UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: July 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _____________________ to_____________________
Commission File Number: 0-25002
TELEHUBLINK CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 59-3200879
- ------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
24 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (781) 229-1102
N/A
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(Former Name, Former Address, and Former Fiscal Year, if Changed Since
Last Report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At September 13, 1999, there were
18,413,442 shares outstanding of common stock, $.01 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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TELEHUBLINK CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - January 30, 1999 and July 31, 1999 .......... 3
Condensed Statements of Operations for the Thirteen Weeks Ended
August 1, 1998 and July 31, 1999 and the Twenty Six Weeks Ended
August 1, 1998 and July 31, 1999 ....................................... 4
Condensed Statements of Cash Flows for the Thirteen Weeks Ended
August 1, 1998 and July 31, 1999 and the Twenty Six Weeks Ended
August 1, 1998 and July 31, 1999 ....................................... 5
Notes to Condensed Financial Statements ................................ 6
Item 2. Management's Discussion and Analysis or Plan of Operation ...... 8
PART II. OTHER INFORMATION
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Item 2. Change in Securities and Use of Proceed ........................ 14
Item 6. Exhibits and Reports on Form 8-K .............................. 14
SIGNATURES ............................................................. 16
2
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION
CONDENSED BALANCE SHEETS
JANUARY 30, JULY 31,
ASSETS 1999 1999
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 445 $ 64,463
Accounts Receivable, net -0- 384,597
Other Receivables -0- -0-
Prepaid expenses and other current assets 5,891 7,105
----------- -----------
Total current assets 6,336 456,165
PROPERTY AND EQUIPMENT, net 1,000 229,719
INTANGIBLE ASSETS, net -0- 552,523
OTHER ASSETS -0- 11,721
----------- -----------
Total assets $ 7,336 $ 1,250,128
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,643 $ 119,311
Accrued expenses 67,000 143,459
Notes Payable, 10% subordinated convertible
debentures maturing July 13, 2000 -0- 600,000
Other current payables -0- 93,214
Current maturities of capital lease obligations 1,981 39,939
----------- -----------
Total current liabilities 73,624 995,923
CAPITAL LEASE OBLIGATIONS -0- 164,499
STOCKHOLDERS' EQUITY:
Common stock 21,181 178,734
Additional paid-in capital 4,538,782 174,638
Accumulated deficit (4,626,251) (263,666)
----------- -----------
Total stockholders' equity (66,288) 89,706
----------- -----------
Total liabilities and stockholders' equity $ 7,336 $ 1,250,128
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
13 WEEKS ENDED 26 WEEKS ENDED
AUGUST 1, 1998 JULY 31, 1999 AUGUST 1, 1998 JULY 31, 1999
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Sales $ -0- $ 490,245 $ -0- $ 811,077
Cost of Sales -0- 266,647 -0- 468,796
------------ ------------ ------------ ------------
Gross Profit -0- 223,598 -0- 342,281
------------ ------------ ------------ ------------
Selling, General and
Administrative Expenses $ 21,446 $ 208,477 $ 38,830 $ 374,432
------------ ------------ ------------ ------------
(Loss)/Gain from operations (21,446) 15,121 (38,830) (20,481)
------------ ------------ ------------ ------------
Interest and Other Income 730 83 1,844 14,469
Interest Expense (101) (1,400) (211) (2,799)
------------ ------------ ------------ ------------
$ 629 $ (1,317) $ 1,633 $ 11,670
------------ ------------ ------------ ------------
NET (LOSS)/GAIN $ (20,817) $ 13,804 $ (37,197) $ (20,481)
============ ============ ============ ============
Net (loss)/gain per weighted average
common and common equivalent share -
basic $ (.01) $ (--) $ (.02) $ (--)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding - basic 2,118,125 17,873,442 2,118,125 17,873,442
Net (loss)/gain per weighted average
common and common equivalent share -
diluted $ (.01) $ -- $ (.02) $ (--)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding - diluted 2,118,125 19,455,442 2,118,125 17,873,442
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
13 WEEKS ENDED 26 WEEKS ENDED
AUGUST 1, 1998 JULY 31, 1999 AUGUST 1, 1998 JULY 31, 1999
-------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (20,817) $ 13,804 $ (37,197) $ (20,481)
Adjustments to reconcile net loss to net
cash and cash equivalents used in operating activities:
Depreciation and amortization 375 9,484 750 27,022
(Gain) on disposal of assets -0- (79) -0- (14,406)
Changes in operating assets and liabilities-
(Increase)/Decrease in Accounts Receivable -0- (188,225) -0- (267,176)
Decrease in Other Receivables -0- 29,319 -0- -0-
(Increase)/(Decrease) in prepaid expenses
and other current assets (528) 670 (1,055) (1,214)
(Increase) in other assets -0- (663) -0- (663)
Increase in accounts payable and accrued
expenses (9,700) 36,923 (49,200) 121,704
Increase in other payables -0- 35,294 -0- 90,930
--------- --------- --------- ---------
Net cash and cash equivalents (used in)
operating activities (30,670) (63,473) (86,702) (64,284)
INVESTING ACTIVITIES:
Purchase of Equipment -0- (3,222) -0- (65,078)
Purchase of Intangible Assets -0- (468,018) -0- (557,634)
Proceeds from Sale of Equipment -0- 2,322 -0- 22,655
--------- --------- --------- ---------
Net cash provided by investing activities -0- (468,918) -0- (600,057)
FINANCING ACTIVITIES:
Proceeds from stock issuance, net of expenses -0- -0- -0- 138,361
Proceeds from notes payable -0- 600,000 -0- 600,000
Payments made on capital lease obligations (375) (5,908) (741) (10,002)
--------- --------- --------- ---------
Net cash provided by/(used in) financing
activities (375) 594,092 (741) 728,359
--------- --------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (31,045) 61,701 (87,443) 64,018
CASH AND CASH EQUIVALENTS, beginning of period 74,315 2,762 130,713 445
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 43,270 $ 64,463 $ 43,270 $ 64,463
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 101 $ 1,400 $ 211 $ 2,799
</TABLE>
The accompanying notes are an integral part of these statements.
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TELEHUBLINK CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JULY 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements of TeleHubLink
Corporation (formerly known as What A World!, Inc.) (the "Company") have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These financial statements should be read
in conjunction with the financial statements and notes thereto for the year
ended January 30, 1999, which are included in the Company's Annual Report on
Form 10-KSB filed on May 14, 1999.
ACQUISITION AND RECAPITALIZATION
On February 4, 1999, the Company (formerly known as What A World!, Inc.)
acquired all of the outstanding common stock of Tele Hub Link Corporation
("TeleHub"), a privately held company organized under the laws of the Province
of Ontario, Canada. For accounting purposes, the acquisition has been treated as
an acquisition of the Company by TeleHub and as a recapitalization of TeleHub.
As a result of the recapitalization, the financial results of the Company will
be primarily those of TeleHub. Pursuant to the February 4, 1999 transaction, the
Company acquired from the TeleHub shareholders all of the outstanding capital
stock of TeleHub and the Company issued to the TeleHub shareholders shares of
the Company's common stock at a rate of 3.9252318 shares for each share of
common stock of TeleHub. As a result, TeleHub became a wholly-owned subsidiary
of the Company. The Company's Certificate of Incorporation was also amended on
February 4, 1999 to increase to 50,000,000 the number of shares of the Company's
common stock authorized for issuance by the Company. In addition, the name of
the Company was changed from What A World!, Inc. to TeleHubLink Corporation.
INTANGIBLE ASSETS
Intangible assets consist primarily of the acquisition and recapitalization
costs related to the Company's business combinations (see above and note 5).
All intangible assets will be amortized over a three to fifteen-year period.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are converted into US Dollars using the rate of
exchange in effect at the balance sheet date for monetary items in assets and
liabilities. For non-monetary items in assets and liabilities, the initial
exchange rate is used. Income statement items are converted at the average rate
in effect during the transaction month. Gains and losses on currency exchange
are reported on the statement of operations.
FISCAL YEAR
The Company's Fiscal Year ends on the Saturday closest to January 31.
NET LOSS PER WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARE
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Net loss per weighted average common and common equivalent share is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding and dilutive common equivalent shares from stock options and
warrants using the treasury stock method.
2. STOCK OFFERING:
In February 1999, the Company consummated a financing arrangement pursuant to
which it issued 2,593,979 shares of Common Stock for an aggregate of $165,214.
Proceeds of the financing were used to fund working capital requirements of the
Company and for general corporate purposes.
In July 1999, the Company sold a total of 24 units, by means of a private
placement, for gross proceeds of $600,000. Each unit consisted of a 10%
subordinated convertible debenture due July 2000 in the principal amount of
$25,000. The Company will be required to issue up to an aggregate of 1,200,000
shares of common stock in the event all of the debenture holders elect to
convert their debentures on the maturity date thereof. In addition, pursuant to
the terms of such offering, the Company will also be required to issue, on the
maturity date of the debentures, warrants to purchase an aggregate of from
150,000 shares of common stock (if no debenture holders elect to convert their
debentures) to 1,200,000 shares of common stock (if all debenture holders elect
to convert their debentures). A portion of the proceeds of such financing was
used to fund certain cash costs associated with the acquisition of Web Trafic
Inc. (see note 5 below) and the payment of certain past due obligations, and the
balance is expected to be used to fund additional future acquisitions,if any,
and to fund working capital and general corporate purposes.
3. STOCK OPTION PLANS:
In November 1994, the Board of Directors adopted the 1994 Stock Option Plan (the
"Stock Option Plan"). Following approval by the Board of Directors and
Stockholders of the Company, effective May 21, 1996, the Stock Option Plan was
amended to add 300,000 shares to the previously authorized 260,000 shares that
were subject to options under the Stock Option Plan. The amendment resulted in a
total of 560,000 shares of common stock available for grant under the Stock
Option Plan. No options were granted under the Stock Option Plan during the
three-month period ended July 31, 1999. As of July 31, 1999, 520,000 options
were outstanding under the Stock Option Plan.
In November 1994, the Board of Directors also approved the 1994 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), pursuant to which 40,000
shares are reserved for issuance in connection with options granted or available
for grant to the Company's non-employee directors. No options were granted under
the Directors' Plan during the three-month period ended July 31, 1999. As of
July 31, 1999, 20,000 options were outstanding under the Directors' Plan.
4. ADDITIONAL OPTIONS:
In February 1999, the Company granted to Mr. Patrick Thomas, Chief Operating
Officer and a director of the Company, time-based options to acquire an
aggregate of 150,000 shares of Common Stock and performance-based options to
acquire an aggregate of 50,000 shares of Common Stock, and granted to Mr. John
DeLuca, a Vice President and director of the Company, time-based options to
acquire an aggregate of 250,000 shares of Common Stock and performance-based
options to acquire an aggregate of 50,000 shares of Common Stock. Effective May
1, 1999, Mr. DeLuca resigned as an officer and director of the Company and is
currently serving as a consultant to the Company. In connection with Mr.
DeLuca's resignation, all of his time-based and performance-based options were
cancelled; however, the Company currently anticipates that, subject to
negotiation of a definitive agreement, the Company will issue additional options
to Mr. DeLuca in consideration for his services as a consultant. All of the
options granted to Mr. Thomas are exercisable at a price of $.06 per share. The
time-based options vest in equal installments on each of the first three
anniversaries of the date of grant and the performance-based options are subject
to vesting based on the Company's having met certain performance criteria.
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On February 4, 1999, the Company granted to Bruce Young, the Company's President
and Chief Executive Officer, options to acquire an aggregate of 500,000 shares
at the fair market value of the common stock at the date of the grant. The
exercise price is $.8125 per share. Fifty percent of such options vested
immediately upon grant, and the balance of such options will vest on the first
anniversary of the date of grant; provided however, that in the event the
closing bid quotation of the Company's common stock equals or exceeds $5.00 for
a period of 30 consecutive trading days, the remaining unvested options will
become immediately vested and exercisable.
In February 1999, the Company also granted to a third-party consultant in
consideration for goods and services provided by him to the Company, options to
purchase an aggregate of 90,000 shares at the fair market value of the common
stock at the date of the grant. The exercise price is $.8125 per share.
In connection with the Company's acquisition of Web Trafic Inc. on August 2,
1999, the Company retained a management firm operated by the former President of
Web Trafic Inc.to assist the Company in establishing its Internet division.
Pursuant to the Company's agreement with such management firm, the Company
granted to the firm options to acquire an aggregate of 250,000 shares at an
exercise price of $.50 per share. Of such options, 50,000 vested immediately
upon execution of the agreement and the remaining 200,000 options will vest and
become exercisable in increments of 50,000 options on each six-month anniversary
of the agreement, subject to completion of certain milestones.
5. SUBSEQUENT EVENTS:
On May 13, 1999, the Company entered into a letter of intent to acquire all of
the outstanding shares of wirelessEncryption.com, a privately-held development
stage company which is currently in the process of developing advanced
ultra-secure signal processing technology for wireless and Internet
communications as well as other data transmissions. Consummation of the
transaction is subject to completion of due diligence and preparation of a
definitive purchase agreement and related documentation. There can be no
assurance that the parties to the acquisition will enter into a definitive
agreement or that, if a definitive agreement is entered into, the acquisition
will be completed or, if completed, that the acquisition would generate
meaningful revenues or profits for the Company.
On August 2, 1999, the Company acquired all the assets of Web Trafic Inc., a
privately held company that provides Internet e-commerce opportunities to small
and medium sized businesses, in consideration for which the Company paid
$50,000. In addition, in connection with such transaction, the Company retained
a management firm to assist the Company in developing its Internet division (see
note 4 above). There can be no assurance that this acquisition will generate
meaningful revenues or profits for the Company.
On August 16, 1999, the Company consummated a financing arrangement pursuant to
which it issued 540,000 shares of Common Stock for an aggregate of $675,000.
Proceeds of the financing will be used for potential acquisitions, for the
payment of certain obligations, to fund working capital requirements of the
Company, and to use for general corporate purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
TeleHubLink Corporation (formerly known as What A World!, Inc.)(the "Company")
was incorporated under the laws of the State of Delaware in July 1993. Until May
1997, the Company operated as a mall-based specialty retailer of a wide
assortment of products which targeted customers having an active interest in
nature, the environment, education, wildlife, the outdoors and science. In May
1997, the Company sold substantially all of its assets to Natural Wonders, Inc.
for cash in the amount of $517,795 plus the assumption by Natural Wonders, Inc.
of specified liabilities (the "1997 Sale"). The completion of the 1997 Sale
terminated the Company's specialty retail operations. For the period May 1997
through February 3, 1999, the Company had no operating business and sought to
serve as a vehicle to effect an acquisition, whether by merger, exchange of
capital stock, acquisition of assets or other similar business combination. On
February 4, 1999, the Company acquired all the issued and outstanding capital
stock of Tele Hub Link Corporation ("TeleHub"), a privately-held company
organized under the laws of the Province of Ontario, Canada, that is engaged in
the business of providing teleservices. Pursuant to a Share Purchase Agreement
dated as of December 21, 1998 (as amended, the "Share Purchase Agreement")
8
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between the Company, TeleHub and the shareholders of TeleHub (the "TeleHub
Shareholders"), the Company acquired from the TeleHub Shareholders all of the
issued and outstanding capital stock of TeleHub in exchange for an aggregate of
13,011,339 shares (the "Shares") of common stock, par value $.01 per share
("Common Stock"), of the Company (or 3.9252318 shares of the Company's Common
Stock for each share of TeleHub common stock) and, as a result thereof, TeleHub
became a wholly-owned subsidiary of the Company (the "TeleHub Transaction"). In
addition, in connection with the TeleHub Transaction, the Company amended its
Certificate of Incorporation in order to change its name from What A World!,
Inc. to TeleHubLink Corporation. As a result of the 1997 Sale and the TeleHub
Transaction, the Company currently operates as a holding company, the principal
asset of which is its 100% ownership interest in TeleHub. Accordingly, the
business of the Company is currently conducted primarily through TeleHub.
