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EXHIBIT 10
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REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES (INCLUDING SHARES ISSUABLE UPON CONVERSION OF SUCH
SECURITIES) HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION S
("REGULATION S") PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S)
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OF SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement") is
executed by the undersigned (the "Subscriber") in connection with the offer and
subscription by the undersigned for two 3 7/8% Convertible Subordinated
Debentures the first due , 2002 and the second due , 2002 (forty five days
thereafter) (the "Debentures") of Krantor Corporation, a Delaware corporation
(the "Company"). The Company is offering and the undersigned Subscriber has
agreed to accept as investment an aggregate amount of $150,000 principal amount
of the Debentures in this offering (the "Offering") in denominations of $75,000
each at face value. The terms and conditions of the Debentures, including the
terms upon which the Debentures may be converted into Common Stock of the
Company, shall be as set forth in the forms of the two Debentures in the forms
annexed hereto as Exhibit A. The solicitation of this Subscription and, if
accepted by the Company, the offer and sale of Debentures, are being made in
reliance upon the provisions of Regulation S ("Regulation S") promulgated under
the United States Securities Act of 1933, as amended (the "Act"). The Debentures
and the shares of Common Stock issuable upon conversion thereof are sometimes
referred to herein as the "Securities." The Subscriber wishes to subscribe for
principal amount of the Debentures set forth on the signature page hereof in
accordance with the terms and conditions of the form of Debentures and this
Agreement. It is agreed as follows:
1. OFFER TO SUBSCRIBE: PURCHASE PRICE
Subject to the terms and conditions of this Agreement (including the
company's acceptance, as provided below), by his, her or its execution and
delivery of this Agreement, the Subscriber hereby irrevocably offers to purchase
and subscribe for the principal amount of the Debentures set forth on the
signature page hereof, at fact value. The Company, in its sole discretion, may
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accept such offer by executing and delivering this Agreement in which event this
Agreement shall be binding upon the Company and the Subscriber. Concurrently
with its delivery of this Agreement to the Company, Subscriber shall deliver
full payment (the "Subscription Funds") for the first Debenture with payment on
the second Debenture to follow within 45 days to the Company. Such payment shall
be by wire transfer or certified check payable to the Escrow Account of the
Company established for such purpose as further described in Section 2.13 of
this Agreement. The Escrow Agent (as defined in Section 2.13) shall notify the
Company of such deposit within 2 days of the subscription funds clearing in the
Escrow Account. Promptly following the Company's acceptance of this subscription
and the payment the Company shall deliver certificates representing the
Debenture subscribed and paid for to the Subscriber.
2. REPRESENTATIONS; COVENANTS; ACCESS TO INFORMATION; INDEPENDENT INFORMATION;
INDEPENDENT INVESTIGATION
2.1 OFFSHORE TRANSACTION. The Subscriber represents and warrants to the Company
that (i) the Subscriber is not a "U.S. person" as that term is defined in Rule
902(o) of Regulation S (a copy of which definition is attached as Exhibit B) and
the Subscriber was not formed by a "U.S. person" for the purpose of investing in
securities not registered under the Act; (ii) the Securities were not offered to
the Subscriber in the United States and at the time of execution of this
Subscription Agreement and of any offer to the Subscriber to purchase the
Securities hereunder, the Subscriber was physically outside the United States;
(iii) the Subscriber is purchasing the Securities for its own account and not on
behalf of or for the benefit of any U.S. person and the sale and resale of the
Securities have not been prearranged with any buyer in the United States; (iv)
the Subscriber and to the best knowledge of the Subscriber each distributor, if
any, participating in the offering of the Securities, has agreed and the
Subscriber hereby agrees that all offers, sales, pledges, assignments, or other
dispositions of the Securities prior to the expiration of a period commencing on
the Closing of last sale of Debentures in the Offering and ending forty days
thereafter (the "Restricted Period") shall not be made to U.S. persons or for
the account or benefit of U.S. persons and shall otherwise be made in compliance
with the provisions of Regulation S. Subscriber has not been engaged as a
distributor or dealer in the U.S. with respect to this transaction. All offers
and sales by Subscriber during the Restricted Period will be made only in
accordance with Rules 903 or 904 of Regulation S, or pursuant to a registration
under the Act or an exemption therefrom. The Subscriber is a bona fide resident
of or organization domiciled outside of the United States.
2.2 INDEPENDENT INVESTIGATION. In making its investment decision to purchase the
Securities, the Subscriber is not relying on any oral or written representations
or assurances from the Company or any other person other than as set forth in
this Agreement, public filings of the Company or press releases. The Subscriber
has such experience in business and financial matters that it is capable of
evaluating the risk of its investment and determining the suitability of its
investment. The undersigned Subscriber meets the criteria of an "accredited
investor" as defined in Rule 501 of Regulation D (see Exhibit C).
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2.3 ECONOMIC RISK. The Subscriber understands and acknowledges that an
investment in the Securities involves a high degree of risk, including a
possible total loss of investment. The Subscriber represents that the Subscriber
is able to bear the economic risk of an investment in the Securities. In making
this statement the Subscriber hereby represents and warrants that the Subscriber
has adequate means of providing for the Subscriber's current needs and
contingencies; the Subscriber is able to afford to hold the Securities for an
indefinite period and the Subscriber further represents that the Subscriber has
such knowledge and experience in financial and business matters that the
Subscriber is capable of evaluating the merits and risks of the investment in
the Securities to be received by the Subscriber. Further, the Subscriber
represents that the Subscriber is able to bear the economic risks of an
investment in the Securities; the Subscriber has no present need for liquidity
in such Securities; the Subscriber can afford a complete loss of such investment
in the Securities; and the Subscriber is willing to accept such investment
risks.
2.4 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Subscriber understands that no
United States federal or state agency or similar agency of any other country,
has passed upon or made any recommendation or endorsement of the Company, this
transaction or the subscription of the Securities.
2.5 NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION. To the best of
the knowledge of the Subscriber and Company neither the Company nor any
distributor, if any, participating in the offering of the Securities nor any
person acting for the Company or any such distributor has conduced any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S. Such
activity includes, without limitation, the mailing of printed material to
investors residing in the United States, the holding of promotional seminars in
the United States, and the placement of advertisements with radio or television
stations broadcasting in the United States or in publications with a general
circulation in the United States, which discuss the offering of the Securities.
2.6 RELIANCE ON REPRESENTATION. This Agreement is made by the Company with the
Subscriber in reliance upon the Subscriber's representations and covenants made
in this Section 2, which by his execution of this Agreement the Subscriber
hereby confirms. If the Subscriber includes or consists of more than one person
or entity, the obligations of the Subscriber shall be joint and several and the
representations and warranties herein contained shall be deemed to be made by
and be binding upon each such person or entity and their respective heirs,
executors, administrators, successors and assigns.
2.7 NO REGISTRATION. Subscriber understands that the offer and sale of the
Debentures and the Common Shares issuable upon the conversion of the Debentures
have not been registered under the Act and are being offered and sold pursuant
to an exemption from registration contained in the Act based primarily upon the
representations of subscriber contained herein and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of to any "U.S. Person" (as defined in
Rule 902(o) of Regulation S) or in the United States during the Restricted
Period and, thereafter, only if such transaction is registered under the Act or
pursuant to an applicable exemption from registration.
