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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)
Thermo Tech Technologies, Inc.
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(Name of Issuer)
Common Stock, no par value per share
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(Title of Class of Securities)
88360H101
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(CUSIP Number)
Stephen T. Burdumy, Esq.
Todd L. Silverberg, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 10, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on following page(s))
Page 1 of 7
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CUSIP No. 88360H101 Page 2 of 7 Pages
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<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capital Ventures International
- -------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
/ /
- -------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
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7 SOLE VOTING POWER
NUMBER OF
SHARES 1,094,375
BENEFICIALLY -------------------------------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING N/A
PERSON -------------------------------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,094,375
-------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
N/A
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,094,375
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
- -------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.9%
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14 TYPE OF REPORTING PERSON*
CO
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</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
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CUSIP No. 88360H101 Page 3 of 7 Pages
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Statement of
Reporting Persons (as defined below)
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
THERMO TECH TECHNOLOGIES, INC.
This Report filed by Capital Ventures International ("CVI") is
its initial filing on Schedule 13D with respect to the common stock, no par
value per share (the "Common Stock"), of Thermo Tech Technologies, Inc. (the
"Company").
The descriptions contained in this Report of certain
agreements and documents are qualified in their entirety by reference to the
completed text of such agreements and documents filed as Exhibits hereto.
Item 1. Security and Issuer
The class of equity securities to which this statement relates
is the Common Stock of the Company. The principal executive office of the
Company is located at 101-95 County Court Boulevard, Brampton, Ontario, Canada
L6W 4P7.
Item 2. Identity and Background
CVI is an unlimited liability company organized under the laws
of the Cayman Islands, with its principal place of business and principal office
located at One Capital Place, P.O. Box 1787GT, Grand Cayman, Cayman Islands,
BWI.
CVI is a company engaged in the purchase of securities for
investment.
The entire share capital of CVI is owned by the following
entities in the stated percentages.
Mu Trading, Inc. ("Mu Trading") owns 44% of CVI and is a
Delaware corporation which does not conduct business other than as a holding
company for subsidiary operating companies engaged in the securities business.
Mu Trading's principal place of business and principal office are located at 42
Reads Way, New Castle, DE 19720. Mu Trading is owned 100% by Jeffrey Yass, a
U.S. citizen and an investor with a business address of 401 City Line Avenue,
Suite 220, Bala Cynwyd, PA 19004. Mr. Yass is the sole director and executive
officer of Mu Trading.
Rattan, Inc. ("Rattan') owns 14% of CVI and is a Delaware
corporation which does not conduct business other than as a holding company for
subsidiary operating companies engaged in the securities business. Rattan's
principal place of business and principal office are located at 42 Reads Way,
New Castle, DE 19720. Rattan is owned 100% by
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CUSIP No. 88360H101 Page 4 of 7 Pages
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Eric Brooks, a U.S. citizen and an investor with a business address of 401 City
Line Avenue, Suite 220, Bala Cynwyd, PA 19004. Mr. Brooks is the sole director
and executive officer of Rattan.
Lobby, Inc. ("Lobby") owns 14% of CVI and is a Delaware
corporation which does not conduct business other than as a holding company for
subsidiary operating companies engaged in the securities business. Lobby's
principal place of business and principal office are located at 42 Reads Way,
New Castle, DE 19720. Lobby is owned 100% by Arthur Dantchik, a U.S. citizen and
an investor with a business address of 401 City Line Avenue, Suite 220, Bala
Cynwyd, PA 19004. Mr. Dantchik is the sole director and executive officer of
Lobby.
East Bay, Inc. ("East Bay") owns 14% of CVI and is a Delaware
corporation which does not conduct business other than as a holding company for
subsidiary operating companies engaged in the securities business. East Bay's
principal place of business and principal office are located at 42 Reads Way,
New Castle, DE 19720. East Bay is owned 100% by Andrew Frost, a U.S. citizen and
an investor with a business address of 220 Bush Street, Suite 950, San
Francisco, CA 94104. Mr. Frost is the sole director and executive officer of
East Bay.
Selt, Inc. ("Selt") owns 14% of CVI and is a Delaware
corporation which does not conduct business other than as a holding company for
subsidiary operating companies engaged in the securities business. Selt's
principal place of business and principal office are located at 42 Reads Way,
New Castle, DE 19720. Selt is owned 100% by Joel Greenberg, a U.S. citizen and
an investor with a business address of 401 City Line Avenue, Suite 220, Bala
Cynwyd, PA 19004. Mr. Greenberg is the sole director and executive officer of
Selt.
Each of the individuals referred to above (the "Principals")
conducts his principal business activities through Susquehanna Investment Group
("SIG") and its related companies. SIG's principal place of business and
principal office are located at 401 City Line Avenue, Suite 220, Bala Cynwyd, PA
19004. CVI's directors are comprised solely of the Principals, except for
director Ian Wight, a U.K. Citizen and a trust accountant with a business
address of RHB Trust Company, Ltd, 1 Capital Place, Grand Cayman, Cayman
Islands, BWI. The executive officers of CVI are Richard Douglas, a U.K. Citizen
and a trust accountant, and Woodbourne Associates (Cayman) Ltd., a Nominee
Company located in the Cayman Islands.
During the last five years, neither CVI, nor to the best of
CVI's knowledge, any individual or entity named in this Item 2, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such civil
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds and Other Consideration.
CVI is a party to a Securities Subscription Agreement with the
Company, dated as of February 20, 1996, pursuant to which CVI agreed to acquire
for purposes of investment convertible debentures in the aggregate principal
amount of $800,000 (the "Debentures"). The aggregate purchase price of the
Debentures was $800,000. In addition, the Company received $9,200,000 from other
investors (the "Other Investors") who purchased convertible debentures in the
aggregate principal amount of $9,200,000 pursuant to Securities Subscription
Agreements by and between the Company and each of the Other Investors.
The Debentures, together with interest accrued thereon (at a
rate of 8% per annum), are convertible into Common Stock at a price per share
(the "Conversion Price") equal to the lesser of: (i) $2.125 (the "Fixed
Conversion
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CUSIP No. 88360H101 Page 5 of 7 Pages
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Price") and (ii) 85% of the average of the closing bid prices for the Common
Stock on the NASDAQ Small Cap Market, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded, for the
five consecutive trading days ending one trading day prior to the conversion
date (subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalization, reclassifications or similar events).
CVI utilized its own working capital funds to consummate the
purchase of the Debentures.
Item 4. Purpose of Transaction.
CVI acquired the Debentures for investment purposes for its
own account. CVI does not currently have any plan or intention to acquire
additional securities of the Company other than its intention to acquire the
shares of Common Stock issuable upon conversion of the Outstanding Debentures
(as defined below).
Except as stated above, CVI has no plans or proposals that
relate or would result in any of the transactions referred to in sub-items (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
On August 14, 1996, CVI converted Debentures in the aggregate
principal amount of $250,000 into 225,229 shares of Common Stock. Between August
14 and August 24, 1996, CVI sold in open market transactions an aggregate of
224,900 shares of Common Stock at average daily per share prices (net of
brokerage commissions) of between $1.23 and $1.48. Such sales of Common Stock
resulted in the receipt by CVI of aggregate net proceeds of approximately
$293,576.
On October 14, 1996, CVI converted Debentures in the aggregate
principal amount of $250,000 into 532,294 shares of Common Stock and sold, in
open market transactions, 77,000 shares of Common Stock at an average per share
price (net of brokerage commissions) of $0.62. Such sales of Common Stock
resulted in the receipt by CVI of net proceeds of approximately $47,740.
As a result of the conversion of Debentures in the aggregate
principal amount of $500,000, as of October 14, 1996, CVI holds Debentures in
the aggregate principal amount of $300,000 (the "Outstanding Debentures"). In
addition, as a result of such conversions and the sale of an aggregate of
301,900 shares of Common Stock, as of October 14, 1996, CVI holds an aggregate
of 455,623 shares of Common Stock.
Based on the Conversion Price in effect on October 14, 1996
($.50), the total of number of shares of Common Stock that CVI beneficially owns
through the ownership of the Outstanding Debentures is 638,752 shares of Common
Stock. Accordingly, as of such date, CVI beneficially owns 1,094,375 shares of
Common Stock or 5.9% of the Outstanding Common Stock.
The number of shares of Common Stock issuable to CVI upon
conversion of the Outstanding Debentures will fluctuate depending on the
Conversion Price from time to time in effect; provided, however, except to the
extent that shares are disposed of, the number of shares so issuable will never
be less than the number of shares issuable based on the Fixed Conversion Price.
To the extent the Conversion Price is less than the Fixed Conversion Price, the
number of shares beneficially owned by CVI will increase without any action on
the part of CVI. The number of shares issuable to CVI upon conversion of the
Outstanding Debentures can be determined by dividing (A) the sum of (i) the
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CUSIP No. 88360H101 Page 6 of 7 Pages
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principal amount of the Outstanding Debentures plus (ii) accrued interest
thereon by (B) the Conversion Price then in effect.
To the best knowledge of CVI, none of the individuals listed
in Item 2 hereof beneficially owns any Common Stock other than through their
ownership interest in CVI. Neither CVI, nor to the best of CVI's knowledge, any
of the individuals listed in Item 2 hereof has effected any transactions in the
Common Stock during the past 60 days other than CVI's conversion of Debentures
in the aggregate principal amount of $500,000 and CVI's sale of an aggregate of
301,900 shares of Common Stock, as described herein.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Simultaneously with the execution of the Securities
Subscription Agreement, the Company and CVI entered into a Registration Rights
Agreement, pursuant to which the Company agreed to register under the Securities
Act of 1933, as amended, the resale by CVI of the Common Stock underlying the
Debentures.
Item 7. Material to be Filed as Exhibits.
Exhibit A - Securities Subscription Agreement (together with
Form of Debenture and Registration Rights Agreement).
Exhibit B - Limited Power of Attorney.
<PAGE>
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CUSIP No. 88360H101 Page 7 of 7 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
CAPITAL VENTURES INTERNATIONAL
By: Bala International, Inc. (f/k/a Arbit Inc.),
pursuant to a Limited Power of Attorney,
a copy of which is filed as an exhibit hereto
By: /s/
--------------------------------------------
Arthur Dantchik, Director
Date: October 21, 1996
<PAGE>
EXHIBIT A
<PAGE>
THERMO TECH TECHNOLOGIES, INC.
