EXHIBIT 4.11
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 3, 2000 is entered
into by and between Information Highway.com, Inc., a Florida corporation (the
"Company"), and Senasqua Investors LLC, a Delaware limited liability company
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to issue,
upon the terms and subject to the conditions of this Agreement, one million five
hundred thousand dollars ($1,500,000) principal amount of the Company's 5%
Convertible Debentures (the "Debentures") and warrants (the "Warrants") to
purchase two hundred twenty-five thousand (225,000) shares of common stock of
the Company, par value $.0001 per share (the "Common Stock"). The Debentures
are convertible, at the holder's option, into the Company's Common Stock, on the
terms set forth therein, and the Warrants may be exercised for the purchase of
Common Stock, on the terms set forth therein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. Purchase of Securities. On the Closing Date (as defined herein)
the Purchaser hereby agrees to purchase from the Company (i) Debentures in the
principal amount of one million five hundred thousand dollars ($1,500,000),
which shall be issued in substantially the form attached hereto as Exhibit A,
and (ii) Warrants to purchase two hundred twenty-five thousand (225,000) shares
of Common Stock, which shall be issued in substantially the form attached hereto
as Exhibit B the aggregate. The aggregate purchase price for such Debentures
and Warrants (collectively, the "Securities") shall be one million five hundred
thousand dollars ($1,500,000), and shall be payable in same day funds.
b. Closings. The Debentures and the Warrants to be purchased by the
Purchaser hereunder, in definitive form, and in such denominations and
registered in such names as the Purchaser or its representative, if any, may
request upon notice to the Company, shall be delivered by or on behalf of the
Company for the account of the Purchaser, against payment by the Purchaser or on
its behalf of the purchase price therefor by wire transfer to an account of the
Company, all at the offices of Pryor Cashman Sherman & Flynn LLP, 410 Park
Avenue, New York, New York 10022, at 9:30 a.m., New York time on March 3, 2000,
or at such other time and date as the Purchaser or its representative, if any,
and the Company may agree upon in writing, such date being referred to herein as
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Purchaser represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Purchaser and each of its equity owners is (i) experienced in
making investments of the kind described in this Agreement and the related
documents, (ii) able, by reason of the business and financial experience of its
management, to protect its own interests in connection with the transactions
described in this Agreement and the related documents, and (iii) able to afford
the entire loss of its investment in the Securities.
b. All subsequent offers and sales of the Debentures, the Warrants,
and the Common Stock issuable upon conversion or exercise of, or in lieu of
interest payments on the Debentures or the Warrants, shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to an
applicable exemption from such registration.
c. The Purchaser understands that the Securities are being offered
and sold to it in reliance upon exemptions from the registration requirements of
the United States federal securities laws, and that the Company is relying upon
the truth and accuracy of the Purchaser's representations and warranties, and
the Purchaser's compliance with its agreements, each as set forth herein, in
order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Securities.
d. The Purchaser: (A) has been provided with sufficient information
with respect to the business of the Company and such documents relating to the
Company as the Purchaser has requested and Purchaser has carefully reviewed the
same including, without limitation, the Company's Form 10-QSB for the fiscal
year quarter November 30, 1999 filed with the Securities and Exchange Commission
("the Commission"), (B) has been provided with such additional information with
respect to the Company and its business and financial condition as the
Purchaser, or the Purchaser's agent or attorney, has requested, and (C) has had
access to management of the Company and the opportunity to discuss the
information provided by management of the Company and any questions that the
Purchaser had with respect thereto have been answered to the full satisfaction
of the Purchaser.
e. The Purchaser has the requisite corporate power and authority to
enter into this Agreement and this Agreement has been duly and validly
authorized, executed and delivered on behalf of the Purchaser and is a valid and
binding agreement of the Purchaser, enforceable in accordance with its terms,
except to the extent that enforcement of this Agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
f. This Agreement and the registration rights agreement, dated the
date hereof, between the Company and the Purchaser (the "Registration Rights
Agreement"), attached hereto as Exhibit D, and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Purchaser; and
such agreements, when executed and delivered by each of the
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Purchaser and the Company will each be a valid and binding agreement of the
Purchaser, enforceable in accordance with their respective terms, except to the
extent that enforcement of each such agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and to
general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
Each of the Company's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction.
Each of the Company and its subsidiaries is duly qualified as a foreign
corporation in all jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken as a whole.