2.8 INVESTMENT INTENT. Subscriber is acquiring the Debentures to be issued and
sold hereunder (and the Common Shares (the "Common Shares") issuable upon the
conversion of the Debentures) for his or its own account (or a trust account if
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such Subscriber is a trustee) for investment and not as a nominee and not with a
view to the distribution thereof. Subscriber understands that Subscriber must
bear the economic risk of this investment indefinitely unless sale of such
Securities is registered pursuant to the Act, or an exemption from such
registration is available, and that the Company has no present intention of
registering any such sale of the Securities. Subscriber represents and warrants
to the Company that it intends to hold the Securities indefinitely, and that
Subscriber has no present plan or intention to sell the Securities in the United
States at any predetermined time, and has made no predetermined arrangements to
sell the Securities. Subscriber covenants that neither Subscriber nor its
affiliates nor any person acting on its or their behalf has the intention of
entering, or will enter during the Restricted Period, into any put option, short
position or other similar instrument or position with respect to the Common
Shares or securities of the same Class as the Common Shares and neither
Subscriber nor any of its affiliates nor any person acting on its or their
behalf will use at any time Common Shares acquired pursuant to this Agreement to
settle any put option, or short position or other similar instrument or position
that may have been entered into prior to the execution of this Agreement.
2.9 NO SALE IN VIOLATION OF THE ACT. Subscriber further covenants that he or she
will not make any sale, transfer or other disposition of the Debentures or the
Common Shares in violation of the Act (including Regulation S), the Securities
and Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder or any other applicable law.
2.10 AUTHORITY. Subscriber has the full power and authority to execute, deliver
and perform this Agreement. This Agreement, when executed and delivered by
Subscriber, and accepted by the Company, will constitute a valid and legally
binding obligation of Subscriber, enforceable in accordance with its terms.
2.11 NO RELIANCE ON TAX ADVICE. Subscriber has reviewed with his, her to its own
tax advisors the foreign, federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. Subscriber is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that Subscriber (and not the Company) shall be responsible for the
Subscriber's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
2.12 NO LEGAL ADVICE FROM COMPANY. Subscriber acknowledges that he or she has
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with his or her own legal counsel. Subscriber is relying
solely on such counsel and not on any statements or representations of the
Company or any of its agents for legal advice with respect to this investment or
the transactions contemplated by this Agreement, except for the representations,
warranties and covenants set forth herein and in the opinion provided for in
paragraph 6.3 herein.
2.13 ESCROW. Subscriber acknowledges that the Subscription Funds shall be
delivered to an Escrow Account maintained by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. (the "Escrow
Agent") attorney for the Company and shall be made payable to "▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., for Krantor Corporation" mailing address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ABA Routing No. ▇▇▇▇▇▇▇▇▇, Account No. 4009012154. Subscriber
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further acknowledges that the Escrow Account is non-interest bearing and is FDIC
insured to a maximum of $100,000. Further, all parties to this Agreement
acknowledge and agree that the Escrow Agent is acting strictly in a ministerial
capacity and is allowed to rely, in its sole discretion, on what is believes to
be the genuineness of all signatures on any pertinent documents it receives in
connection with the Escrow Account but that said Escrow Agent does not and is
not required to guaranty collection on any funds received or to be received in
the Escrow Account. If there is any question or concern raised regarding any
aspect of the Escrow Account which Escrow Agent is not satisfied has been
resolved between the parties hereto, said Escrow Agent need not accept and/or
release funds into or from the Escrow Account until he is satisfied the question
or concern has been resolved, and he may resign at any time for any reason and
deposit the funds in the Escrow Account with a court of competent jurisdiction.
Escrow Agent shall not be held liable for actions taken within his reasonable
discretion regarding the Escrow Account as long as such actions are within the
parameters of the purposes of which the Escrow Account has been established, and
all parties hereto shall be jointly and severally responsible to pay or
reimburse Escrow Agent for any and all expenses of or related to the Escrow
Account, including but not limited to reasonable fee to the Escrow Agent not to
exceed 1% of the funds on deposit, which expenses may be withdrawn from the
Escrow Account before payment of such funds to the Company.
2.14 INDEMNIFICATION. The Subscriber shall indemnify, defend and hold harmless
the Company, and its employees, agents, officers, directors and affiliates from
and against all claims, damages, losses, liabilities, costs and expenses arising
from or in connection with any breach or alleged breach of any representation,
warranty, acknowledgement or covenant of the Subscriber contained in this
Agreement or in any other document, instrument or certificate now or hereafter
delivered by the Subscriber to the Company.
3. RESALES
Subscriber acknowledges and agrees that the Securities may and will
only be resold (a) in compliance with Regulation S; (b) pursuant to a
Registration Statement under the Act; or (c) pursuant to an exemption from
registration under the Act.
4. LEGENDS; SUBSEQUENT TRANSFER OF SECURITIES
4.1 LEGENDS. The certificates representing the Securities shall bear the first
legend set forth on the first page of this Agreement and any other legend, if
such legend or legends are reasonably required by the Company to comply with
state, federal or foreign law. Assuming that there are no changes in the
applicable laws from the date hereof until the date of conversion, the Common
Shares which may be acquired upon the conversion of the Debentures after the
Restricted Period shall not bear a restrictive legend.
4.2 TRANSFERS. The Subscriber acknowledges and agrees that the Securities may
not be transferred to any U.S. Person or entity if such transfer occurs within
the restricted Period and thereafter only if registered or if an exemption from
registration than exists under the Act and any applicable state statutes or
statutes of other applicable jurisdictions.
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4.3 REGISTRATION.
REGISTRATION RIGHTS
(1) REGISTRATION. If at any time or from time to time, the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders, in a registration statement covering
the sale of registrable securities, the Company will: (a) promptly give to each
holder of any of the Debentures (the "Holder") written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and (b) include in such registration (and any related
qualification under blue sky laws or other compliance) and in any underwriting
involved therein, all the securities into which the Debentures, or any of them,
may be converted (the "Registrable Securities") specified in a written request
or requests, made within thirty days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in subparagraph (2)
below.
(2) UNDERWRITING. The right of any Holder to registration pursuant to this
agreement shall be conditioned upon such Holder's participation in the
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this paragraph, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities to be included in the
registration and underwriting; provided, however, that with respect to such
registration the underwriter may not limit the amount of Registrable Securities
included in such registration and underwriting to less than an amount equal to
20 percent of the amount of all of the Company's securities included within such
registration and underwriting. The Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities entitled to inclusion in such registration
held by such Holders at the time of filing the registration statement. If any
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall,
unless the Holder requests otherwise, be included in such registration but shall
not be transferred in a public distribution prior to ninety days after the
effective date of the registration statement relating thereto or under such
other restrictions which shall reasonably be requested by the underwriter and/or
the Company.
(3) EXPENSES OF REGISTRATION. All expenses incurred in connection with any
registration, qualification or compliance in furtherance of registration rights
provided in this Agreement, including without limitation, all registration,
filing, and qualification fees, printing expenses, fees and
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disbursements of counsel for the Company, and expenses of any special audits
incidental to or required by such registration, shall be borne by the Company;
provided however:
(1) The Company shall not be required to pay for expenses of any
registration the request for which has been subsequently withdrawn by the
Holders, in which case, such expenses shall be borne by the Holders
requesting such withdrawal;
(2) The Company shall not be required to pay fees of legal counsel of
Holder, or underwriters' fees, discounts, or commissions relating to
Registrable Securities.
(4) REGISTRATION PROCEDURES. In the case of each registration,
qualification, or compliance effected by the Company as provided herein, the
Company will keep each Holder participating therein advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(1) Keep such registration, qualification or compliance effective for a
period of 180 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; and
(2) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request.