PLAN OF OPERATION
Since the consummation of the TeleHub Transaction, the Company, through its
wholly-owned subsidiary TeleHub, has been primarily engaged in the business of
providing call center teleservices, including both inbound and outbound
teleservices. The Company has not generated any meaningful revenues since the
consummation of the TeleHub Transaction, and although the Company in the second
quarter of fiscal 1999 recognized limited profits for the first time since the
1997 Sale, there can be no assurance that the Company's operations will continue
to generate profits or that such profits, if any, would be significant.
The Company is seeking to continue the development of its multi-service call
center "HUB" concept, pursuant to which the Company would act as a central focus
for businesses to outsource typical non-core functions and capitalize on the
network to be established by the Company. In this connection, the Company offers
or proposes to offer the following services: providing call center teleservices,
including inbound and outbound call center activities in connection with sales,
marketing, customer support and product support; selling local and long distance
telecom services; and selling certain cellular and PCS telephone services. In
addition, the Company is also seeking to expand its operations by servicing the
Internet market, and is in the early stages of establishing a structure to
address the emerging Internet "e-commerce" market. In this connection, the
Company has formed a new Internet division which is engaged in selling client
advertisements to Internet malls, facilitating the creation of web sites for its
clients and providing e-commerce fulfillment services, and is currently in
discussions regarding possible acquisitions of certain Internet-related
businesses. In August 1999, the Company acquired all of the assets of Web Trafic
Inc., a privately-held company which has acquired the rights to sell advertising
for e-commerce on iMall, one of the leading e-commerce websites on the Internet
with approximately 1,600 merchants. Web Trafic Inc. serves as an independent
Canadian representative for iMall, Inc., and intends to market its services
through its business listings, classified ads, referral web pages and portals.
In consideration for the Web Trafic Inc. assets, the Company paid $50,000 and,
in connection with the acquisition, the Company retained a management firm
operated by the former President of Web Trafic Inc. to assist the Company in
developing its Internet division. There can be no assurance that this
acquisition will generate meaningful revenues or profits for the Company. In
addition, the Company will be required to obtain additional financing in order
to fund the development and operational costs of any companies, including Web
Trafic Inc., acquired by the Company. There can also be no assurance that the
Company will be successful in implementing its "HUB" concept or developing its
teleservices operations or Internet-related businesses.
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A key element of the Company's strategy involves growth through acquisitions of
other companies or assets that would complement or expand the Company's existing
business. On May 13, 1999, the Company entered into a letter of intent to
acquire wirelessEncryption.com, a development stage company which is working on
the development of a product which encrypts data at the signal level while
enhancing signal reception and voice quality. The Company presently anticipates
that it may issue up to 1,000,000 unregistered shares of its common stock in
connection with the acquisition of wirelessEncryption.com and that it may also
issue up to 4,000,000 additional unregistered shares of is common stock
depending upon the satisfaction of certain milestones and other conditions.
Consummation of the transaction is subject to completion of due diligence and
preparation of a definitive purchase agreement and related documentation.
Affiliates of Mr. Stanley Young, Chairman of the Board and a director of the
Company, and members of his family own a substantial equity interest in
wirelessEncryption.com. There can be no assurance that the parties to the
acquisition will enter into a definitive agreement or that, if a definitive
agreement is entered into, the acquisition will be completed or, if completed,
that the acquisition would generate meaningful revenues or profits for the
Company. In addition, if the acquisition is consummated, the Company will be
required to obtain additional financing to fund the development and operational
costs of the acquired company.
The Company's long-term strategy is to provide comprehensive
telecommunication-based solutions to facilitate its clients' marketing, sales
and other business objectives. Through relationships with clients and strategic
alliances, and its combination of proposed teleservices activities, the Company
intends to provide its clients with a multi-service call center or "HUB" that
will link clients with their ultimate customers and other organizations across
various complementary industries. In addition, as part of this strategy, the
Company will also seek to introduce its clients to the emerging "e-commerce"
market and to thereby expand its business by providing various Internet services
to its clients.
The Company's proposed plan of operation and prospects will be largely
dependent on the Company's ability to successfully establish and equip
additional call centers on a timely and cost effective basis; hire and retain
skilled technical, marketing and other personnel; successfully expand into the
Internet market and attract and retain significant numbers of clients.
RECENT DEVELOPMENTS
In July 1999, the Company sold a total of 24 units, by means of a private
placement, for gross proceeds of $600,000 (the "July 1999 Private Financing").
Each unit consisted of a 10% subordinated convertible debenture due July 13,
2000 in the principal amount of $25,000. The Company will be required to issue
up to an aggregate of 1,200,000 shares of common stock in the event all of the
debenture holders elect to convert their debentures on the maturity date
thereof. In addition, pursuant to the terms of such offering, the Company will
also be required to issue, on the maturity date of the debentures, warrants to
purchase an aggregate of from 150,000 shares of common stock (if no debenture
holders elect to convert their debentures) to 1,200,000 shares of common stock
(if all debenture holders elect to convert their debentures). A portion of the
proceeds of such financing was used to fund certain cash costs associated with
the acquisition of Web Trafic Inc. and the payment of certain past due
obligations, and the balance is expected to be used to fund additional future
acquisitions, if any, and to fund working capital and general corporate
purposes.
On August 16, 1999, the Company consummated a financing arrangement
pursuant to which it issued 540,000 shares of Common Stock for an aggregate of
$675,000 (the "August 1999 Private Financing). Proceeds of the financing will be
used for potential acquisitions, for the payment of certain obligations, to fund
working capital requirements of the Company, and for general corporate purposes.
10
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In the event the Company consummates the acquisiton of
wirelessEncryption.com, the Company currently intends to invest a portion of the
proceeds of the July 1999 Private Financing and the August 1999 Private
Financing, and may issue additional debt or equity securities, in connection
with such acquisition. However, the Company may elect not to acquire
wirelessEncryption.com and may invest in or acquire additional companies which
may be identified by management. There can be no assurance that any acquisitions
will be completed or, if completed, that any acquisition would generate
meaningful revenues or profits for the Company.
RESULTS OF OPERATIONS
THIRTEEN AND TWENTY SIX WEEKS ENDED JULY 31, 1999 COMPARED TO THE THIRTEEN AND
TWENTY SIX WEEKS ENDED AUGUST 1, 1998
Net sales for the thirteen weeks ended July 31, 1999 (the "Second Quarter
of Fiscal 1999) increased to approximately $490,200 from net sales of $0 for the
comparable thirteen weeks ended August 1, 1998 (the "Second Quarter of Fiscal
1998"). Net sales also increased for the twenty-six weeks ended July 31, 1999 to
approximately $811,077 from net sales of $0 for the twenty-six weeks ended
August 1, 1998. The increases are the result of the acquisition of TeleHub's
business in the TeleHub Transaction.
Gross profit for the Second Quarter of Fiscal 1999 was approximately
$223,600 or 46.0% of sales, as compared with $0 for the Second Quarter of Fiscal
1998. Gross profit for the first twenty six weeks of fiscal 1999 was
approximately $342,300 or 42.0% of sales, as compared with $0 for the first
twenty six weeks of fiscal 1998. The increase is the result of the acquisition
of TeleHub in the TeleHub Transaction.
Selling, general and administrative expenses ("SG&A") increased to
approximately $208,500 in the Second Quarter of Fiscal 1999 and to approximately
$374,400 in the first twenty-six weeks of fiscal 1999 from approximately $20,700
and $37,200 for the Second Quarter of Fiscal 1998 and the first twenty-six weeks
of fiscal 1998. The primary components of SG&A are rent, salaries (including
commissions and fringe benefits), consulting fees, depreciation, travel and
promotion, and corporate overhead expenses (including primarily professional
fees, insurance, administrative salaries (including fringe benefits), transfer
agent fees and printing fees). In the Second Quarter of Fiscal 1999, corporate
overhead expenses accounted for approximately $70,000 or 34% of the total SG&A,
while corporate overhead expenses accounted for approximately $130,000 or 35% of
the total SG&A for the first twenty six weeks of fiscal 1999. The increases in
SG&A for the Second Quarter of Fiscal 1999 as compared to the Second Quarter of
Fiscal 1998 were primarily the result of the Company's having acquired an
operating business as a result of the TeleHub Transaction.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are anticipated to be
for funding its operations and exploring any opportunities to effect future
acquisitions, whether by merger, exchange of capital stock or other business
combination. There can be no assurance that any such transactions will be
effected. In view of the limited resources of the Company, consideration may be
given to additional equity or debt placement to fund merger and acquisition
activities as well as to fund working capital for general corporate purposes
that might be required to effectuate the Company's business objective.
The Company had working capital of approximately $(539,800) and $(67,300)
at July 31, 1999 and January 30, 1999, respectively. Since the TeleHub
Transaction, the Company's primary ongoing capital requirements have been and
are anticipated to be for funding its operations and exploring and developing
opportunities in the call center teleservices industry and in expanding its
business into servicing the Internet market.
In July 1999, the Company consummated the July 1999 Private Financing,
pursuant to which it sold a total of 24 units, by means of a private placement,
for gross proceeds of $600,000. Each unit consisted of a 10% subordinated
convertible debenture due July 13, 2000 in the principal amount of $25,000. The
Company will be required to issue up to an aggregate of 1,200,000 shares of
common stock in the event all of the debenture holders elect to convert their
debentures on the maturity date thereof. In addition, pursuant to
11
<PAGE>
the terms of such offering, the company will also be required to issue, on the
maturity date of the debentures, warrants to purchase an aggregate of from
150,000 shares of common stock (if no debenture holders elect to convert their
debentures) to 1,200,000 shares of common stock (if all debenture holders elect
to convert their debentures). A portion of the proceeds of such financing was
used to fund certain cash costs associated with the acquisition of Web Trafic
Inc. and the payment of certain past due obligations, and the balance is
expected to be used to fund additional future acquisitions, if any, and to fund
working capital and general corporate purposes.
On August 16, 1999, the Company consummated the August 1999 Private
Financing pursuant to which it issued 540,000 shares of Common Stock for an
aggregate of $675,000. Proceeds of the financing will be used for potential
acquisitions, for the payment of certain obligations, to fund working capital
requirements of the Company, and to use for general corporate purposes.
As described above, the Company currently anticipates that it will continue
to seek additional financing from several sources, including private placements
of debt and/or equity securities, in order to fund its business expansion plans,
including funding acquisition opportunities which may arise, and to provide
short-term working capital. There can be no assurance that additional financing
will be available to the Company on commercially reasonable terms, or at all.
Any inability to obtain additional financing could have a materially adverse
effect on the Company, including possibly requiring the Company to significantly
curtail, and possibly causing the Company to cease, its operations. In addition,
any equity financing may involve substantial dilution to the interests of the
Company's then existing stockholders. Further, there can be no assurance that
the Company will achieve profitability or positive cash flow.
During the first twenty-six weeks of fiscal 1999, cash increased by
approximately $64,000 to approximately $64,500. The overall increase in cash
resulted primarily from the cash received from the Company's July 1999 Private
Financing arrangement. The Company repaid approximately $10,000 in indebtedness
during the period.
During the first twenty-six weeks of fiscal 1998, cash decreased by
approximately $87,400 to approximately $43,200. The overall decrease in cash
resulted primarily from the Company's paying ongoing general and administrative
costs, repayment of debt, and the loss of the Company's main source of cash flow
as a result of the Company's discontinuing its retail operations. The Company
repaid approximately $700 in indebtedness during the period.
During the first twenty-six weeks of fiscal 1998, the Company did not
maintain any lines of credit or cash borrowings to finance its reduced capital
requirements.
FORWARD-LOOKING STATEMENTS
Certain statements in the foregoing discussion of financial condition and
the results of operations, or elsewhere in this document, represent
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1996. Such statements involve matters that are subject to risks
and uncertainties, as a result of which actual future results or events may
differ materially depending on a variety of factors.
The Company's future operations are subject to various risk factors,
including the following: the limited funds currently available to the Company
may not be adequate for the Company to pursue its business objectives, and there
is no assurance funds will be available from any source and, if not available,
the Company will be required to limit its operations to those that can be
financed from existing funds; TeleHub has a limited operating history and there
can be no assurance that any of its future activities will be profitable; as a
holding company, the Company's success will depend on the operations, financial
condition and management of TeleHub and any other companies which the Company
may acquire, and in the event the Company does not have the resources or is
otherwise unable to diversify its operation into a number of areas, the Company
may become subject to economic fluctuations within a particular business or
industry and thereby increase the risks associated with its operations; the
Company may be unable to successfully complete acquisitions of assets or
complementary companies which are necessary to expand its business, and may be
unable to integrate into its operations any such businesses or assets acquired
by it;
12
<PAGE>
TeleHub is a start-up company and, as such, may become subject to the problems,
expenses, difficulties, complications and delays that are frequently encountered
by a company establishing a new business; TeleHub may be unable to secure
teleservices contracts with clients or generate revenues under any such
contracts it does secure; TeleHub may be unable to successfully develop and
utilize its acquired infrastructure and develop databases to perform
teleservices for its clients and may be unable to successfully implement
marketing and sales methods for its services or expand into new areas, including
Internet and "e-commerce" related businesses; TeleHub may be unable to acquire
and implement quality telecommunications and computer technology and end user
database and software products necessary for its operations; TeleHub may be
unable to respond to changing technological developments and acquire and
implement new equipment and systems to meet changing customer needs on a timely
and cost-effective basis; TeleHub may be unable to adequately ensure that its
operations will not be adversely impacted by the Year 2000 Issue; TeleHub's
inability to obtain adequate local or long distance telephone service, or any
interruption in such service or rate increases relating thereto, could
materially adversely affect TeleHub's business, results of operations and
financial condition; TeleHub may not be able to procure, hire and train on a
timely basis a sufficient labor force of qualified employees or independent
contractors in connection with an increase, if any, in the volume of its
teleservices business; TeleHub's failure to retain the service of its key
employees or its failure to retain additional qualified management personnel to
support its planned growth could have a material adverse effect on TeleHub; the
teleservices industry is highly competitive and is characterized by low barriers
to entry and rapid growth, and TeleHub may not be able to compete effectively
against its current competitors or future competitors, many of whom may be
substantially larger and better capitalized than TeleHub; and any changes to
existing Canadian or U.S. federal, provincial or state laws or regulations
governing TeleHub's business, or any additional laws or regulations, could limit
TeleHub's current or future activities or could significantly increase TeleHub's
cost of compliance.
YEAR 2000 COMPLIANCE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. The Company
recognizes the need to ensure that its operations will not be adversely impacted
by software failures caused by the advent of the year 2000. While the Company
intends to obtain assurance from its program suppliers and independently assess
acquired computer programs regarding Year 2000 issue computer risks, the systems
on which the Company relies may be adversely impacted by software failures
caused by the advent of the Year 2000. It is not possible to be certain that all
aspects of the Year 2000 issue affecting the Company, including those related to
the efforts of customers, suppliers, or other third parties, will be fully
resolved. The likely worst case scenario may be an inability to efficiently
process incoming and outgoing telephone calls at the Company's call center and
to process its daily business for some period of time. The lost reserves, if
any, resulting from a worst case scenario would depend on the time period in
which the failure goes uncorrected and the difficulty of remediating such
failure. Management is currently assessing the need to develop contingency plans
for its call center operations. However, the Company does not currently believe
that such contingency plans will be required due to its use of alternative
technology systems at the Company's call center.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
In July 1999, the Company sold a total of 24 units, by means of a private
placement, for gross proceeds of $600,000 (the "July 1999 Private Financing").