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THE DEBENTURES BEING SUBSCRIBED FOR HEREIN AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THE DEBENTURES HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES 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 THE 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 THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
NO SECURITIES COMMISSION OR SIMILAR REGULATORY AUTHORITY IN CANADA HAS
PASSED ON THE MERITS OF THE SECURITIES OFFERED AND ANY REFERENCE TO THE CONTRARY
IS AN OFFENSE. THE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED IN
CANADA OR BY THE SECURITIES COMMISSION OF ANY PROVINCE OF CANADA. THE SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN
CANADA OR TO A CANADIAN RESIDENT INDIVIDUAL OR CORPORATION ABSENT AN EFFECTIVE
REGISTRATION OR QUALIFICATION UNDER THE LAWS OF CANADA AND ANY APPLICABLE
PROVINCIAL SECURITIES LAWS OR COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
QUALIFICATION OR REGISTRATION. THE COMPANY MAY REFUSE TO AUTHORIZE ANY TRANSFER
OF THE SECURITIES TO A CANADIAN RESIDENT INDIVIDUAL OR CORPORATION IN RELIANCE
ON AN EXEMPTION FROM QUALIFICATION OR REGISTRATION UNTIL THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH QUALIFICATION OR REGISTRATION IS NOT REQUIRED.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN SUCH SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED BY
ANY U.S. FEDERAL, CANADIAN PROVINCIAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT REVIEWED,
PASSED UPON, CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT
OR ANY INFORMATION PROVIDED BY THE COMPANY TO POTENTIAL INVESTORS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This Securities Subscription Agreement (the "Agreement") is executed by
the undersigned (the "Subscriber") in connection with the offering (the
"Offering") and subscription by the undersigned for 8% convertible Debentures
(the "Debentures") of Thermo Tech Technologies, Inc. (the "Company"), due on
February 9, 1999, and offered in denominations of at least $50,000 and integral
multiples of $10,000 in excess thereof up to an aggregate principal amount of
$10,000,000. The terms of the Debentures, including the terms on which the
Debentures may be converted into common stock, no par value of the Company (the
"Common Stock"), are set forth in the Debenture, in the form attached hereto as
Exhibit A. The solicitation of this Subscription and, if accepted by the
Company, the offer and sale of Debentures, are being made in reliance upon the
provisions of Regulation S. The Debentures, and the shares of Common Stock
issuable upon conversion thereof (the "Shares"), are sometimes referred to
herein collectively as the "Securities." The Subscriber wishes to subscribe for
Debentures in the amount set forth in Section 19 in accordance with the terms
and conditions of the form of Debenture and this Agreement.
It is agreed as follows:
1. Offer to Subscribe; Purchase Price and Closing; and Placement Fees
(a) The Subscriber hereby subscribes for and agrees to purchase the
aggregate principal amount of Debentures for a purchase price set out
in Section 19 of this Agreement.
(b) The closing of the sale and purchase of the Debentures ("Closing")
will occur upon (i) the satisfaction of all conditions described in
this Agreement, (ii) sale in this Offering of at least $5,000,000
principal amount of Debentures (the "Minimum Amount"), and no more than
$10,000,000 principal amount of Debentures (the "Maximum Amount"), and
(iii) the satisfaction of all conditions required by the Escrow
Agreement ("Escrow Agreement", defined as the agreement between the
Company, Swartz Investments, LLC ("Placement Agent ") and First Union
National Bank ("Escrow Agent") regarding this Offering). As soon as the
subscriptions for the Minimum Amount have been accepted by the Company,
according to the terms of this Agreement, the Company may close on the
Minimum Amount. Thereafter, the Company may conduct one or more
additional Closings until the Maximum Amount has been reached.
(c) The parties hereto acknowledge that the Placement Agent for this
Offering will be compensated by the Company in cash and warrants to
purchase Common Stock of the Company. The Placement Agent has acted
solely as placement agent in connection with the Offering by the
Company of the Debentures pursuant to this Agreement. The information
and data contained in the Disclosure Documents (as defined in Section
2.2) have not been subjected to independent verification by Placement
Agent , and no representation or warranty is made by Placement Agent as
to the accuracy or completeness of the information contained in the
Disclosure Documents.
(d) The Subscriber's obligations hereunder are further conditioned upon
the following:
(i) the Common Stock is listed on the National Association of
Securities Dealers, Inc.'s National Market System or Small
Capitalization System,
(ii) the representations and warranties of the Company are
true and correct in all material respects on the Closing Date
as if made on such date, and the Company shall deliver a
certificate, signed by an officer of a Company, to such effect
to the Escrow Agent, and
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(iii) there have been no material adverse changes in the
Company's business prospects or financial condition since the
date of the Company's balance sheet dated December 31, 1995.
2. Representations and Covenants; Access to Information; Independent
Information; Independent Investigation
2.1 Offshore Transaction.
(a) United States Representations. The Subscriber represents
and warrants to the Company that (i) the Subscriber is not a
U.S. Person ("U.S. person") as that term is defined in Rule
902(o) of Regulation S (a copy of which definition is attached
as Exhibit B) including, without limitation if a corporation
or partnership, (a) it is organized under the laws of a
jurisdiction other than the United States and (b) if organized
by a U.S. person principally for the purpose of investing in
securities not registered under the Act, it was organized or
incorporated and is owned by accredited investors (as defined
in Rule 501(a) of Regulation D under the Act) who are not
natural persons, estates or trusts;
(ii) the Securities were not offered to the Subscriber in the
United States and at the time of execution of this
Subscription Agreement and the time of any offer to the
Subscriber to purchase the Securities hereunder, the
Subscriber was physically outside the United States; (iii) the
Subscriber is purchasing the Securities for its own account
and not on behalf of or for the benefit of any U.S. person and
the sale and resale of the Securities have not been
prearranged with any U.S. person or buyer in the United
States; (iv) the Subscriber agrees, and to the knowledge of
the Subscriber, without any independent investigation, each
distributor, if any, participating in the offering of the
Securities, has agreed, that all offers and sales of the
Securities prior to the expiration of a period commencing on
the date of the last Closing of a sale and purchase of
Debentures (the "Last Closing") and ending forty days
thereafter (the "Restricted Period") shall not be made to U.S.
persons or for the account or benefit of U.S. persons and
shall otherwise be made in compliance with the provisions of
Regulation S; and (v) subscriber is not an underwriter,
dealer, or other person who participates, pursuant to a
contractual arrangement, in the distribution of the Securities
offered or sold in reliance on Regulation S.
(b) Canadian Representations. The Subscriber represents and
warrants to the Company that save and except in the
circumstance where an offering of the Securities may be made
to a Canadian Resident (as hereinafter defined) in reliance on
an available exemption to all applicable Canadian federal or
provincial securities laws (i) the Subscriber is not a
Canadian resident ("Canadian Resident") including, without
limitation if a business organization, such as a corporation
or partnership, it is organized under the laws of a
jurisdiction other than Canada; (ii) the Securities were not
offered to the Subscribers in Canada and at the time of
execution of this Subscription Agreement and the time of any
offer to the Subscriber to purchase the Securities hereunder,
the Subscriber was physically outside Canada, (iii) the
Subscriber is purchasing the Securities for its own account
and not on behalf of or for the benefit of any Canadian
Resident and the sale and resale of the Securities have not
been prearranged with any Canadian Resident or buyer in
Canada, and (iv) the Subscriber agrees, and to the knowledge
of the Subscriber, without any independent investigation, each
distributor, if any, participating in the offering of the
Securities, has agreed, that all offers and sales of the
Securities in Canada should be made in accordance with all
applicable securities laws in Canada, and in any event the
Subscriber agrees not to offer or sell the Securities
3
<PAGE>
to any resident of British Columbia, Canada except in
accordance with available securities resale exemptions.
2.2 Subscriber's Independent Investigation. The Subscriber, in
making its investment decision to subscribe for the Debentures
hereunder, represents that (a) it has received the Company's
Annual Report on Form 20-F for the year ended April 30, 1995,
the Company's periodic reports on Form 6-K filed with the
Commission for the periods July 31, 1995 and October 31, 1995
and the Company's proxy statement for the Company's 1995
annual meeting of shareholders; (b) it has read, reviewed, and
relied solely on the documents described in (a) above, the
Company's representations and warranties and other information
in this Subscription Agreement, including the Exhibits, any
other written information prepared by the Company which has
been specifically provided to the Subscriber in connection
with this Offering (together, the "Disclosure Documents"), and
an independent investigation made by it and its
representatives, if any; (c) it has, prior to the date of this
Agreement, been given an opportunity to review material
contracts and documents of the Company which have been filed
as exhibits to the Company's filings under the Act and the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") and has had an opportunity to ask questions of and
receive answers from the Company's officers and directors; (d)
is not relying on any oral representation of the Company or
any other person, nor any written representation or assurance
from the Company other than those referred to in Section
2.2(b) and; (e) is an accredited investor as defined in Rule
501 of Regulation D, a copy of which definition is attached
hereto as Exhibit C. The Subscriber assumes, without any
independent investigation, neither the Company nor Placement
Agent has offered the Debentures to any Subscribers in the
U.S. or to any U.S. person unless such U.S. person is a
professional fiduciary of a non-U.S. person (as defined in
Section (o) (2) through (o) (4) of rule 902 of Regulation S).
2.3 Subscriber's Economic Risk. The Subscriber understands and
acknowledges that an investment in the Securities involves a
high degree of risk. Subscriber acknowledges that there are
limitations on the liquidity of the Securities. The Subscriber
represents that the Subscriber is able to bear the economic
risk of an investment in the Securities, including a possible
total loss of investment. In making this statement the
Subscriber hereby represents and warrants to the Company that
the Subscriber has adequate means of providing for the
Subscriber's current needs and contingencies; that Subscriber
is able to afford to hold the Securities for an indefinite
period; and that Subscriber further represents Subscriber has
such knowledge and experience in financial and business
matters that the Subscriber is capable of evaluating the
merits and risks of the investment in the Securities to be
received by the Subscriber. Further, the Subscriber
represents, as of the date of signing this Agreement, that the
Subscriber has no present need for liquidity in the Securities
and the Subscriber is willing to accept such investment risks.
Subscriber has reviewed the Disclosure Documents, including
without limitation the Risk Factors set forth at Exhibit D,
prior to subscribing for any Debentures.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency or
Canadian regulating authority, or similar agency of any other
country, has reviewed, approved, passed upon or made any
recommendation or endorsement of the Company, the Offering or
the subscription for the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. To
the knowledge of the Subscriber, without any independent
investigation, neither the Company, Placement Agent nor any
distributor participating in the Offering (if any), nor any
person acting for the Company, Placement Agent or any such
distributor, has conducted any "directed
4
<PAGE>
selling efforts" in the United States as the term "directed
selling efforts" is defined in Rule 902(b) of Regulation S,
which in general, means any activity undertaken for the
purpose of, or that could reasonably be expected to have the
effect of, conditioning the market in the United States for
any of the Securities being offered in reliance on Regulation
S. Such activity includes, without limitation, the mailing of
printed material to investors residing in the United States,
the holding of promotional seminars in the United States, and
the placement of advertisements with radio or television
stations broadcasting in the United States or in publications
with a general circulation in the United States, that refers
to the offering of the Securities in reliance on Regulation S.