(5) INDEMNIFICATION. The Company will indemnify each Holder of Registrable
Securities, each of the Holder's officers and directors, and each person
controlling such Holder, with respect to such registration, qualification, or
compliance effected pursuant to this paragraph, and each underwriter, if any,
and each person who controls any underwriter of the Registrable Securities held
by or issuable to such Holder, against all claims, losses, damages, and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification, or compliance,
and will reimburse each such Holder, each of the Holder's officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defining any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.
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(b) Each Holder will, if Registrable Securities held by or issuable to such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors and officers who sign such registration statement, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company within the meaning of the
Securities Act, and each other such Holder, each of such Holder's officers and
directors and each person controlling such Holder, against all claims, losses,
damages, and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any 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 will reimburse the Company, such Holders, such
directors, officers, persons, or underwriters for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein.
(c) Each party entitled to indemnification under this paragraph (the
Indemnified Party) shall give notice to the party required to provide
indemnification (the Indemnifying Party) promptly after such indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgement or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
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(6) INFORMATION BY HOLDER
The Holder or Holders of Registrable Securities included in any
registration shall furnish to the Company such written information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration, qualification, or compliance referred to in this
paragraph.
(7) TRANSFER OF REGISTRATION RIGHTS
The Rights to cause the Company to register your securities granted to you
by the Company under this Agreement may be assigned by you to a transferee or
assignee of any of your Registrable Securities, provided, that the Company is
given written notice by you at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned.
4.4 MECHANICS OF CONVERSION. In order to convert Debentures into full shares of
Common Stock, the Holder shall (i) fax a copy of the fully executed notice of
conversion in the form attached hereto ("Notice of Conversion") to the Company
at the office of the Company and of its designated Transfer Agent for the Common
Shares that the Holder elects to convert the same, which notice shall specify
the principal amount of the Debentures to be converted, the applicable
conversion price and a calculation of the number of shares of Common Stock
issuable upon such conversion (together with a copy of the first page of each
certificate to be converted) prior to Midnight, New York City time (the
"Conversion Notice Deadline") on the date of conversion specified on the Notice
of Conversion and (ii) surrender the original certificates representing the
Debentures being converted (the "Debenture Certificates"), duly endorsed, along
with a copy of the Notice of Conversion (together with the Debenture
Certificates, the "Conversion Documents") no later than Midnight, New York city
time the next business day, to a common courier for either overnight or 2-day
delivery to the office of the Company or the Transfer Agent for the Debentures.
The Company shall cause to be issued and delivered within five (5) business days
after delivery to the Company of the facsimile copies of such Notice of
Conversion and such Debenture Certificates to such Holder at the address of the
Holder on the books of the Company or such other address as may be specified by
such Holder), a certificate or certificates for the number of shares of Common
Stock issuable upon such conversion; provided, however, that the Company shall
not be obligated to issue certificates evidencing the shares of Common Stock
unless either the original Debenture Certificates have been received by the
Company or its Transfer Agent, or the Holder notifies the Company or its
Transfer Agent, or the Holder delivers to the Company an affidavit and
indemnification to the effect that such certificates have been lost, stolen or
destroyed, together with an appropriate indemnity bond.
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(b) As set forth in this Agreement, the Transfer Agent or the Company (as
applicable) shall, no later than 6:00 P.M. (New York City time) on the fifth
business day (the "Deadline") after receipt by the Company or its Transfer Agent
of a notice of conversion and a facsimile copy of the Debenture and this
Agreement, provided the Company or Transfer Agent has received the Conversion
Documents, issue a certificate for the number of shares of Common Stock to which
the Holder of the Debenture shall be entitled as aforesaid and surrender such
original Common Stock certificates to a common courier for overnight delivery to
the Holder at the address of the Holder on the books of the Company.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Subscriber as follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as now conducted and as proposed to be conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries taken as a whole. The
Company to its knowledge is not the subject of any pending or threatened
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which have not been disclosed in the reports
referred to in Section 5.5 below.
5.2 CORPORATE CONDITION. The Company's condition is as described in the
Company's reports filed pursuant to the Exchange Act and provided to Subscriber
specified in Section 5.5 below. There have been no material adverse changes in
the Company's financial condition or business since the date of those reports
which have not been disclosed to Subscriber in writing.
5.3 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder and the authorization, issuance (or reservation for issuance)
and delivery of the Debentures being sold hereunder and the Common Shares
issuable upon the conversion thereof have been taken, and this Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms.
5.4 VALID ISSUANCE OF SHARES. The Common Shares issuable upon the conversion of
the Debentures when issued in accordance with the terms thereof, shall be duly
and validly issued and outstanding, fully paid and nonassessable, and based in
part on the representations and warranties of Subscriber and any transferee of
the Securities, will be issued in compliance with all applicable U.S. federal
and state securities laws.
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5.5 CURRENT PUBLIC INFORMATION. The Company represents and warrants to the
Subscriber that the Company is a "reporting issuer' as defined in Rule 902(1) of
Regulation S and it has a class of securities registered under Section 12(b) or
12 (g) of the Exchange Act or is required to file reports pursuant to Section
15(d) of the Exchange Act, and has filed all the materials required to be filed
as reports pursuant to the Exchange Act for a period of at least twelve months
preceding the date hereof (or for such shorter period as the Company was
required by law to file such material). The Subscriber has obtained copies of
the Company's Form 10-K Annual Report for the year ended December 31, 1995, the
Form 10-Q Reports for the quarterly periods ended from then through September
30, 1996 and press releases.
5.6 NO U.S. OFFERING. The Company represents that it has not offered the
Securities to the Subscriber in the U.S. or, to the best knowledge of the
Company, to any person in the United States or any U.S. person.
5.7 NO DEFAULT. The Company is not in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property may be bound, and neither the
execution, nor the delivery by the Company, nor the performance by the Company
of its obligations under this Agreement or the Debentures, other than the
conversion provision thereof, will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under any material indenture, mortgage, deed of trust
or other material agreement or instrument to which the Company is a party or by
which it is bound or any statute or the Certificate of Incorporation or By-Laws
of the Company, or any decree, judgment, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or its
properties.
5.8 SEC FILINGS. None of the SEC Filings with the Securities and Exchange
Commission since January 1, 1995 contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made, not misleading. The
Company has since January 1, 1995 timely filed all requisite forms, reports and
exhibits thereto with the Securities and Exchange Commission.
5.9 NON-CONTRAVENTION. The execution and delivery of this Agreement and the
consummation of the issuance of the Debentures, the transactions contemplated by
this Agreement and the Debentures do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of the Company, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, or any existing applicable law, rule or regulation of the United
States, of any State thereof or any applicable decree, judgment or order of any
Federal or State court, Federal or State regulatory body, administrative agency
or other United States governmental body having jurisdiction over the Company or
any of its properties or assets.
-17-
6. COVENANTS OF COMPANY
6.1 ACCOUNTANTS. The Company shall, until at least December 31, 1997, maintain
as its independent auditors an accounting firm that is authorized to practice
before the SEC.
6.2 CORPORATE EXISTENCE AND TAXES. The Company shall, until at least December
31, 1997, maintain its corporate existence in good standing, and shall pay all
its taxes when due except for taxes which the Company disputes.
