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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 18, 1997
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Byron Preiss Multimedia Company, Inc.
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(Exact name of registrant as specified in its charter)
New York 1-13084 13-3676574
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State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
24 West 25th Street, New York, New York 10010
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 989-6252
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 7. Financial Statements and Exhibits:
(a) Financial Statement of businesses acquired.
Not applicable.
(b) Pro Forma financial information.
Not applicable.
(c) Exhibits:
10.1 Form of Offshore Securities
Subscription Agreement.
10.2 Form of 6% Convertible Debenture
payable by the Company.
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Item 9. Sales of Equity Securities Pursuant to Regulation S
On November 18, 1997, Byron Preiss Multimedia Company, Inc.
(the "Company") completed the sale (the "Transaction") of 6% Convertible
Debentures due October 31, 1999 (the "Debentures") in an aggregate principal
amount of $50,000, in reliance upon exemption from registration under Regulation
S ("Regulation S") afforded by the Securities Act of 1933, as amended to Shoroka
Investments Limited (the "Investor").
In connection with the Transaction, the Company received net
proceeds in the amount of approximately $45,000 (excluding legal, accounting
and other miscellaneous expenses), which, at this time, the Company intends to
use to complete acquisitions and for additional working capital. The proceeds
are net of an 9% commission and 1% unaccountable expense allowance paid to
Heritage Equities Ltd. The Debentures are convertible, at the holders (the
"Holders") option, anytime commencing 60 days after the issue thereof, into
shares of common stock, $.001 par value per share, of the Company (the "Common
Stock"), at a conversion price for each share of Common Stock equal to the lower
of (a) 75% of the average closing bid price of the Common Stock for the five (5)
business days immediately preceding the conversion date or (b) 80% of the
average of the closing bid price of the Common Stock for the five (5) business
days immediately preceding the date of subscription by the Holder thereof, in
each case as reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). The Company is entitled, at its option,
to redeem part or all of the Debentures being converted by paying to the Holders
the product of (i) the aggregate principal amount of the Debentures being
redeemed, and (ii) 130%.
In connection with the Transaction, the Company entered into
an Offshore Securities Subscription Agreement with the Investor pursuant to
which, among other things, the Investor made certain representations and
warranties relating to its respective purchase of the securities in accordance
with the requirements and conditions of Regulation S and agreed to take all
necessary steps to ensure compliance with Regulation S.
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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.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: /s/ James R. Dellomo
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Name: James R. Dellomo
Title: Chief Financial Officer
Date: December 1, 1997
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OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of November
__, 1997 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of 1933, as
amended (the "1933 Act"). Capitalized terms used herein and not defined shall
have the meanings given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 6.0% Convertible Debentures of Byron
Preiss Multimedia Company, Inc., a corporation organized under the laws of New
York, with its principal executive offices located at 24 W. 25th Street, 10th
Floor, New York, N.Y. 10010 (hereinafter referred to as "Seller"). Buyer hereby
represents and warrants to, and agrees with Seller that:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN
REGULATION S OF THE 1933 ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS (AS DEFINED IN REGULATION S OF THE 1933 ACT) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
1. Agreement To Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for
and agrees to purchase the Sellers 6.0% Convertible Debentures substantially in
the form of Debentures attached as Exhibit A hereto and having an aggregate
original principal amount of up to Fifty Thousand United States Dollars (U.S.
$50,000) (singly, a "Debenture," and collectively, the "Debentures"), at an
aggregate purchase price as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Buyer's portion of the
Debenture shall be up to Fifty Thousand United States Dollars (U.S. $50,000)
(the "Purchase Price"), which shall be payable at each closing pursuant to
Section 1(c) herein by delivering immediately available funds in United States
Dollars by wire transfer to the designated depository of Seller for closing by
delivery of securities versus payment.
(c) Closing. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, the closing of the transactions contemplated
by this Agreement shall occur on or before November , 1997, or such earlier or
later date as is mutually agreed to in writing by Buyer and Seller.