Schedule 3(a) lists all subsidiaries of the Company and, except as noted
therein, all of the outstanding capital stock of such subsidiaries is owned of
record and beneficially by the Company.
b. Capitalization. On the date hereof, the authorized capital of the
Company consists of 50,000,000 shares of Common Stock, par value $.0001 per
share, of which 7,790,017 are issued and outstanding and 10,000,00 shares of
preferred stock, par value $.0001 per share, of which no shares are issued and
outstanding. Schedule 3(b) sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company (collectively, the "Derivative Securities") which are
outstanding on the date hereof, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such Derivative Securities,
(iii) the number of shares of Common Stock of the Company into which such
Derivative Securities are convertible as of the date hereof, (iv) the conversion
or exercise price or prices of such Derivative Securities as of the date hereof,
(v) the expiration date of any conversion or exercise rights held by the owners
of such Derivative Securities and (vi) any registration rights associated with
such Derivative Securities or outstanding Common Stock.
c. Concerning the Debentures, the Warrants and Common Stock. The
Common Stock issuable upon conversion of, or in lieu of interest payments on,
the Debentures, and upon exercise of the Warrants, when issued, shall be duly
and validly issued, fully paid and non-assessable, and will not subject the
holder thereof to personal liability by reason of being such a holder. There
are no preemptive rights or rights of first refusal of any stockholder of the
Company, as such, to acquire any of the Securities, or the Common Stock issuable
to the Purchaser pursuant to the terms of the Debentures and the Warrants.
d. Reporting Company Status. The Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has duly filed all materials and documents required to be
filed pursuant to all reporting obligations under either Section 13(a) or 15(d)
of the Exchange Act, if any, prior to the offer and sale of the Securities. The
Common Stock is listed and traded on the OTC Bulletin Board, and the Company is
not aware of any pending or contemplated action or proceeding of any kind to
suspend the trading of the Common Stock.
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e. Authorized Shares. The Company has legally available a sufficient
number of authorized and unissued shares of Common Stock as may be necessary to
effect the conversion of the Debentures and the exercise of the Warrants. The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of shares of Common Stock upon conversion of the
Debentures and the exercise of the Warrants. The Company further acknowledges
that its obligation to issue shares of Common Stock upon conversion of the
Debentures and upon exercise of the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. (S) 101 et seq. (the "Bankruptcy
Code"). In the event the Company becomes a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. (S) 362 in respect of the conversion of the
Debentures and the exercise of the Warrants. The Company agrees, without cost
or expense to the Purchaser, to take or consent to any and all action necessary
to effectuate relief under 11 U.S.C. (S) 362.
f. Legality. The Company has the requisite corporate power and
authority to enter into this Agreement and to issue and deliver the Debentures,
the Warrants, and the Common Stock issuable upon conversion of, or in lieu of
interest payments on, the Debentures and the exercise of the Warrants.
g. Transaction Agreements. This Agreement, the Registration Rights
Agreement, the Debentures and the Warrants (collectively, the "Primary
Documents"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Primary
Documents, when executed and delivered by the Company, will each be, a legal,
valid and binding agreement of the Company, enforceable in accordance with their
respective terms, except to the extent that enforcement of each of the Primary
Documents may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and to general principles of equity.
h. Non-contravention. The execution and delivery of this Agreement
and each of the other Primary Documents, and the consummation by the Company of
the other transactions contemplated by this Agreement and each of the other
Primary Documents, does 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 Certificate of Incorporation or By-laws of the Company, or any material
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which they or any of their
properties or assets are bound, or any existing applicable law, rule, or
regulation or any applicable decree, judgment or order of any court or United
States federal or state regulatory body, administrative agency, or any other
governmental body having jurisdiction over the Company, its subsidiaries, or any
of their properties or assets. Neither the filing of the registration statement
required to be filed by the Company pursuant to the Registration Rights
Agreement nor the offering or sale of the Debentures or the Warrants as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied on or prior to the Closing Date, for or relating
to the registration of any shares of the Common Stock.