6.3 OPINION OF COUNSEL. Subscriber shall, upon purchase of the Debentures,
receive an opinion letter from counsel to the Company, to the effect that (i)
the Company is duly incorporated and validly existing; and (ii) this Agreement,
the issuance of the Debentures, and the issuance of Common Stock upon conversion
of the Debentures have been duly approved by all required corporate action, and
that all such securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable.
6.4 OTHER PRIVATE OFFERINGS. The Company covenants not to conduct any other
Regulation D or Regulation S or similar private exempt securities offerings for
180 days from the date of this Agreement, except if such is made to the
Subscriber and/or its affiliates or with their written approval.
7. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, U.S.A., applicable to agreements made in and
wholly to be performed in that jurisdiction, except for matters arising under
the Act or the Exchange Act which matters shall be construed and interpreted in
accordance with such laws. Any action brought to enforce, or otherwise arising
out of, this Agreement shall be heard and determined in either a federal or
state court sitting in the State of New York, U.S.A.
8. ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the form of Debenture, and the other documents delivered
pursuant hereto constitutes the full and entire understanding and agreement
between the parties with regard to the subject hereof and thereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
9. NOTICES, ETC.
Any notice, demand or request required or permitted to be given by either
the Company or the Subscriber pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile,
with a hard copy to follow by two day courier addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
-18-
10. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against he parties actually executing such counterparts,
and all of which together shall constitute one instrument.
11. SEVERABILITY
In the event that any provision of this Agreement becomes or is declared by
a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
12. TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
13. EXACT REGISTERED NAME OF SECURITY HOLDER
Subscriber agrees to provide Company with the exact name it wishes the
securities to be registered by providing that information on the accompanying
signature page of this Subscription Agreement. Additionally, Subscriber also
agrees to provide Company with detailed delivery instructions.
14. SUBSCRIBER TO FORWARD ORIGINAL SIGNED SUBSCRIPTION AGREEMENT
Subscriber agrees to courier to Company his, her or its original inked
signed Subscription Agreement within 2 days of faxing said agreement.
-19-
KRANTOR CORPORATION
The undersigned hereby subscribes for $ 75,000 principal amount of the
Debentures, and agrees to pay herewith funds in the amount of seventy five
thousand U.S. Dollars ($75,000 U.S.).
The undersigned acknowledges that this subscription shall not be effective
unless accepted by the Company as indicated below.
Dated this 20th day of March, 1997.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ DELIVERY INSTRUCTIONS:
------------------ ----------------------
Signature)
Please print offshore address to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ which you want your security
-------------- delivered
Name: Please Print
President ATTN:
--------- -----
Title/Representative Capacity Name of Addressee
CYGNI, S.A. c/o Soreq Inc.
----------- --------------
Name of Company You Represent ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
---------------- -----------------
Place of Execution ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
------------------------
City/Providence;Offshore Country
REGISTERED HOLDER:
------------------
M3K1Z3
------
Offshore Postal Code
CYGNI S.A.
----------
EXACT NAME YOU WANT THE
SECURITY TO BE REGISTERED 416 630 9130
------------
Phone Number (For Federal Express)
Please Print Exact Registered Name
-20-
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON March 20, 1997.
KRANTOR CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
Print Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Title: Secretary
----------------
-21-
THE SECURITIES REPRESENTED BY THIS DEBENTURE CERTIFICATE AND THOSE ISSUABLE UPON
THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S.
PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
KRANTOR CORPORATION
3-7/8% SUBORDINATED CONVERTIBLE DEBENTURE DUE , 2002
Number: ____________________
Amount: $75,000.00
Original Issue Date: , 1997 Address: c/o RTH LTD.
------------------------ ------------
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
CH-6302
Registered Holder(s): CYGNI ▇.▇. ▇▇▇, Switzerland
(name)
(name)
KRANTOR CORPORATION, a Delaware corporation (the "Company"), for value
received, hereby promises to pay the registered holder hereof (the "Holder") the
principal sum of $75,000.00 on , 2002, in such coin or currency of the United
States of America as at the time of payment shall be the legal tender for the
payment of public and private debts, and to pay interest, less any amounts
required by law to be deducted or withheld, computed on the basis of a 365 day
year, on the unpaid principal balance hereof from the date hereof (the "Original
Issue Date"), at the rate of 3-7/8% per year, annually commencing , 1997, until
such principal sum shall have become due and payable, and to pay interest at the
rate of 8-7/8% per year or the maximum legal rate allowed by law, whichever is
lower, on any overdue principal and (to the extent permitted by applicable law)
on any overdue interest, from the due date thereof until the obligation of the
Company with respect to the payment thereof shall be discharged.
By acceptance and purchase of this Debenture, the registered holder hereof
agrees with the Company that the Debenture shall be subject to the following
terms and conditions:
1. AUTHORIZATION OF DEBENTURES. The Company has authorized the issue and
sale of this Debenture as one of two similar debentures, the second (hereinafter
the "Second Debenture") being for an identical amount of debt and with identical
terms on repayment except for the dates of the Second Debenture and repayment
thereof, and this debenture and the provisions, arrangements and obligations
included and related thereto are conditioned upon the parties hereto executing
and complying with the terms of the Second Debenture.
-22-
2. RESTRICTIONS ON TRANSFER. Neither the Debenture nor any part thereof,
nor any Common Stock (defined in Section 4.4 below) into which it is
convertible, shall be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of, and the Company shall not be required to register any
such disposition, unless and until:
2.1 The Company shall have received (i) written notice of the contemplated
disposition, setting forth all of the circumstances and details thereof, and
(ii) an opinion of the counsel, in the form and substance satisfactory to the
Company and its counsel, stating that the contemplated disposition is exempt
from the registration and prospectus requirements of the Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC") under the Act
and of any applicable state or foreign securities act; or
2.2 The Debenture or shares of Common Stock, as the case might be, are
disposed of pursuant to and in strict accordance with a registration statement
which has been filed under the Act with the SEC and a similar registration
statement filed with any state securities administrators having jurisdiction.
The Company has placed a restrictive legend on this certificate for the
Debenture and may place such a legend on any future certificates for the
Debenture and on the certificates for shares of Common Stock issued upon
conversion thereof reflecting the requirements of this Section.
3. CURRENT MARKET PRICE.
3.1 For purposes of this Debenture, "Current Market Price" of the Common
Stock means:
(a) If traded on a securities exchange, the closing price of the common
stock on such exchange;
(b) If traded over the counter, the high closing bid price; or
(c) In all other events, the market price determined by the Board of
Directors of the Company in good faith.
4. PREPAYMENT OF DEBENTURE.
4.1 OPTIONAL PREPAYMENT OF DEBENTURE. The Company may not prepay the
Debenture, except that,
(a) on or after , the Company may prepay all or any portion of the
Debenture by prepayment of all or a portion of the principal amount
outstanding plus any accrued interest and a premium of 10% of the principal
amount prepaid;
(b) on or after , provided the Current Market Price of the Company's Common
Stock equals or exceeds 150% of the Conversion Price (defined below) for
ten consecutive trading days prior to such call, the Company may call the
Debenture for conversion into shares of Common Stock at the Conversion
Price in effect on the day preceding such call; and
-23-
(c) in the event that a registered holder surrenders all or any part of the
principal of the Debenture for conversion in the manner set forth in
Paragraph 5.1 below and the average per share high closing bid price of the
Company's Common Stock for any ten (10) consecutive trading days
immediately before the Conversion Date is less than $.60, the Company, at
its election, may redeem, in lieu of such conversion, any or all of the
principal so surrendered at a price equal to 115% of the principal
redeemed, plus any and all amounts of accrued and unpaid interest with
respect to such principal amount to the date of the final payment.