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2. Buyer Representations and Covenants; Access to Information.
Offshore Transaction. In connection with the purchase and sale
of the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not
organized under the laws of any jurisdiction within the United
States (as defined in Regulation S), was not formed by a U.S.
Person (as defined in Section 902(o) of Regulation S) for the
purpose of investing in securities not registered under the
1933 Act and is not otherwise a U.S. Person. Buyer is not, and
on the closing date will not be, an affiliate of Seller;
(ii) At the time the buy order was originated, Buyer
was outside the United States and is outside of the United
States as of the date of the execution and delivery of this
Agreement;
(iii) No offer to purchase the Debentures or the
common stock of Seller issuable upon conversion of the
Debentures (collectively, the "Securities"), was made by Buyer
in the United States;
(iv) Buyer is purchasing the Securities for its own
account and Buyer is qualified to purchase the Securities
under the laws of its jurisdiction of residence, and the offer
and sale of the Securities will not violate the securities or
other laws of such jurisdiction;
(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as
hereinafter defined) shall be made in compliance with any
applicable securities laws of any applicable jurisdiction and
in accordance with Rule 903 and 904, as applicable, of
Regulation S or pursuant to registration of the Securities
under the 1933 Act or pursuant to an exemption from
registration. In any case, none of the Securities have been
and will be offered or sold by Buyer to, or for the account or
benefit of, a U.S. Person or within the United States until
after the end of the forty (40) day period commencing on the
later of (x) the date of closing of the offering of the
Securities or (y) the date of the first offer of the
Securities to persons other than distributors (the "Restricted
Period"), as certified by Buyer to Seller, and thereafter only
pursuant to a Registration Statement or an applicable
exemption from registration;
(vi) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Buyer with a
purchaser located in the United States or a purchaser which is
a U.S. Person, and (b) are not and will not be part of a plan
or scheme by Buyer, to evade the registration provisions of
the 1933 Act;
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(vii) Buyer understands that the Securities are not
registered under the 1933 Act and are being offered and sold
to it in reliance on specific exclusions from the registration
requirements of Federal and State securities laws of the
United States, and that Seller is relying upon the truth and
accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein
in order to determine the applicability of such exclusions and
the suitability of Buyer and any purchaser from Buyer to
acquire the Securities;
(viii) Buyer shall take all reasonable steps to
ensure its compliance with Regulation S and shall promptly
send to each purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or other
remuneration in respect of any of the Securities, who
purchases prior to the expiration of the Restricted Period
referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject
to the same restrictions on offers and sales as Buyer pursuant
to Section 903(c)(2)(iv) of Regulation S;
(ix) Buyer has not conducted and shall not conduct
any "directed selling efforts" as that term is defined in Rule
902(b) of Regulation S; nor has Buyer conducted any general
solicitation relating to the offer and sale of any of the
Securities in the United States or elsewhere;
(x) This Agreement has been duly authorized, validly
executed and delivered on behalf of Buyer and is a valid and
binding agreement in accordance with its terms, subject to
general principals of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally;
(xi) The execution and delivery of this Agreement and
the consummation of the purchase of the Securities, and the
transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Buyer of any of the
terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar constitutive
documents) of Buyer or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Buyer is a
party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of
the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court,
Federal or State regulatory body, administrative agency or
other United States governmental body having jurisdiction over
Buyer or any of its properties or assets;
(xii) All invitations, offers and sales of or in
respect of, any of the Securities, by Buyer and any
distribution by Buyer of any documents relating to any offer
by it of any of the Securities will be in compliance with
applicable laws and regulations and will be made in such a
manner that no prospectus need be
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filed and no other filing need be made by Seller with any
regulatory authority or stock exchange in any country or any
political sub-division of any country;
(xiii) Buyer will not make any offer or sale of the
Securities by any means which would not comply with the laws
and regulations of the territory in which such offer or sale
takes place or to which such offer or sale is subject or which