Each unit consisted of a 10% subordinated convertible debenture on 2000 in the
principal amount of $25,000. Upon maturity of the debentures on July 13, 2000,
holders will be entitled to be paid 100% of the principal amount of each
debenture (plus accrued interest thereon) either in cash or in shares of common
stock of the Company, at the holder's option. The number of shares issuable on
the maturity date of the debentures will be based on a conversion price of $.50
per share (subject to adjustment for stock splits and similar transactions). Any
holder who elects to receive payment on a debenture in the form of shares of
common stock of the Company shall also receive, concurrent with such payment,
redeemable warrants to purchase an aggregate of 50,000 shares of common stock at
an exercise price of $2.50 per share (subject to adjustment) for each $25,000
debenture converted into common stock. Any holder who elects to receive payment
on a debenture in the form of cash shall also receive, concurrent with such
payment, redeemable warrants to purchase an aggregate of 6,250 shares of common
stock at an exercise price of $2.00 per share (subject to adjustment) for each
$25,000 debenture paid in cash. Each warrant will be exercisable for a
three-year period commencing on the date of issuance. A portion of the proceeds
of such financing was used to fund certain cash costs associated with the
acquisition of Web Trafic Inc. and the payment of certain past due obligations,
and the balance is expected to be used to fund additional future acquisitions,
if any, and to fund working capital and general corporate purposes. The
Registrant relied upon the exception provided by Section 4(2) of the Securities
Act of 1933 in connection with the issuance and sale of such securities.
On August 16, 1999, the Company consummated a financing arrangement
pursuant to which it issued 540,000 shares of Common Stock for an aggregate of
$675,000. Proceeds of the financing will be used for potential acquisitions, for
the payment of certain obligations, to fund working capital requirements of the
Company, and to use for general corporate purposes. The Registrant relied upon
the exception provided by Section 4(2) of the Securities Act of 1933 in
connection with the issuance and sale of such securities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Employment Agreement between the Company and Bruce W. Young
10.2 Form of Debenture Issued in July 1999 Private Financing
10.3 Form of Warrants to be issued in connection with July 1999
Private Financing
10.4 Registration Rights Agreement entered into in connection
with July 1999 Private Financing
10.5 Registration Rights Agreement entered into in connection
with August 1999 Private Financing
Resources
11 Statement re Computation of Per Share Earnings (not
required because the relevant computations can be clearly
determined from material contained in the financial
statements included herein).
27 Financial Data Schedule (For SEC Use Only)
99.1 Purchase Agreement between the Company and Web Trafic Inc.
99.2 Management Agreement between the Company and Serge Trudeau Resources
14
<PAGE>
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K
during the thirteen weeks ended July 31, 1999.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TeleHubLink Corporation
Date: SEPTEMBER 14, 1999 By: /s/ BRUCE W. YOUNG
--------------------- ----------------------------------
Bruce W. Young
President
Date: SEPTEMBER 14, 1999 By: /s/ PATRICK THOMAS
--------------------- ----------------------------------
Patrick Thomas
Chief Operating Officer
(Principal Financial and Accounting
Officer)
16
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 Employment Agreement between the Company and Bruce W. Young
10.2 Form of Debenture Issued in July 1999 Private Financing
10.3 Form of Warrants to be issued in connection with July 1999
Private Financing
10.4 Registration Rights Agreement entered into in connection
with July 1999 Private Financing
10.5 Registration Rights Agreement entered into in connection
with August 1999 Private Financing
Resources
11 Statement re Computation of Per Share Earnings (not
required because the relevant computations can be clearly
determined from material contained in the financial
statements included herein).
27 Financial Data Schedule (For SEC Use Only)
99.1 Purchase Agreement between the Company and Web Trafic Inc.
99.2 Management Agreement between the Company and Serge Trudeau Resources
CONFIDENTIAL
TELEHUBLINK CORPORATION
24 New England Executive Park
Burlington, MA 01803
TELEHUBLINK CORPORATION
April 5, 1999
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, between TELEHUBLINK CORPORATION (NASD BB: THLC)
(the "Company") and BRUCE W. YOUNG (the "Employee").
1) For good consideration, the COMPANY EMPLOYS THE EMPLOYEE on the
following terms and conditions.
2) TERM OF EMPLOYMENT: Subject to the provisions for termination, set
forth below this agreement will begin on February 4, 1999, and be for
a period of two years, unless sooner terminated.
3) SALARY: The Company shall pay Employee a salary of $200,000.00 per
year, for the services of the Employee, payable at regular payroll
periods.
4) STOCK OPTIONS: The Employee shall be granted 500,000 shares of THLC at
the time of execution of this contract. These shares vest 50% at the
point of signing and 50% upon completion of the first full year of
operations. In the event the stock price reaches $5.00 per share for a
period of 30 days, the entire 500,000 shares will vest and become
excerciseable.
5) DUTIES AND POSITION: The Company hires the Employee in the capacity of
President and Chief Executive Officer of TeleHubLink Corporation, the
parent company. The Employee's duties may not be modified during the
term of this contract.
6) EMPLOYEE TO DEVOTE FULL TIME TO COMPANY: The Employee will devote full
time, attention, and energies to the business of the Company and
during this employment, will not engage in any other business
activity, regardless of whether such activity is pursued for profit,
gain, or other pecuniary advantage. Employee is not prohibited from
making personal investments in any other businesses provided those
investments do not require active involvement in the operation of said
companies.
7) CONFIDENTIALITY OF PROPRIETARY INFORMATION: Employee agrees, during or
after the term of this employment, not to reveal confidential
information, or trade secrets to any person, firm, corporation, or
entity. Should Employee reveal or threaten to reveal this information,
the Company shall be entitled to an injunction restraining the
Employee from disclosing same, or from rendering any services to any
entity to whom said information has been or is threatened to be
disclosed. The right to secure an injunction is not exclusive, and the
Company may pursue any other remedies it has against the Employee for
a breach or threatened breach of this condition, including the
recovery of damages from the Employee.
TELESERVICING FOR YOUR INTERNET NEEDS
<PAGE>
8) REIMBURSEMENT OF EXPENSES: The Employee may incur reasonable expenses
for furthering the Company's business, including expenses for
entertainment, travel, and similar items. The Company shall reimburse
Employee for all business expenses after the Employee presents an
itemized account of expenditures, pursuant to Company policy.
9) VACATION: The Employee shall be entitled to a yearly vacation of 4
weeks at full pay.
10) DISABILITY: If Employee cannot perform the duties because of illness
or incapacity for a period of more than 52 weeks, the compensation
otherwise due during said illness or incapacity will be reduced by ten
percent (10) percent. The Employee's full compensation will be
reinstated upon return to work. However, if the Employee is absent
from work for any reason for a continuous period of over 6 months, the
Company may terminate the Employee's employment, and the Company's
obligations under this agreement will cease on that date.
11) TERMINATION OF AGREEMENT: Without cause, the Company upon payment of
the full severance provisions, may terminate this agreement at any
time upon 90 days' written notice to the Employee. If the Company
requests, the Employee will continue to perform his/her duties and be
paid his/her regular salary up to the date of termination. In
addition, the Company will pay the Employee on the date of termination
a severance allowance of the greater of $500,000.00 or two full years
pay including bonuses less taxes and social security required to be
withheld. Without cause, the Employee may terminate employment upon 45
days' written notice to the Company. Employee may be required to
perform his/her duties and will be paid the regular salary to date of
termination but shall not receive a severance allowance.
Notwithstanding anything to the contrary contained in this agreement,
the Company may terminate the Employee's employment, providing that
the Company pays all severance in accordance with the severance
provisions, upon the following Conditions:
12) THE SALE OF SUBSTANTIALLY all of the Company's assets to a single
purchaser or group of associated purchasers; or
>> The sale, exchange, or other disposition, in one
transaction of the majority of the Company's
outstanding corporate shares; or
>> The Company's decision to terminate its business and
liquidate its assets;
>> The merger or consolidation of the company with another
company.
>> Bankruptcy or Chapter 11 Reorganization.
13) The COMPANY MUST PROVIDE 90 DAYS' NOTICE to the Employee should any of
the following events occur:
a) The sale of substantially all of the Company's assets to
a single purchaser or group of associated purchasers; or
b) The sale, exchange, or other disposition, in one transaction of
the majority of the Company's outstanding corporate shares; or
c) The Company's decision to terminate its business and liquidate
its assets;
d) The merger or consolidation of the Company with another company.
e) Bankruptcy or Chapter 11 Reorganization.
<PAGE>
14) DEATH BENEFIT: Should Employee die during the term of employment, the
Company shall pay to Employee's estate any compensation due through the
end of the month in which death occurred as well as any accrued
bonuses, stock options or other compensation normally accruing to the
benefit of the Employee.
15) RESTRICTION ON POST EMPLOYMENT COMPENSATION: For a period of one (1)
year after the end of employment, the Employee shall not compete in any
business similar to that conducted by the Company, either by soliciting
any of its accounts or by operating within Employer's general trading
area.
16) ASSISTANCE IN LITIGATION: EMPLOYEE shall upon reasonable notice,
furnish such information and proper assistance to the Company as it may
reasonably require in connection with any litigation in which it is, or
may become, a party either during or after employment.
17) EFFECT OF PRIOR AGREEMENTS: This agreement supersedes any prior
agreement between the Company or any predecessor of the Company and the
Employee, except that this agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Employee of a kind
elsewhere provided and not expressly provided in this agreement.
18) SETTLEMENT BY ARBITRATION: Any claim or controversy that arises out of
or relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in any
court with jurisdiction.
19) LIMITED EFFECT OF WAIVER BY COMPANY. Should Company waive breach of any
provision of this agreement by the Employee, that waiver will not
operate or be construed as a waiver of further breach by the Employee.
20) SEVERABILITY: If, for any reason, any provision of this agreement is
held invalid, all other provisions of this agreement shall remain in
effect. If this agreement is held invalid or cannot be enforced, then
to the full extent permitted by law any prior agreement between the
Company (or any predecessor thereof) and the Employee shall be deemed
reinstated as if this agreement had not been executed.
21) ASSUMPTION OF AGREEMENT by Company's Successors and Assignees: The
Company's rights and obligations under this agreement will inure to the
benefit and be binding upon the Company's successors and assignees.
22) ORAL MODIFICATIONS NOT BINDING: This instrument is the entire agreement
of the Company and the Employee. Oral changes shall have no effect. It
may be altered only by
<PAGE>
a written agreement signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
Signed this 5th day of April, 1999.
/s/STANLEY A. YOUNG /s/BRUCE W. YOUNG
- ----------------------- -----------------------
Stanley A. Young Bruce W. Young
Chairman of THLC Board Employee
EXHIBIT 10.2
NEITHER THIS DEBENTURE, NOR ANY SECURITY ISSUABLE UPON CONVERSION THEREOF, HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO
INTEREST IN THIS DEBENTURE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT), OR (iii)
AN EXEMPTION FROM REGISTRATION UNDER THE ACT WHERE THE HOLDER HAS FURNISHED TO
THE COMPANY AN OPINION OF ITS COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
TELEHUBLINK CORPORATION
10% SUBORDINATED CONVERTIBLE DEBENTURE
$25,000 , 1999
---------
Number New York, New York
------
FOR VALUE RECEIVED, the undersigned, TeleHubLink Corporation, a Delaware
corporation ("Payor"), having its executive office at 24 New England Executive
Park, Burlington, MA 01803 (telecopier no. (781) 229-6794), hereby promises to
pay to the order of _________________________ or registered assigns ("Payee"),
having an address at _________________________, Attn:_______________ (telecopier
no._________________), at Payee's address set forth above (or at such other
place as Payee may from time to time hereafter direct by notice in writing to
Payor), the principal sum of Twenty-Five Thousand Dollars ($25,000), in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts, on the first to occur of the
following dates:_______________, 2000 (the "Maturity Date") [I.E., first
anniversary of Initial Closing]; (ii) the date on which the outstanding
principal amount of this Debenture is prepaid in full as hereinafter permitted
(the "Prepayment Date"); and (iii) any date on which any principal amount of, or
accrued unpaid interest on, this Debenture is declared to be, or becomes, due
and payable pursuant to its terms prior to the Maturity Date (the "Acceleration
Date").
This Debenture is part of a unit or units (the "Units") and one of a series
of Debentures being issued pursuant to Payor's Confidential Private Offering
Memorandum dated June 8, 1999 (the "Memorandum"), relating to the offering of
Units, each Unit consisting of a 10% subordinated convertible debenture in the
principal amount of $25,000 (each, a "Debenture").
1. INTEREST AND PAYMENT.
1.1. The principal amount of this Debenture outstanding from time to
time shall bear simple interest at the annual rate (the "Debenture Rate") of ten
percent (10%) from the date hereof through the earliest to occur of (i) the
Maturity Date, (ii) the Prepayment Date and (iii) the Acceleration Date.
<PAGE>
1.2. Interest accrued on this Debenture shall be payable on the
earliest to occur of (i) the Maturity Date, (ii) the Prepayment Date and (iii)
the Acceleration Date.
1.3. All payments made by the Payor on this Debenture shall be applied
first to the payment of accrued unpaid interest on this Debenture and then to
the reduction of the unpaid principal balance of this Debenture.
1.4. If payment of the outstanding principal amount of this Debenture,
together with accrued unpaid interest thereon at the Debenture Rate, is not made
on the earliest to occur of (i) the Maturity Date, (ii) the Prepayment Date and
(iii) the Acceleration Date, then interest shall accrue on the outstanding
principal amount due under this Debenture and on any unpaid accrued interest due
on this Debenture from and after such date of default to the date of the payment
in full of such amounts (including from and after the date of the entry of
judgment in favor of Payee in an action to collect this Debenture) at an annual
rate equal to the lesser of 18% or the maximum rate of interest permitted by
applicable law (the "Maximum Rate").
1.5. In no event shall Payee be entitled to receive interest, however
characterized and including other consideration received in connection with this
Debenture, at an effective rate in excess of the Maximum Rate. In the event that
a court of competent jurisdiction determines that such amounts paid or agreed to
be paid by Payor in connection with this Debenture causes the effective interest
rate on this Debenture to exceed the Maximum Rate, such interest or other
consideration shall automatically be reduced to a rate which results in an
effective interest rate under this Debenture equal to the Maximum Rate over the
term hereof, and, in such event, any amounts received by Payee deemed to
constitute excessive interest shall be applied first to the payment of accrued
unpaid interest on this Debenture and then to the reduction of the unpaid
principal balance of this Debenture.
1.6. In the event that the date for the payment of any amount payable
under this Debenture falls due on a Saturday, Sunday or public holiday under the
laws of the State of New York, the time for payment of such amount shall be
extended to the next succeeding business day and interest at the Debenture Rate
shall continue to accrue on any principal amount so effected until the payment
thereof on such extended due date.
