the "Subscription Agreement"), the Transfer
Agent or the Company (as applicable) shall, no later than the close of
business on the third (3rd) business day after delivery to the Company of the
Debenture(s) to be converted (or after provision for security or
indemnification, if required), issue a certificate for the number of Shares
without a restrictive legend of any kind to which the Holder shall be
entitled as aforesaid and surrender such original certificates to a common
courier for either overnight or (if delivery is outside the United States,
then two (2) day delivery) to the Holder at the address of the Holder on the
books of the Company.
(e) No Fractional Shares. No fractional Shares shall be issued
upon conversion of this Debenture. If any conversion of the Debenture would
create a fractional share or a right to acquire a fractional share such
fractional shares, on an aggregate basis, shall be disregarded and the number
of Shares issuable upon conversion shall be, on an aggregate basis, the next
lower number of whole shares.
(f) Date of Conversion. The date on which conversion occurs (the
"Date of Conversion") shall be deemed to be the date set forth in such Notice
of Conversion, provided (i) that the advance copy of the Notice of Conversion
is faxed to the Company on or before 11:59 p.m., New York City time, on the
Date of Conversion, and (ii) that the original Debentures to be converted are
surrendered by depositing such Debentures with a common courier, as provided
above, and received by the Company within three (3) business days from the
Date of Conversion. The person or persons entitled to receive the Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Shares on the Date of Conversion. If the original
Debentures to be converted are not received by the Company within three (3)
business days after the Date of a Conversion or if the facsimile of the
Notice of Conversion is not received by the Company prior to the Conversion
Notice Deadline, the Notice of Conversion, at the Company's option, may be
declared null and void.
(g) Reservation of Shares Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its unissued Shares,
solely for the purpose of effecting the conversion of the Debentures, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all then outstanding Debentures; and if at any
time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding Debentures,
the Company will immediately take such corporate action as may be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
(h) Automatic Conversion. Each of the Debentures that remains
issued on the date which is five (5) years after the Closing Date
automatically shall be converted into Shares on such date at the Conversion
Rate then in effect (calculated in accordance with the formula in Section
3(a) above), and the date which is five (5) years after the Closing Date
shall be deemed the Date of Conversion with respect to such conversion.
<PAGE>
(i) Adjustment to Conversion Price
(A) Adjustment to Fixed Conversion Price Due to Stock Split,
Stock Dividend, Etc. If at any time when the Debentures are issued and
outstanding, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, or other similar event, the Fixed 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 Fixed Conversion Price shall be
proportionately increased.
(B) Adjustment to Variable Conversion Price. If, at any time
when Debentures are issued, the number of outstanding shares of Common Stock
is increased by a stock split, stock dividend, or other similar event, which
event shall have taken place during the reference period for determination of
the Conversion Price for any conversion of the Debentures, then the Variable
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event
for all five (5) trading days immediately preceding the Date of Conversion.
(C) Adjustment Due to Merger, Consolidation, Etc. If at any
time when the Debentures are issued, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar 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 another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets, then the
holders of the Debentures shall thereafter have the right to receive upon
conversion of the Debentures, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such Common Stock,
securities and/or other assets which the holder would have been entitled to
receive in such transaction had the Debentures been converted immediately
prior to such transaction, and in such case appropriate provisions shall be
made with respect to the rights and interests of the holders of the
Debentures to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion price and of the
number of shares issuable upon conversion of the Debentures) shall thereafter
be applicable, as nearly as may be practicable in relation to any securities
thereafter deliverable upon the exercise hereof. The Company shall not
effect any transaction described in this subsection 3(d)(iii) unless (a) it
first gives thirty (30) business days prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event (during which time the Holder shall be entitled to convert its
Debentures into Shares) and (b) the resulting successor or acquiring entity
(if not the Company) assumes by written instrument the obligation of the
Company under this Debenture including this Section 3(e)(iii).
(j) Forced Conversion. The Company may at its sole option force
conversion of this Debenture in whole at any time from and after one (1) year
from the Closing Date, on not less than fifteen (15) or more than thirty (30)
days prior written notice given by the Company to the Holder of this
Debenture ("Notice of Redemption") in accordance with the terms and
conditions of Section 3 herein.
<PAGE>
(k) Registration of Shares. If any Shares required to be reserved
for purposes of conversion of the Debentures hereunder require registration
with or approval of any governmental authority under any federal (including
but not limited to the Securities Act of 1933, as amended (the "Act") or
similar federal statute than in force) or state law, or listing on any
national securities exchange, before such Shares may be issued upon
conversion; for reasons including but not limited to a material change in
Regulation S of the Securities Act, Company will, at its expense, as
expeditiously as possible to cause such shares to be duly registered or
approved or listed on the relevant national securities exchange, as the case
may be. Shares issued upon conversion of the Debentures shall be registered
by the Company under the Act if required by Debentures Purchase Agreement,
dated February 28, 1997 and subject to the conditions stated therein.