would in connection with any such offer or sale impose upon
Seller any obligation to satisfy any public filing or
registration requirement or provide or publish any information
of any kind whatsoever or otherwise undertake or become
obligated to do any act;
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the
Restricted Period enter into any put option, short position or
other similar instrument or position with respect to any of
the Securities or securities of the same class as the
Securities;
(xv) the Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax
advisors with respect to applicable resale restrictions and
applicable tax considerations and it (or others for whom it is
contracting hereunder) is solely responsible (and the Seller
is not in any way responsible) for compliance with applicable
resale restrictions and applicable tax legislation;
(xvi) No Government Recommendation or Approval. Buyer
understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement
of the Securities;
(xvii) Current Public Information. Buyer acknowledges
that it and its advisors, if any, have been furnished with all
publicly available materials relating to the business,
finances and operations of Seller and all publicly available
materials relating to the offer and sale of the Securities, in
each case which have been requested by Buyer. Buyer further
acknowledges that it and its advisors, if any, have had the
opportunity to ask questions of the Seller regarding the
business, operations and financial condition of Seller, and
have received complete and satisfactory answers to such
inquiries;
(xviii) Buyer's Sophistication. Buyer acknowledges
that the purchase of the Securities involves a high degree of
risk, including the total loss of Buyer's investment. Buyer
has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks
of purchasing the Securities and is capable of bearing a
complete loss of its investment hereunder; and
(xix) Tax Status. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code) of Seller.
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3. Seller Representations and Covenants.
(a) Reporting Company Status. Seller is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller has registered its Common Stock,
$.001 par value per share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Common
Stock is listed and trades on NASDAQ Small Cap Market. Seller has filed all
reports required to be filed pursuant to all reporting obligations under either
Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve (12)
months immediately preceding the offer or sale of the Securities (or for such
shorter period that Seller has been required to file such material). The Seller
will file a Form 8-K relating to this transaction in accordance with its
obligations under the Exchange Act.
(b) Current Public Information. Seller has furnished Buyer
with copies of its most recent reports, as amended, filed under the Exchange Act
referred to in Section 3(a) above, and such other publicly available documents
as requested by Buyer. There has not occurred any event which has had a material
adverse effect on the business, properties and operations of the Seller since
the filing of the Seller's Form 10-QSB for the quarterly period ended June 30,
1997.
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, or any identifiable groups of
U.S. citizens abroad as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller
and/or its agents reasonably believe the Buyer was outside of
the United States and was not a U.S.
person, based on the representations of Buyer.
(ii) Seller and/or its agents reasonably believe that
the transaction has not been pre-arranged with a buyer in the
United States, based on the representations of Buyer.
(iii) No offer to buy or sell the Securities was or
will be made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to
this Agreement will be made in accordance with the provisions
and requirements of Regulation S provided that the
representations and warranties of (i) Buyer in Section 2
hereof and (ii) the Broker contained in the Agreement dated
October __, 1997 between Seller and __________________________
(the "Broker Agreement") are true and correct.
(v) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Seller with
a purchaser located in the United States or a purchaser which
is a U.S. Person, and (b) are not and will not be part of a
plan or scheme by Seller to evade the registration provisions
of the 1933 Act.
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(d) No Directed Selling Efforts. In regard to this
transaction, Seller has not conducted any "directed selling efforts" as that
term is defined in Rule 902 of Regulation S nor has Seller conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere based in part upon the representations and warranties
of Broker in the Broker Agreement.
(e) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Debenture has been or will be duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Debentures, shall be duly and validly issued, fully paid, and non-assessable and
will not subject the holders thereof, if such persons are non-U.S. Persons, to
personal liability by reason of being such holders. There are no pre-emptive
rights of any shareholder of Seller except as otherwise disclosed in the reports
filed by the Company with the Securities and Exchange Commission.