2. REPLACEMENT OF DEBENTURE.
2.1. In the event that this Debenture is mutilated, destroyed, lost or
stolen, Payor shall, at its sole expense, execute, register and deliver a new
Debenture, in exchange and substitution for this Debenture, if mutilated, or in
lieu of and substitution for this Debenture, if destroyed, lost or stolen. In
the case of destruction, loss or theft, Payee shall furnish to Payor indemnity
reasonably satisfactory to Payor, and in any such case, and in the case of
mutilation, Payee shall also furnish to Payor evidence to its reasonable
satisfaction of the mutilation, destruction, loss or theft of this Debenture and
of the ownership thereof. Any replacement Debenture so issued shall be in the
same outstanding principal amount as this Debenture and dated the date to which
interest shall have been paid on this Debenture or, if no interest shall have
yet been paid, dated the date of this Debenture.
-2-
<PAGE>
2.2. Every Debenture issued pursuant to the provisions of Section 2.1
above in substitution for this Debenture shall constitute an additional
contractual obligation of the Payor, whether or not this Debenture shall be
found at any time or be enforceable by anyone.
3. PREPAYMENT. At the option of the Payor, the principal amount of this
Debenture may be prepaid in whole at any time, or in part from time to time,
without penalty or premium, together with interest thereon accrued through the
Prepayment Date. Each partial prepayment of this Debenture shall first be
applied to interest accrued through the Prepayment Date and then to principal.
In the event of any such prepayment, Payor shall deliver written notice thereof
to the holder of this Debenture at least thirty (30) days prior to the
applicable Prepayment Date.
4. EVENTS OF DEFAULT. If any of the following events (each an "Event of
Default") occurs:
4.1. The dissolution of Payor or any vote in favor thereof by the board
of directors and shareholders of Payor; or
4.2. Payor becomes insolvent, however evidenced, or makes an assignment
for the benefit of creditors, or files with a court of competent jurisdiction an
application for appointment of a receiver or similar official with respect to it
or any substantial part of its assets, or Payor files a petition seeking relief
under any provision of the Federal Bankruptcy Code or any other federal or state
statute now or hereafter in effect affording relief to debtors, or any such
application or petition is filed against Payor, which application or petition is
not dismissed or withdrawn within thirty (30) days from the date of its filing;
or
4.3. Payor fails to pay the principal amount, or interest on, or any
other amount payable under, this Debenture as and when the same becomes due and
payable; or
4.4. Payor admits in writing its inability to pay its debts as they
mature; or
4.5. A proceeding is commenced to foreclose a security interest or lien
in any property or assets of Payor as a result of a default in the payment or
performance of any debt (in excess of $250,000 and secured by such property or
assets) of Payor; or
4.6. A final judgement for the payment of money in excess of $250,000
is entered against Payor by a court of competent jurisdiction, and such judgment
is not discharged (nor the discharge thereof duly provided for) in accordance
with its terms, nor a stay of execution thereof procured, within sixty (60) days
after the date such judgment is entered, and, within such period (or such longer
period during which execution of such judgment is effectively stayed), an appeal
therefrom has not been prosecuted and the execution thereof caused to be stayed
during such appeal; or
-3-
<PAGE>
4.7. An attachment or garnishment is levied against the assets or
properties of Payor or any subsidiary of Payor involving an amount in excess of
$250,000 and such levy is not vacated, bonded or otherwise terminated within
sixty (60) days after the date of its effectiveness; or
4.8. Payor defaults in the due observance or performance of any
covenant, condition or agreement on the part of Payor to be observed or
performed pursuant to the terms of this Debenture (other than the default
specified in Section 4.3 above) and such default continues uncured for a period
of sixty (60) days; or
4.9. Payor defaults in the payment (regardless of amount) when due of
the principal of, interest on, or any other liability on account of, any
indebtedness of Payor having a face or principal amount in excess of $250,000,
or a default occurs in the performance or observance by Payor of any covenant or
condition (other than for the payment of money) contained in any note or
agreement evidencing or pertaining to any such indebtedness, which causes the
maturity of such indebtedness to be accelerated and such default is not waived
or cured within thirty (30) days of receipt of notice by the Payor that such
default has occurred;
then, upon the occurrence of any such Event of Default and at any time
thereafter, the holder of this Debenture shall have the right (at such holder's
option) to declare the principal of, accrued unpaid interest on, and all other
amounts payable under this Debenture to be forthwith due and payable, whereupon
all such amounts shall be immediately due and payable to the holder of this
Debenture, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived; provided, however, that in case of the
occurrence of an Event of Default under any of Sections 4.1, 4.2 or 4.4 above,
such amounts shall become immediately due and payable without any such
declaration by the holder of this Debenture.
5. CONVERSION.
5.1. The holder of this Debenture shall have the right, at its option
(the "Conversion Option"), at any time within not more than twenty (20) days, or
less than ten (10) days, prior to the earliest to occur of the Maturity Date or
the Prepayment Date, to convert, in whole but not in part, the principal amount
of this Debenture, together with accrued unpaid interest thereon, outstanding at
the close of business on the date Payor receives notice of such holder's
exercise of the Conversion Option, into fully paid and nonassessable shares of
Common Stock, par value $.01 per share (the "Conversion Shares"), at a
conversion price per Conversion Share equal to $0.50, as such price may be
adjusted from time to time in accordance with the provisions of this Section 5
(the "Conversion Price"), such that the number of Conversion Shares obtained
upon conversion shall be determined by dividing the then Conversion Price into
the sum of the then outstanding principal amount of, and accrued unpaid interest
on, this Debenture.
5.2. To exercise the Conversion Option, the holder hereof shall give
written notice to Payor that it elects to convert the principal amount of this
Debenture, together with accrued unpaid interest thereon, into Conversion Shares
in accordance with the provisions of Section 5.1 above (the "Conversion
Notice"). The Conversion Notice shall specify the name or names in which the
holder wishes the certificates for the Conversion Shares to be registered,
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<PAGE>
together with the address or addresses of the persons so named, provided such
Conversion Shares may not be registered in the name of a person or persons other
than the holder of this Debenture unless the Debenture, when surrendered for
conversion, is accompanied by (i) instruments of transfer in form reasonably
satisfactory to Payor, duly executed by the holder hereof and (ii) if requested
by Payor, an instrument executed by such other person, in form reasonably
satisfactory to Payor, representing that the Conversion Shares are being
acquired for investment and not with a view to distribution within the meaning
of the Securities Act of 1933, as amended.
5.3. Promptly after the delivery of the Conversion Notice to Payor,
Payor shall cause to be delivered to the holder and/or the holder's designees
certificates representing the number of Conversion Shares into which this
Debenture is being converted and a cash adjustment in respect of any fraction of
a Conversion Share to which the holder shall be entitled. No fractional
Conversion Shares will be issued, but an amount of cash equal to the product of
the fraction of a Conversion Share which would otherwise be issuable upon the
surrender of this Debenture for conversion multiplied by the then existing
Conversion Price per Conversion Share will be paid to the holder upon such
conversion.
Conversion of this Debenture shall be deemed to have been made at the close
of business on the date the Conversion Notice is delivered to Payor (the
"Conversion Date"), so that interest shall not accrue from and after such date
on the principal amount of this Debenture converted and the person or persons
entitled to receive Conversion Shares upon such conversion shall be treated for
all purposes as having been the record holder or holders thereof at such time
and such conversion shall be at the Conversion Price in effect at such time. The
issuance of certificates for Conversion Shares upon conversion of this Debenture
shall be made without charge to the holder of this Debenture for any tax in
respect of the issuance of such certificates; provided, however, that Payor
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Payee and Payor shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to Payor the amount of such tax or shall have
established to the satisfaction of Payor that such tax has been paid. Upon
Payor's (i) delivery of the certificates for the Conversion Shares to the holder
of this Debenture and/or its designees and (ii) payment of the cash adjustment,
if any, due to the holder of this Debenture pursuant to the terms of this
Section 5, the holder of this Debenture shall surrender this Debenture to Payor.
The Certificates representing the Conversion Shares shall be executed on
behalf of Payor by the manual or facsimile signature of those officers required
to sign such certificates under applicable law, and shall bear legends
substantially similar to the following:
"The securities represented by this certificate and/or the securities
issuable upon exercise thereof have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be offered
or sold except (i) pursuant to an effective registration statement
under the Act, (ii) to the extent applicable, pursuant to Rule 144
under the Act (or any similar rule under such Act relating to the
disposition of securities), or (iii) upon the delivery by the holder to
the
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<PAGE>
Company of an opinion of counsel, satisfactory to counsel to the
Company, stating that an exemption from registration under such Act is
available."
5.4. Payor shall at all times keep available out of its authorized but
unissued shares of Common Stock, solely for effecting the conversion of this
Debenture, the full number of whole Conversion Shares then deliverable upon
conversion of the entire principal amount of this Debenture, and accrued unpaid
interest thereon, at the time outstanding. Payor shall take at all times such
corporate action as shall be necessary in order that Payor may validly and
legally issue fully paid and nonassessable shares of Common Stock in accordance
with the provisions of this Section 5.
5.5. In the event Payor shall at any time after the date hereof pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock, then upon such dividend or distribution, the Conversion Price in effect
immediately prior to such dividend or distribution shall be reduced to a price
determined by dividing an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Conversion Price in effect immediately prior to such dividend or
distribution, by the total number of shares of Common Stock outstanding
immediately after such issuance or sale. For purposes of any computation to be
made in accordance with the provisions of this Section 5.5, the shares of Common
Stock issuable by way of dividend or distribution shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for determination of shareholders entitled to receive such dividend or
distribution.
5.6. In the event the Payor shall at any time subdivide or combine the
outstanding shares of Common Stock, the Conversion Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case of
combination.
5.7. In the event the Payor shall, at any time or from time to time
after the date hereof, issue any shares of Common Stock or other securities
convertible into, or exchangeable or exercisable for, Common Stock, in each case
other than Excluded Shares (as hereinafter defined), for no consideration or for
a consideration per share less than the Conversion Price in effect immediately
prior to the issuance of such Common Stock or other securities, the Conversion
Price in effect immediately prior to each such issuance shall automatically be
lowered to a price equal to the consideration per share received by the Payor
upon such issuance. In the case of the issuance of Common Stock for a
consideration in whole or part in property other than cash, the value of such
property shall be deemed to be the fair market value of such property as
determined in good faith by the Board of Directors of the Payor. As used herein,
the term "Excluded Shares" shall mean (i) shares of Common Stock issued in
connection with transactions described in Sections 5.5 and 5.6 hereof, (ii)
shares of Common Stock issued upon the exercise or conversion of any options,
rights, warrants or other securities outstanding on the date hereof, and (iii)
shares of Common Stock issued to officers, directors or employees of, or
consultants to, the Payor pursuant to any agreement, plan or arrangement
approved prior to the date hereof by the Board of Directors of the Payor or a
committee thereof authorized to give such approval.
5.8. In the event of any reclassification or change of the outstanding
Common Stock (other than a change in nominal value to no nominal value, or from
no nominal
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<PAGE>
value to nominal value, or as a result of a subdivision or combination), or in
the case of any consolidation of the Payor with, or merger of the Payor into,
another corporation (other than a consolidation or merger in which the Payor is
the surviving corporation and which does not result in any reclassification or
change of the outstanding Common Stock, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Payor as an entirety, the holder of this Debenture shall
thereafter have the right to convert this Debenture into the kind and number of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by holders
of the number of shares of Common Stock into which this Debenture could have
been converted immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance, subject to further adjustments as
provided herein.
5.9. In the event:
(1) Payor shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of Payor; or
(2) Payor shall offer to all the holders of its Common Stock any
additional shares of Common Stock or other shares of capital stock of Payor or
securities convertible into or exchangeable for Common Stock or other shares of
capital stock of Payor, or any option, right or warrant to subscribe therefor;
or
(3) a reclassification or change of the outstanding Common Stock
(other than a change in nominal value to no nominal value, or from no nominal
value to nominal value, or as a result of a subdivision or combination), or any
consolidation of the Payor with, or merger of the Payor into, another
corporation (other than a consolidation or merger in which the Payor is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Common Stock, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), shall be proposed; or
(4) a dissolution, liquidation or winding up of Payor (other than
in connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed;
then, in any one or more of said events, Payor shall give written notice of such
event at least fifteen (15) days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the shareholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, options or warrants, or entitled to vote on such
proposed reclassification, merger, consolidation, dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to give such notice or
any defect therein shall not affect the validity of any action taken in
connection with the declaration or payment of any such dividend or distribution,
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<PAGE>
or the issuance of any convertible or exchangeable securities or subscription
rights, options or warrants, or any proposed reclassification, merger,
consolidation, dissolution, liquidation, winding up or sale.
6. WARRANTS. If the holder of this Debenture elects to receive payment in
the form of Conversion Shares in accordance with Section 5 hereof, the holder
shall receive concurrent with such payment, redeemable warrants, in the form of
Exhibit H to the Memorandum ("Warrants"), to purchase an aggregate of 50,000
shares of Common Stock at an exercise price of $2.00 per share, subject to
adjustment under certain circumstances, for each Debenture converted into Common
Stock. If the holder elects to receive payment in the form of cash, the holder
shall receive, concurrent with such payment, Warrants to purchase an aggregate
of 6,250 shares of Common Stock at an exercise price of $2.00 per share, subject
to adjustment under certain circumstances, for each Debenture paid in cash.
Notwithstanding the foregoing, the number of warrants issuable shall be
proportionately reduced in any case where partial Units are sold.
7. SUITS FOR ENFORCEMENT AND REMEDIES. If any one or more Events of Default
shall occur and be continuing, the Payee may proceed to (i) protect and enforce
Payee's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in this Debenture or in any agreement or document referred to herein or in aid
of the exercise of any power granted in this Debenture or in any agreement or
document referred to herein, (ii) enforce the payment of this Debenture, or
(iii) enforce any other legal or equitable right of the holder of this
Debenture. No right or remedy herein or in any other agreement or instrument
conferred upon the holder of this Debenture is intended to be exclusive of any
other right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
8. UNCONDITIONAL OBLIGATION; FEES, WAIVERS, OTHER.
8.1. The obligations to make the payments provided for in this
Debenture are absolute and unconditional and not subject to any defense,
set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
8.2. If, following the occurrence of an Event of Default, Payee shall
seek to enforce the collection of any amount of principal of and/or interest on
this Debenture, there shall be immediately due and payable from Payor, in
addition to the then unpaid principal of, and accrued unpaid interest on, this
Debenture, all costs and expenses incurred by Payee in connection therewith,
including, without limitation, reasonable attorneys' fees and disbursements.
8.3. No forbearance, indulgence, delay or failure to exercise any right
or remedy with respect to this Debenture shall operate as a waiver or as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
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<PAGE>
8.4. This Debenture may not be modified or discharged (other than by
payment or conversion) except by a writing duly executed by Payor and Payee.
8.5. Payor hereby expressly waives demand and presentment for payment,
notice of nonpayment, notice of dishonor, protest, notice of protest, bringing
of suit, and diligence in taking any action to collect amounts called for
hereunder, and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which Payee had or is existing as security for any amount called
for hereunder.
8.6. Payor shall bear all of its expenses, including attorneys' fees,
incurred in connection with the preparation of this Debenture.
9. INVESTMENT INTENT. The Payee, by its acceptance of this Debenture,
covenants and agrees that the Debenture and the Conversion Shares issuable upon
conversion of the Debenture are being acquired as an investment and not with a
view to the distribution thereof.
10. REGISTRATION RIGHTS. The Payee shall be entitled to all of the rights
set forth in the Registration Rights Agreement dated as of the date hereof
between Payor and Payee.