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i. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
j. SEC Filings. None of the reports or documents filed by the Company
with the Commission (the "SEC Documents") 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 made
therein, in light of the circumstances under which they were made, not
misleading.
k. Stabilization. Neither the Company, nor any of its affiliates,
has taken or may take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock.
l. Absence of Certain Changes. Except as disclosed in the Company's
SEC Documents and since May 31, 1999, there has been no material adverse change
nor any material adverse development in the business, properties, operations,
financial condition, prospects, outstanding securities or results of operations
of the Company.
m. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Purchaser (i) that could reasonably be
expected to have a material adverse effect upon the condition (financial or
otherwise) or the earnings, business affairs, properties or assets of the
Company or (ii) that could reasonably be expected to materially and adversely
affect the ability of the Company to perform the obligations set forth in the
Primary Documents. The representations and warranties of the Company set forth
in this Agreement do not contain any untrue statement of a material fact or omit
any material fact necessary to make the statements contained herein, in light of
the circumstances under which they were made, not misleading.
n. Title to Properties; Liens and Encumbrances. The Company has good
and marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
o. Patents and Other Proprietary Rights. The Company has sufficient
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted, and such business does not and would not conflict with or constitute
an infringement on the rights of others.
p. Permits. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now
conducted, the lack of which would materially and adversely affect the business
or financial condition of the Company. The
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Company is not in default in any respect under any of such franchises, permits,
licenses or similar authority.
q. Absence of Litigation. Except as disclosed in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, in which an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or the transactions contemplated by the Primary
Documents, or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, the
Primary Documents.
r. No Default. Each of the Company and its subsidiaries is not in
default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound.
s. Transactions with Affiliates. Except as disclosed in the Company's
public filings with the Commission, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors or
affiliates that, had they existed on May 31, 1999, would have been required to
be disclosed in the Company's 1999 Annual Report to stockholders.
t. Employment Matters. The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
u. Insurance. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
v. Taxes. All applicable tax returns required to be filed by the
Company and each of its subsidiaries have been prepared and filed in compliance
with all applicable laws, or if not yet filed have been granted extensions of
the filing dates which extensions have not expired,
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and all taxes, assessments, fees and other governmental charges upon the
Company, its subsidiaries, or upon any of their respective properties, income or
franchises, shown in such returns and on assessments received by the Company or
its subsidiaries to be due and payable have been paid, or adequate reserves
therefor have been set up if any of such taxes are being contested in good
faith; or if any of such tax returns have not been filed or if any such taxes
have not been paid or so reserved for, the failure to so file or to pay would
not in the aggregate have a material adverse effect on the business or financial
condition of the Company and its subsidiaries, taken as a whole.
w. Foreign Corrupt Practices Act. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
x. Investment Company Act. The Company is not conducting, and does
not intend to conduct its business in a manner which would cause it to become,
an "investment company," as defined in Section 3(a) of the Investment Company
Act of 1940, as amended.
y. Agent Fees. Except for one hundred fifty thousand dollars
($150,000) which shall be paid by the Company to David Kalish, the Company has
not incurred any liability for any finder's or brokerage fees or agent's
commissions in connection with the offer and sale of the transactions
contemplated by this Agreement.
z. Private Offering. Subject to the accuracy of the Purchaser's
representations and warranties set forth in Section 2 hereof, the offer, sale
and issuance of the Securities and the other securities as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act.
The Company agrees that neither the Company nor anyone acting on its behalf will
offer any of the Debentures, the Warrants, or any similar securities for
issuance or sale, or solicit any offer to acquire any of the same from anyone so
as to render the issuance and sale of such securities subject to the
registration requirements of the Securities Act. The Company has not offered or
sold the Securities by any form of general solicitation or general advertising,
as such terms are used in Rule 502(c) under the Securities Act.
aa. Year 2000 Processing. The computer systems used by the Company
and its subsidiaries (the "Systems"), both hardware and software, are in good
working order. The Company has taken steps that are reasonable to ensure that
the occurrence of the year 2000 does not materially and adversely affect the
Systems of the Company, its subsidiaries, or their
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business, and no material expenditures are required in order to cause such
Systems to operate properly as a result of the change of the year 1999 to 2000.