Section 4. No Voting Rights. This Debenture shall not entitle the
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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
distribution, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company.
Section 5. Status of Redeemed or Converted Debentures. After this
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Debenture shall have been surrendered for conversion as herein provided or
notice of conversion shall have been given by the Holder pursuant to Section
3(a) herein this Debenture shall no longer be deemed to be outstanding and
all rights hereof, shall forthwith terminate as of the Date of Conversion
except only the right of the Holder hereof to receive Shares in exchange for
such Debenture(s).
Section 6. Events of Default. (i) Upon the occurrence of and during
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the continuation of an Event of Default (as defined below), the Company shall
pay to the Holder an amount equal to the sum of (x) the unpaid principal
amount of this Debenture plus (y) the accrued and unpaid interest on the
unpaid principal amount of this Debenture to the date of payment and all
other amounts payable hereunder shall immediately become due and payable, all
without demand, presentment, or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, reasonable
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or equity.
If the Company fails to pay any amounts due pursuant to this Section 6
within five (5) business days of such amounts being due and payable, then the
Holder shall have the right at any time, so long as the Company remains in
default, to require the Company, upon written notice, to immediately issue,
in lieu of such amounts, the number of Shares of the Company equal to the
amounts owed divided by the Conversion Price then in effect.
The Company shall be required promptly upon its knowledge of an Event
of Default hereunder to give notice of such Event of Default to the Holder
hereof.
<PAGE>
An "Event of Default" shall mean the following:
(a) Conversion. If the Company fails to issue Shares to any
Holder upon exercise by the Holder of the Conversion Rights of the Holder in
accordance with the terms of this Debenture, fails to transfer any
certificate for Shares issued to the Holder upon conversion of this Debenture
and when required by this Debenture or fails to remove any restrictive legend
on any certificate or any stop transfer order on any Shares issued to the
Holder upon conversion of this Debenture as and when required in accordance
with applicable law and by this Debenture or any Subscription Agreement by
and between Company and Holder and any such failure shall continue uncured
for five (5) business days;
(b) Breach of Covenant. If the Company breaches any material
covenant or other material terms or condition of this Debenture (other than
as specifically provided in subsection 6(a) hereof), or any Subscription
Agreement by and between Company and Holder (including the failure to have
enough Shares available for issuance upon conversion), and the breach of
which would have a material adverse effect on the Company or the prospects of
the Company or a material adverse effect on the Holder or the rights of the
Holder with respect to this Debenture or the Shares issuable upon conversion
of this Debenture and such breach continues for a period of five (5) business
days after written notice thereof to the Company from the Holder;
(c) Breach of Representations and Warranties. Any representation
or warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, any Subscription Agreement by and between
Company and Holder), shall be false or misleading in any material respect
when made and the breach of which would have a material adverse effect on the
Company or the prospects of the Company or a material adverse effect on the
Holder or the rights of the Holder with respect to this Debenture or the
Shares issuable upon conversion of this Debenture;
(d) Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceeding for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against
the Company or any material subsidiary of the Company.
Section 7. Governing Law. This Debenture shall be governed by and
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construed in accordance with the laws of the Commonwealth of Virginia without
giving effect to the principles of conflicts of laws, except for matters
arising under the Act or the Securities Exchange Act of 1934, as amended,
which matters shall be governed by and construed in accordance with such
laws.
Section 8. Business Day Definition. For purposes hereof, the term
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"business day" shall mean any day on which banks are generally open for
business in the State of New York, USA excluding any Saturday and Sunday.
<PAGE>
Section 9. Notices. Any notices or other communication required or
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permitted to be given hereunder shall be given as provided herein or
delivered against receipt if to (i) the Company at 1401 Municipal Road, N.W.,
Roanoke, VA 24014-1309, Attn.: John D. McKenna, Telephone No.
(540) 265-0004, Telecopy No. (540) 265-0082; (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 the party shall have furnished in
writing as its new address to be entered on the Debenture Register (which
address must include a telecopy number) in accordance with the provisions of
this Section 10) and (iii) a copy to Kaplan Gottbetter & Levenson, LLP, 630
Third Avenue, New York, New York 10017, Telephone No. (212) 983-0532,
Telecopy No.: (212) 983-9210. Any notice or other communication needs to be
made by facsimile and delivery shall be deemed given, except as otherwise
required herein, at the time of transmission of said facsimile. Any notice
given on a day that is not a business day shall be effective upon the next
business day.