2.6 Company's Reliance on Representations of Subscribers. This
Agreement is made by the Company with each Subscriber in
reliance upon such Subscriber's representations and covenants
made in this Section 2, which reliance by his or its execution
of this Agreement the Subscriber hereby confirms.
2.7 Securities Not Registered Under the Act and Under Canadian
Law. Subscriber understands that the Debentures and the Common
Stock issuable upon conversion of the Debentures have not been
registered under the Act or any state or provincial securities
laws ("State Acts") and are being offered and sold pursuant to
Regulation S and applicable Canadian exemptions based in part
upon the representations of Subscriber contained herein. The
Common Stock does, however, carry certain registration rights
as set forth in the Registration Rights Agreement executed by
the parties hereto.
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with
the proposed issuance and sale of the Securities.
2.9 Investment Intent. Subscriber is acquiring the Debentures to
be issued and sold hereunder (and the Shares issuable upon
conversion of the Debentures) for his, her or its own account
(or a trust account if such Subscriber is a trustee) for
investment and not as a nominee and not with a view to the
distribution thereof. Subscriber understands that Subscriber
must bear the economic risk of this investment indefinitely
unless such Debentures or such Shares are registered pursuant
to the Act and any applicable State Acts, or an exemption from
such registration is available, and that the Company has no
present intention of registering any such sale of the
Debentures or Shares other than as contemplated by the
Registration Rights Agreement. Subscriber represents and
warrants to the Company, as of the date of this Agreement,
that Subscriber has no present plan or intention to sell the
Debentures or the Shares in the United States or Canada at any
predetermined time, and has made no predetermined arrangements
to sell the Debentures or the Shares. Subscriber covenants
that neither Subscriber nor its affiliates nor any person
acting on its or their behalf has entered, has the intention
of entering, or will enter into any put option, short position
or other similar instrument or position in the U.S. with
respect to the Debentures or Common Stock of the Company
anytime after receipt of the term sheet concerning this
Offering until the end of the Restricted Period, or for the
intended purpose of lowering the price at which the Debentures
are convertible into Shares; and neither Subscriber nor any of
its affiliates nor any person acting on its or their behalf
will at any time use Shares acquired upon conversion of the
Debentures to settle/cover any put option, short position or
other similar instrument or position entered into after
receipt of the term sheet (except that transactions
constituting "short exempt" transactions under NASD rules
shall be permissible).
2.10 Subscriber Not to Sell or Transfer Securities in Violation of
the Securities Laws. Subscriber covenants that he, she or it
will not knowingly make any sale, transfer or
5
<PAGE>
other disposition of the Debentures or the Shares in violation
of (1) the Act (including Regulation S), the Exchange Act, any
applicable State Acts or the rules and regulations of the
Commission or of any state securities commissions or similar
state authorities promulgated under any of the foregoing; and
(2) all federal and provincial securities laws and regulations
in force in Canada.
2.11 Subscriber's Power and Authority. Subscriber has the full
power and authority to execute, deliver and perform this
Agreement. This Agreement, when executed and delivered by
Subscriber, will constitute a valid and legally binding
obligation of Subscriber, enforceable in accordance with its
terms.
2.12 Signatory's Representation. The signatory to this Agreement
hereby represents and warrants that he, she or it is either:
(a) not a U.S. person (as defined in Regulation S), and is not
located in the U.S. at the time of signing this Agreement, or
(b) a professional fiduciary of Subscriber (as described in
Section (o)(2) through (o)(4) of Rule 902 of Regulation S),
acting solely in his capacity as holder of such account, as a
fiduciary, executor, administrator, or trustee, and has
completed and signed the accompanying Certificate (Exhibit E)
and forwarded it to Placement Agent, and
(c) save and except in the circumstance where an offering of
the Securities may be made to a Canadian Resident in reliance
on an available exemption to all applicable Canadian federal
or provincial securities laws is not a Canadian Resident and
is not located in Canada at the time of signing this
Agreement.
2.13 No Tax Advice From Company. Subscriber has reviewed with his,
her or its own tax advisors the foreign, U.S. federal, state
and local tax consequences of this investment, and the
transactions contemplated by this Agreement. Subscriber is
relying solely on such advisors and not on any statements or
representations of the Company or any of its agents and
understands that Subscriber (and not the Company) shall be
responsible for the Subscriber's own tax liability that may
arise as a result of this investment or the transactions
contemplated by this Agreement.
2.14 No Legal Advice from Company. Subscriber acknowledges that he,
she, or it has had the opportunity to review this Agreement
and the transactions contemplated by this Agreement with his,
or her or its own legal counsel. Subscriber is relying solely
on such counsel and not on any statements or representations
of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by
this Agreement, except for the representations, warranties and
covenants set forth herein and in the opinion provided for in
paragraph 7.3 herein.
2.15 Offering Material Statements. Subscriber acknowledges that all
offering materials and documents received by it in connection
with the offers and sales of the Securities included
statements to the effect of those contained in the first full
capitalized paragraph of this Agreement.
2.16 No Scheme to Evade Registration. Subscriber's acquisition of
the Debentures is not a transaction (or any element of a
series of transactions) that is part of a plan or scheme to
evade the registration provisions of the Act.
6
<PAGE>
3. Resales of Securities by Subscriber
Subscriber acknowledges, covenants and agrees that the
Securities may and will only be resold by it in the U.S. and/or Canada (a) in
compliance with Regulation S, Canadian federal Securities laws and applicable
State Acts, if any; or (b) pursuant to an exemption from registration under the
Act other than Regulation S and applicable State Acts and/or pursuant to
applicable Canadian exemptions, if any; or (c) pursuant to an effective and
current Registration Statement under the Act and/or applicable Canadian law. In
addition, in connection with any resale of the Debentures in accordance with
clause (a) or (b), above, the Subscriber will deliver to the Company and will
cause the purchaser to deliver to the Company the documents described in Section
3.1 and 3.2 below:
3.1. Documents to be Delivered for Offshore Regulation S Resales.
If any Debenture is being resold in compliance with
Regulation S:
1. Sales Agreement, executed by Subscriber and
Purchaser (in the form of Exhibit F);
2. Seller Representation Letter (in the form of
Exhibit G);
3. Assignment Separate from Certificate (in the form
of Exhibit H)(or endorsed Certificates);
4. Seller's Instruction Letter (in the form of
Exhibit I); and
5. Purchaser Representation Letter (in the form of
Exhibit J).
3.2 Documents to be Delivered for Resales into the United States.
If any Debenture is being resold pursuant to an exemption from
registration under the Act other than Regulation S:
1. Sales Agreement, executed by both Subscriber and
Purchaser (in the form of Exhibit F);
2. Seller Representation Letter (in the form of
Exhibit K);
3. Assignment Separate from Certificate (in the form
of Exhibit H) (or endorsed Certificates);
5. Seller's Instruction Letter (in the form of
Exhibit I); and
6. Purchaser Representation Letter (in the form of
Exhibit J).
Upon receipt of the executed documents listed above, the Company will
effect the transfer of the Debentures on the Company's books and will issue and
deliver new Debentures in the purchaser's name (and, in the case of a resale
pursuant to Section 3.2 after the Restricted Period, free of any restrictive
legend) within three (3) business days of such receipt (unless the Company has a
bona fide reason to believe that the representations and agreements contained in
the documents listed above are not true). The provisions of Section 3.2 shall
not apply to subsequent resales of Debentures that have previously been sold by
Subscriber in compliance with this Section 3.
3.3 Resale of Securities by Subscribers in Canada or to Canadian
Residents. Subscriber acknowledges, covenants and agrees that the Securities may
and will only be resold by it in Canada or to a Canadian Resident in compliance
with all federal or provincial securities laws and regulations, if any; or
pursuant to an exemption under the above-noted laws and regulation. In any
event, the Company will only effect the transfer of the Debentures on the
Company's books to a Canadian Resident and issue and deliver new Debentures in a
Canadian purchaser's name upon receipt of the documents referenced in Section
3.2 herein and an opinion of counsel for the Subscriber in form and substance
acceptable to the Company in regard to compliance with or the availability of an
exemption from applicable securities laws and regulations in Canada.
7
<PAGE>
4. Legends; Subsequent Sale of Securities
4.1 The Debenture shall bear the first legend set forth on the
first page of this Agreement and any other legend or legends
as reasonably required to comply with the state, U.S. federal,
Canadian or other foreign law.
4.2 Assuming that there are no changes in the material facts set
forth in Section 2 of this Agreement or applicable law from
the date hereof until the Date of Conversion of the Debentures
by Subscriber for resale, the Shares so obtained shall not
bear any restrictive legend, nor shall any stop order be
placed on the books of the Transfer Agent, provided the
Subscriber shall deliver to the Company a Certificate (in the
form of Exhibit L).
4.3 Upon the submission, at any time after the expiration of 40
days after the Last Closing, by Subscriber of a written
request for legend removal for the purpose of a bona fide
pledge or deposit of Debentures with a margin account,
together with the Debentures for which legend removal is being
requested and a Certificate in the form of Exhibit M, the
Company shall immediately re-issue the Debentures without any
restrictive legend, and the Company shall instruct its
designated U.S. transfer agent ("Transfer Agent") to do so,
assuming that there are no changes in the material facts set
forth in Section 2 of this Agreement or applicable law from
the date hereof until the date of such submission. Except for
the requirements otherwise set forth in this Agreement, and
assuming there are no changes after the date hereof in the
material facts set forth in Section 2 of the Agreement or
applicable law, no action other than as set forth in this
Section 4.3 shall be required by the Subscriber to remove the
Regulation S Restrictive Legend. If such margined Debentures
are returned to Holder (as defined in the Debenture) by broker
prior to the end of the Restricted Period Holder shall return
such margined Debentures to Company to have the Regulation S
legend placed back on such Debentures.
4.4 The Company will issue to its Transfer Agent an irrevocable
instruction letter (Exhibit N) to convert the Subscriber's
Debentures to Common Stock (in accordance with the Debenture
and so long as Section 4.2 is complied with, free of any
restrictive legend) upon receipt of a valid Notice of
Conversion from a Subscriber and the original Debentures, and
such other documents as are required by this Agreement or the
Debenture.
5. Issuance of Securities in the Near Future; Notice Requirements
The Company shall not issue any debt or equity securities for cash in
private capital raising transactions ("Future Offerings") for a period
seventy five (75) days after the Last Closing without obtaining the
prior written approval of Subscribers holding a majority of the
purchase price of Debentures then outstanding, provided that the
preceding shall not limit the Company's right to conduct a public
secondary offering. The Company will not conduct any Future Offerings
for a period of two hundred and forty (240) days after the Closing
without delivering to the Subscriber, at least seven (7) days prior to
the closing of such issuance, written notice describing the proposed
issuance and the terms upon which such securities are being issued, and
providing the Subscriber the option during such seven (7) day period to
purchase the securities being offered in the Future Offerings on the
same terms as contemplated by such Future Offerings and in the amount
set forth below (the limitations referred to in this and the
immediately preceding sentence are collectively referred to as the
"Capital Raising Limitation"). The Capital Raising Limitation shall not
apply to any transaction involving the Company's commercial banking
arrangements or issuances of securities in connection with a merger,
consolidation or sale of assets, or in connection with or as part of
the same transaction as a joint
8
<PAGE>
venture or other acquisition or disposition of a business, a product or
a license by the Company, or exercise of options by employees,
consultants or directors or any transaction with a strategic corporate
partner or to loan securitization or sales of loans to master trusts.