(f) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
material indenture, mortgage, deed of trust, or other material agreement or
instrument to which Seller is a party or by which it or any of its material
properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable decree,
judgment or order of any Federal or State court, Federal or State regulatory
body, administrative agency or other United States governmental body having
jurisdiction over Seller or any of its properties or assets, the violation of
which would have a material adverse effect on Seller.
(h) Approvals. Other than any additional listing application
for the issuance of the shares of Common Stock upon conversion of the
Debentures, Seller is not aware of any authorization, approval or consent of any
governmental body which is legally required for the issuance and sale of the
Debentures and the Common Stock issuable upon conversion thereof to persons who
are non-U.S. Persons, as contemplated by this Agreement, so long as the sale of
the Debenture and Common Stock are made in accordance with the rules and
regulations of Regulation S.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying
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on the rules governing offers and sales made outside the United States pursuant
to Regulation S.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the
holder thereof shall submit such Debenture with a notice of conversion to the
Seller and the Seller shall instruct Seller's transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture or Debentures are convertible in accordance with the provisions
regarding conversion set forth in the Debenture. The Seller or its designees
shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon
the conversion of any Debenture by a person who is a non-U.S. Person, Seller
shall instruct Seller's transfer agent to issue Stock Certificates without
restrictive legend in the name of Buyer (being a non-U.S. Person) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. Seller warrants that
no instructions other than these instructions and instructions to impose a "stop
transfer" instruction with respect to the certificates until the end of the
Restricted Period have been given or will be given to the transfer agent and
that the Common Stock issuable upon conversion of the Debentures in accordance
with the terms thereof shall otherwise be freely transferable on the books and
records of Seller subject to compliance with requirements of Regulation S.
Nothing in this Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreements to comply with all applicable securities
laws upon resale of the Securities.
6. Registration. If upon conversion of Debentures effected by the Buyer
pursuant to the terms of this Agreement the Company fails to issue certificates
for shares of Common Stock issuable upon such conversion (the "Underlying
Shares") to the Buyer bearing no restrictive legend for any reason other than
(i) the Company's reasonable good faith belief that the representations and
warranties made by the Buyer in this Agreement or the Notice of Conversion were
untrue when made, or are untrue at the time of question, (ii) failure by the
Buyer to comply with the rules of Regulation S, or (iii) if the restricted
period under Regulation S is extended, then the Company shall be required, at
the request of the Buyer and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion of the Debentures
under the Act and relevant Blue Sky laws as promptly as is practicable on Form
S-3. The Company and the Buyer shall cooperate in good faith in connection with
the furnishing of information required for such registration and the taking of
such other actions as may be legally or commercially necessary in order to
effect such registration. The Company shall file a registration statement within
60 days of Buyer's demand therefor and shall use its reasonable best efforts to
cause such registration statement to become effective as soon as practicable
thereafter. Such best efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the Securities and
Exchange Commission, providing Buyer's counsel with a contemporaneous copy of
all written communications from and to the
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staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from the
staff of the Securities and Exchange Commission. Once declared effective by the
Securities and Exchange Commission, the Company shall cause such registration
statement to remain effective until the earlier of (i) the sale by the Buyer of
all Underlying Shares registered or (ii) 120 days after the effective date of
such registration statement. The foregoing shall not in any way limit Buyer's
rights in connection with the Common Stock pursuant to Regulation S.
7. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Buyer at such time and place as shall be mutually
agreed by Seller and Buyer.
8. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Buyer of this Agreement as
evidenced by execution of this Agreement by Buyer.
(b) Delivery into the Seller's account of good funds by Buyer
as payment in full of the purchase price of the Debentures.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as
evidenced by execution of this Agreement by the duly authorized officer of
Seller.
(b) Delivery of the Debentures as described herein.
10. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(v) hereof shall include
statements to the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither Buyer, nor any
direct or indirect purchaser of the Securities from Buyer, may directly or
indirectly offer or sell the Securities in the United States or to U.S. Persons
(other than distributors) unless the Securities are registered under the 1933
Act and any applicable state securities laws, or any exemption from the
registration requirements of the 1933 Act or such state securities laws is
available. Such statements shall appear (1) on the cover of any prospectus or
offering circular used in connection with the offer or sale of the Securities,
(2) in the underwriting section of any prospectus or offering circular used in
connection with the offer or sale of the Securities, and (3) in any
advertisement made or issued by Seller, Buyer, any other distributor, any of
their respective affiliates, or any person acting on behalf of any of the
foregoing and in accordance with 902(h)(2) of Regulation S.
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11. No Shareholder Approval. Seller hereby agrees that from the Closing
Date until the issuance of Common Stock upon the conversion of the Debentures,
Seller will not take any action in respect of the Securities which would require
Seller to seek shareholder approval of the issuance of the Securities unless
such shareholder approval is required by law or regulatory body (including but
not limited to the NASDAQ Stock Market, Inc.) as a result of the issuance of the
Securities hereunder.
12. Miscellaneous.
(a) Except as specifically referenced herein, this Agreement
constitutes the entire contract between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent
of Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller makes no representations or warranties with respect
to Seller, its finances, assets, business prospects or otherwise. Buyer will
advise each purchaser, if any, and potential purchaser of the Securities, of the
foregoing sentence, and that such purchaser is relying on its own investigation
with respect to all such matters.
(d) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(e) This Agreement shall be construed in accordance with the
laws of New York (without regard to conflicts of law principles) and shall be
binding upon the successors and permitted assigns of each party hereto. This
Agreement may be executed in counterparts, and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from
any and all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
Official Signatory of Seller:
Byron Preiss Multimedia Company, Inc.
By:___________________________________
Title:________________________________
Official Signatory of Buyer:
______________________________________
By:___________________________________
Title:________________________________
Address of Buyer:
______________________________________
______________________________________
______________________________________
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FORM OF DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S
UNDER THE ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS
DEFINED IN REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION
UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS.
No. _______ US $50,000
BYRON PREISS MULTIMEDIA COMPANY, INC.
6.0% CONVERTIBLE DEBENTURE DUE OCTOBER 31, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of Byron
Preiss Multimedia Company, Inc., a corporation duly organized and existing under
the laws of New York (the "Company") designated as its 6.0% Convertible
Debenture Due October 31, 1999, in an aggregate principal amount not exceeding
Fifty Thousand Dollars (U.S. $50,000).
FOR VALUE RECEIVED, the Company promises to pay to
_____________________________ the registered holder hereof and its successors
and assigns (the "Holder"), the principal sum of Fifty Thousand Dollars (US
$50,000) on October 31, 1999 (the "Maturity Date"), and to pay interest on the
principal sum outstanding, at the rate of 6% per annum due and payable quarterly
in arrears for each quarter ending March 31, June 30, September 30, and December
31 (an "interest determination date"), within 10 business days of the end of
such quarter, commencing with the quarterly period ending December 31, 1997.
Accrual of interest shall commence on the date hereof and shall continue until
payment in full of the outstanding principal sum has been made or duly provided
for or the date of conversion of the Debentures. The interest so payable will be
paid to the person in whose name this Debenture (or one or more predecessor
Debentures) is registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions of the Offshore Securities Subscription Agreement dated as of
October 15, 1997 between the Company and _____________________________ (the
"Subscription Agreement"). The principal of, and interest on, this Debenture are
payable 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, at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder hereof from time to time; provided, however, that the
Company may, at its sole option, pay any or all accrued interest hereunder in
shares of the Company's Common Stock (as herein defined), and in any such case,
the shares of Common Stock shall be valued on the basis of the 5-day average
closing bid price as of the applicable interest determination date. The Company
will pay the outstanding principal of and all accrued and unpaid interest due
upon this Debenture on the
<PAGE>
Maturity Date, less any amounts required by law to be deducted or withheld, to
the record Holder of this Debenture as of the Maturity Date and addressed to
such record Holder at the last address appearing on the Debenture Register. The
forwarding of such check shall constitute a payment of outstanding principal and
interest hereunder and shall satisfy and discharge the liability for principal
and interest on this Debenture to the extent of the sum represented by such
check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand
Dollars (US$50,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holders surrendering the same but
not less than U.S. $50,000. No service charge will be made for such registration
or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged in the U.S.