11. SUBORDINATION. The indebtedness represented by this Debenture, and the
payment of the principal of and accrued interest on this Debenture are hereby
made expressly subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, whether outstanding on the date hereof or
hereafter created, incurred or assumed. As used herein, the term "Senior
Indebtedness" shall mean the principal of, and premium (if any) and unpaid
interest and fees on, (i) all obligations incurred by Payor (whether as borrower
or guarantor) and/or any of its subsidiaries under or pursuant to any loan or
credit agreement with one or more banks and/or other institutional lenders, (ii)
all indebtedness of the Payor and/or any of its subsidiaries for monies borrowed
by the Payor from other persons or entities, (iii) all obligations of the Payor
and/or any of its subsidiaries as lessee under leases of real or personal
property, (iv) all indebtedness incurred by the Payor and/or any of its
subsidiaries to finance the acquisition by it of assets classified as capital
assets under generally accepted accounting principles, (v) all indebtedness or
obligations of others of the kinds described in clauses (i), (ii), (iii) and
(iv) above assumed or guaranteed in any manner by the Payor and/or any of its
subsidiaries, (vi) deferrals, renewals, extensions and refundings of any such
indebtedness or obligations described in clauses (i), (ii), (iii), (iv) and (v),
and any other indebtedness of the Payor and/or any of its subsidiaries which the
Payor and the holders of more than 50% of the unpaid principal amount of the
Debentures then outstanding may hereafter from time to time expressly agree in
writing shall constitute Senior Indebtedness. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include indebtedness of the Payor evidenced by
the other Debentures which shall rank equally and ratably with this Debenture.
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<PAGE>
12. MISCELLANEOUS.
12.1. The headings of the various paragraphs of this Debenture are for
convenience of reference only and shall in no way modify any of the terms or
provisions of this Debenture.
12.2. All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, if personally delivered, or one (1) business day after having been
deposited with courier, if sent by overnight courier or by telecopy (receipt
confirmed), or three (3) business days after having been mailed, if sent by
registered or certified mail (return receipt requested, postage prepaid), to the
address of the intended recipient as set forth in the preamble to this Debenture
or at such other address as the intended recipient shall have hereafter given to
the other party hereto pursuant to the provisions of this Debenture.
12.3. This Debenture and the obligations of Payor and the rights of
Payee shall be governed by and construed in accordance with the substantive laws
of the State of New York without giving effect to the choice of laws rules
thereof.
12.4. Payor (i) agrees that any legal suit, action or proceeding
arising out of or relating to this Debenture shall be instituted exclusively in
the New York State Supreme Court, County of New York or in the United States
District Court for the Southern District of New York, (ii) waives any objection
which Payor may have now or hereafter based upon FORUM NON CONVENIENS or to the
venue of any such suit, action or proceeding, and (iii) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. Payor further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the New York State Supreme Court, County of New York or in the
United States District Court for the Southern District of New York and agrees
that service of process upon the Payor, mailed by certified mail to the Payor's
address, will be deemed in every respect effective service of process upon
Payor, in any suit, action or proceeding. FURTHER, BOTH PAYOR AND PAYEE HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS DEBENTURE AND IN CONNECTION
WITH ANY DEFENSE, COUNTERCLAIM OR CROSSCLAIM ASSERTED IN ANY SUCH ACTION.
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12.5. This Debenture shall bind Payor and its successors and assigns.
TELEHUBLINK CORPORATION
By: /s/ BRUCE YOUNG
-------------------
Bruce Young, President
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THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT: (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, SATISFACTORY TO COUNSEL FOR THE COMPANY,
STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _________, 2003
No. W-____ _______ Warrants
TELEHUBLINK CORPORATION
WARRANT CERTIFICATE
This warrant certificate (the "Warrant Certificate") certifies that
_______________________ or registered assigns, is the registered holder of
warrants to purchase, at any time during the period commencing on the
Commencement Date (as hereinafter defined) and continuing until 5:00 P.M. New
York City time on __________, 2003 (the "Expiration Date"), up to _______
fully-paid and non-assessable shares, subject to adjustment in accordance with
Section 6 hereof (the "Warrant Shares"), of the common stock, par value $.01 per
share (the "Common Shares"), of TeleHubLink Corporation, a Delaware corporation
(the "Company"), subject to the terms and conditions set forth herein. The
warrants represented by this Warrant Certificate and any warrants resulting from
a transfer or subdivision of the warrants represented by this Warrant
Certificate shall sometimes hereinafter be referred to, individually, as a
"Warrant" and, collectively, as the "Warrants." As used herein, the term
"Commencement Date" shall mean the earliest of the Maturity Date or the
Prepayment Date set forth in that certain 10% Subordinated Convertible Debenture
dated ________, 1999 made by the Company in favor of the holder hereof (the
"Debenture").
This Warrant Certificate is one of a series of Warrant Certificates being
issued as part of a private offering pursuant to the Company's Confidential
Private Offering Memorandum dated June 8, 1999 (the "Memorandum").
1. EXERCISE OF WARRANTS. Each Warrant is initially exercisable to purchase
one Warrant Share at the Initial Exercise Price (as defined in Section 5.1
hereof), subject to adjustment
<PAGE>
as set forth in Section 6 hereof, payable in cash or by check to the order of
the Company, or any combination of cash or check. Upon surrender of this Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
Warrant Shares purchased, at the Company's principal offices (presently located
at 24 New England Executive Park, Burlington, MA 01803) the registered holder
thereof (the "Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Warrant Shares so purchased. The purchase rights
represented by this Warrant Certificate are exercisable at the option of the
Holder hereof, in whole or in part (but not as to fractional Common Shares). In
the case of the purchase of less than all the Warrant Shares purchasable under
this Warrant Certificate, the Company shall cancel this Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrant Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES. Exercise of the Warrants shall be deemed to
have been made at the close of business on the date on which a duly executed
Form of Election to Purchase, together with the applicable Exercise Price, is
delivered to the Company. Upon the exercise of the Warrants, the person or
persons entitled to receive the Warrant Shares shall be treated for all purposes
as having been the record holder or holders thereof as of the relevant time
described in the foregoing sentence. Upon such exercise of the Warrants, the
issuance of certificates for the Warrant Shares purchased pursuant to such
exercise shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Section 3 hereof) be issued in
the name of, or in such names as may be directed by, the Holder thereof;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificates in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
The Warrant Certificates and, upon exercise of the Warrants, the
certificates representing the Warrant Shares shall be executed on behalf of the
Company by the manual or facsimile signature of those officers required to sign
such certificates under applicable law.
The Warrant Certificates and, upon exercise of the Warrants, in part or in
whole, certificates representing the Warrant Shares shall bear legends
substantially similar to the following:
"The securities represented by this certificate and/or the securities
issuable upon exercise thereof have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be offered or
sold except (i) pursuant to an effective registration statement under the
Act, (ii) to the extent applicable, pursuant to Rule 144 under the Act (or
any similar rule under such Act relating to the disposition of securities),
or (iii) upon the delivery by the holder to the
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<PAGE>
Company of an opinion of counsel, satisfactory to counsel to the Company,
stating that an exemption from registration under such Act is available."
3. INVESTMENT INTENT. The Holder of this Warrant Certificate, by its
acceptance thereof, covenants and agrees that the Warrants and the Warrant
Shares issuable upon exercise of the Warrants are being acquired as an
investment and not with a view to the distribution thereof.
4. REGISTRATION RIGHTS. The Holder shall be entitled to all of the rights
set forth in the Registration Rights Agreement dated as of the date hereof
between the Company and the Holder.
5. PRICE.
5.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise price of
each Warrant (the "Initial Exercise Price") shall be $2.00 per Warrant Share.
The adjusted exercise price (the "Adjusted Exercise Price") shall be the
price which shall result from time to time from any and all adjustments of the
Initial Exercise Price in accordance with the provisions of Section 6 hereof.
5.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
Initial Exercise Price or the Adjusted Exercise Price, depending upon the
context.
6. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
6.1 DIVIDENDS AND DISTRIBUTIONS. In case the Company shall at any time
after the date hereof pay a dividend in Common Shares or make a distribution in
Common Shares, then upon such dividend or distribution, the Exercise Price in
effect immediately prior to such dividend or distribution shall be reduced to a
price determined by dividing an amount equal to the total number of Common
Shares outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend or
distribution, by the total number of Common Shares outstanding immediately after
such issuance or sale. For purposes of any computation to be made in accordance
with the provisions of this Section 6.1, the Common Shares issuable by way of
dividend or distribution shall be deemed to have been issued immediately after
the opening of business on the date following the date fixed for determination
of shareholders entitled to receive such dividend or distribution.
6.2 SUBDIVISION AND COMBINATION. In case the Company shall at any time
subdivide or combine the outstanding Common Shares, the Exercise Price shall
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination.
6.3 ISSUANCES OF COMMON SHARES. If the Company shall, at any time or from
time to time after the Commencement Date, issue any Common Shares or other
securities convertible into, or exchangeable or exercisable for, Common Shares,
in each case other than Excluded Shares (as hereinafter defined), for no
consideration or for a consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such Common Shares or other
securities, the Exercise Price in effect immediately prior to each such issuance
shall automatically be lowered to a price equal to the consideration per share
received by the Company upon such
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<PAGE>
issuance. In the case of the issuance of Common Shares for a consideration
consisting in whole or part of property other than cash, the value of such
property shall be deemed to be the fair market value of such property as
determined in good faith by the Board of Directors of the Company. As used
herein, the term "Excluded Shares" shall mean (i) Common Shares issued in
connection with transactions described in Sections 6.1 and 6.2 hereof, (ii)
Common Shares issued upon the exercise or conversion of any options, rights,
warrants or other similar securities outstanding on the date hereof, (iii)
Common Shares issued to officers, directors or employees of or consultants to
the Company pursuant to any agreement, plan or arrangement approved prior to the
date hereof by the Board of Directors of the Company or a committee thereof
authorized to give such approval.
6.4 ADJUSTMENT IN NUMBER OF WARRANT SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 6, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full Common Share by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
6.5 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of any
reclassification or change of the outstanding Common Shares (other than a change
in nominal value to no nominal value, or from no nominal value to nominal value,
or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Common Shares, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of Warrant Shares issuable upon
exercise of the Warrants and (y) the Exercise Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrants.
6.6 DETERMINATION OF OUTSTANDING COMMON SHARES. The number of Common Shares
at any one time outstanding shall include the aggregate number of shares issued
or issuable upon the exercise of outstanding options, rights and warrants and
upon the conversion or exchange of outstanding convertible or exchangeable
securities.
7. REDEMPTION OF WARRANTS. The Warrants are redeemable by the Company, in
whole or in part, on not less than thirty (30) days' prior written notice at a
redemption price of $0.10 per Warrant at any time after issuance by the Company;
provided that the closing bid quotation of the Company's Common Shares has
exceeded $3.00 (subject to adjustment consistent with the provisions of Section
6 hereof) for a period of 30 consecutive trading days during the period in which
the Warrants are exercisable. The redemption notice shall be mailed to the
holders of the
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<PAGE>
Warrants at their addresses appearing in the Warrant register. Holders of the
Warrants will have exercise rights until the close of business on the date fixed
for redemption.
8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. This Warrant
Certificate is exchangeable without expense, upon the surrender hereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificates of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares, in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
9. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required
to issue certificates representing fractions of Common Shares and shall not be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of Common Shares, provided
that at its option the Company may pay cash in lieu of fractional shares based
on the closing sale price of the Company's Common Shares on the exchange or
market, if any, where such Common Shares are traded or quoted at the close of
business on the date on which the Warrants are deemed to have been exercised.
10. RESERVATION OF SHARES. The Company covenants and agrees that it will at
all times reserve and keep available out of its authorized share capital, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
Common Shares as shall be equal to the maximum number of Warrant Shares issuable
upon the exercise of the Warrants, for issuance upon such exercise, and that,
upon exercise of the Warrants and payment of the Exercise Price therefor, all
Warrant Shares issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to the preemptive rights of any
shareholder.
11. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement shall
be construed as conferring upon the Holder or Holders the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its Common
Shares for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings,
as indicated by the accounting treatment of such dividend or distribution
on the books of the Company; or
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<PAGE>
(b) the Company shall offer to all the holders of its Common Shares
any additional Common Shares or other shares of capital stock of the
Company or securities convertible into or exchangeable for Common Shares or
other shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
12. NOTICES All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
personally delivered or sent by registered or certified mail (return receipt
requested, postage prepaid), facsimile transmission or overnight courier:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 1 of this
Agreement or to such other address as the Company may designate by notice
to the Holders.
13. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
14. GOVERNING LAW
14.1 CHOICE OF LAW. This Warrant Certificate shall be deemed to have
been made and delivered in the State of New York and shall be governed as to
validity, interpretation, construction, effect and in all other respects by the
substantive laws of the State of New York, without giving effect to the choice
of laws rules thereof.
14.2 JURISDICTION AND SERVICE OF PROCESS. The Company and the Holder
each (a) agrees that any legal suit, action or proceeding arising out of or
relating to this Warrant Certificate, or any other agreement entered into
between the Company and the Holder pursuant to the Private Financing
contemplated by the Memorandum shall be instituted exclusively in the New York
State Supreme Court, County of New York or in the United States District Court
for the
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<PAGE>
Southern District of New York, (b) waives any objection which the Company or
such Holder may have now or hereafter based upon FORUM NON CONVENIENS or to the
venue of any such suit, action or proceeding, and (c) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company and the Holder each further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York or in the United States District Court for the Southern District of New
York and agrees that service of process upon the Company or the Holder mailed by
certified mail to their respective addresses shall be deemed in every respect
effective service of process upon the Company or the Holder, as the case may be,
in any suit, action or proceeding. FURTHER, BOTH THE COMPANY AND THE HOLDER
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THE TERMS OF THIS WARRANT
CERTIFICATE AND IN CONNECTION WITH ANY DEFENSE, COUNTER-CLAIM OR CROSSCLAIM
ASSERTED IN ANY SUCH ACTION.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of this ____ day of ________, 1999.
[SEAL] TELEHUBLINK CORPORATION
By:____________________
Name:
Title:
Attest:
____________________________
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<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Warrant Shares and
herewith tenders in payment for such Warrant Shares cash or a check payable to
the order of TeleHubLink Corporation in the amount of $_______ , all in
accordance with the terms hereof. The undersigned requests that a certificate
for such Warrant Shares be registered in the name of_________________ , whose
address is______________________ , and that such certificate be delivered
to_______________________, whose address is____________________.
Dated: Signature:
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
____________________________
____________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_____________________hereby sells, assigns and transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint_________________________ ,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:
________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the day of 1999, executed and delivered by
TeleHubLink Corporation, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 24 New England Executive
Park, Burlington, MA 01803 (the "Company"), in favor of the Holders (as defined
below).