The Capital Raising Limitation also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of December 31,
1995, or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan. The amount of securities which a Subscriber is
entitled to purchase in such a Future Offering shall be a number
obtained by multiplying the aggregate amount of securities being
offered in the Future Offering by a fraction, the numerator of which is
the aggregate principal dollar amount of Debentures purchased by the
Subscriber pursuant to this Agreement and the denominator of whih is
the aggregate principal dollar amount of Debentures placed in this
Offering.
6. Representations and Warranties of Company
Company represents and warrants to Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the province of British Columbia,
Canada and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on
the business or properties of the Company and its subsidiaries
taken as a whole. The Company, to its knowledge is not the
subject of any pending or threatened investigation or
administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local
jurisdiction, or the Securities and Exchange Commission which
have not been disclosed in the reports referred to in Section
2.2 above.
6.2 Corporate Condition. The Company's condition was, in all
material respects, as described in the Disclosure Documents at
the respective dates thereof, including without limitation the
reports filed pursuant to the Exchange Act and described in
Section 2.2. Except for normal year-end adjustments that are
not, in the aggregate, material, there has been no material
adverse change in the Company's business financial condition
or prospects since April 30, 1995. The Disclosure Documents
are true and correct, in all material respects, and the
financial statements contained in the Disclosure Documents
have been prepared in accordance with generally accepted
accounting principles as applied in Canada, consistently
applied, and fairly present the financial position and results
of operation and cash flows of the Company on a consolidated
basis, for the periods then ended. Without limiting the
foregoing, there are no material liabilities, contingent or
actual, that are not disclosed in the Disclosure Documents.
The Company has paid all material taxes which are due, except
for taxes which it reasonably disputes. There is no material
claim, litigation, or administrative proceeding pending, or to
the best of the Company's knowledge, threatened against the
Company, except as disclosed in the Disclosure Documents. This
Agreement and the Disclosure Documents do not contain any
untrue statement of a material fact and do not omit to state
any material fact required to be stated therein or herein
necessary to make statements contained therein or herein not
misleading in the light of the circumstances under which they
were made.
6.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and
the
9
<PAGE>
authorization, issuance (or reservation for issuance) and
delivery of the Debentures being sold hereunder and issuance
of the Common Stock obtainable on conversion of the Debentures
have been taken, and this Agreement and the Registration
Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with its
terms. The Company has obtained all consents and approvals
required for it to execute, deliver, and perform this
Agreement. The Company is not in violation or default of any
provisions of its Certificate of Incorporation or Articles, as
amended and in effect on and as of the date of the Agreement,
or of any material provision of any instrument or contract to
which it is a party or by which it is bound or, of any
material provision of any federal or state judgment, writ,
decree, order, statute, rule or governmental regulation
applicable to the Company except where such conflict would
have no material adverse affect on the Company's business
prospects or financial condition, or on the transaction
contemplated herein. The execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or
be in conflict with or constitute, with or without the passage
of time and giving of notice, either a default under any such
provision, instrument or contract or an event which results in
the creation of any lien, charge or encumbrance upon any
assets of the Company.
6.4 Valid Issuance of Securities. The Debentures, when issued,
sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be validly issued and
binding obligations of the Company, enforceable in accordance
with their terms, and, based in part upon the representations
of the Subscriber in this Agreement, will be issued in
compliance with all applicable U.S. federal and state
securities laws. The Common Stock issuable upon conversion of
the Debentures, when issued in accordance with the terms of
the Debentures, shall be duly and validly issued and
outstanding, fully paid and nonassessable, and based in part
on the representations and warranties of Subscriber of the
Debentures, will be issued in compliance with all applicable
U.S. federal securities laws and State Acts. The Shares will
be issued free of any preemptive right. The Company currently
has 10 million Shares reserved for issuance upon conversion of
the Debentures.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a "reporting
issuer" as defined in Rule 902(1) of Regulation S and it has a
class of securities registered under Section 12(b) or 12(g) of
the Exchange Act or is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, and has filed all the
materials required to be filed as reports pursuant to the
Exchange Act for a period of at least twelve months preceding
the date hereof (or for such shorter period as the Company was
required by law to file such material), and all such filings
have been made on a timely basis. The Company undertakes to
furnish the Subscriber with copies of such information as may
be reasonably requested by the Subscriber prior to
consummation of this Offering.
6.6 No Securities Offered in U.S. or to any U.S. Person. The
Company represents that it has not offered the Debentures to
the Subscriber in the U.S. or to any person in the United
States or any U.S. person (as defined in Regulation S) unless
such U.S. person is a professional fiduciary of a non-U.S.
person (as defined in Section (o) (2) through (o) (4) of rule
902 of Regulation S; and (2) in Canada or to any Canadian
Resident save and except in the circumstance where an offering
of the Securities may be made to a Canadian Resident in
reliance on an available exemption to all applicable Canadian
federal or provincial securities laws.
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6.7 No Directed Selling Efforts in Regard to this Transaction
Neither the Company, Placement Agent nor any distributor
participating in the Offering (if any), nor any person acting
for the Company, Placement Agent or any such distributor, has
conducted any "directed selling efforts" in the United States
or Canada as the term "directed selling efforts" is defined in
Rule 902(b) of Regulation S, which in general, means any
activity undertaken for the purpose of, or that could
reasonably be expected to have the effect of, conditioning the
market in the United States or Canada for any of the
Securities being offered in reliance upon Regulation S. Such
activity includes, without limitation, the mailing of printed
material to investors residing in the United States or Canada,
the holding of promotional seminars in the United States or
Canada, and the placement of advertisements with radio or
television stations broadcasting in the United States or
Canada or in publications with a general circulation in the
United States or Canada, that refers to the offering of the
Securities.
6.8 Capitalization Structure of the Company. The capitalization of
Company, as of the date of the Closing, after giving effect to
the issuances of the Securities in this Offering, is as set
forth in Exhibit O.
6.9 Termination Date of Offering. In no event shall the Last
Closing of a sale of a Debenture occur later than February 20,
1996, which date can be extended by up to 10 days upon written
approval by the Company and the Placement Agent.
6.10 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses)
for the purposes and in the approximate amounts set forth in
Exhibit P hereto. These purposes and amounts are estimates and
are subject to change.
6.11 Intellectual Property. The Company has a valid unrestricted,
enforceable and exclusive license for the use of all patents,
trademarks, trademark registrations, trade names, copyrights,
trade secrets, know-how, technology and other intellectual
property necessary to the conduct of its business, except to
the extent such rights have been licensed, assigned or
otherwise transferred to others, as indicated on Schedule
IP-1. To the best of the Company's knowledge, the Company is
not infringing on the intellectual property rights of any
third party, nor is any third party infringing on the
Company's intellectual property rights. There are no
restrictions in any agreements, licenses, franchises, or other
instruments that are necessary for the conduct of the
Company's business as presently conducted or as planned to be
conducted in the future. The Company has granted valid and
enforceable licenses as listed on Schedule IP-1.
7. Covenants of Company
7.1 Independent Auditors. The Company shall, until at least
February 9, 1999, maintain as its independent auditors an
accounting firm authorized to practice before the Commission.
7.2 Corporate Existence and Taxes. The Company shall, until at
least the earlier of February 9, 1999, or the conversion or
redemption of all the Debentures purchased pursuant to this
Agreement maintain its corporate existence in good standing
(provided, however, that the foregoing covenant shall not
prevent the Company from entering into any merger or corporate
reorganization as long as the surviving entity in such
transaction, if not the Company, assumes the Company's
obligations with respect to the Debentures) and shall
11
<PAGE>
pay all its material taxes when due except for taxes which the
Company reasonably disputes.
7.3 Opinion of Counsel. Subscriber shall, upon purchase of the
Debentures, receive an opinion letter from outside U.S. and
outside Canadian counsel to the Company, in the form attached
hereto as Exhibit Q-1 and Q-2 (i) the Company is duly
incorporated and validly existing under the laws of British
Columbia, Canada; (ii) this Agreement, the Registration Rights
Agreement, the issuance of the Debentures, and the issuance of
the Common Stock upon conversion of the Debentures have been
duly authorized by all required corporate action, and that all
such Shares, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this
Agreement, the Registration Rights Agreement and the
Debentures constitute valid and binding obligations of the
Company, enforceable in accordance with their terms, except as
enforceability of any indemnification provisions may be
limited by principles of public policy, and subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and rules of laws governing specific
performance and other equitable remedies; (iv) based upon the
representations and warranties of the Subscribers contained in
the Regulation S Subscription Agreements entered into in
connection with the Offering (and the Placement Agent), and
assuming that no Subscriber is engaged in a plan or scheme to
evade the registration requirements of the Act, the issuance
of the Debentures has been effected in compliance with
Regulation S, and the issuance of the Shares upon conversion
of the Debentures in accordance with their terms by the
holders of the Debentures (assuming that no commission or
other remuneration is paid or given, directly or indirectly,
for soliciting such conversion) will not be subject to the
registration provisions of the Act; and (v) the execution,
delivery and performance of this Agreement and the other
agreements entered into in connection herewith, does not
conflict with or result in a breach of the Company's Articles,
charter, or any agreement to which the Company is a party by
which its property is bound or any judgment, or decree to
which it is subject.
7.4 Registration Rights. The Company will grant Subscriber the
registration rights covering the Common Stock issuable on
conversion of the Debentures on the terms of the Registration
Rights Agreement attached hereto as Exhibit R.
7.5 Notification of Final Closing Date & Restricted Period by
Company. Within five (5) business days after the Last Closing,
the Company shall notify the Subscriber in writing that the
Last Closing has occurred, the date of the Last Closing, the
date upon which the 40 day Restricted Period will terminate
with respect to the Securities, the dates that the subscribers
are entitled to convert the respective portions of their
Debentures and the value of the Fixed Conversion Price, as
that term is defined in the Debenture.