4.2 NOTICE AND APPLICATION OF PREPAYMENT. In the case of each prepayment of
the Debenture, notice thereof shall be given at least five days prior to the
date fixed in such notice for such prepayment or call (the date fixed for such
prepayment is referred to herein as the "Redemption Date"). Upon such notice of
any prepayment being so given there shall become due and payable, at the
principal office of the Company on the Redemption Date, the prepayment price
(including the premium described in Section 4.1 above) together with interest
accrued and unpaid on the principal amount of the Debenture so prepaid to, but
not including, the Redemption Date or the number of shares of Common Stock into
which the Debentures are converted, as the case may be. Unless the Company shall
fail to pay such prepayment price on the Redemption Date, interest on the
principal amount of the Debenture shall cease to accrue from and after that
date.
In the case of any prepayment of less than the entire unpaid principal
amount of all outstanding Debentures, the amount to be prepaid shall be applied
pro rata to all outstanding Debentures according to the respective unpaid
principal amounts thereof.
4.3 EVIDENCE OF PREPAYMENTS. Upon any partial prepayment of the Debenture,
the Holder thereof shall surrender the same to the Company at its principal
office, in exchange, without cost to such Holder, for one or more new Debentures
in aggregate principal amount equal to the principal amount remaining unpaid on
the Debenture or Debentures surrendered and otherwise having the same terms and
provisions as the Debenture or Debentures surrendered.
4.4 CONVERSION. Any or all Debentures chosen for prepayment pursuant to
paragraphs 4.1(a) or (b) above shall nevertheless, at any time prior to 5:00
p.m., New York time on the Redemption Date, be convertible into Common Stock of
the Company, par $.001 per share ("Common Stock"), pursuant to the provisions of
Section 5 hereof. Any and all Debentures chosen for prepayment pursuant to
paragraph 4(c) shall cease to be convertible as of the date of the Company's
notice.
-24-
5. CONVERSION OF DEBENTURE.
5.1 CONVERSION OF DEBENTURE.
(a) Subject to the Company's rights to redeem the Debenture set forth in
paragraph 4.1(c) above any Holder of the Debenture may, at his, her or its
option, at any time and from time to time on or after the 41st day
following the Original Issue Date set forth above, convert such Debenture
into the Company's Common Stock at the rate, expressed in principal amount
of Debenture per share of Common Stock, determined pursuant to the formula
set forth in paragraph (b) of this Section 5.1 subject to adjustment in
certain events as hereinafter set forth (the "Conversion Price").
(b) The Conversion Price shall be the lower of:
(i) .75 times the Current Market Price on the Original Issuance Date; or
(ii) 0.70 times the average Current Market Price on the five trading days
preceding the date of conversion.
5.2 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise conversion
privilege, the Holder shall surrender such Debenture, together with the Notice
of Conversion annexed hereto as Exhibit 1 appropriately endorsed to the Company
at its principal office, accompanied by written notice to the Company (a)
stating that the Holder elects to convert the Debenture or a portion thereof,
and if a portion, the amount of such portion in multiples of $1,000 in principal
amount, and (b) setting forth the name or names (with address) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. Provided the Debenture is received properly endorsed
promptly by the Company, the date of conversion of such Debenture shall be
deemed to be the date of receipt of Notice of Conversion, even if the Company's
stock transfer books are at that time closed, and the converting Holder shall be
deemed to have become, on the date of conversion, the record holder of the
shares of Common Stock deliverable upon such conversion.
As soon as reasonably possible after the date of conversion, the Company
shall issue and deliver to such converting Holder a certificate or certificates
for the number of shares of Common Stock due on such conversion. Reference is
made to Section 5 of the Regulation S Securities Subscription Agreement between
the Company and the Holder which is incorporated herein by reference. No
adjustments in respect of interest or cash dividends shall be made upon the
conversion of any Debenture or Debentures.
Upon conversion of the Debenture in part, the Company shall execute and
deliver to the Holder thereof, at the expense of the Company, a new Debenture,
in aggregate principal amount equal to the unconverted portion of such
Debenture, such new Debenture shall have the same terms and provisions other
than the principal amount as the Debenture or Debentures surrendered for
conversion.
5.3 DURATION OF CONVERSION PRIVILEGE. The right to subscribe for and
purchase shares of Common Stock pursuant to the conversion privilege granted
herein shall commence on the Original Issue Date and shall expire at 5:00 p.m.,
New York time on . In case the Company shall have given notice of its election
to prepay, pursuant to Section 4 hereof, all or any portion of the principal of
any Debenture or Debentures, and the Company does not default in such
prepayment, then in respect of such Debenture or Debentures or portion thereof,
the rights to subscribe for and purchase shares of Common Stock pursuant to the
conversion privilege granted herein shall expire at 5:00 p.m., New York time on
the Redemption Date.
-25-
5.4 STOCK FULLY PAID. The Company covenants and agrees that all shares
which may be issued upon the exercise of the conversion privilege granted herein
will, upon issuance in accordance with the terms hereof, be fully paid,
nonassessable, and free from all taxes, liens and charges (except for taxes, if
any, upon the income of the Holder) with respect to the issue thereof, and that
the issuance thereof shall not give rise to any preemptive rights on the part of
the stockholders.
5.5 ANTIDILUTION PROVISIONS. The following provisions apply to the
Debenture:
(a) In case the Company shall (i) pay a dividend or make a distribution in
shares of Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, (iv) make a distribution on its Common Stock in shares of its
capital stock other than Common Stock, or (v) issue by reclassification of
its Common Stock other securities of the Company, the conversion privilege
of the Debenture and the Conversion Price then in effect immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive
the kind and number of shares of Common Stock and other securities of the
Company which it would have owned or would have been entitled to receive
after the happening of any of the events described above, had the Debenture
been converted immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all holders of its Common Stock, without any
charge to such holders, entitling them to subscribe for or to purchase
shares of Common Stock at a price per share which is lower at the record
date mentioned below than the then current Conversion Price, the Conversion
Price thereafter shall be determined by multiplying the then current
conversion Price by a fraction (but in no event greater than 1), of which
the denominator shall be (i) the number of shares of the common stock
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus (ii) the number of additional
shares of Common Stock offered for subscription or purchase, and of which
the numerator shall be (x) the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus (y) the number of shares which the aggregate
offering price of the total number of shares offered would convert at the
higher of the then Current Market Price, or then current Conversion Price.
Such adjustment shall be made whenever such rights, options, warrants or
convertible securities are issued, and shall become effective immediately
and retroactively after the record date for the determination of
stockholders entitled to receive such rights, options, warrants or
convertible securities.
-26-
(c) In case the Company shall distribute to all holders of its shares of
Common Stock (i) debt securities or other evidences of its indebtedness
which are not convertible into Common Stock or (ii) assets (excluding cash
dividends or distributions out of earnings), then the Conversion Price
shall be determined by dividing the then current Conversion Price by a
fraction, of which the numerator shall be the higher of the then Current
Market Price, or the Conversion Price on the date of such distribution, and
of which the denominator shall be such Current Market Price, or such
Conversion Price on such date minus the then fair value of the portion of
the assets or evidences of indebtedness so distributed applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders
entitled or receive such distribution. The fair value of such assets shall
be determined in good faith by the Board of Directors of the Company.