Section 10. Waiver of any Breach to be in Writing. Any waiver by the
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Company or the Holder hereof of a breach of any provision of the Debenture
shall not operate as, or be construed to be a waiver of any breach of such
provision or any breach of any other provision of the Debenture. The failure
of the Company or the Holder hereof to insist upon strict adherence to any
term of the 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 term of the Debenture. Any waiver must be in
writing.
Section 11. Unenforceable Provisions. If any provision of this
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Debenture is invalid, illegal or unenforceable, the balance of this Debenture
shall remain in effect, and if any provision is applicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons
and circumstances.
Section 12. Withholding. The Company shall be entitled to withhold all
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payments of principal and interest on this Debenture for any amounts required
to be withheld under the applicable provisions of the Internal Revenue Code
of the United States of America, or other applicable laws, at the time of
such payments. Holder shall, prior to any transfer hereof, deliver to the
Company, a fully completed Form W-8 for such transferee. The Holder shall
pay any other taxes, charges or levies in connection with the issuance and
transfer thereof.
Section 13. Conditions Precedent to the Company's Obligations. The
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obligations of the Company hereunder are subject to the following conditions
precedent:
13.1 As of the Closing Date and at the Date of Conversion, the
representations and warranties made by the Holder shall, unless waived by the
Company, be true and correct in all material respect.
[Remainder of Page Intentionally Left Blank
Signature Page to Follow]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
ETS INTERNATIONAL, INC.
Dated: February , 1997 By:
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Title:
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<PAGE>
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
("SHARES OR WARRANT SHARES") HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT.
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S)
UNLESS THESE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION REQUIREMENTS OF THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ETS INTERNATIONAL, INC.
COMMON STOCK PURCHASE WARRANT
Dated: February 28, 1997
WARRANT
to purchase 100,000 Shares of ETS International, Inc.
common stock, no par value (the "Common Stock")
at an exercise price per Share equal to 100% of the average Closing Bid Price
(payable in U.S. Dollars) of the Company's Shares for the five (5) days
immediately preceding the closing date, February 28, 1997 (the "Closing
Date").
THIS IS TO CERTIFY THAT, for value received, the undersigned or registered
assigns (the "Holder"), is entitled to purchase from ETS International, Inc.
(the "Company"), at any time or from time to time forty-five (45) days after
9.00 a.m., New York time, on February 28, 1997 and prior to 6.00 p.m., New
York time, on February 27, 2002, at the Company's principal executive office,
at a price per Share equal to 100% of the average Closing Bid Price of the
Company's Shares for the five (5) days immediately preceding the Closing
Date, up to the number of Shares of the Company's Common Stock shown above,
all subject to adjustment and upon the terms and conditions as herein
provided, and is entitled also to exercise the other appurtenant rights,
powers and privileges hereinafter described. No fractional Shares will be
issued upon the exercise of this Warrant. This Warrant is being issued in
connection with the Company's 7% Convertible Debenture Due February 27, 2002,
between the Company and the Holder.
The holder of Warrants evidenced by this "Warrant Certificate" may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with
payment of the Exercise Price in cash at the office of the Company designated
for such purpose. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number
of Warrants evidenced hereby, there shall be issued to the holder hereof or
his assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
<PAGE>
This Warrant, and the rights and privileges conferred hereby, shall be
exercisable only by the Holder and shall not be assignable or transferable
except pursuant to the provisions of the Securities Act of 1933, as amended,
and the Rules and Regulations promulgated thereunder and applicable state
securities laws. This Warrant shall be binding upon and shall inure to the
benefit of the Company and any successor to the Company and to the Holder's
successors and assigns.
The Holder, by acceptance hereof, acknowledges and agrees that:
(a) The Warrant represented by this certificate has not been
registered under the Securities Act of 1933, as amended or any state
securities laws, and the Warrants are restricted Securities within the
meaning of the rules promulgated under the Securities Act of 1933, as amended
(the "Act"). This Warrant has been issued to Holder for investment purposes
only and not with a view to distribution or sale, and may not be made subject
to a security interest or be pledged, hypothecated or otherwise transferred
without an effective Registration Statement for such Warrant under the Act,
and all applicable state securities laws or an opinion of counsel for the
Company that such Shares may be lawfully offered, sold or otherwise
transferred without such registration in reliance on applicable exemptions
from such registration. Any Shares issued upon the exercise of this Warrant
shall be issued under the provisions of Regulation S ("Regulation S") under
the Act without restrictive legend. Any offer to sell, pledge, hypothecate
or transfer these securities, or any interest therein effected in violation
of any of the foregoing restrictions and conditions is unlawful and shall not
be consummated on the books and records of the Company or otherwise be
recognized as valid by the Company, and the Company shall not have any
liability therefor.