7.6 Payments for Late Conversion or Failure to Reserve Authorized
but Unissued Common. (a) Payments for Late Conversion. As set
forth in the Debenture, the Company shall issue and use its
best efforts to deliver, within three (3) business days after
the Subscriber has fulfilled all conditions and submitted all
necessary documents duly executed and in the proper form
required for conversion (the "Deadline"), to such Holder of
Debentures 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
upon submission of a notice of conversion. 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 late payments to the Holder for late
issuance of Shares upon
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Conversion in accordance with the following schedule (where
"No. Business Days Late" is defined as the number of business
days beyond 3 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 Debentures,
all in accordance with the subscription documents):
Late Payment For Each
$10,000 Of Debenture Principal
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
\10 $1,000 + $200 for each
Business Days Late beyond 10 days
To the extent that the failure of the Company to issue the
Common Stock pursuant to this Section 7.6 is due to the
unavailability of authorized but unissued shares of Common
Stock, the provisions of this Section 7.6(a) shall not apply
but instead the provisions of Section 7.6(b) shall apply.
The Company shall pay any payments incurred under this Section
7.6(a) inimmediately available funds within three (3) business
days from the date of issuance of the applicable Common Stock.
Nothing herein shall limit a share-holder's right to pursue
actual damages for the Company's failure to issue and deliver
Common Stock to the Holder pursuant to the terms of the
Debenture.
(b) Payments for Failure to Reserve Authorized but Unissued
Common . If, at any time a Holder of Debentures submits a
Notice of Conversion (as defined in the Debenture) and the
Company does not have sufficient authorized but unissued
shares of Common Stock available to effect, in full, a
conversion of Debentures under Section 4 of the Debenture (a
"Conversion Default", the date of such default being referred
to herein as the "Conversion Default Date"), the Company shall
issue to the Holder all of the shares of Common Stock which
are available, and the Notice of Conversion as to any
Debentures requested to be converted but not converted (the
"Unconverted Debentures") shall become null and void. The
Company shall provide notice of such Conversion Default
("Notice of Conversion Default") to each Holder of outstanding
Debentures, by facsimile, within one (1) business day of such
default (with the original delivered by overnight or two day
courier). Holder may not submit a Notice of Conversion after
receipt of a Notice of Conversion Default until the date
additional shares of Common Stock are authorized by the
Company.
The Company agrees to pay to all Holders of
outstanding Debentures payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365) x
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<PAGE>
(.24) x the initial issuance price of the outstanding
Debentures held by each Holder where N = the number of days
from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of all
remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding
Debentures that additional shares of Common Stock have been
authorized, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion
Default shall be paid in cash or shall be convertible into
Common Stock at the Conversion Rate, at the Holder's option,
payable as follows: (I) in the event Holder elects to take
such payment in cash, cash payments shall be made to each
Holder of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Holder elects
to take such payment in stock, the Holder may convert such
payment amount into Common Stock at the Conversion Rate at
anytime after the 5th day of the following calendar month,
until the automatic conversion date set forth in the
Debenture.
. Nothing herein shall limit the Subscriber's right to pursue
actual damages for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
7.7 Payment of Accrued Interest on Funds in Escrow. The Company shall
pay interest to each Subscriber at the rate of 8% per annum for the use
of Subscriber's funds deposited into escrow for the aggregate amount of
Debentures for the period commencing on the date that, in connection
with the consummation of the initial purchase by Subscriber of its
Debenture(s) from the Company, the escrow agent first had in its
possession funds representing full payment for such Debenture(s) and
ending on the date of issuance of such Debenture(s). Such payment shall
be made by the Company to Subscriber, by check, within 7 days of the
date of the Last Closing.
8. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the New York, U.S.A. applicable to agreements made in and wholly to
be performed in that jurisdiction, except for matters arising under the Act or
the Exchange Act which matters shall be construed and interpreted in accordance
with such laws. Any action brought to enforce, or otherwise arising out of, this
Agreement shall be heard and determined only in either a federal or state court
sitting in the County of New York in the State of New York, U.S.A. The
Subscriber's and the Company's representations and warranties shall survive the
closing of the transaction.
9. Entire Agreement; Written Amendments Required
This Agreement, the Debentures, the Registration Rights Agreement and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
10. Written Notices, Etc.
Any notice, demand or request required or permitted to be given by
either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by two day courier), addressed to
14
<PAGE>
the parties at the addresses and/or facsimile telephone number of the parties
set forth at the end of this Agreement or such other address as a party may
request by notifying the other in writing.
11. Execution in Counterparts Permitted
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12. Severability of Agreement
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this
Agreement to any party.
13. Titles and Subtitles; Gender
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. The use in this Agreement of a masculine, feminine or neuter pronoun
shall be deemed to include a reference to the others.
14. Exact Registered Name of Security Holder; Offshore Delivery
Instructions
Subscriber agrees to provide Company with the exact name in which he,
she or it wishes the Securities to be registered by providing that information
on the accompanying signature page of this Agreement. Additionally, Subscriber
also agrees to provide Company with detailed delivery instructions to an
offshore addressee and will also provide that information on the accompanying
signature page of this Agreement.
15. Subscriber to Forward Original Signed Subscription Agreement to Company
Subscriber agrees to courier to Company his, her or its original inked
signed Subscription Agreement within 2 days of faxing said signed agreement to
the Placement Agent.
16. Assignment.
Neither party to this Agreement may assign this Agreement without the
written consent of the other (which may be withheld for any reason). This
provision does not limit the Subscriber's right to transfer the Securities
pursuant to the terms of the Debenture and this Agreement.
17. Subscription and Writing Instructions; Irrevocability
(a) Subscriber shall send its signed Subscription Agreement by
facsimile to Placement Agent at (770) 640-7150, and shall send its subscription
funds by wire transfer, to the Escrow Agent as follows:
First Union National Bank of Georgia
Attn: Rick Schaal
Corporate Trust Administration
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Fax: 404-827-7305
15
<PAGE>
ABA Number: 053000219
Account Number: 465946
Attn: Claire Moore
Ref: Thermo Tech Technologies, Inc. /Swartz Investments, LLC
Ref: Subscriber's Name
A/C 307-223-2426
SWIFT Code: FUNBUS33
(b) The Subscriber hereby acknowledges and agrees, subject to the
provisions of any applicable laws providing for the refund of subscription
amounts submitted by the Subscriber, that this Agreement is irrevocable and that
the Subscriber is not entitled to cancel, terminate or revoke this Agreement;
provided, however, that if the conditions to Closing are not satisfied or if the
Disclosure Documents are discovered prior to Closing to contain statements which
are materially inaccurate, or omit statements of material fact, the Subscriber
may revoke or cancel this Agreement.
(c) This Agreement shall be accepted by the Company when the Company
countersigns this Agreement. The Subscriber hereby confirms that the Company has
full right in its sole discretion to accept or reject the subscription of the
Subscriber, in whole or in part, provided that, if the Company decides to reject
such subscription, the Company must do so promptly and in writing. In the case
of rejection, the Company will promptly return any rejected payments and (if
rejected in whole) copies of all executed subscription documents (including
without limitation this Agreement) to Subscriber (with any earned interest)
18. Indemnification.
Subscriber shall indemnify and hold harmless Company, Placement Agent,
and each of their officers, directors, control persons and agents (an
"Indemnified Party") who is or may be a party to any threatened, pending, or
completed action, suit or proceeding of any kind, against any losses, damages,
liabilities and expenses (including attorneys fees) suffered or incurred by an
Indemnified Party and not otherwise reimbursed, arising from or due to any
representation or warranty of Subscriber contained in this Agreement that is an
actual or alleged misstatement of applicable facts or omission to state
applicable facts in connection with the Offering.
[Intentionally Left Blank]
16
<PAGE>
19. Amount
The undersigned hereby subscribes for Eight Hundred Thousand
principal amount of Debentures, and pays herewith funds in the amount of
Eight Hundred Thousand U.S. Dollars ($800,000 U.S.) on the terms and
conditions of this Agreement.
The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.
Dated this 13 day of February, 1996.
<TABLE>
<S> <C>
/s/ CAPITAL VENTURES INTERNATIONAL
____________________________________ ____________________________________
Your Signature EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
(Please Print Exact Registered Name)
Johann H. Koehne
____________________________________ OFFSHORE DELIVERY INSTRUCTIONS:
Name: Please Print
Please type or
print address
where your
security is to be
delivered.
Managing Director ATTN: ______________________
Susquehanna Securities Trading GmbH
____________________________________________ ____________________________
Title/Representative Capacity (if applicable) Street Address
As agent for Capital Ventures International
____________________________________________ ____________________________
Name of Company You Represent (if applicable) Street Address
Frankfurt/Main, Germany
____________________________________________ ____________________________
Place of Execution of this Agreement City, State or Province, Country
____________________________
Offshore Postal Code
____________________________
Phone Number (For Federal Express)
____________________________
Facsimile Number (re: Notice)
</TABLE>
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF
________________ 1996.
THERMO TECH TECHNOLOGIES, INC.
By: /s/
-----------------------------
(Signature)
Print Name: Rene J. Branconnier
Title: President
17
<PAGE>
EXHIBIT E
- Thermo Tech Technologies, Inc. -
FIDUCIARY, ADMINISTRATOR, EXECUTOR OR TRUSTEE CERTIFICATE
Nature of Signatory. The signatory to this Agreement hereby represents and
warrants that he, she or it is either:
(a) the Subscriber, who is not a U.S. person (as defined in
Regulation S) and is not a Canadian Resident save and except
in the circumstance where an offering of the Securities may be
made to a Canadian Resident in reliance on an available
exemption to all applicable Canadian federal or provincial
securities laws and is not located in the U.S. at the time of
signing this Agreement,
OR
(b) a professional fiduciary of Subscriber (as described in
Section o(2) through (o)(4) of Rule 902 of Regulation S),
acting solely in his capacity as holder of such account, in
which case:
(i) the Subscriber is not a U.S. person (as defined in
Regulation S) and is not a Canadian Resident; and
(ii) either (sign either A, B or C, as applicable):
A. The account for which the Securities are being
purchased by Subscriber is a discretionary account or
similar account (other than an estate or trust) which
the undersigned manages and holds for the benefit or
account of Subscriber and the Subscriber is not
located in the U.S. or Canada at the time of signing
this Agreement;
_________________ (signature)
OR
B. The account for which the Securities are being
purchased by Subscriber is the account of an estate
of which the undersigned acts as executor or
administrator, provided that an executor or
administrator of the estate who is not a U.S. person
(as defined in Regulation S) has sole or shared
investment discretion with respect to the assets of
the estate, and the estate is governed by foreign law
and provided further that the Subscriber is not
located in the U.S. or Canada at the time of signing
this Agreement;
_________________ (signature)
OR
C. The account for which the securities are being
purchased by Subscriber is the account of a trust of
which the undersigned acts as trustee, provided that
the undersigned who is not a U.S. person (as defined
in Regulation S) or a Canadian resident has sole or
shared investment discretion with respect to the
trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. person
(as defined in Regulation S) or a Canadian Resident
and provided further that the Subscriber is not
located in the U.S. at the time of signing this
Agreement.