(d) To the extent not covered by paragraphs (b) or (c) hereof, in case the
Company shall sell or issue shares of Common stock, or rights, options,
warrants or convertible securities containing the right to subscribe for or
purchase shares of Common stock, at a price per share (determined, in the
case of such rights, options, warrants or convertible securities, by
dividing (i) the total amount received or receivable by the Company in
consideration of the sale or issuance of such rights, options, warrants or
convertible securities, plus the total consideration payable to the Company
upon exercise or conversion thereof, by (ii) the total number of shares
covered by such rights, options, warrants or convertible securities) lower
than the Conversion Price in effect immediately prior to such sale or
issuance, then the Conversion Price shall be reduced to a price (calculated
to the nearest cent) determined by dividing (I) an amount equal to the
Conversion Price multiplied by the sum of (A) the number of shares of
Common stock outstanding immediately prior to such sale or issuance plus
(B) the number of shares which could have been purchased at the Conversion
Price with the consideration received by the Company upon such sale or
issuance by (II) the total number of shares of Common Stock outstanding
immediately after such sale or issuance. For the purposes of such
adjustments, the shares of Common Stock, which the holders of any such
rights, options, warrants or convertible securities shall be entitled to
subscribe for or purchase, shall be deemed issued and outstanding as of the
date of such sale or issuance and the consideration received by the Company
therefor shall be rights, options, warrants or convertible securities, plus
the consideration or premiums stated in such rights, options, warrants or
convertible securities to be paid for the shares of Common Stock covered
thereby. In case the Company shall sell or issue shares of Common Stock, or
rights, options, warrants or convertible securities containing the right to
subscribe or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its
equivalent, then in determining the "price per share" of shares of Common
Stock, any underwriting discounts or commissions shall not be deducted from
the price received by the Company for sales of securities registered under
the Act.
(e) No adjustment in the Conversion Price shall be required in the
following events:
-27-
(i) If the amount of such adjustment would be less than $.01 per share;
provided, however, that any adjustment which by reason of this paragraph
5.5(e)(i) is not required to be made immediately shall be carried forward
and taken into account in any subsequent adjustment; and
(ii) The issuance of options under the Company's existing stock option
plans, future stock option plans approved by the Company's shareholders,
and the issuance of securities underlying such options.
(f) When the number of shares of Common Stock or the Conversion Price is
adjusted as herein provided, the Company shall cause to be promptly mailed
to the Holder by first class mail, postage prepaid, notice of such
adjustment or adjustments and a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company (who may be
the regular accountants employed by the Company) setting forth the number
of shares of Common Stock and the Conversion Price after such adjustment, a
brief statement of the facts requiring such adjustment and the computation
by which such adjustment was made.
(i) The term "Common Stock" shall mean (A) the class of stock designated as
the Common Stock of the Company at the date of this Debenture or (B) any
other class of stock resulting from successive changes or reclassification
of such Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event that
at any time, as a result of an adjustment made pursuant to this Section
5.5, the Holder shall become entitled to receive any securities upon
conversion of the Company other than shares of Common Stock thereafter the
number of such other securities and the Conversion Price of such securities
shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 5.5.
(ii) If the Common Stock is traded on a securities exchange or over the
counter, the "Current Market Price" for purposes of this section 5.5 shall
mean the average of the Current Market Price for the five consecutive
trading days immediately prior to the date of the event which necessitates
an adjustment to the Conversion Price.
(h) Upon the expiration of any unexercised rights, options, warrants or
conversion privileges, the Conversion Price shall be readjusted and shall
thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) on
the basis of (i) the fact that the only shares of Common Stock so issued
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion rights and (ii)
the fact that such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options,
-28-
warrants or conversion rights whether or not exercised; provided, however,
that no such readjustment shall have the effect of increasing the
Conversion Price by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
options, warrants or conversion privileges.
5.6 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 5.5, no
adjustment in respect to any dividends paid shall be made during the term of the
Debenture or upon the exercise of the Debenture.
5.7 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION CONSOLIDATION,
etc. In the case of any consolidation of the Company with or merger of the
Company into another corporation or in the case of any sale or conveyance to
another corporation of all or substantially all of the property, assets or
business of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall provide that the Holder shall have the
right thereafter upon payment of the Conversion Price in effect immediately
prior to such action to purchase upon conversion of the Debenture the kind and
amount of shares and other securities and property which the Holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Debenture been converted
immediately prior to such action, such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The provisions of this Section 5.7 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
5.8 PAR VALUE OF COMMON STOCK. Before taking any action which would cause
an adjustment reducing the Conversion Price below the then par value of the
shares of Common Stock issuable upon conversion of the Debenture, the Company
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
5.9 STATEMENT ON DEBENTURE CERTIFICATES. Irrespective of any adjustments in
the Conversion Price or the number of securities convertible, this Debenture
certificate or any certificates hereafter issued may continue to express the
same price and number of securities as are stated in this Debenture certificate.
However, the Company may at any time in its sole discretion (which shall be
conclusive) make any change in the form of the Debenture certificate that it may
deem appropriate and that does not affect the substance thereof; and any
Debenture certificate thereafter issued, whether upon registration or transfer
of, or in exchange or substitution for, an outstanding Debenture certificate,
may be in the form so changed.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be issued
in connection with any subscription hereunder but in lieu of such fractional
shares, the Company shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Conversion Price then in
effect.
7. SUBORDINATION. Any right of the Holder to payment of principal or
interest from the Company shall be subordinated to the claims and rights of the
holders of the Senior Debt ("Senior Debt Holders"). " Senior Debt" means the
indebtedness of the Company incurred in connection with : (i) all existing and
future secured or unsecured institutional financing, including without
limitation, financing from banks, savings and loans, mortgage companies,
insurance companies, governmental agencies and/or any other institution which is
engaged in whole or in part in making loans in the ordinary course of its
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business, (ii) all future purchase money financing which is secured by an
encumbrance against all or any portion of the properties and/or assets of the
Company, and (iii) any refinancing of the type of indebtedness referred to in
Section 7 (i), (ii) above. Any payment of principal or interest to the Holder
shall be collected, enforced or received by the Holder as trustee for the Senior
Debt Holders and paid over to the Senior Debt Holders. The Holder agrees that in
the event of any payment of principal or interest by the Company to the Holder
by reason of any receivership, insolvency or bankruptcy proceeding, or
proceeding for reorganization or readjustment of the Company or its properties,
or otherwise, then, in any such event, the Senior Debt Holders shall be
preferred in the payment of their claims over the claim of the Holder to payment
of principal or interest against the Company or its properties, and the claims
of the Senior Debt Holders shall be first paid and satisfied in full before any
payment or distribution of any kind or character, whether in cash, property or
securities, shall be made to the Holder. Provided, however, that this Section 7
shall not apply to any payment of principal or interest made to the Holder while
the Company is solvent and not in default with respect to its Senior Debt.
8. REPLACEMENT OF DEBENTURE CERTIFICATE. Upon receipt of evidence
satisfactory to the Company of the certificate loss, theft, destruction or
mutilation of the Debenture certificate and, in the case of any such loss,
theft, or destruction, upon delivery of a bond of indemnity satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of the Debenture certificate, the Company will issue a new Debenture
certificate, of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Debenture Certificate.