The Company and its subsidiaries have resolved all issues discovered as a result
of year 2000 inquires or compliance testing or otherwise known to the Company.
bb. Environmental Matters. Neither the Company and its subsidiaries,
nor any predecessor in interest nor, to the Company's knowledge, after due
inquiry, any other person has ever caused or permitted any Hazardous Material
(as defined below) to be released, treated or disposed of on, at, under or
within any real property owned, leased or operated by the Company and its
subsidiaries or any predecessor in interest, and no such real property has ever
been used (either by the Company and its subsidiaries, any predecessor in
interest or, to the Company's knowledge, after due inquiry, by any other person)
as a treatment, storage or disposal site for any Hazardous Material. The
Company has no liabilities with respect to Hazardous Materials, and to the
knowledge of the Company, after due inquiry, no facts or circumstances exist
which could give rise to liabilities with respect to Hazardous Materials, which
could have any reasonable likelihood of having a material adverse effect on the
Company. For purposes of this Agreement "Hazardous Materials" shall mean (i)
any pollutants or contaminations, (ii) any asbestos or insulation or other
material composed of or containing asbestos and (iii) any petroleum product and
any hazardous, toxic or dangerous waste, substance or material defined as such
in, or for purposes of, the Comprehensive Environmental Response, Compensation
and Liability Act, any so-called "Superfund" or "Superlien" law, or (iv) any
other applicable federal, state, local or other statute, law, ordinance, code,
rule, regulation, order or decree concerning the protection of human health or
the environment or otherwise regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
cc. Intellectual Property. Except as set forth in the SEC Documents,
to the best of the Company's knowledge, each of the Company and its subsidiaries
owns or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights which are described in the SEC Documents; except as set forth in the
SEC Documents, the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business of the Company and its subsidiaries, taken as a
whole, as presently conducted; and, except as set forth in the SEC Documents,
the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with the asserted rights of others with respect to
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names and copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
or business of the Company and its subsidiaries, taken as a whole, as presently
conducted.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (1) neither the Debentures, the
Warrants, nor the Common Stock issuable upon conversion of, or in lieu of
interest payments on, the Debentures or upon exercise of the Warrants, have
been, and are not being, registered under the Securities Act, and may not be
transferred unless (A) subsequently registered thereunder or (B) they are
transferred pursuant to an exemption from such registration; and (2) any sale of
the Debentures, the Warrants or the Common Stock issuable upon conversion or
exchange thereof made in reliance upon Rule 144 under the Securities Act may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of the Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require compliance
with another exemption under the Securities Act and the rules and regulations of
the Commission thereunder. The provisions of Section 4(a) and 4(b) hereof,
together with the rights of the Purchaser under this Agreement and the other
Primary Documents, shall be binding upon any subsequent transferee of the
Debentures and the Warrants.
b. Restrictive Legend. The Purchaser acknowledges and agrees that,
until such time as the Securities or the Common Stock issuable upon conversion
or exchange thereof shall have been registered under the Securities Act or the
Purchaser demonstrates to the reasonable satisfaction of the Company and its
counsel that such registration shall no longer be required, such Securities or
the Common Stock issuable upon conversion or exchange thereof may be subject to
a stop-transfer order placed against the transfer of such Securities, and such
Securities shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
SHALL NO LONGER BE REQUIRED.
c. Filings. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities or the Common
Stock issuable upon conversion or exchange thereof to the Purchaser as required
by United States laws and regulations, or by any domestic securities exchange or
trading market, including, qualifying the shares of Common Stock issuable upon
exercise of the Warrants for trading on the OTC Bulletin Board or the filing of
a listing application with NASDAQ to list all of the shares of Common Stock
issuable upon conversion of the Debentures and upon the exercise of the
Warrants, as applicable, and if applicable, the filing of a notice on Form D (at
such time and in such manner as required by the rules and regulations of the
Commission), and to provide copies thereof to the Purchaser promptly after such
filing or filings.
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d. OTC Bulletin Board. The Company agrees and covenants that it will
not seek to have the trading of its Common Stock through OTC Bulletin Board
suspended or terminated, will use its best efforts to maintain its eligibility
for trading on OTC Bulletin Board and, if such trading of its Common Stock is
suspended or terminated, will use its best efforts to requalify its Common Stock
or otherwise cause such trading to resume.
e. Reporting Status. So long as the Purchaser beneficially owns any
of the Securities, the Company shall timely file all reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
and shall not terminate its status as an issuer required to file reports under
the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
f. State Securities Filings. The Company shall from time to time
promptly take such action as the Purchaser or any of its representatives, if
applicable, may reasonably request to qualify the Securities or the Common Stock
issuable upon conversion or exchange thereof for offering and sale under the
securities laws (other than United States federal securities laws) of the
jurisdictions in the United States as shall be so identified to the Company, and
to comply with such laws so as to permit the continuance of sales therein,
provided that in connection therewith, the Company shall not be required to
qualify as a foreign corporation or to file a general consent to the service of
process in any jurisdiction.