_________________ (signature)
_____________________ _________________________________________
Print Your Name Person or Entity for Whom You are Signing
18
<PAGE>
THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS DEBENTURE
(COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE 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 THE
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 THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
NO SECURITIES COMMISSION OR SIMILAR REGULATORY AUTHORITY IN CANADA HAS PASSED ON
THE MERITS OF THE SECURITIES OFFERED AND ANY REFERENCE TO THE CONTRARY IS AN
OFFENSE. THE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED IN
CANADA OR BY THE SECURITIES COMMISSION OF ANY PROVINCE OF CANADA. THE SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN
CANADA OR TO A CANADIAN RESIDENT INDIVIDUAL OR COMPANY ABSENT AN EFFECTIVE
REGISTRATION OR QUALIFICATION UNDER THE LAWS OF CANADA AND ANY APPLICABLE
PROVINCIAL SECURITIES LAWS OR COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
QUALIFICATION OR REGISTRATION. THE COMPANY MAY REFUSE TO AUTHORIZE ANY TRANSFER
OF THE SECURITIES TO A CANADIAN RESIDENT INDIVIDUAL OR COMPANY IN RELIANCE ON AN
EXEMPTION FROM QUALIFICATION OR REGISTRATION UNTIL THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
QUALIFICATION OR REGISTRATION IS NOT REQUIRED.
No. ____ $50,000 U.S.
THERMO TECH TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE FEBRUARY 9, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
THERMO TECH TECHNOLOGIES, INC., a corporation duly organized and existing
under the laws of the Province of British Columbia (the "Company"),
designated as its 8% Convertible Debentures due February 9, 1999, in an
aggregate principal amount not exceeding U.S. $10,000,000 (the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Nelson Partners, or
any subsequent registered holder hereof (the "Holder"), the principal sum
of Fifty Thousand Dollars ($50,000 U.S.), on or prior to February 9, 1999
(the "Maturity Date"), and
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
THERMO TECH TECHNOLOGIES, INC.
Dated: February __, 1996 By:______________________________
Rene J. Branconnier, President
1
<PAGE>
to pay interest on the principal sum outstanding in arrears on the earlier of
the Date of Conversion (as defined below) or the Maturity Date, at the rate of
8% per annum. Accrual of interest on this Debenture shall commence on the date
hereof, 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 paid 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 of, and interest on, this Debenture are payable, if
converted, in shares of Common Stock, or if redeemed, 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, 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 Common Shares so paid.
This Debenture is subject to the following additional provisions:
Section 1. Debenture Denominations. The Debentures are initially issuable in
denominations of at least Fifty Thousand Dollars ($50,000 U.S.) and integral
multiples of $10,000 U.S. in excess thereof. 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 of such new debenture(s).
Section 2. Withholding. 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 or Canadian
income tax laws, or other applicable laws, at the time of such payments. Holder
shall, prior to any transfer hereof, deliver to the Company a completed form W-8
for such transferee. The Holder shall pay any other taxes, charges, or levies in
connection with the issuance or transfer thereof.
Section 3. Sale, Transfer or Exchange. This Debenture has been issued subject to
investment representations of the original purchaser hereof and may be sold,
transferred or exchanged only in compliance with the Act, including Regulation
S, and, in the case of a transfer in Canada applicable Canadian provincial and
State laws. Any Holder of this Debenture, by acceptance hereof, agrees to the
representations, warranties and covenants herein. 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 4. Conversion. The record Holders of this Debenture shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Rate. The record Holder of
this Debenture shall be entitled, commencing on the date of the last closing of
a purchase and sale of the Debenture that occurs pursuant to the offering of the
Debentures by the Company (the "Last Closing Date") and at any time thereafter,
subject to the Company's right of redemption set forth in Section 5(a), at the
office of the Company or its designated U.S. Transfer Agent ("Transfer Agent")
for the Debenture(s), to convert the Debenture held by such Holder into that
number of fully-paid and non-assessable shares of Common Stock at the Fixed
Conversion Price during the first 45 days, and thereafter, as follows:
Each record Holder of the Debenture shall be entitled to convert,
subject to the Company's right of redemption set forth in Section 5(a), up to
one-third (1/3) of the Debenture(s) (measured by the initial aggregate principal
amount) held by such Holder beginning 45 days following the Last Closing Date
and at any time thereafter, an additional one-third (1/3) of the Debenture(s)
(measured by the initial aggregate principal amount) held by such Holder
beginning 75 days following the Last Closing Date and at any time thereafter,
and may convert all remaining Debentures beginning 105 days following the Last
Closing Date, at the office of the Company or its Transfer Agent for the
Debentures, into that number of fully-paid and non-assessable shares of Common
Stock of the Company calculated in accordance with the following formula (the
"Conversion Rate"):
Number of shares issued upon conversion = (Principal + Interest)/Conversion
Price, where
o Principal = The principal amount of the Debenture(s) to be converted,
o Interest = Principal x (N/365) x .08, where
o N = the number of days between (i) the date of issuance, as dated on
the first page of this Debenture, and (ii) the applicable Date of
Conversion (as defined in Section 4(b)(iv) below) for the Debenture(s)
for which conversion is being elected, and
2
<PAGE>
o Conversion Price = the lesser of (x) 100% of the average Closing Bid
Price, as that term is defined below, for the five (5) trading days
ending on February 2, 1996, which amounts to $ 2.2125 (the "Fixed
Conversion Price"), or (y) .85 times the average Closing Bid Price, as
that term is defined below, of the Company's Common Stock 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 over-the-counter market as reported by NASDAQ's
National Market System or Small Capitalization System ("NASDAQ"), 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 so traded.
(b) Mechanics of Conversion. In order to convert the
Debentures into full shares of Common Stock, the Holder shall (i) fax a copy of
the fully executed notice of conversion in the form attached hereto ("Notice of
Conversion") to the Company at the office of the Company or its Transfer Agent
for the Debentures, which notice shall specify the number 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) prior to Midnight,
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), and the original Notice of Conversion, no later than 12 Midnight
(New York City Time) the next business day, to a common courier for either
overnight or 2-day delivery to the office of the Company or its Transfer Agent
for the Debentures; provided, however, that the Company shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless either the original Debentures are delivered to the Company or
its Transfer Agent as provided above, or the Holder notifies the Company or its
Transfer Agent that such Debenture(s) have been lost, stolen or destroyed. In
the case of a dispute as to the calculation of the Conversion Rate, the
Company's calculation shall be deemed conclusive absent manifest error.
(i) Lost or Stolen Debentures. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of this
Debenture, and (in the 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.
(ii) Delivery of Common Stock upon Conversion. The
Company shall issue and use its best efforts to deliver within three (3)
business days after delivery to the Company of this Debenture and Notice of
Conversion or after provision for security or indemnification required by (i)
above, to such Holder of this Debenture at the address of the Holder on the
books of the Company, a certificate for the number of shares of Common Stock to
which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of this Debenture. If any
conversion of the Debenture would create a fractional share of Common Stock or a
right to acquire a fractional share of Common Stock, such fractional shares
shall, on an aggregate basis, be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of whole shares.
(iv) 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 before midnight, 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 for either
overnight or 2-day delivery, as provided above, and received by the Transfer
Agent or the Company within five business days from the Date of Conversion. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record Holder or
Holders of such shares of Common Stock on such date. If the original Debentures
to be converted are not received by the Transfer Agent or the Company within
five business days after the Date of Conversion or if the facsimile of the
Notice of Conversion is not received by the Company or its designated Transfer
Agent prior to the Conversion Notice Deadline, the Notice of Conversion, at the
Company's option, may be declared null and void.
(c) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, 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.
(d) Automatic Conversion. Each of the Debentures that remains
issued and outstanding on February 9, 1999 automatically shall be converted into
Common Stock on such date at the Conversion Rate then in effect
3
<PAGE>
(calculated in accordance with the formula in Section 4(a) above) and February
9, 1999 shall be deemed the Date of Conversion with respect to such conversion.
(e) Adjustment to Conversion Price.
(i) Adjustment 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.
(ii) Adjustment to Variable Conversion Price. If, at
any time when Debentures are issued and outstanding, the number of outstanding
shares of Common Stock is increased or decreased 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 Adjustable Conversion Price shall be calculated giving
appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event for all five trading days immediately
preceding and including the Date of Conversion.
(iii) Adjustment Due to Merger, Consolidation, Etc.
If at any time when the Debentures are issued and outstanding, there shall be
any merger, amalgamation, 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, 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 stock and/or securities
which the Holder would have been entitled to receive in such transaction had the
Debentures been converted immediately prior to such transaction, and in any 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 4(e)(iii) unless
(a) it first gives 30 days prior notice of such merger, amalgamation,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event (during which time the Holder shall be entitled to convert its
Debentures into Common Stock) and (b) the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the obligation of this
Section 4(e)(iii).
Section 5. Redemption by Company.
(a) Company's Right to Redeem upon Receipt of Notice of
Conversion. If the Conversion Price of the Company's Common Stock is less than
the Fixed Conversion Price (as defined in Section 4(a)), at the time of receipt
of a Notice of Conversion pursuant to Section 4, the Company shall have the
right, in its sole discretion, to redeem in whole or in part any Debentures
submitted for conversion, immediately prior to and in lieu of conversion
("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to
redeem some, but not all, of the Debentures submitted for conversion, the
Company shall redeem from among the Debentures submitted by the various
shareholders for conversion on the applicable date, a pro-rata amount from each
such Holder so submitting Debentures for conversion.
(i) Redemption Price Upon Receipt of a Notice of
Conversion. The redemption price per Debenture for a redemption under this
Section 5(a) shall be the applicable Conversion Rate calculated in accordance
with the following formula:
(Principal + Interest) x Closing Bid Price on the Date of Conversion
-------------------------------------------
Conversion Price
For the purposes of the above formula, "Principal", "Interest",
"Closing Bid Price" and "Conversion Price" shall have the meanings set forth in
Section 4(a), and "Date of Conversion" shall have the meaning set forth in
Section 4(b)(iv).
(ii) Mechanics of Redemption Upon Receipt of Notice
of Conversion. The Company shall effect each such redemption by giving notice of
its election to redeem, by facsimile, within 1 business day following receipt of
a Notice of Conversion from a Holder, and Company shall provide a copy of such
redemption notice by overnight or 2-day courier, to (A) the Holder of the
Debentures submitted for conversion at the address and facsimile number of such
Holder appearing in the Company's register for the Debentures and (B) the
Company's Transfer Agent. Such redemption notice shall indicate whether the
Company will redeem all or part of the Debentures submitted for conversion and
the applicable redemption price.
(b) Company's Right to Redeem at its Election. At any time,
commencing 90 days after the Last Closing, the Company shall have the right, in
its sole discretion, to redeem ("Redemption at Company's Election"), from
4
<PAGE>
time to time, any or all of the Debentures; provided (i) Company shall first
provide 30 days advance written notice (which cannot be given sooner than 90
days after the Last Closing), and (ii) that the Company shall only be entitled
to redeem Debentures in increments having an aggregate Stated Value (as defined
below) of at least One and One-Half Million Dollars ($1,500,000). If the Company
elects to redeem some, but not all, of the Debentures, the Company shall redeem
a pro-rata amount from each Holder of the Debentures.