WHEREAS, pursuant to the terms and conditions set forth in the Confidential
Private Offering Memorandum of the Company, dated June 8, 1999, including the
exhibits thereto, and any and all supplements thereof and amendments thereto,
and all documents incorporated by reference therein (collectively, the
"Memorandum"), the Company is offering for sale (the "Offering") units
("Units"), each Unit consisting of a 10% Subordinated Convertible Debenture in
the principal amount of $25,000 (the "Debentures"); and
WHEREAS, each of the Debentures provides for the issuance by the Company of
warrants (the "Warrants") to acquire Common Stock of the Company (the "Warrant
Shares"); and
WHEREAS, the Debentures are convertible into shares ("Conversion Shares")
of Common Stock of the Company; and
WHEREAS, pursuant to the terms and conditions set forth in the Memorandum,
including those contained in the subscription agreement ("Subscription
Agreement") which has been executed and delivered by or on behalf of each of the
initial purchasers of Units from the Company (the "Initial Purchasers"), each of
the Initial Purchasers is purchasing the Units for which it has subscribed; and
WHEREAS, the terms and conditions of the Offering provide for the execution
and delivery of this Agreement;
NOW, THEREFORE, in order to induce the Initial Purchasers to purchase the
Units, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged by the Company, the Company hereby agrees as
follows:
1. PIGGYBACK REGISTRATION. (a) If, at any time during the five-year period
commencing on the first anniversary of the Initial Closing (as defined in the
Memorandum), the Company proposes to prepare and file one or more registration
statements or amendments, including post-effective amendments, or supplements
thereto covering any of the Company's equity or debt securities held by the
Company or any of its shareholders, in such case other than pursuant to Form S-8
or successor form (collectively, a "Registration Statement"), it will give
written notice of its intention to do so by registered mail ("Notice"), at least
thirty (30) business days prior to the filing of each such Registration
Statement, to each Person (defined hereafter) who beneficially holds Warrant
Shares, Conversion Shares, Warrants exercisable for Warrant Shares and/or
Debentures convertible into Conversion Shares (such Warrant Shares and
Conversion Shares, including those issued and those issuable upon exercise of
Warrants or conversion of Debentures, collectively referred to herein as
"Registrable Securities") and each of the successors, assigns and transferees of
each of such Persons (individually, a "Holder" and collectively, "Holders").
"Person" as used herein shall mean any individual, sole proprietorships,
partnership, corporation, association, joint venture, trust, unincorporated
entity or other entity, or the government of any country or sovereign state, or
of any state, province, municipality or other political subdivision thereof.
(b) Upon the written request of a Holder or Holders, made within twenty
(20) business days after receipt of the Notice, that the Company include all or
a portion of the Registrable Securities held by such Holders ("Piggyback
Securities") in the proposed Registration Statement (each such Holder, a
"Requesting Holder"), the Company shall use its best efforts to cause such
Registration Statement to be declared effective under the Securities Act of
1933, as amended (the "Act"), by the Securities and Exchange Commission (the
"SEC") so as to permit the public sale by the Requesting Holders of their
Piggyback Securities pursuant thereto, at the Company's sole cost and expense
and at no cost or expense to the Requesting Holders. However, if, in the written
opinion of the Company's managing underwriter, if any, for the offering
evidenced by such Registration Statement, the inclusion of all or a portion of
the Piggyback Securities, when added to the securities being registered, will
exceed the maximum amount of the Company's securities which can be marketed
either (i) at a price reasonably related to their then-current market value or
(ii) without otherwise materially adversely affecting the entire offering, then
the Company may exclude from such offering all or a portion of the Piggyback
Securities.
(c) If securities are proposed to be offered for sale pursuant to such
Registration Statement by other security holders of the Company and the total
number of securities to be offered by the Requesting Holders and such other
selling security holders is required to be reduced pursuant to a request from
the managing underwriter (which request shall be made only for the reasons and
in the
<PAGE>
manner set forth above), the aggregate number of Piggyback Securities
to be offered by Requesting Holders pursuant to such Registration Statement
shall equal the number which bears the same ratio to the maximum number of
securities that the underwriter believes may be included for all the selling
security holders (including the Requesting Holders) as the original number of
Piggyback Securities proposed to be sold by the Requesting Holders bears to the
total original number of securities proposed to be offered by the Requesting
Holders and the other selling security holders.
(d) Once effective, the Company covenants and agrees to use its best
efforts to maintain the effectiveness of the Registration Statement until the
earlier of (i) the date that all of the Registrable Securities have been sold
pursuant to a Registration Statement or Rule 144 of the General Rules and
Regulations promulgated under the Act ("Rule 144"), or (ii) the date that the
Holders of the Registrable Securities receive an opinion of counsel to the
Company that all of the Registrable Securities may be freely traded (without
limitation or restriction as to quantity or timing and without registration
under the Act) pursuant to Rule 144 or otherwise, except that, the Company may
suspend the use of the Registration Statement for a period not to exceed 90 days
in any 12-month period for valid business reasons, including the acquisition or
divestiture of assets, public filings with the SEC, pending corporate
developments and similar events.
(e) Anything herein contained to the contrary notwithstanding, the
provisions of this Agreement shall not apply to, and the term "Registrable
Securities" as used in this Agreement shall not include, Warrant Shares or
Conversion Shares after they have been sold by a Holder pursuant to an effective
Registration Statement under the Act or pursuant to Rule 144.
(f) Notwithstanding the provisions of this Section 1, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 1 (irrespective of whether any written request for inclusion of
Piggyback Securities shall have already been made) to elect not to file any such
proposed Registration Statement or to withdraw the same after its filing but
prior to the effective date thereof.
2. ADDITIONAL COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The
Company covenants and agrees as follows:
(a) In connection with any registration of Registrable Securities pursuant
to Section 1 above, the Company shall furnish each Holder of Registrable
Securities included in a Registration Statement with such reasonable number of
copies of such Registration Statement, related preliminary prospectus and
prospectus meeting the requirements of the Act, and other documents necessary or
incidental to the registration and public offering of such Registrable
Securities, as shall be reasonably requested by the Holder to permit the Holder
to make a public distribution of such Registrable Securities.
(b) If any stop order shall be issued by the SEC in connection with any
Registration Statement filed pursuant to Section 1 above, the Company will use
its best efforts to obtain the removal of such order.
(c) The Company shall pay all costs, fees, and expenses in connection with
all Registration Statements filed pursuant to Section 1 above, including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses; provided, however, that the Holders shall be
solely responsible for the fees of any counsel retained by the Holders in
connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Registrable Securities sold by
the Holders pursuant thereto.
(d) The Company will use its best efforts to qualify any Registrable
Securities included in a Registration Statement for sale in such states as the
Holders of such securities shall reasonably request, provided that no such
qualification will be required in any jurisdiction where, solely as a result
thereof, the Company would be subject to general service of process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
3. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with any Registration Statement covering Registrable
Securities, the Company agrees to indemnify and hold harmless each Holder, the
affiliates of each such Holder, the directors, partners, officers, employees and
agents
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<PAGE>
of each such Holder and each person who controls any such Holder within the
meaning of either the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
a Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon 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, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that (i) the
Company will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such Holder specifically for inclusion therein,
(ii) the Company will not be liable to any indemnified party under this
indemnity agreement with respect to any Registration Statement or Prospectus to
the extent that any such loss, claim, damage or liability of such indemnified
party results from the use of the Prospectus during a period when the use of the
Prospectus has been suspended, provided that the Holders received prior notice
of such suspension, which notice shall be deemed to have been received by such
Holders within 48 hours after the giving thereof; and (iii) the Company shall
not be liable to any indemnified party with respect to any preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results from the fact that such indemnified party sold
Registrable Securities to a person as to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Prospectus or of
the Prospectus as then amended or supplemented in any case where such delivery
is required by the Act, if the loss, claim, damage or liability of such
indemnified party results from an untrue statement or omission of a material
fact contained in the preliminary Prospectus which was corrected in the
Prospectus or in the Prospectus as then amended or supplemented. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company also agrees to indemnify and provide contribution to each
person who may be deemed to be an underwriter (for purposes of the Act) with
respect to the Registrable Securities ("Underwriters"), their officers and
directors, and each person who controls each such Underwriter, on substantially
the same basis as that of the indemnification of and contribution to the Holders
provided in this Section 3.
(b) By its participation in a Registration Statement, each Holder shall
be deemed to have agreed to indemnify and hold harmless (i) the Company, (ii)
each of its directors, (iii) each of its officers who signs such Registration
Statement and (iv) each person who controls the Company within the meaning of
either the Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with respect to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have. Each Holder shall also be
deemed to have agreed to indemnify and contribute to each Underwriter, their
officers and directors, and each person who controls each such Underwriter, on
substantially the same basis as that of the indemnification of and contribution
to the Company provided in this Section 3. Anything in this Agreement contained
to the contrary notwithstanding, the liability of each Holder for
indemnification or contribution hereunder shall be limited to the amount of
proceeds received by such Holder in the offering giving rise to such liability.
(c) Promptly after receipt by an indemnified party under this Section 3
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 3, notify the indemnifying party in writing of the commencement thereof;
but the failure so to promptly notify the indemnifying party will not relieve
the indemnifying party from liability under Section 3(a) or 3(b) hereof unless
and to the extent that it is materially prejudiced thereby. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party
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<PAGE>
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party. An indemnified party shall not settle or compromise any action for which
it seeks indemnification or contribution hereunder without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld. An indemnifying party will not, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in Section 3(a) or 3(b) is
unavailable to or insufficient to hold harmless an indemnified party for any
reason, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such losses.
(e) The provisions of this Section 3 shall remain in full force and effect
regardless of any investigation made by or on behalf of any Holder or the
Company or any other persons who are entitled to indemnification pursuant to the
provisions of this Section 3, and shall survive the sale by a Holder of
Registrable Securities pursuant to the Registration Statement.
4. AMENDMENTS. This Agreement may not be amended, modified or supplemented,
and waivers of or consents to departures from the provisions of this Agreement
may not be given, unless the Company has obtained the consent of Holders then
holding a majority of the Registrable Securities.
5. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the Company, the Holders and the other persons and entities
described in Section 3 hereof and their respective successors, assigns and
transferees, including, without limitation and without the need for an express
assignment, subsequent Holders.
6. THIRD PARTY BENEFICIARIES. The Holders from time to time shall each be a
third party beneficiary of the agreements of the Company contained herein.
7. HEADINGS. The headings which are contained in this Agreement are for the
sole purpose of convenience of reference, and shall not limit or otherwise
affect the interpretation of any of the provisions hereof.
8. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of New York applicable to contracts made and to be wholly performed therein.
9. NOTICES. All notices and other communications hereunder shall be in
writing (which shall include publication), and shall be made by hand delivery,
registered first-class mail, telecopier or any courier providing overnight
delivery, (i) if to the Company or an Initial Purchaser, at the address set
forth in the Subscription Agreement and (ii) if to a Holder to the address set
forth on the books and records of the Company. All such notices and other
communications shall be deemed to have been duly given upon receipt.
10. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
Company with respect to the subject matter hereof.
11. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions of this Agreement shall not be in any way impaired or
affected thereby.
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<PAGE>
12. FURTHER ASSURANCES. The Company will from time to time after the date
hereof take any and all actions, and execute, acknowledge and deliver any and
all documents and instruments, at its cost and expense, as any Holder may from
time to time reasonably request in order to more fully perfect or protect the
rights intended to be granted to it hereunder.
13. INTERPRETATION. As used in this Agreement, unless the context otherwise
requires: words describing the singular number shall include the plural and vice
versa; words denoting any gender shall include all genders; words denoting
natural persons shall include corporations, partnerships and other entities, and
vice versa; and the words "hereof", "herein" and "hereunder", and words of
similar import, shall refer to this Agreement as a whole, and not to any
particular provision of this Agreement.
14. WAIVER. The failure of the Company or any Holder to at any time enforce
any of the provisions of this Agreement shall not be deemed or construed to be a
waiver of any such provision, nor to in any way affect the validity of this
Agreement or any provision hereof or the right of the Company or any Holder to
thereafter enforce each and every provision of this Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Agreement as of the date above written:
TELEHUBLINK CORPORATION
By:/s/ BRUCE YOUNG
------------------
Name: Bruce Young
Title: President
AGREED:
HOLDER SIGNATURE:
- -----------------
- --------------------------
Print Name of Organization
By:-----------------------
(Signature and Title)
- --------------------------
Print Name and Title of
Person Signing
INDIVIDUAL SIGNATURE:
- ---------------------
- ---------------------
- ---------------------
Signature(s)
- ---------------------
Print Name
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REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the____day of_____ 1999, executed and delivered by
TeleHubLink Corporation, a company incorporated under the laws of the State of
Delaware, having its principal place of business at 24 New England Executive
Park, Burlington, MA 01803 (the "Company"), in favor of the Holders (as defined
below).
WHEREAS, pursuant to the terms and conditions set forth in the Confidential
Private Offering Memorandum of the Company, dated July 26, 1999, including the
exhibits thereto, and any and all supplements thereof and amendments thereto,
and all documents incorporated by reference therein (collectively, the
"Memorandum"), the Company is offering for sale (the "Offering") units
("Units"), each Unit consisting of 40,000 shares of common stock, par value $.01
per share ("Common Stock"), of the Company; and
WHEREAS, pursuant to the terms and conditions set forth in the Memorandum,
including those contained in the subscription agreement ("Subscription
Agreement") which has been executed and delivered by or on behalf of each of the
initial purchasers of Units from the Company (the "Initial Purchasers"), each of
the Initial Purchasers is purchasing the Units for which it has subscribed; and
WHEREAS, the terms and conditions of the Offering provide for the execution
and delivery of this Agreement;
NOW, THEREFORE, in order to induce the Initial Purchasers to purchase the
Units, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged by the Company, the Company hereby agrees as
follows:
1. PIGGYBACK REGISTRATION. (a) If, at any time during the five-year period
commencing on the first anniversary of the Initial Closing (as defined in the
Memorandum), the Company proposes to prepare and file one or more registration
statements or amendments, including post-effective amendments, or supplements
thereto covering any of the Company's equity or debt securities held by the
Company or any of its shareholders, in such case other than pursuant to Form S-8
or successor form (collectively, a "Registration Statement"), it will give
written notice of its intention to do so by registered mail ("Notice"), at least
thirty (30) business days prior to the filing of each such Registration
Statement, to each Person (defined hereafter) who beneficially holds shares of
Common Stock issued by the Company pursuant to the Memorandum (such shares being
collectively referred to herein as "Registrable Securities") and each of the
successors, assigns and transferees of each of such Persons (individually, a
"Holder" and collectively, "Holders"). "Person" as used herein shall mean any
individual, sole proprietorships, partnership, corporation, association, joint
venture, trust, unincorporated entity or other entity, or the government of any
country or sovereign state, or of any state, province, municipality or other
political subdivision thereof.
(b) Upon the written request of a Holder or Holders, made within twenty
(20) business days after receipt of the Notice, that the Company include all or
a portion of the Registrable Securities held by such Holders ("Piggyback
Securities") in the proposed Registration Statement (each such Holder, a
"Requesting Holder"), the Company shall use its best efforts to cause such
Registration Statement to be declared effective under the Securities Act of
1933, as amended (the "Act"), by the Securities and Exchange Commission (the
"SEC") so as to permit the public sale by the Requesting Holders of their
Piggyback Securities pursuant thereto, at the Company's sole cost and expense
and at no cost or expense to the Requesting Holders. However, if, in the written
opinion of the Company's managing underwriter, if any, for the offering
evidenced by such Registration Statement, the inclusion of all or a portion of
the Piggyback Securities, when added to the securities being registered, will
exceed the maximum amount of the Company's securities which can be marketed
either (i) at a price reasonably related to their then-current market value or
(ii) without otherwise materially adversely affecting the entire offering, then
the Company may exclude from such offering all or a portion of the Piggyback
Securities.
(c) If securities are proposed to be offered for sale pursuant to such
Registration Statement by other security holders of the Company and the total
number of securities to be offered by the Requesting Holders and such other
selling security holders is required to be reduced pursuant to a request from
the managing underwriter (which request shall be made only for the reasons and
in the manner set forth above), the aggregate number of Piggyback Securities to
be offered by Requesting Holders pursuant to such Registration Statement shall
equal the number which bears the same ratio to the maximum number of securities
that the underwriter believes may be included for all the selling security
holders (including the Requesting Holders) as the original number of Piggyback
Securities proposed to be sold by the Requesting Holders bears to the total
original number of securities proposed to be offered by the Requesting Holders
and the other selling security holders.