g. Use of Proceeds. The Company will use all of the net proceeds
from the issuance of the Securities for the development of portal sites in
Canada, the United States and internationally; for expansion of the virtual
Internet service within Canada and the United States; for production and rollout
of the Voice Over Internet protocol phone services; for marketing and for
working capital and to pay the costs of this offering.
h. Reservation of Common Stock. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Debentures and the
exercise of the Warrants. The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance that is no
less than two (2) times the number that is then actually issuable upon the
conversion of the Debentures and the exercise in full of the Warrants.
i. Sales of Additional Shares. The Company shall not, directly or
indirectly, without the prior written consent of the Purchaser, offer, sell,
offer to sell, contract to sell or otherwise dispose of any (1) shares of Common
Stock at a price below four dollars ($4.00) per share, (2) any security or other
instrument convertible into or exchangeable for shares of its Common Stock, or
(3) securities that contain any form of repricing rights, in each case, for a
period beginning on the date hereof and ending on the date that is later of two
hundred seventy (270) days after the date of this Agreement or one hundred
eighty (180) days after the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective by the Commission (the
"Lock-Up Period"), except that the Company may (i) issue securities for the
aggregate consideration of at least $15 million in connection with a bona fide,
firm commitment, underwritten public offering under the Securities Act; (ii) may
issue shares of Common Stock which are issued in connection with a bona fide
transaction involving the acquisition of another business entity or segment of
any such entity by the Company by merger,
10
asset purchase, stock purchase or otherwise; (iii) may issue shares of common
stock to directors, officers, employees or consultants of the Company for the
primary purpose of soliciting or retaining their services in an aggregate
amount, together with any New Options (as defined below) vesting or becoming
exercisable during the Lock-Up Period, not to exceed 150,000 shares; (iv) may
issue shares of Common Stock upon the exercise or conversion of currently
outstanding options, warrants and other convertible securities and up to 150,000
shares of Common Stock underlying New Options as provided in clause (v) below;
(v) may issue options to purchase shares of its Common Stock to its directors,
officers, employees and consultants in connection with its existing stock option
plans ("New Options"); provided, that, during the Lock-Up Period, New Options to
purchase not more than 150,000 shares of Common Stock shall vest or become
exercisable; and (vi) may issue Common Stock in connection with a stock split,
stock dividend or similar recapitalization of the Company which affects all
holders of the Company's Common Stock on an equivalent basis, in each case,
without the prior written consent of the Purchaser. In addition, the Company
agrees that it will not cause any shares of its capital stock that are issued in
connection with a transaction of the type contemplated by clause (ii) (or upon
the conversion or exercise of other securities that are issued in connection
with such transaction) or that were issued in connection with any financing,
acquisition or other transaction that occurred prior or subsequent to the date
of this Agreement to be covered by a registration statement that is filed with
the Commission or declared effective by the Commission prior to the time that
the Debentures and the Warrants and Common Stock issuable upon conversion or
exercise thereof are covered by a registration statement filed by the Company
pursuant to its obligations under the Registration Rights Agreement has been
effective under the Securities Act for a period of at least one hundred eighty
(180) days during which one hundred eighty (180) day period the Company has not
notified the Purchaser that such registration statement or the prospectus
included in such registration statement includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
j. Right of First Refusal. Subject to Section 4(i), if during the
twelve (12) month period following the date hereof the Company shall desire to
sell, offer to sell, contract to sell or otherwise dispose of any securities or
any security or other instrument convertible into or exchangeable for shares of
Common Stock (collectively, the "Offered Securities") to a prospective investor
(the "Prospective Investor"), the Company shall notify (the "Offer Notice") the
Purchaser in accordance with Section 10 hereof of the terms (the "Third Party
Terms") on which the Company proposes to sell, contract to sell or otherwise
dispose of the Offered Securities to the Prospective Investor. If, within the
five (5) day period following the Purchaser's receipt of the Offer Notice, the
Purchaser delivers a written notice (the "Acceptance Notice") to the Company
stating its desire to purchase all or any portion of the Offered Securities on
the Third Party Terms, the Company shall be required to sell the Offered
Securities (or any portion thereof so desired by the Purchaser) to the Purchaser
at the price and on the terms set forth in the Offer Notice and the Company
shall not be permitted to sell such Offered Securities to the Prospective
Investor. If the Purchaser does not deliver an Acceptance Notice to the Company
in such five (5) day period, then for a period of sixty (60) days following the
date of the Offer Notice the Company may sell the Offered Securities to the
Prospective Investor on the terms set forth in the Offer Notice.