(b) In the event that the Company shall, at any time prior to the
expiration date of this Warrant and prior to the exercise thereof: (i)
declare or pay to the holders of the Shares of the Company a dividend payable
in Shares of the Company; or (ii) change, divide or otherwise reclassify its
Shares into the same or a different number of Shares: or (iii) consolidate or
merge with, or transfer its property as an entirety or substantially as an
entirety to any other corporation: or (iv) make any distribution of its
assets to holders of its Shares as a liquidation or partial liquidation
dividend or by way of return of capital; then, upon the subsequent exercise
of this Warrant, the Holder hereof shall receive for the exercise price, in
addition to or in substitution for the Shares to which the Holder would
otherwise be entitled upon such exercise, such additional Shares of the
Company, or such Shares of the securities or property of the Company
resulting from such consolidation, merger or transfer, or such assets of the
Company which Holder would have been entitled to receive had the Holder
exercised the Warrant prior to the happening of any of the foregoing events;
(c) Except with respect to any pending registration statements on the
Closing Date, if the Company shall at any time or from time to time determine
to register any of its securities with the Securities and Exchange Commission
the Company shall:
(i) promptly (but not less than thirty (30) days prior to the
filing of any registration statement) give written notice
thereof (which shall include a list of the jurisdictions,
if any, in which the Company intends to register or qualify
such securities under the applicable blue sky or other
state securities laws) to each Holder or holder of Warrant
Shares;
<PAGE>
(ii) use its reasonable best efforts to effect such registration
and any qualification and compliance relating thereto,
including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state
securities laws and appropriate compliance with the
Securities Act and any other government requirements or
regulations as would permit or facilitate:
(1) the sale and distribution of the Warrant to the
extent outstanding;
(2) the sale and distribution of all Warrant Shares; and
(3) the exercise of the Warrant to the extent outstanding
and the sale and distribution of all Warrant Shares.
All notices, requests and other communications provided for herein shall be
in writing, and shall be deemed to have been made or given when delivered or
mailed or sent by facsimile. Such notices and communications shall be
addressed:
(a) if to the Company, to: ETS International, Inc., 1401 Municipal
Road, N.W., Roanoke, VA 24012-1309, Attn.: John McKenna.
(b) if to the Holder, to its address as shown on the registry books
maintained by the Company.
No failure or delay of the Holder in exercising any right, power or
privilege, hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof, or any abandonment or discontinuance of steps to
enforce such a right, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies of the Holder are cumulative and not exclusive of any
rights or remedies which it would otherwise have. The provisions of this
Warrant may be amended, modified or waived if, but only if, such amendment,
modification or waiver is in writing and is signed by a majority of the
holders of the Warrants; provided that no amendment, modification or waiver
may change the exercise price of (including without limitation any
adjustments or any provisions with respect to adjustments, the expiration of
or the manner of exercising the Warrants) without the consent in writing of
all of the holders of the Warrants outstanding.
This Warrant shall be construed in accordance with and be governed by the
laws of the Commonwealth of Virginia.
All warranties, representations and covenants made by the Company herein or
in any certificate or other instrument delivered by or on behalf of it in
connection herewith or the Company's 7% Convertible Debenture due February
27, 2002, as applicable, shall be considered to have been relied upon by the
Holder and shall survive the issuance and delivery of the Warrants and the
Shares issuable upon exercise of this Warrant, and shall continue in full
force and effect as long as this Warrant is outstanding. All statements in
any such certificate or other instrument shall constitute representations and
warranties hereunder.
All the covenants, stipulations, promises and agreements in this Warrant
contained by or on behalf of the Company shall bind its successors and
assigns, whether or not so expressed.
<PAGE>
In case any one or more of the provisions contained in this Warrant shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired in such jurisdiction and shall
not invalidate or render illegal or unenforceable such provision in any other
jurisdiction.
This Warrant shall not entitle the Holder to any rights as a stockholder of
the Company.
At the time of the Holder's election to purchase Shares, the representations
and warranties set forth in Section 8 of the Warrants Purchase Agreement,
dated as of the date hereof, shall be true and correct in all material
respects. Said representations and warranties are incorporated herein by
reference.
[Remainder of Page Intentionally Left Blank
Signature Page to Follow]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and
its corporate seal to be hereunto affixed, attested by its Secretary or an
assistant Secretary, all as of the day and year first above written.
ETS INTERNATIONAL, INC.
By:
--------------------------- [corporate seal]
Title:
-------------------------
<PAGE>