(d) Once effective, the Company covenants and agrees to use its best
efforts to maintain the effectiveness of
<PAGE>
the Registration Statement until the earlier of (i) the date that all of the
Registrable Securities have been sold pursuant to a Registration Statement or
Rule 144 of the General Rules and Regulations promulgated under the Act ("Rule
144"), or (ii) the date that the Holders of the Registrable Securities receive
an opinion of counsel to the Company that all of the Registrable Securities may
be freely traded (without limitation or restriction as to quantity or timing and
without registration under the Act) pursuant to Rule 144 or otherwise, except
that, the Company may suspend the use of the Registration Statement for a period
not to exceed 90 days in any 12-month period for valid business reasons,
including the acquisition or divestiture of assets, public filings with the SEC,
pending corporate developments and similar events.
(e) Anything herein contained to the contrary notwithstanding, the
provisions of this Agreement shall not apply to, and the term "Registrable
Securities" as used in this Agreement shall not include, Conversion Shares after
they have been sold by a Holder pursuant to an effective Registration Statement
under the Act or pursuant to Rule 144.
(f) Notwithstanding the provisions of this Section 1, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 1 (irrespective of whether any written request for inclusion of
Piggyback Securities shall have already been made) to elect not to file any such
proposed Registration Statement or to withdraw the same after its filing but
prior to the effective date thereof.
2. ADDITIONAL COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. The
Company covenants and agrees as follows:
(a) In connection with any registration of Registrable Securities pursuant
to Section 1 above, the Company shall furnish each Holder of Registrable
Securities included in a Registration Statement with such reasonable number of
copies of such Registration Statement, related preliminary prospectus and
prospectus meeting the requirements of the Act, and other documents necessary or
incidental to the registration and public offering of such Registrable
Securities, as shall be reasonably requested by the Holder to permit the Holder
to make a public distribution of such Registrable Securities.
(b) If any stop order shall be issued by the SEC in connection with any
Registration Statement filed pursuant to Section 1 above, the Company will use
its best efforts to obtain the removal of such order.
(c) The Company shall pay all costs, fees, and expenses in connection with
all Registration Statements filed pursuant to Section 1 above, including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses; provided, however, that the Holders shall be
solely responsible for the fees of any counsel retained by the Holders in
connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Registrable Securities sold by
the Holders pursuant thereto.
(d) The Company will use its best efforts to qualify any Registrable
Securities included in a Registration Statement for sale in such states as the
Holders of such securities shall reasonably request, provided that no such
qualification will be required in any jurisdiction where, solely as a result
thereof, the Company would be subject to general service of process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
3. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with any Registration Statement covering Registrable
Securities, the Company agrees to indemnify and hold harmless each Holder, the
affiliates of each such Holder, the directors, partners, officers, employees and
agents of each such Holder and each person who controls any such Holder within
the meaning of either the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
a Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements
-2-
<PAGE>
therein not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that (i) the Company will not be liable
in any case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein, (ii) the Company will not be liable
to any indemnified party under this indemnity agreement with respect to any
Registration Statement or Prospectus to the extent that any such loss, claim,
damage or liability of such indemnified party results from the use of the
Prospectus during a period when the use of the Prospectus has been suspended,
provided that the Holders received prior notice of such suspension, which notice
shall be deemed to have been received by such Holders within 48 hours after the
giving thereof; and (iii) the Company shall not be liable to any indemnified
party with respect to any preliminary Prospectus to the extent that any such
loss, claim, damage or liability of such indemnified party results from the fact
that such indemnified party sold Registrable Securities to a person as to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act, if the
loss, claim, damage or liability of such indemnified party results from an
untrue statement or omission of a material fact contained in the preliminary
Prospectus which was corrected in the Prospectus or in the Prospectus as then
amended or supplemented. This indemnity agreement will be in addition to any
liability which the Company may otherwise have. The Company also agrees to
indemnify and provide contribution to each person who may be deemed to be an
underwriter (for purposes of the Act) with respect to the Registrable Securities
("Underwriters"), their officers and directors, and each person who controls
each such Underwriter, on substantially the same basis as that of the
indemnification of and contribution to the Holders provided in this Section 3.
(b) By its participation in a Registration Statement, each Holder shall be
deemed to have agreed to indemnify and hold harmless (i) the Company, (ii) each
of its directors, (iii) each of its officers who signs such Registration
Statement and (iv) each person who controls the Company within the meaning of
either the Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with respect to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have. Each Holder shall also be
deemed to have agreed to indemnify and contribute to each Underwriter, their
officers and directors, and each person who controls each such Underwriter, on
substantially the same basis as that of the indemnification of and contribution
to the Company provided in this Section 3. Anything in this Agreement contained
to the contrary notwithstanding, the liability of each Holder for
indemnification or contribution hereunder shall be limited to the amount of
proceeds received by such Holder in the offering giving rise to such liability.
(c) Promptly after receipt by an indemnified party under this Section 3 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 3, notify the indemnifying party in writing of the commencement thereof;
but the failure so to promptly notify the indemnifying party will not relieve
the indemnifying party from liability under Section 3(a) or 3(b) hereof unless
and to the extent that it is materially prejudiced thereby. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnified party shall not
settle or compromise any action for which it seeks indemnification or
contribution hereunder without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless
-3-
<PAGE>
such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in Section 3(a) or 3(b) is
unavailable to or insufficient to hold harmless an indemnified party for any
reason, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such losses.
(e) The provisions of this Section 3 shall remain in full force and effect
regardless of any investigation made by or on behalf of any Holder or the
Company or any other persons who are entitled to indemnification pursuant to the
provisions of this Section 3, and shall survive the sale by a Holder of
Registrable Securities pursuant to the Registration Statement.
4. AMENDMENTS. This Agreement may not be amended, modified or supplemented,
and waivers of or consents to departures from the provisions of this Agreement
may not be given, unless the Company has obtained the consent of Holders then
holding a majority of the Registrable Securities.
5. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, the Company, the Holders and the other persons and entities
described in Section 3 hereof and their respective successors, assigns and
transferees, including, without limitation and without the need for an express
assignment, subsequent Holders.
6. THIRD PARTY BENEFICIARIES. The Holders from time to time shall each be a
third party beneficiary of the agreements of the Company contained herein.
7. HEADINGS. The headings which are contained in this Agreement are for the
sole purpose of convenience of reference, and shall not limit or otherwise
affect the interpretation of any of the provisions hereof.
8. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of New York applicable to contracts made and to be wholly performed therein.
9. NOTICES. All notices and other communications hereunder shall be in
writing (which shall include publication), and shall be made by hand delivery,
registered first-class mail, telecopier or any courier providing overnight
delivery, (i) if to the Company or an Initial Purchaser, at the address set
forth in the Subscription Agreement and (ii) if to a Holder to the address set
forth on the books and records of the Company. All such notices and other
communications shall be deemed to have been duly given upon receipt.
10. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
Company with respect to the subject matter hereof.
11. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions of this Agreement shall not be in any way impaired or
affected thereby.
12. FURTHER ASSURANCES. The Company will from time to time after the date
hereof take any and all actions, and execute, acknowledge and deliver any and
all documents and instruments, at its cost and expense, as any Holder may from
time to time reasonably request in order to more fully perfect or protect the
rights intended to be granted to it hereunder.
13. INTERPRETATION. As used in this Agreement, unless the context otherwise
requires: words describing the singular number shall include the plural and vice
versa; words denoting any gender shall include all genders; words denoting
natural persons shall
-4-
<PAGE>
include corporations, partnerships and other entities, and vice versa; and the
words "hereof", "herein" and "hereunder", and words of similar import, shall
refer to this Agreement as a whole, and not to any particular provision of this
Agreement.
14. WAIVER. The failure of the Company or any Holder to at any time enforce
any of the provisions of this Agreement shall not be deemed or construed to be a
waiver of any such provision, nor to in any way affect the validity of this
Agreement or any provision hereof or the right of the Company or any Holder to
thereafter enforce each and every provision of this Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Agreement as of the date above written:
TELEHUBLINK CORPORATION
By:/s/ BRUCE YOUNG
------------------
Name: Bruce Young
Title: President
AGREED:
HOLDER SIGNATURE:
- -----------------
- --------------------------
Print Name of Organization
By:-----------------------
(Signature and Title)
- --------------------------
Print Name and Title of
Person Signing
INDIVIDUAL SIGNATURE:
- ---------------------
- ---------------------
- ---------------------
Signature(s)
- ---------------------
Print Name
-5-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 64,463
<SECURITIES> 0
<RECEIVABLES> 426,872
<ALLOWANCES> 42,275
<INVENTORY> 0
<CURRENT-ASSETS> 456,165
<PP&E> 277,782
<DEPRECIATION> (48,063)
<TOTAL-ASSETS> 1,250,128
<CURRENT-LIABILITIES> 995,923
<BONDS> 0
0
0
<COMMON> 178,734
<OTHER-SE> (89,028)
<TOTAL-LIABILITY-AND-EQUITY> 1,250,128
<SALES> 811,077
<TOTAL-REVENUES> 811,077
<CGS> 468,796
<TOTAL-COSTS> 828,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,799
<INCOME-PRETAX> (20,481)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,481)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,481)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
EXHIBIT 99.1
SALE OF ENTERPRISE AGREEMENT
ENTERED THIS JUNE 16TH, 1999
BETWEEN: TELEHUBLINK CORPORATION, a duly constituted corporation,
having its head office located at New England Executive
Park, in the city and district of Burlington, State of
Massachussets, represented by BRUCE YOUNG being duly
authorized to enter its President, into this Agreement,
(hereinafter referred to as "the Buyer");
AND: WEB TRAFIC INC., a duly constituted corporation, having its
head office at 9625 Ignace, in the city of Brossard,
province of Quebec, herein represented by SERGE TRUDEAU, its
President being duly authorized to enter into this Agreement
and its Director Michel Cote,
(hereinafter referred to as "the Vendor");
BEFORE ENTERING INTO THE PRESENT AGREEMENT, THE PARTIES DECLARE AS FOLLOWS:
WHEREAS the Vendor is engaged in the operatation of an e-commerce and internet
business known as WEB TRAFIC INC. (hereinafter the "business");
WHEREAS the Vendor has concluded an agreement with IMALL to represent its
services, on a non-exclusive basis, in Canada produced and appended hereto in
ANNEX "A" and referred to hereafter as the "IMALL Agreement".
WHEREAS the Vendor desires to sell the said business and all related rights and
assets;
WHEREAS the Buyer has expressed an interest in acquiring the business and all
related rights and assets;
WHEREAS the Vendor's representative and the Buyer have prior to this agreement
entered into a management contract referred to, and appended hereto in ANNEX
"B" (hereinafter referred to as the ("Management Agreement");
<PAGE>
2
WHEREAS the parties intend to satisfy the requirements of the Code Civil of
Quebec governing such a transaction;
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
For the purpose of the present agreement, and of any other document related to
it or which makes reference to it, unless the context opposes it, the following
words, terms or expressions will have the meaning given to them hereafter:
1.1. ASSETS: means all of the fixed assets, plus inventory as defined
hereafter, any and all rights, trade marks, trade names which it may
have in its internet and e-commerce related businesses and the goodwill
attached to such businesses, including the rights and benefits
pertaining to the IMALL Agreement referred hereto as if recited at
length (Annex "A");
1.2. CLOSING: means the fulfilling and the complete execution, in accordance
with the conditions laid out in the present agreement, of the sale of
the business by the Vendor to the Buyer and of all other related
transactions between the parties made necessary by the present
agreement and which will happen, on or before June 16, 1999 in the
province of Quebec;
1.3. EFFECTIVE CLOSING DATE: means June 16, 1999;
1.4. BUSINESS: means the Internet and e-commerce business presently
exploited by the Vendor under the name "Web Trafic Inc.";
1.5 ESCROW AGENT: means the law firm of Mannella & Associates, located at
3055, De l'Assomption, in Montreal, province of Quebec;
1.6 FIXED ASSETS: means all the equipment, furniture and other accessories;
1.7. INVENTORY: means all existing supplies on the Premises;
1.8. MANAGEMENT: means the officers, directors, key employees identified by
the Buyer as being part of the management of the Vendor;
1.09. TAXES: means federal and provincial income taxes, federal, provincial
or municipal taxes of any type such as goods and services taxes,
capital taxes, sales or use taxes, property taxes, business taxes, any
liability relating to Worker's Compensation or Employers' Health Tax
and any withholding requirements relating to Employment Insurance, the
Canada Pension Plan or
<PAGE>
3
Employment Standards, the Quebec Pension Plan and any other
governmental charges or assessments.
2. PREAMBLE
2.1. The preamble hereto shall form a part hereof as if hereinafter recited
at length.
3. NATURE OF THE AGREEMENT
3.1. This Agreement is an offer to purchase from the Vendor the entreprise
called "WEB TRAFIC INC." together with all its rights and assets, as
further described hereinafter, effective on the Effective Closing Date;
3.2. The present Agreement constitutes the entire agreement between the
parties and any and all previous agreement, written or oral, express or
implied between the parties or on their behalf during the course of the
negotiation of the present Agreement are hereby terminated and
cancelled;
4. SALE PRICE OF THE ENTERPRISE
4.1. The parties have agreed that the sale price of the business and its
assets shall be EIGHTY THOUSAND DOLLARS (80,000.00 $) which the Vendor
herein declares having received and for which said Vendor gives
complete quit and discharge thereof to the Buyer;
5. VENDOR'S REPRESENTATIONS AND WARRANTEES
5.1. The Vendor represents and warrants to the Buyer, that, at the signing
of the present agreement, that each of the following representations
and warrantees constitute for the Buyer a condition without which the
Buyer would not have entered into the present Agreement.
5.2. The Vendor represents and warrants to the Buyer that it is a duly
constituted corporation and is in good standing with respect to the
laws pertaining to its existence and its activities; that it will have
the capacity and the right to own assets and to dispose of them, to
carry out its business and, notwithstanding the approval of the present
Agreement by its board of directors, to fulfill its obligations under
the present Agreement;
5.3. The Vendor represents and warrants that all returns, filings, elections
and information reports required to be filed by it have been or will be
filed on or
<PAGE>
4
before the date of closing and that such returns are true, complete and
correct and properly reflect the liability of the Vendor for taxes.
5.4. The Vendor has furnished the Buyer with an unaudited balance sheet and
the related unaudited statement of income, for the period ending June
15, 1999 at closing attached as ANNEX "C". The Vendor represents and
warrants that such financial statements, including the notes thereto,
are true and correct and fairly present the financial condition of the
Vendor at the date thereof and, except as indicated therein, reflect
all claims against and all liabilities of the Vendor, fixed or
contigent, as at the date thereof, required to be shown under Canadian
generally accepted accounting principles, and accurately present the
results of the operations of the Vendor and the changes in financial
position for the period indicated;
5.5 The Vendor represents and warrants that it has made timely payment of
all taxes, installments and all assessments, reassessments, charges,
penalties, interest and fines related thereto which were or are due and
payable by it.
The Vendor also represents and warrants that it is not subject to taxes
in any jurisdiction other than Canada and the province of Quebec;
5.6. The Vendor represents and warrants that, where applicable, it has
withheld from each payment made to any of its officers, directors,
former directors, and employees the amount of all taxes and other
deductions required to be withheld therefrom and has paid the same on a
timely basis to the proper governmental authority.