11
k. Additional Registration Statements. At any time during the period
beginning on the date hereof and ending on the first date that follows a period
of one hundred eighty (180) consecutive days following the effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement) during
which there has been no Blackout Event (as defined in the Registration Rights
Agreement) relating to such Registration Statement, the Company agrees that it
will not cause any registration statement (other than the Registration
Statement) to be declared effective by the Commission.
l. Stockholder Approval. If required in accordance with Nasdaq Rule
4310 or 4460, the Company agrees to use its best efforts (including obtaining
any vote of its stockholders required by applicable law or Nasdaq rules) to
authorize and approve the issuance of the Common Stock issuable upon conversion
of the Debentures and exercise of Warrants, to the extent that such conversion
or issuance results in the issuance of 20% or more of the Company's outstanding
Common Stock.
m. Ownership. At no time shall the Purchaser (including its
officers, directors and affiliates) maintain in the aggregate beneficial
ownership (as defined for purposes of Section 16 of the Securities Exchange Act
of 1934, as amended) of shares of Common Stock in excess of 4.999% of the
Company's outstanding Common Stock unless the Purchaser gives the Company at
least sixty-one days notice that it intends to increase its ownership position.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Sections 4(a) and 4(b) hereof prior to the registration and sale
of the Securities in the manner contemplated by the Registration Rights
Agreement, will be given by the Company to the transfer agent and that the
shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on the Debentures or upon exercise of the Warrants shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing in this Section shall affect in any way the Purchaser's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Purchaser provides the Company with an opinion
of counsel reasonably satisfactory (as to both the identity of such counsel and
the content of such opinion) to the Company and its counsel that registration of
a resale by the Purchaser of any of the Securities in accordance with clause
(1)(B) of Section 4(a) of this Agreement is not required under the Securities
Act, the Company shall permit the transfer of the Securities and, in the case of
the Common Stock, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such names and in such
denominations as specified by the Purchaser.
b. The Company will permit the Purchaser to exercise its right to
convert the Debentures or to exercise the Warrants by faxing an executed and
completed Notice of Conversion or Form of Election to Purchase, as applicable,
to the Company, and delivering within three (3) business days thereafter, the
original Notice of Conversion (and the related original Debentures) or Form of
Election to Purchase (and the related original Warrants) to the Company by hand
delivery or by express courier, duly endorsed. Each date on which a Notice of
Conversion or Form of Election to Purchase is faxed to the Company in accordance
with the
12
provisions hereof shall be deemed a "Conversion Date." The Company will transmit
the certificates representing the Common Stock issuable upon conversion of any
Debenture or upon exercise of any Warrants (together with the Debentures not so
converted, or the Warrants not so exercised) or upon conversion of the
Debentures and exercise of the Warrants to the Purchaser via express courier as
soon as practicable, but in all events no later than five (5) business days in
the case of conversion of the Debentures, or five (5) business days in the case
of the exercise of any Warrant after the Conversion Date (the "Delivery Date").
For purposes of this Agreement, such conversion of the Debentures or the
exercise of the Warrants shall be deemed to have been made immediately prior to
the close of business on the Conversion Date.
c. In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the Debentures or the exercise of
the Warrants, provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, on
the written request of the Purchaser, who shall have previously instructed the
Purchaser's prime broker to confirm such request to the Company's transfer
agent, the Company shall cause its transfer agent to electronically transmit
such Common Stock to the Purchaser by crediting the account of the Purchaser's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system no later than the applicable Delivery Date.
d. The Company understands that a delay in the issuance of Common
Stock beyond the applicable Delivery Date could result in an economic loss to
the Purchaser. As compensation to the Purchaser for such loss, the Company
agrees to pay to the Purchaser for late issuance of Common Stock upon conversion
of or in lieu of interest payments on, the Debentures or upon exercise of the
Warrants the sum of $1,500 per day for each $100,000 in aggregate principal
amount of Debentures that are being converted or for any or all shares of Common
Stock purchased upon the exercise of the Warrants. The Company shall pay any
payments that are payable to the Purchaser pursuant to this Section 5 in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to so issue
and deliver Common Stock to the Purchaser. Furthermore, in addition to any
other remedies which may be available to the Purchaser, in the event that the
Company fails for any reason to effect delivery of such Common Stock within five
(5) business days after the relevant Delivery Date, the Purchaser will be
entitled to revoke the relevant Notice of Conversion or Form of Election to
Purchase by delivering a notice to such effect to the Company, whereupon the
Company and the Purchaser shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion or Form of Election
to Purchase. For purposes of this Section 5, "business day" shall mean any day
in which the financial markets of New York are officially open for the conduct
of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SECURITIES.