only in compliance with the Securities Act of 1933, as amended (the "Act") and
applicable state securities laws. Prior to due presentment 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 or bound by notice to the
contrary. Any holder of this Debenture, electing to exercise the right of
conversion set forth in Section 4 hereof, in addition to the requirements set
forth in Section 4, is also required to give the Company written confirmation
that it is not a U.S. Person or for the account or benefit of a U.S. Person and
the Debenture is not being converted on behalf of a U.S. Person ("Notice of
Conversion"). In the event a Notice of Conversion or opinion of counsel is not
provided the Holder hereof will not be entitled to exercise the right to convert
the Debentures pursuant to Section 4(a) herein. The Company will use its best
efforts to cause its counsel to render an opinion to the Company's transfer
agent, to the extent required by the transfer agent, to the effect that the
Debenture and shares of common stock issuable upon conversion thereof have been
registered under the 1933 Act or are exempt from such registration.
4. (a) The Holder of this Debenture is entitled, at its option, at any
time commencing 60 days after issue hereof to convert any or all of the original
principal amount of this Debenture into shares of common stock, $0.001 par value
per share, of the Company (the "Common Stock"), at a conversion price for each
share of Common Stock equal to the lower of (a) 75% of the average closing bid
price of the Common Stock for the five (5) business days immediately preceding
the conversion date or (b) 80% of the average of the closing bid price of the
Common Stock for the five (5) business days immediately preceding the date of
Subscription by the Holder in each case as reported by the National Association
of Securities Dealers
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<PAGE>
Automated Quotation System ("NASDAQ") (the "Conversion Price"). Such conversion
shall be effectuated by surrendering the Debentures to be converted to the
Company with the form of conversion notice (by facsimile copy) attached hereto
as Exhibit A, executed by the Holder of this Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid
interest shall be subject to conversion at the option of the Company. No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share, with the fraction paid in cash at the discretion of the Company.
The date on which notice of conversion is given shall be deemed to be the date
on which the Holder has delivered this Debenture, with the conversion notice
duly executed, to the Company. On or after 90 days of the issuance of Debenture,
the Company, at its option, can require Holder to convert any and all of the
principal amount of this Debenture and interest thereon not converted in
accordance with the provisions of this paragraph provided, however, that such 90
day waiting period shall be waived in the event that Holder demands this
Debenture to be immediately due and payable upon an "Event of Default" described
in Section 8 below.
(b) Notwithstanding the provisions of paragraph 4(a) hereof,
the Company is entitled, at its option, to redeem part or all of the Debentures
by paying to the holder the product of (i) the aggregate principal amount of the
Debentures being redeemed, and (ii) 130%. Such payment shall include accrued
interest to such date, and shall be less any amounts required by law to be
deducted or withheld. Such payment shall be made by delivering immediately
available funds in United States Dollars by wire transfer to the Holder, or if
no wiring instructions have been provided to the Company, by cashier's or
certified check to the last address of Holder appearing on the Debenture
Register, within 5 days of the date of the Company's giving notice to the holder
of the Company's intention to redeem all or part of the Debentures. The wiring
of such funds or the forwarding of such check shall constitute a payment of
principal and interest hereunder and shall automatically satisfy and discharge
the liability for principal and interest on this Debenture to the extent of the
sum represented by such wire or check plus any amount so deducted. Company shall
notify Holder of its intent to redeem within 2 days of receipt of the Notice of
Conversion.