5.7. The Vendor represents and warrants that all accounts, books, ledgers
and other records material to the buniess of whatsoever kind have been
fully, properly and accurately kept and completed in all material
respects, and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein, and they give and reflect a
true and fair view of the business;
5.8 The Vendor represents and warrants that the Vendor is not a party to
any material contract, but not limited to, (a) any employment,
compensation, pension plan or shareholders agreement, (b) any loan
agreement, (c) any guarantee, (d) any maintenance or service agreement,
(e) any agreement, contract or commitment limiting the ability of the
Vendor to engage in any line of business or to compete with any other
person, (f) any lease for real (immoveable) or personal (moveable)
property, (g) any agreement with any officer or director of the Vendor,
(h) any contract with clients, and (i) any agreement, contract or
commitment which might reasonably be expected to have a negative
material impact on the business or operations of the Vendor;
<PAGE>
5
5.9 The Vendor represents and warrants that it is the sole proprietor of
all the assets sold under the present Agreement and that those assets
are free of any charges, liens or encumbrances of any sort;
5.10 The Vendor represents and warrants that there has not been, and to its
best knowledge, information and belief do not anticipate, any adverse
change in relations with Clients as a result of the transactions
contemplated by this Agreement or otherwise;
5.11. The Vendor represents and warrants that all of the assets sold and all
of the inventory on the Premises are insured;
5.12. The Vendor represents and warrants to the Buyer that it has no
employees;
5.13. The Vendor represents and warrants that it has no unpaid creditors;
The Vendor agrees and undertakes to confirm in writing and repeat all of the
above representations and warranties to the Buyer as of Closing Effective Date
on Closing;
6. OPERATION OF THE BUSINESS UNTIL THE CLOSING DATE
6.1. As from the time of signing of the present Agreement until the date of
closing, the Vendor will carry on the operations of the business with
due diligence and in a manner appropriate and normal for an enterprise
operating a similar business. Without limiting the meaning of the
preceding, the Vendor undertakes not modify the prices or offer
discount or prices of any kind on the services that it offers to the
Clients;
6.2. The Vendor will not hire any employee or enter into any kind of
contractual agreement for the purpose of employment or of offering
services to the Clients from the Premises without prior written
approval of the Buyer;
6.3. The Vendor will maintain until the closing date proper property damage
insurance, including public and general liability, for the Premises;
6.4. The Vendor undertakes not to pledge or other wise encumber the assets
sold. In addition, the Vendor shall not sell, transfer or assign or
promise to sell, transfer or assign the assets sold to a third party
between the time of signing of the present Agreement and the closing
date;
6.5. The Vendor will pay all taxes, including, but without limiting the
generality of the preceding, all income, business, real-estate and
municipal taxes, due on or before December 31st, 1999 against the
business, if applicable;
<PAGE>
6
6.6. The Vendor will buy all the supplies if applicable necessary for the
effective continuous operation of the business directly from its
suppliers and pay for them no later thirty (30) days;
6.7. The Vendor will allow access to the Premises to the designated
representatives and to the officers of the Buyer at any time during
regular business hours and will if requested to do so introduce the
representatives or officers of the Buyer to the Clients;
6.8 It is agreed by the parties that until June 16, 1999, and subject to
the terms and conditions of the present agreement, including, without
limiting the generality of the preceding, the Closing, the income from
the operations, including, without limiting the generality of the
preceding, the account receivable as of Effective Closing Date, but
excluding work-in-progress not yet billed to the Clients, and profits
if any, of the business shall remain the sole property of WEB TRAFIC
INC.;
6.9. The Vendor agrees to abandon on the date of closing, forever and
without any recourse the name "WEB TRAFIC INC." or "WEB TRAFIC" and to
do all the acts and sign all the documents necessary for the buyer to
be able to use the name "WEB TRAFIC INC." or "WEB TRAFIC" for the
purpose of the business that it acquires under the present Agreement;
7. BUYER'S OBLIGATIONS, REPRESENTATIONS AND WARRANTEES
7.1. The Buyer represents and warrants to the Vendor the following and
acknowledges that each of the following representations and warrantees
constitute for the Vendor a condition without which the Vendor would
not have entered into the present Agreement;
7.2. The Buyer represents and warrants to the Vendor that it will be, at the
date of closing, a duly constituted corporation and will be in good
standing with respect to the laws pertaining to its existence and its
activities; that it will have the capacity and the right to own assets,
to carry out its business and, notwithstanding the approval of the
present Agreement by its board of directors, to fulfill its obligations
under the present Agreement;
7.3. The Buyer shall abide by the dispositions of the Management Agreement
(Annex "B") and any and all modifications brought thereto by
the parties hereto relating to the execution of the said Management
Agreement;
<PAGE>
7
8. NON-COMPETITION AND NON-SOLICITATION
8.1. The Management and the Vendor acknowledge that the goodwill acquired as
part of the present business purchase represents its most important
element and that the Management of the Vendor entering into a business
competitive to that of the business would cause serious and irreparable
damage to the Buyer;
8.2. Consequently, the Management and the Vendor both undertake, for a
period of twenty-four (24) months following the signing of the present
agreement, not to, alone or in association with others, directly or
indirectly, whether as employee, shareholder, director, agent, officer,
lender, guarantor, mandatory or otherwise:
(a) enter into any business that would be competitive in any way
with the business of the enterprise within the province of
Quebec;
8.3. Also, the Management and the Vendor both undertake to NEVER, alone or
in association with others, directly or indirectly, whether as
employee, shareholder, director, agent, officer, lender, guarantor,
mandatory or otherwise:
(b) solicit a client of the enterprise, present or future; and
(c) solicit an employee of the enterprise, present or future, to
work into any business that would be competitive with that of
the enterprise;
8.4. Any contravention to the non-competition obligations contained in
provision 8.2 or the non-solicitation obligations contained in
provision 8.3 from a member of the Management or the Vendor will
generate against the contravening party, without prejudice to any of
the other rights and recourses offered to the Buyer, a fixed penalty of
TEN THOUSAND DOLLARS ($10,000) for each and every day any such
contravention shall occur or continue;
8.5. The Management and the Vendor both recognize that the non-competition
obligations and penalties contained in provisions 8.2, 8.3 and 8.4 are
reasonable in the circumstances and are necessary for the protection of
the Buyer;
8.6. In the event that any of the obligations contained in provisions 8.2,
8.3 or 8.4 is found to be abusive by a court or an arbitrator for any
reason, the court or arbitrator can reduce the obligation to a
reasonable level;
9. ESCROW AGENT
9.01 The escrow agent shall not be required to give security nor shall he be
responsible for the acts, omissions, faults, errors, fraud, failure or
misconduct of any agent whom he may reasonably employ in the exercise
of the powers conferred upon him hereunder, nor for loss occasioned by
his own acts,
<PAGE>
8
omissions or defaults, unless such acts, omissions or defaults
constitute a breach of trust knowingly and intentionally committed by
him;
9.02 The escrow agent shall not be required to institute, defend, or
intervene in any legal action to enforce the terms and conditions of
the present Agreement until the escrow agent has been indemnified
against all expenses and liabilities incurred and to be incurred by the
escrow agent, including his own reasonable compensation as escrow
agent;
9.03 The escrow agent may, at any time, consult with and retain the advice
of such counsel it deems appropriate, and the escrow agent shall incur
no liability whatsoever for any action taken by the escrow agent
pursuant to this Agreement, whether or not with advice of such counsel,
unless the escrow agent knowingly and intentionally commits a breach of
trust;
9.04 The escrow agent shall not be bound to pay any premiums nor to ensure
that any policies of insurance are kept in force;
9.05 The parties shall be jointly and severally responsible to the escrow
agent for prompt payment of all fees, charges and expenses incurred by
him, including those incurred by him in fulfilling his obligations or
in defending himself against any claims made against him in connection
with his duties hereunder including counsel fees, and the escrow agent
shall have the right to retain the shares and of any moneys deposited
with him, as security for the payment of all such fees, charges and
expenses;
10. FINAL DISPOSITIONS
10.1. The present Agreement shall be governed by and construed in accordance
with the laws of the Province of Quebec.
10.2. Within context, the singular form shall also include the plural form
and the masculine gender includes the feminine gender.
10.3. The parties hereto confirm that they have each required that the
present Agreement and all accessory documents and notices be drawn up
in the English language. Les parties a la presente confirment qu'elles
ont exige que cette convention ainsi que tout autre document ou avis
soient rediges dans la langue anglaise.
<PAGE>
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in Montreal,
Quebec, this 16th day of June 1999.
THE BUYER:
TELEHUBLINK CORPORATION
per: /s/ BRUCE YOUNG
-------------------------
Bruce Young
THE VENDOR:
WEB TRAFIC INC.
per: /s/ SERGE TRUDEAU
------------------------
Serge Trudeau
Per: /s/ MICHEL COTE
------------------------
Michel Cote
<PAGE>
10
A F F I D A V I T
Je, soussigne, SERGE TRUDEAU, residant aux fins des presentes au 9625
rue Ignace, Brossard, province de Quebec, J4Y 2P3, declare sous serment ce qui
suit :
1. Je suis le Directeur de la compagnie WEB TRAFIC INC.;
2. La compagnie WEB TRAFIC INC. est en operation depuis moins d'une annee;
3. La compagnie WEB TRAFIC INC. n'a, en date des presentes, aucun
creancier.
ET J'AI SIGNE :
_________________________________
Serge Trudeau
DECLARE SOLENNELLEMENT DEVANT MOI
a Montreal, ce 16ieme jour de juin 1999
_______________________________________
Commissaire a l'assermentation
CONFIDENTIAL
TeleHubLink Corporation
24 New England Executive Park
Burlington, MA 01803
TELEHUBLINK CORPORATION
July 9. 1999
MANAGEMENT AGREEMENT
Management Agreement, between TELEHUBLINK CORPORATION (THLC) (the "Company") and
SERGE TRUDEAU RESOURCES (the "Management firm").
1. For good consideration, the COMPANY EMPLOYS THE MANAGEMENT FIRM on the
following terms and conditions.
2. TERM OF EMPLOYMENT: Subject to the provisions for termination set
forth below this agreement will begin on June 1st, 1999, and be for an
initial period of six months and a maximum of twenty-four months
unless sooner terminated.
3. SALARY: The Company shall pay to the Management firm a total of
$17,000.00 (CDN$) per month, for the services of the Management firm
including the services of Serge Trudeau.
4. STOCK OPTIONS: The Management firm will be granted 250,000 stock
option shares, with the initial 50,000 shares vesting upon signature
of the employment contract. The balance of 200,000 shares will vest in
increments of 50,000 shares every six months upon completing certain
milestones as agreed to by the President/CEO of THLC and the
Management firm. In the event, the contract is canceled at any time
by either party, any vested options would be included in any future
(next) registration.
5. DUTIES AND POSITION: The Company hires the Management firm for the
purposes of establishing an Internet Division. The Management firm
guarantees that it will provide the following services to the Company:
Sales management, consulting, business development, secretarial and
technical coordinator.
6. MANAGEMENT FIRM MANDATE: The Management firm has established a set of
commitments relative to sales volume, has "capped" the expenses
through the utilization of Serge Trudeau Resources and has committed
to a minimum of $600,000.00 EBIT for the first full year of
operations.
7. MANAGEMENT FIRM TO DEVOTE FULL TIME TO COMPANY: The Management firm
Management firm will devote full time, attention, and energies to the
business of the Company and during the term of this agreement, will
not engage in any other business activity unless agreed to by the
Company. The Management firm is not prohibited from making personal
investments in any other businesses provided those investments do not
require active involvement in the operation of said companies.
8. CONFIDENTIALITY OF PROPRIETARY INFORMATION: The Management firm
agrees, during or after the term of this employment, not to reveal
confidential information, or trade secrets to any person, firm,
corporation, or entity. Should Management firm reveal or threaten to
reveal this information, the Company shall be entitled to an
injunction restraining the Management firm from disclosing same, or
from rendering any services to any entity to whom said information has
been or is threatened to be disclosed. The right to secure an
injunction is not exclusive, and the Company may pursue any other
remedies it has against the Management firm for a breach or threatened
breach of this condition, including the recovery of damages from the
Management firm.
TELESERVICING FOR YOUR INTERNET NEEDS
<PAGE>
9. REIMBURSEMENT OF EXPENSES: The Management firm may INCUR REASONABLE
reasonable expenses outside of the services rendered within the
management firm for furthering the Company's business, including
expenses for entertainment, travel, and similar items. The Company
shall reimburse the Management firm for all business expenses after
the Management firm presents an itemized account of expenditures,
pursuant to Company policy.
10. TERMINATION OF AGREEMENT: Without cause, the Company may terminate
this agreement at any time upon 60 days' written notice to the
Management firm. If the Company requests, the Management firm will
continue to perform its duties and be paid up to the date of
termination. In addition, the Management firm will be entitled on the
date of termination to all vested stock options. Without cause, the
Management firm may terminate employment upon 60 days' written notice
to the Company. The Management firm may be required to perform its
duties and will be paid to the date of termination but shall not
receive a severance allowance. Notwithstanding anything to the
contrary contained in this agreement, the Company may terminate the
Management firm's employment upon Conditions:
>> The sale of substantially all of the Company's assets to
a single purchaser or group of associated purchasers; or
>> The sale, exchange, or other disposition, in one transaction of
the majority of the Company's outstanding corporate shares; or
>> The Company's decision to terminate its business and liquidate
its assets;
>> The merger or consolidation of the company with another company.
>> Bankruptcy or Chapter 11 Reorganization.
11. RESTRICTION ON POST EMPLOYMENT COMPENSATION: For a period of two ( 2 )
years after the end of employment, the Management firm shall not
solicit any of its accounts or compete in similar businesses by
operating within the Company's general trading area.
12. ASSISTANCE IN LITIGATION: Management firm shall upon reasonable
notice, furnish such information and proper assistance to the Company
as it may reasonably require in connection with any litigation in
which it is, or may become, a party either during or after employment.
13. EFFECT OF PRIOR AGREEMENTS: This agreement supersedes any prior
agreement between the Company or any predecessor of the Company and
the Management firm.
14. SETTLEMENT BY ARBITRATION: Any claim or controversy that arises out of
or relates to this agreement, or the breach of it, shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in any
court with jurisdiction.
15. LIMITED EFFECT OF WAIVER BY COMPANY. Should Company waive breach of
any provision of this agreement by the Management firm, that waiver
will not operate or be construed as a waiver of further breach by the
Management firm.
16. SEVERABILITY: If, for any reason, any provision of this agreement is
held invalid, all other provisions of this agreement shall remain in
effect. If this agreement is held invalid or cannot be enforced, then
to the full extent permitted by law any prior agreement between the
Company (or any predecessor thereof) and the Management firm shall be
deemed reinstated as if this agreement had not been executed.
<PAGE>
17. ASSUMPTION OF AGREEMENT BY COMPANY'S SUCCESSORS AND ASSIGNEES: The
Company's rights and obligations under this agreement will inure to
the benefit and be binding upon the Company's successors and
assignees.
18. ORAL MODIFICATIONS NOT BINDING: This instrument is the entire
agreement of the Company and the Management firm. Oral changes shall
have no effect. It may be altered only by a written agreement signed
by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
Signed this 1st day of June, 1999.
/s/ BRUCE W. YOUNG /s/SERGE TRUDEAU
------------------ ----------------
Bruce W. Young Serge Trudeau