Purchaser understands that the Company's obligation to issue the Securities
on the Closing Date to Purchaser pursuant to this Agreement is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of Purchaser contained in this Agreement as if made on the Closing
Date and the performance by Purchaser on or before the Closing Date of all
covenants and agreements of Purchaser required
13
to be performed on or before the Closing Date;
b. The absence or inapplicability of any and all laws, rules or
regulations prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SECURITIES.
The Company understands that Purchaser's obligation to purchase the
Debentures and the Warrants on the Closing Date is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date, and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date;
b. On the Closing Date, the Purchaser shall have received (I) the
Debentures, in substantially the form of Exhibit A hereto, and (ii) the
Warrants, in substantially the form of Exhibit B hereto;
c. On the Closing Date, the Purchaser shall have received an opinion
of counsel for the Company, dated the Initial Closing Date, in form, scope and
substance reasonably satisfactory to Purchaser, in substantially the form of
Exhibit C attached hereto;
d. On the Closing Date the Company shall have executed and delivered
a signed counterpart to the Registration Rights Agreement, in form, scope and
substance reasonably satisfactory to Purchaser, to the effect set forth in
Exhibit D attached hereto;
e. On Closing Date, the Purchaser shall have received a certificate
executed by (i) the President or the Chairman of the Company and (ii) the Chief
Financial Officer of the Company, stating that all of the representations and
warranties of the Company set forth in this Agreement are accurate as of the
Closing Date and that the Company has performed all of its covenants and
agreements required to be performed under this Agreement on or before the
Closing Date;
f. On the Closing Date, the Purchaser shall have received from the
Company such other certificates and documents as it or its representative, if
applicable, shall reasonably request, and all proceedings taken by the Company
in connection with the Primary Documents contemplated by this Agreement and the
other Primary Documents and all documents and papers relating to such Primary
Documents shall be satisfactory to the Purchaser;
g. On or prior to the Closing Date, there shall not have occurred any
of the following: (i) a suspension or material limitation in the trading of
securities generally on the New York Stock Exchange, Nasdaq National Market,
Nasdaq SmallCap or OTC Bulletin Board; (ii) a general moratorium on commercial
banking activities in New York declared by the applicable banking authorities;
(iii) the outbreak or escalation of hostilities involving the United States, or
the declaration by the United States of a national emergency or war; or (iv) a
change in
14
international, political, financial or economic conditions, if the effect of any
such event, in the reasonable judgment of the Purchaser, makes it impracticable
or inadvisable to proceed with the purchase of the Securities on the terms and
in the manner contemplated in this Agreement and in the other Primary Documents.
h. The Company shall have delivered to the Purchaser reimbursement of
the Purchaser's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement (including fees and disbursements of
the Purchaser's legal counsel) up to a maximum of twenty thousand dollars
($20,000).
8. EXPENSES.
The Company covenants and agrees with the Purchaser that the Company will
pay or cause to be paid the following: (a) the fees, disbursements and expenses
of the Purchaser and Purchaser's counsel in connection with the issuance of the
Securities payable on the Closing Date up to a maximum of twenty thousand
dollars ($20,000), (b) all expenses in connection with registration or
qualification of the Securities for offering and sale under state securities
laws as provided in Section 4(f) hereof, and (c) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section, including the fees and disbursements
of the Company's counsel, accountants and other professional advisors, if any.
If the Company fails to satisfy its obligations or to satisfy any condition set
forth in this Agreement, as a result of which the Securities are not delivered
to the Purchaser on the terms and conditions set forth herein, the Company shall
reimburse the Purchaser for any out-of-pocket expenses reasonably incurred in
making preparations for the purchase, sale and delivery of the Securities not so
delivered.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company and the Purchaser shall
survive the execution and delivery of this Agreement and the delivery of the
Debentures and the Warrants.