9. COVENANTS OF THE COMPANY. So long as any of the Debentures remain
outstanding, the Company shall:
(a) At all times keep reserved and/or take such action as may be necessary
to make certain there is available the total number of shares of Common
Stock necessary for the conversion of all of the then outstanding
Debentures at the then current Conversion Price;
(b) Not enter into a loan secured by the property and/or assets of the
Company or any of its subsidiaries with (i) any director, officer or 5%
stockholder of the Company, (ii) any entity in which a director, officer or
5% stockholder has an interest as an officer, director, partner,
beneficiary of a trust or is a 5% or more equity holder of such entity, or
(iii) any parent, spouse, child or grandchild of an officer, director or 5%
stockholder of the Company except upon terms no less favorable to the
Company than those which could be obtained from an "arms-length" lender;
and
(c) Not redeem, repurchase or otherwise acquire any shares of the common or
preferred stock of the Company, if such redemption would result in the
Company's net worth falling below Two Million Dollars ($2,000,000) on a pro
forma basis.
10. REGISTRATION RIGHTS.
(1) REGISTRATION. If at any time or from time to time, the Company shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders, in a registration statement covering
the sale of registrable securities, the Company will: (a) promptly give to each
holder of any of the Debentures (the "Holder") written notice thereof (which
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shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and (b) include in such registration (and any related
qualification under blue sky laws or other compliance) and in any underwriting
involved therein, all the securities into which the Debentures, or any of them,
may be converted (the "Registrable Securities") specified in a written request
or requests, made within thirty days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in subparagraph (2)
below.
(2) UNDERWRITING. The right of any Holder to registration pursuant to this
agreement shall be conditioned upon such Holder's participation in the
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this paragraph, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities to be included in the
registration and underwriting; provided, however, that with respect to such
registration the underwriter may not limit the amount of Registrable Securities
included in such registration and underwriting to less than an amount equal to
20 percent of the amount of all of the Company's securities included within such
registration and underwriting. The Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities entitled to inclusion in such registration
held by such Holders at the time of filing the registration statement. If any
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall,
unless the Holder requests otherwise, be included in such registration but shall
not be transferred in a public distribution prior to ninety days after the
effective date of the registration statement relating thereto or under such
other restrictions which shall reasonably be requested by the underwriter and/or
the Company.
(3) EXPENSES OF REGISTRATION. All expenses incurred in connection with any
registration, qualification or compliance in furtherance of registration rights
provided in this Agreement, including without limitation, all registration,
filing, and qualification fees, printing expenses, fees and disbursements of
counsel for the Company, and expenses of any special audits incidental to or
required by such registration, shall be borne by the Company; provided however:
(1) The Company shall not be required to pay for expenses of any
registration the request for which has been subsequently withdrawn by the
Holders, in which case, such expenses shall be borne by the Holders
requesting such withdrawal;
(2) The Company shall not be required to pay fees of legal counsel of
Holder, or underwriters' fees, discounts, or commissions relating to
Registrable Securities.
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(4) REGISTRATION PROCEDURES. In the case of each registration,
qualification, or compliance effected by the Company as provided herein, the
Company will keep each Holder participating therein advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(1) Keep such registration, qualification or compliance effective for a
period of 180 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; and
(2) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request.
(5) INDEMNIFICATION. The Company will indemnify each Holder of Registrable
Securities, each of the Holder's officers and directors, and each person
controlling such Holder, with respect to such registration, qualification, or
compliance effected pursuant to this paragraph, and each underwriter, if any,
and each person who controls any underwriter of the Registrable Securities held
by or issuable to such Holder, against all claims, losses, damages, and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification, or compliance,
and will reimburse each such Holder, each of the Holder's officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defining any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or issuable to such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors and officers who sign such registration statement, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company within the meaning of the
Securities Act, and each other such Holder, each of such Holder's officers and
directors and each person controlling such Holder, against all claims, losses,
damages, and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any 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 will reimburse the Company, such Holders, such
directors, officers, persons, or underwriters for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent,
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that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular,
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder
specifically for use therein.
(c) Each party entitled to indemnification under this paragraph (the
Indemnified Party) shall give notice to the party required to provide
indemnification (the Indemnifying Party) promptly after such indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgement or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
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(6) INFORMATION BY HOLDER
The Holder or Holders of Registrable Securities included in any
registration shall furnish to the Company such written information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration, qualification, or compliance referred to in this
paragraph.
(7) TRANSFER OF REGISTRATION RIGHTS
The Rights to cause the Company to register your securities granted to you
by the Company under this Agreement may be assigned by you to a transferee or
assignee of any of your Registrable Securities, provided, that the Company is
given written notice by you at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned.
11. DEFAULT. If any of the following events (herein called "Events of
Default") shall occur:
(a) if the Company shall default in the payment or prepayment of any part
of the principal of any of the Debentures after the same shall become due
and payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise, and such default shall continue for more than 30
days; or
(b) if the Company shall default in the payment of any installment of
interest on any of the Debentures for more than 30 days after the same
shall become due and payable; or
(c) if the Company shall make an assignment for the benefit of creditors or
shall be unable to pay its debts as they become due; or
(d) if the Company shall dissolve; terminate its existence; become
insolvent on a balance sheet basis; commence a voluntary case under the
federal bankruptcy laws or under any other federal or state law relating to
insolvency or debtor's relief; permit the entry of a decree or order for
relief against the Company in an involuntary case under the federal
bankruptcy laws or under any other applicable federal or state law relating
to insolvency or debtor's relief; permit the appointment or consent to the
appointment of a receiver, trustee, or custodian of the Company or of any
of the Company's property; make an assignment for the benefit of creditors;
or admit in writing to be failing generally to pay its debts as such debts
become due;
(e) if the Company shall default in the performance of or compliance with
any material agreement, condition or term contained in this Debenture or
any of the other Debentures and such default shall not have been cured
within 30 days after such default,
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(f) any of the representations or warranties made by the Company herein, in
the Subscription Agreement, or in any certificate or financial or other
statements heretofore or hereafter furnished by or on behalf of the Company
in connection with the execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading in any material respect
at the time made; or
(g) any money judgment, writ or warrant of attachment, or similar process
not covered by insurance in excess of One Million Dollars ($1,000,000) in
the aggregate shall be entered or filed against the Company or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than ten
(10) days prior to the date of any proposed sale thereunder; or
(h) the Company shall have its Common Stock delisted from an exchange or
over the counter market,
then and in any such event the Holder of this Debenture shall have the option
(unless the default shall have theretofore been cured) by written notice to the
Company to declare the Debenture to be due and payable, whereupon the Debenture
shall forthwith mature and become due and payable, at the applicable prepayment
price on the date of such notice, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived, anything
contained in this Debenture to the contrary notwithstanding. Upon the occurrence
of an Event of Default, the Company shall promptly notify the Holder of this
Debenture in writing setting out the nature of the default in reasonable detail.
12. REMEDIES ON DEFAULT; NOTICE TO OTHER HOLDERS. In case any one or more
of the Events of Default shall occur, the Holder may proceed to protect and
enforce his or her rights by a suit in equity, action at law or other
appropriate proceeding, whether, to the extent permitted by law, for the
specific performance of any agreement of the Company contained herein or in aid
of the exercise of any power granted hereby. If any Holder of one or more of the
Debentures provided for or referenced herein shall declare the same due and
payable or take any other action against the Company in respect of an Event of
Default, the Company will forthwith give written notice to the Holder of this
Debenture, specifying such action and the nature of the default alleged.