(i) Redemption Price At Company's Election. The
"Redemption Price At Company's Election" shall be calculated as a percentage of
Stated Value, as that term is defined below, of the Debentures redeemed pursuant
to this Section 5(b), which percentage shall vary depending on the date of
delivery of the Notice of Redemption at Company's Election, and shall be
determined as follows:
<TABLE>
<CAPTION>
<S> <C>
Date of Delivery of Notice of Redemption at Company's Election % of Stated Value
- -------------------------------------------------------------- -----------------
91 days to 6 months following Last Closing Date 130%
6 months and 1 day to 12 months following Last Closing Date 125%
12 months and 1 day to 18 months following Last Closing Date 120%
18 months and 1 day to 24 months following Last Closing Date 115%
24 months and 1 day to 30 months following Last Closing Date 110%
30 months and 1 day to 36 months following Last Closing Date 105%
</TABLE>
For purposes hereof, "Stated Value" shall mean the original principal
amount of the Debentures being redeemed, plus the unpaid interest being
redeemed, pursuant to this Section 5(b).
(ii) Mechanics of Redemption at Company's Election.
The Company shall effect each such redemption by giving at least 30 days prior
written notice ("Notice of Redemption At Company's Election") to (A) the Holders
of the Debentures selected for redemption, at the address and facsimile number
of such Holder appearing in the Company's Debenture Register and (B) the
Transfer Agent, which Notice of Redemption At Company's Election shall be deemed
to have been delivered three (3) business days after the Company's mailing (by
overnight or 2-day courier, with a copy by facsimile) of such Notice of
Redemption At Company's Election. Such Notice of Redemption At Company's
Election shall indicate the number of Debentures that have been selected for
redemption, the date which such redemption is to become effective (the "Date of
Redemption At Company's Election") and the applicable Redemption Price At
Company's Election, as defined in (b)(i) above. Notwithstanding the above,
Holder may convert into Common Stock, prior to the close of business on the Date
of Redemption at Company's Election, any Debenture which it is otherwise
entitled to convert.
(c) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure under Sections 5(a) and 5(b) unless it has:
(1) the full amount of the redemption price in cash, available
in a demand or other immediately available account in a bank or similar
financial institution; or
(2) immediately available credit facilities, in the full
amount of the redemption price with a bank or similar financial institution, or
(3) a combination of the items set forth in (1) and (2) above,
aggregating the full amount of the redemption price.
(d) Payment of Redemption Price. Each holder submitting
Debentures being redeemed under this Section 5 shall send their Debentures so
redeemed to the Company or its Transfer Agent, and the Company shall pay the
applicable redemption price to that Holder within five (5) business days of the
date of such receipt of the certificates. The Company shall not be obligated to
deliver the redemption price unless the Debentures so redeemed are delivered to
the Company or its Transfer Agent, or, in the event one or more certificates
have been lost, stolen, mutilated or destroyed, the Holder has complied with
Section 4(b)(i).
(e) Blackout Period. Notwithstanding the foregoing, the
Company may not either send out a redemption notice or effect a redemption
pursuant to subsection (b) above during a Blackout Period (defined as a period
during which the Company's officers or directors would not be entitled to buy or
sell stock because of their holding of material non-public information), unless
the Company shall first disclose the non-public information that resulted in the
Blackout Period, provided, however, that no redemption shall be effected until
at least 10 days after the Company shall have given the Holder written notice
that the Blackout Period has been lifted.
Section 6. Holder's Right to Advance Notice of Company's Election to Redeem.
(a) Holder's Right to Elect to Receive Notice of Cash
Redemption by Company. Holder shall have the right to require Company to provide
advance notice stating whether Company will elect to redeem Holder's Debentures
in cash, pursuant to Company's redemption rights discussed in Section 5(a).
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(b) Mechanics of Holder's Election Notice. Holder shall send
notice ("Election Notice") to Company and such other person(s) as the Company
may designate, by facsimile, stating Holder's intention to require Company to
disclose that if Holder were to exercise his, her or its right of conversion
(pursuant to section 4) whether Company would elect to redeem Holder's
Debentures for cash in lieu of issuing Common Stock. Company is required to
disclose to Holder what action Company would take over the subsequent five (5)
day period, including the date Company receives such Election Notice.
(c) Company's Response. Company must respond by the close of
business on the next business day following receipt of Holder's Election Notice
(1) via facsimile, and (2) via overnight or two (2) day courier. If Company does
not respond to Holder within one business day via facsimile and overnight or two
(2) day courier, Company shall be required to issue to Holder Common Stock upon
Holder's conversion within the subsequent five (5) day period.
Section 7. No Voting Rights. This Debenture shall not entitle the Holder hereof
to any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company.
Section 8. Protective Provision. So long as Debentures are outstanding, the
Company shall not, without first obtaining the approval (by vote or written
consent, as provided by British Columbia Law) of the Holders of at least 75% of
the then outstanding Debentures in principle amount and 75% of the
then-outstanding Holders, alter or change the rights, preferences or privileges
of the Debentures or of any securities, senior in right of payment, so as to
affect adversely the Debentures. No provision herein that adversely affects the
rights of the Holders of Debentures may be amended without the consent of all
Holders of the then outstanding Debentures.
Any Holders of the Debentures that did not agree to such alteration or
change (the "Dissenting Holders") shall have the right to convert pursuant to
the terms of this Debenture, without such alteration affecting such Dissenting
Holders (notwithstanding the 45 day, 75 day, and 105 day holding requirements
set forth in Section 4(a) hereof), or continue to hold their Debentures
provided, however, that the Dissenting Holders may not convert anytime on or
before the fortieth (40th) day following the Last Closing Date.
Section 9. Status of Redeemed or Converted Debentures. After this Debenture
shall have been surrendered for conversion as herein provided or notice of
conversion shall have been given by the Holder pursuant to Section 4(a) herein
(or redeemed pursuant to Section 5(a) or 5(b) herein), this Debenture shall no
longer be deemed to be outstanding and all rights with respect to this
Debenture, including, without limitation, the right to receive interest hereon
and the principal hereof, shall forthwith terminate as of the Date of Conversion
or redemption, except only the right of the Holder hereof to receive shares of
Common Stock in exchange for such Debenture(s).
Section 10. Governing Law. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York U.S.A. 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 11. Business Day Definition. For purposes hereof, the term "business
day" shall mean any day on which banks are generally open for business in the
State of New York, USA and excluding any Saturday and Sunday.
Section 12. Notices. Any notice or other communication required or permitted to
be given hereunder shall be given as provided herein or delivered against
receipt if to (i) the Company at 105-20530 Langley Bypass, Langley British
Columbia, Canada V3A-6K8, Telephone No. (604) 534-5085, Telecopy No. (604)
534-9346 and (ii) the Holder of this Debenture, to such Holder at its last
address as shown on the Debenture Register (or to such other address as 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 12). Any notice or other communication
neededto 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 13. Waiver of any Breach to be in Writing. Any waiver by the 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 other breach of such provision
or of 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 other term of the Debenture. Any waiver must be in writing.
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Section 14. Unenforceable Provisions. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
[See Exhibit "A", Notice of Conversion]
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<PAGE>
NOTICE OF CONVERSION
-- Thermo Tech Technologies, Inc --
(To be Executed by the Registered Holder
in order to Convert the Debentures)
The undersigned hereby irrevocably elects to convert Debentures into shares of
common stock ("Common Stock") of Thermo Tech Technologies, Inc. (the "Company")
according to the conditions of the Debenture, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates. No fee will be charged to the Holder for
any conversion, except for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Debentures shall be made in compliance with Regulation S,
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Act") or pursuant to an exemption from registration under the
Act.
Date of Conversion:_________________
Applicable Conversion Price:___________
Signature:__________________________
Name:_____________________________
Address: ___________________________
* No shares of Common Stock will be issued until the original Debenture(s) to be
converted and the Notice of Conversion are received by the Transfer Agent. The
Company shall use its best efforts to issue and deliver shares of Common Stock
to an overnight courier not later than three business days following receipt of
the original Debentures to be converted, and shall make payments pursuant to the
Subscription Agreement for the number of business days such issuance and
delivery is late.
EXHIBIT A
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<PAGE>
THERMO TECH TECHNOLOGIES, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
February __, 1996, by and among THERMO TECH TECHNOLOGIES, INC., a British
Columbia, Canada corporation ("Company"), Swartz Investments, LLC., a Georgia
limited liability corporation ("Swartz Investments") and the subscribers
("Subscribers") to the Company's offering ("Offering") of up to $10,000,000 of
Debentures pursuant to the Regulation S Subscription Agreement between the
Company and the Subscribers of even date herewith ("Subscription Agreement").
1. Definitions. For purposes of this Agreement:
(a) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933 (the
"Act"), and the declaration or ordering of effectiveness of such registration
statement or document;
(b) The term "Registrable Securities" means the Common Stock
issuable or issued upon (i) conversion of the Debentures issued to Subscribers
in the Offering and (ii) exercise of the Warrant; provided, however, that (x)
after the expiration of the Restricted Period, shares of Common Stock obtainable
on conversion of the Debentures (in whole or in part), and (y) after two years
from the date of this Agreement, shares of Common Stock obtainable on exercise
of the Warrant, shall not constitute Registrable Securities, if those shares of
Common Stock may be sold or transferred in the U.S. free of any restrictive
legend, including without limitation under Rule 144.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock which
have been issued or are issuable upon conversion of the Debentures or exercise
of the Warrant at the time of such determination;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof; and
(e) The term "Warrant" means the warrant granted to Swartz
Investments in connection with the Offering.
EXHIBIT R
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2. Demand Registration.
(a) At any time beginning after the end of the Restricted
Period (as defined in the Subscription Agreement), the Holders of Registrable
Securities obtained or obtainable upon conversion of at least 25% of the
Registrable Securities the outstanding may notify the Company in writing that
they demand that the Company file a registration statement under the Act
covering the registration of all of the Registrable Securities then outstanding
(other than Registrable Securities held by any Holder who does not want to be
included therein). Upon receipt of such notice, the Company shall, within ten
(10) days, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 2(b), effect as soon as practicable, and in any
event within 60 days of the receipt of such request, the registration under the
Act of all Registrable Securities which the Holders request, by notice given to
the Company within (10) days of receipt of the Company's notice, to be
registered as expeditiously as reasonably possible after the mailing of such
notice by the Company (a "Demand Registration").
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 2 and the
Company shall include such information in the written notice referred to in
subsection 2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
6(f)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, and reasonably acceptable to the Company.