5. No provision of this Debenture, other than the provision for forced
conversion, shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin currency, herein
prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and diligence
in taking any action to collect amounts called for hereunder except as otherwise
set forth herein and shall be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
3
<PAGE>
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Company shall default in the payment of principal
or interest on this Debenture; or
(b) Any of the material representations or warranties
made by the Company herein, in the Subscription
Agreement, or in any certificate or financial or
other written statements heretofore or hereafter
furnished directly by the Company in connection with
the execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading
in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any
material respect, any other material covenant, term,
provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall
continue uncured for a period of ten (10) business
days after notice from the Holder of such failure
including, but not limited to, failure to issue the
Common Stock upon conversion of this Debenture
pursuant to paragraph 4 hereof; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
all of its or for a substantial part of its property
or business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of Seven Hundred Fifty
Thousand ($750,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its
properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale
thereunder; or
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<PAGE>
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
(i) The Company shall have its Common Stock delisted from
all exchanges or over- the-counter market.
Then, or at any time thereafter, and in each and every such case, as long as
such Event of Default is continuing for ten (10) business days after written
notice of such Event of Default unless such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed to be a waiver
of any subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Debenture immediately due and payable,
without presentment, demand, protest or notice of any kinds, all of which are
hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately, and
without expiration of any period of grace other than as contained in this
Section, enforce any and all of the Holder's rights and remedies provided herein
or any other rights or remedies afforded by law except that Company shall
maintain at all times the absolute right to force conversion of the Debentures
pursuant to Section 4 hereof.
9. This Debenture represents a general unsecured obligation of the
Company. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon exercise thereof except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky law or similar laws
relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby. Anything in this Debenture to the contrary
notwithstanding, the obligations of the Company to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made to the extent that the Holder's receipt thereof would not be
permissible
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<PAGE>
under the law or laws applicable to it limiting rates of interest which may be
charged or collected by it.
12. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the Company
and the Holder with respect to the subject hereof. Neither this Debenture nor
any term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in accordance
with the laws of New York, without giving effect to its conflicts of law rules.
14. As set forth herein, the Company shall use all reasonable efforts
to issue and deliver, within ten business days after the Holder has fulfilled
all conditions and submitted all necessary documents duly executed and in proper
form required for conversion (the "Deadline"), to the Holder or any party
receiving a Debenture by transfer from the Holder (together, a "Holder"), at the
address of the Holder on the books of the Company, a certificate or certificates
for the number of Shares of Common Stock to which the Holder shall be entitled.
The Company understands that a delay in the issuance of the Shares of Common
Stock beyond the Deadline could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay liquidated
damages to the Holder for late issuance of Shares upon conversion in accordance
with the following schedule (where "No. Business Days Late" is defined as the
number of business days beyond ten (10) business days from the date of receipt
by the Company of a Notice of Conversion and the transfer agent of all necessary
documentation duly executed and in proper form required for conversion,
including the original Debenture to be converted, all in accordance with the
Debenture, Subscription Agreement and the requirements of the transfer agent
unless the Company has used all reasonable efforts to issue and deliver said
certificates):
Liquidated Damages
No. Business Days Late Per $100,000 of Debenture
---------------------- -------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
over 10 $1,000 + $100 each
Business
Day Late
beyond 10
days but
in no
event
more than
$3,000.
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<PAGE>
; provided, however, that the Company shall not be required to pay any
liquidated damages as hereinabove set forth in the event that the Company has
timely provided to the transfer agent of the Company the documentation necessary
to issue to the Holder in question the stock certificate representing the shares
of Common Stock issuable upon conversion of the Debenture by such Holder.
The Company shall pay the Holder any liquidated damages incurred under
this Section by check upon the earlier to occur of (i) issuance of the Shares to
the Holder or (ii) each monthly anniversary of the receipt of the Company of
such Holder's Notice of Conversion. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
shares of Common Stock to the Subscriber in accordance with the terms of the
Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:_____________________________
BYRON PREISS MULTIMEDIA COMPANY, INC.
By:____________________________________
Title:_________________________________
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