13. AMENDMENTS. With the consent of the Holders of more than 50% in
aggregate principal amount of the Debentures provided for or referenced herein
at the time outstanding, the Company, when authorized by a resolution of its
Board of Directors, may enter into a supplementary agreement for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Debenture or of any supplemental agreement or modifying in
any manner the rights and obligations of the holders of Debentures or Common
Stock issued upon conversion of the Debentures, and of the Company, provided,
however, that no such supplemental agreement shall (a) extend the fixed maturity
of any Debenture, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or alter or impair the right to
convert the same into Common Stock at the rates and upon the terms provided in
this Debenture, without the consent of the Holder of each of the Debentures so
affected, or (b) reduce the aforesaid percentage of Debentures, the Holders of
which are required to consent to any supplemental agreement, without the consent
of the Holders of all debentures then outstanding; provided however that the
Board of Directors of the Company may decrease the conversion Price or otherwise
increase the amount of shares of Common stock of the Company into which such
debenture may be converted.
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14. CHANGES, WAIVERS, ETC. Neither this Debenture nor any provision hereof
may be changed, waived, discharged or terminated orally, but only by a statement
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in Section 12
of this Debenture.
15. ENTIRE AGREEMENT. This Debenture embodies the entire agreement and
understanding between the Holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
16. GOVERNING LAW, JURISDICTION, ETC. It is the intention of the parties
that the laws of the State of New York shall govern the validity of this
Debenture, the construction of its terms and the interpretation of the rights
and duties of the parties. Any legal action or proceeding with respect to this
Debenture may be brought in the courts of the State of New York or of the United
States of America for the Southern or Eastern District of New York, and by
execution and delivery of this Debenture, each of the Company and all Holders
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the Holder
and the Company hereby knowingly, voluntarily, intentionally and irrevocably
waives, in connection with any such action or proceeding: (i) any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions and
(ii) to the maximum extent not prohibited by law, any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Debenture.
KRANTOR CORPORATION
[Corporate Seal]
By_________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Vice Pres.
ATTEST:
By____________________________________
, Secretary
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ of the above
Debenture No. into shares of the Common Stock of KRANTOR CORPORATION (the
"Company") according to the conditions set forth in such Debenture, as of the
date written below.
The undersigned represents that is it not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person. The undersigned also
restates all representations and warranties made in Section 2 of the
subscription Agreement between the Company and the original holder hereof.
____________________________
Date of Conversion *
____________________________
Applicable Conversion Price
____________________________
Signature
____________________________
Name
____________________________
Address
____________________________
*The original Debenture and this Notice of Conversion must be received by the
Company within five business days following the date of Conversion.
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CATEGORIES OF U.S. PERSONS
1. Any natural person resident in the United States;
2. Any partnership or corporation organized or incorporated under the laws of
the United States;
3. Any estate of which any executor or administrator is a U.S. person;
4. Any trust of which any trustee is a U.S. person;
5. Any agency or branch of a foreign entity located in the U.S.;
6. Any non-discretionary account or similar account (other than estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. person;
7. Any partnership or corporation if: (A) organized or incorporated under the
laws of any foreign jurisdiction; and (B) formed by a U.S. person principally
for the purpose of investment in securities not registered under the Act, unless
it is organized or incorporated, and owned, by accredited investors (as defined
in Rule 501[a]) who are not natural persons, estates or trusts.
8. Any employee benefit plan established and administered in accordance with the
law of a county other than the United States and customary practices and
documentation of such country shall not be deemed a U.S. person.
9. Any agency or branch of a U.S. person located outside the United States shall
not be deemed a "U.S. person" if :
the agency or branch operates for valid business
reasons: and the agency or branch is engaged in the
business of insurance or banking and is subject to
substantive insurance or banking regulation,
respectively, in the jurisdiction where located.
10. The International Monetary Fund, the International Bank for Reconstruction
and Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the United States, and their agencies,
affiliates and pension plans, and any other similar international organizations,
their agencies, affiliates and pension plans shall not be deemed "U.S. persons."
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WHO MAY RECEIVE AN OFFER
-Suitability Standards-
The Company has adopted as a general policy, a suitability standard that each
investor must: (i) be an accredited investor as defined in Rule 501 of
Regulation D under the Act (an "Accredited Investor"), or (ii) alone or together
with his purchaser representative, have the ability to evaluate the merits and
risks of an investment in the Company based upon their knowledge and experience
in financial and business matters. An Offeree is an Accredited investor if:
(i) in the case of a natural person, he or she has an individual gross
income in excess of $200,000 in each of the two most recent years and he or she
reasonably expects an income in excess of $200,000 in the current year; or
(ii) in the case of a natural person, he or she has an individual net
worth, or a joint net worth with his or her spouse, at the time of his purchase,
in excess of $1,000,000 (net worth for these purposes and (iii) below includes
home, home furnishings and automobiles); or
(iii) he or she otherwise satisfies to the Company that he or she is an
accredited investor, as defined in Rule 501 under the 1933 Act.
Other Accredited investors include the following: certain institutional
investors, including certain banks, whether acting in their individual or
fiduciary capacities, certain insurance companies, federally registered
investment companies, business development companies (as defined under the
Investment Company Act of 1940), Small Business Investment Companies licensed by
the Small Business Administration, certain employee benefit plans, private
business development companies (as defined in the Investment Advisor's Act of
1940), tax exempt organizations (as defined in Section 501(c)(3) of the Internal
Revenue Code) with total assets in excess of $5,000,000, certain entities in
which all the equity owners are Accredited Investors, and certain Affiliates of
the Company.
The Company may require that each person who is not an Accredited Investor
establish their ability, alone or together with his or her purchaser
representative(s), to evaluate the merits and risks of an investment in the
Company based upon his or their knowledge and experience in financial and
business matters.
A purchaser representative selected by an investor must have sufficient
knowledge and experience in financial and business matters to enable him or her,
either alone or together with other purchaser representatives or the prospective
investor, to evaluate the merits and risks of an investment in the Company. Each
purchaser representative will have to satisfy the Company with regard to such
qualifications. In addition, a purchaser representative must make written
disclosure to the prospective investor whom he or she intends to represent,
prior to the prospective investor's subscription for any Shares, of the
relationship, if any (past, present or contemplated), of the purchaser
representative to the Company or its Affiliates, including the amount of any
compensation paid or to be paid by the Company to such purchaser representative
as a result of such relationship.
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The Company has not adopted any minimum net worth or income criteria but
reserves the right to make an individual evaluation of the suitability of each
investor and to have the investor complete a confidential offeree questionnaire.
Satisfaction of the Company's suitability standards by a prospective Offeree
does not represent a determination by the Company that the Company is a suitable
investment for such person. Each Offeree must consult their own professional
advisors in order to ascertain the suitability of the investment. The Company
may make or cause to be made such further inquiry and obtain such additional
information as it deems appropriate with regard to the suitability of
prospective Offerees. The Company may reject subscriptions, in whole or in part,
in its sole judgment.
CERTAIN STATES OR OTHER JURISDICTIONS MAY IMPOSE ADDITIONAL SUITABILITY
QUALIFICATIONS FOR INVESTORS WHICH MAY HAVE THE EFFECT OF REQUIRING POTENTIAL
INVESTORS TO HAVE A NET WORTH AND/OR ANNUAL INCOME IN EXCESS OF THE MINIMUM
REQUIREMENTS SET FORTH HEREIN. IF SUCH OFFERS AND SALES ARE MADE IN SUCH STATES,
INVESTORS FROM SUCH STATES OR OTHER JURISDICTIONS, AS THE CASE MAY BE WILL BE
REQUIRED TO MEET SUCH QUALIFICATIONS IN ORDER TO PARTICIPATE IN THIS OFFERING.
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