(c) The Company is obligated to effect only one demand
registration pursuant to Section 2 of this Agreement. The Company agrees to
include all Registrable Securities held by all Holders in such Registration
Statement without cutback or reduction. In the event the Company breaches its
obligation of the preceding sentences, any Holders of the Registrable Securities
which were not included in such Registration Statement shall be entitled to a
second Demand Registration for such excluded securities on the same terms as the
Demand Registration described in this Agreement.
(d) The Company is not obligated to effect a demand
registration under this Section 2 if in the written opinion of counsel to the
Company reasonably acceptable to the person or persons from whom written request
for registration has been received (and satisfactory to the Company's transfer
agent to permit the transfer) that registration under the Act is not required
for the immediate transfer of the Registrable Securities pursuant to Rule 144 or
other applicable provision.
3. Piggyback Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its Common Stock under the Act in connection with the public offering of
such securities solely for cash(other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a registration on
Form S-4 promulgated under the Act or any successor or similar form registering
stock issuable on upon a reclassification, upon a business combination involving
an exchange of securities or upon an exchange offer for securities of the issuer
or another entity), the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given by fax within ten (10) days after mailing of such notice by the Company,
which request shall state the
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<PAGE>
intended method of disposition of such shares by such Holder, the Company shall
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered (a "Piggyback Registration").
4. Limitation on Obligations to Register.
(a) In the case of a Piggyback Registration on an underwritten
public offering by the Company, if the managing underwriter determines and
advises in writing that the inclusion in the registration statement of all
Registrable Shares proposed to be included would interfere with the successful
marketing of the securities proposed to be registered by the Company, then the
number of such Registrable Shares to be included in the registration statement
shall be allocated among all Holders who had requested Piggyback Registration,
in the proportion that the number of Registrable Shares which each such Holder,
including Swartz Investments, seeks to register bears to the total number of
Registrable Shares sought to be included by all Holders and other holders of
securities of the Company having comparable registration rights and outstanding
on the date hereof, including Swartz Investments.
(b) Notwithstanding anything to the contrary herein, the
Company shall have the right (i) to defer the initial filing or request for
acceleration of effectiveness of any Demand Registration or Piggyback
Registration or (ii) after effectiveness, to suspend effectiveness of any such
registration statement, if, in the good faith judgment of the board of directors
of the Company and upon the advice of counsel to the Company, such delay in
filing or requesting acceleration of effectiveness or such suspension of
effectiveness is necessary in light of the existence of material non-public
information (financial or otherwise) concerning the Company disclosure of which
at the time is not, in the opinion of the board of directors of the Company upon
the advice of counsel, (A) otherwise required and (B) in the best interests of
the Company; provided however that the Company will use its best efforts to
terminate such delay or suspension as soon as practicable and, in any event,
will not delay effectiveness of such Demand Registration for more than three
months from the date of the demand or suspend effectiveness from more than 30
days, unless it is then engaged in an acquisition that would make such
registration impracticable, in which case it will use its best efforts to
eliminate such impracticability as soon as possible.
5. Obligations to Increase Available Shares. In the event that
the number of shares available under a registration statement filed pursuant to
Section 2 is insufficient to cover all of the Registrable Securities then
outstanding, the Company shall amend that registration statement, or file a new
registration statement, or both, so as to cover all shares of Registrable
Securities then outstanding. The Company shall effect such amendment or new
registration within ninety days of the date the registration statement filed
under Section 2 is insufficient to cover all the shares of Registrable
Securities then outstanding. Any Registration Statement filed hereunder shall,
to the extent permissible by the Rules of the Securities and Exchange
Commission, state that in accordance with Rule 416 under the Act, such
registration Statement also covers such indeterminate numbers of additional
shares of Common Stock as any become issuable upon conversion of the Debentures
to prevent dilution resulting from stock changes or be reason of changes in the
conversion price in accordance with the terms thereof.
6. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective.
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(b Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) With respect to any Demand Registration, use best efforts
to keep such registration statement effective for a period of at least 180 days
and in any event until 90 days after all of the Debentures have been converted
or redeemed, or until the Holders of Registrable Securities covered by such
registration statement have completed the distribution described in the
registration statement.
(d) Furnish to the Holders (i) such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them
(ii) copies of all correspondence to or with the SEC. Each holder shall be
furnished with draft copies of all filings prior to filing and be given
sufficient time to provide comments thereof.
(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders of the Registrable Securities covered by such registration statement,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(g) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(h) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(i) Maintain the listing of the Common Stock on NASDAQ Small Cap,
NASDAQ National Market System or a national securities exchange for as long as
any of the Registrable Securities are still outstanding.
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<PAGE>
7. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities or to determine that registration is not
required pursuant to Rule 144 or other applicable provision of the Act.
8. Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and
including the reasonable fees and disbursements incurred of only one counsel for
the selling Holders, shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Holders who had
requested such registration shall bear such expenses); provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 2.
9. Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto (and including the reasonable fees and
disbursements incurred of only one counsel for the selling Holders selected by
them), but excluding underwriting discounts and commissions relating to
Registrable Securities.
10. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each "Holder Indemnified Persons" (defined for purposes of
this Section 9 as each Holder, the officers and directors of each Holder acting
in their capacity as such, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act")), against any losses, claims, damages, expenses, or liabilities
(joint or several)("Losses") to which they may become subject under the Act, the
1934 Act or other federal or state law, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement,
or alleged untrue statement, of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission, or alleged
omission, to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any Violation
by the Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will reimburse each such Indemnified
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<PAGE>
Person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Loss or action; provided, however, that
the indemnity agreement contained in this subsection 9(a) shall not apply to
amounts paid in settlement of any such Loss or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such Loss or action to the extent that it arises out of or is based upon a
Violation which occurs (i) in reliance upon and in onformity with written
information furnished expressly for use in connection with such registration by
any such Holder Indemnified Person, or (ii) based upon a prospectus which
included a Violation, after the Company has advised the Holder not to sell
pursuant to such prospectus, and has made available an amended or supplemental
prospectus that corrects such Violation.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the "Company Indemnified Persons" (defined for the
purpose of this Section 9 as the Company, each of its directors in their
capacity as such, each of its officers who have signed the registration
statement in their capacity as such, each person, if any, who controls the
Company within the meaning of the Act in their capacity as such, any underwriter
and any other Holder Indemnified Person selling securities in such registration
statement), against any Loss (joint or several) to which the Company or any such
director, officer, controlling person, or underwriter or controlling person, or
other such Holder Indemnified Person may become subject, under the Act, the 1934
Act or other federal or state law, insofar as such Loss (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company and any such
Company Indemnified Person in connection with investigating or defending any
such Loss or action; provided, however, that the indemnity agreement contained
in this subsection 9(b) shall not apply to amounts paid in settlement of any
such Loss or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that, in no
event shall any indemnity under this subsection 9(b) exceed the gross proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 10, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 10 to the extent it is prejudicial.
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(d) The obligations of the Company and Holders under this
Section 10 shall survive the redemption and conversion, if any, of the
Debentures, the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
11. Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration,
the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without
registration.
12. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder, each future Holder, and the Company; provided that no amendment or
waiver that materially and adversely affects the rights of any Holder shall be
effective against such Holder unless such Holder agrees thereto.
13. Notices. All notices required or permitted under this
Agreement shall be made in writing signed by the party making the same, shall
specify the section under this Agreement pursuant to which it is given, and
shall be addressed if to (i) the Company at: President, Rene Branconnier
Telephone No. (604) 534-5085, Telecopy No. (604) 534-9346 and (ii) the Holders
at their respective last address as the party shall have furnished in writing as
a new address to be entered on such register. Any notice, except as otherwise
provided in this Agreement, shall be made by fax and shall be deemed given at
the time of transmission of the fax.
14. Termination. This Agreement shall terminate on the later
to occur of (a) the data that is two years from the date of this Agreement and
(b) the date any distribution of Registrable Securities described in a
registration statement filed pursuant to this Agreement is completed; but
without prejudice to (i) the parties' rights and obligations arising from
breaches of this Agreement occurring prior to such termination or (ii) other
indemnification obligations under this Agreement.
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15. Assignment. No assignment, transfer or delegation, whether
by operation of law or otherwise, of any rights or obligations under this
Agreement by the Company or any Holder, respectively, shall be made without the
prior written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, together with or prior to such
transferee's request to have such Registrable Shares included in a Demand
Registration or Piggyback Registration, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement); and provided
further that the Company may transfer its rights and obligations under this
Agreement to a purchaser of all or a substantial portion of its business if the
obligations of the Company under this Agreement are assumed in connection with
such transfer, either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable Shares are converted
into securities of the successor in interest) or by specific assumption executed
by the transferee.
[Intentionally Left Blank]
8
<PAGE>
16. Governing Law. This Registration Rights Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made in and wholly to be performed in that
jurisdiction, except for matters arising under the Act or the Securities
Exchange Act of 1934, which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined only in either a federal or
state court sitting in the State of New York, New York County.
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date first above written.
THERMO TECH TECHNOLOGIES, INC.
By: /s/
---------------------------------
Rene Branconnier, President
Address: 105-20530 Langley Bypass
Langley, British Columbia
Canada V3A-6K8
INVESTOR(S)
CAPITAL VENTURES INTERNATIONAL
____________________________________
Investor's Name
By: /s/
---------------------------------
(Signature)
Address: ____________________________________
____________________________________
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EXHIBIT B
LIMITED POWER OF ATTORNEY
THIS LIMITED POWER OF ATTORNEY given on the 11th day of October, 1993 by CAPITAL
VENTURES INTERNATIONAL, (hereinafter called "the Company") whose Registered
Office is situated at Third Floor, One Regis Place, P.O. Box 1787, Grand Cayman,
Cayman Islands, B.W.I.
WHEREAS, by agreement dated August 28, 1989 by and between the Company and Arbit
Inc., the Company expressly authorized Arbit Inc. to enter into transactions in
certain designated areas as defined in the Agreement attached hereto marked
"Appendix 1".
NOW THIS DEED WITNESSETH that Ian A.N. Wight (Director) and Woodbourne
Associates (Cayman) Limited (Secretary) of the Company, hereby appoint on behalf
of the Company the firm of ARBIT INC. which through its officers, directors and
employees is hereby formally granted limited power of attorney for the purpose
of entering into transactions on behalf of and for the account of the Company
and to take any actions on behalf of the Company as may be necessary to
consummate such transactions, including but not limited to instructing the
transfer of funds where necessary and executing required documentation.
IN WITNESS WHEREOF, the Company has caused its common seal to be hereunto
affixed the day and year above written.
THE COMMON SEAL OF /s/
CAPITAL VENTURES INTERNATIONAL --------------------------
was hereunto affixed in the presence of: Ian A.N. Wight
(Director)
/s/
--------------------------
/s/
--------------------------
Woodbourne Associates
(Cayman) Limited
(Secretary)