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to principles of conflict of laws.
Each of the parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference only and shall not form part of, or
affect the interpretation of this Agreement. This Agreement and each of the
Primary Documents have been entered into freely by each of the parties,
following consultation with their respective counsel, and shall be interpreted
fairly in accordance with its respective terms, without any construction in
favor of or against either party. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
15
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or unenforceability of this
Agreement in any other jurisdiction. This Agreement shall inure to the benefit
of, and be binding upon the successors and assigns of each of the parties
hereto, including any transferees of the Securities. This Agreement may be
amended only by an instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
11. NOTICES.
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
Company: Information Highway.com., Inc.
#185-10751 Shellbridge Way
Richmond, British Columbia V6X 2W8
Attention: John G. Robertson
Tel: (604) 278-5996
Fax: (604) 278-3409
With a copy to:
Ogden Murphy Wallace P.L.L.C.
2100 Westlake Center Tower
1601 Fifth Avenue
Seattle, Washington 98101-1686
Attention: James L. Vandeberg, Esq.
Tel: (206) 447-7000
Fax: (206) 407-0215
Purchaser: Senasqua Investors LLC
c\o WEC Asset Management LLC
110 Colabaugh Pond Road
Croton-on-Hudson, New York 10520
Attention: Daniel J. Saks
Tel: (914) 271-2211
Fax: (914) 271-0889
16
With a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Mark Saks, Esq.
Tel: (212) 326-0140
Fax: (212) 326-0806
12. INDEMNIFICATION
The Company agrees to indemnify the Purchaser and each officer, director,
employee, agent, partner, stockholder, member and affiliate of the Purchaser
(collectively, the "Indemnified Parties") for, and hold each Indemnified Party
harmless from and against: (i) any and all damages, losses, claims and other
liabilities of any and every kind, including, without limitation, judgments and
costs of settlement, and (ii) any and all reasonable out-of-pocket costs and
expenses of any and every kind, including, without limitation, reasonable fees
and disbursements of counsel for such Indemnified Parties (all of which expenses
periodically shall be reimbursed as incurred), in each case, arising out of or
suffered or incurred in connection with any of the following: (a) any
misrepresentation or any breach of any warranty made by the Company herein or in
any of the other Primary Documents, (b) any breach or non-fulfillment of any
covenant or agreement made by the Company herein or in any of the other Primary
Documents and (c) any claim relating to or arising out of a violation of
applicable federal or state securities laws by the Company in connection with
the sale or issuance of the Initial Shares, Additional Shares, Initial Warrants,
Additional Warrants or Conditional Warrant by the Company to the Purchaser
(collectively, the "Indemnified Liabilities"). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK, SIGNATURE PAGE TO FOLLOW]
17
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
INFORMATION HIGHWAY.COM, INC.
By:
-----------------------------------------------
Name: John G. Robertson
Title: President
SENASQUA INVESTORS LLC
By: WEC Asset Management LLC, Manager
By:
-----------------------------------------------
Name: Daniel J. Saks
Title: Managing Director
18
EXHIBIT INDEX
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF WARRANT
EXHIBIT C FORM OF OPINION OF COUNSEL TO COMPANY
EXHIBIT D FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULE INDEX
SCHEDULE 3(a) SUBSIDIARIES
SCHEDULE 3(b) CAPITALIZATION, DERIVATIVE SECURITIES AND
REGISTRATION RIGHTS
19
SCHEDULE 3(a)
LIST OF SUBSIDIARIES
Information Highway, Inc. (of which Information Highway.com, Inc. owns
approximately a 98% interest, which is expected to ultimately be a 100%
interest)
YesIC Communications Inc. - 100% interest
World Tel-Internet (Toronto) Ltd. - 100% interest
Blue Crow Internet Co. Ltd. - 100% interest
20
SCHEDULE 3(b)
CAPITALIZATION, DERIVATIVE SECURITIES AND REGISTRATION RIGHTS
Name of Shareholder Name and Issue Date Number of Conversion or Expiration Registration
Class of Common Stock Exercise Date Rights
Derivative Into which Price
Securities Derivative
Securities are
Convertible
Tammy Del Santo 7,000 01/26/98 7,000 $0.50 01/26/03 Form S-8
Jack Wasserman 75,000 01/25/98 75,000 $0.50 01/26/03 Form S-8
Gordon Friesen 25,000 01/26/98 25,000 $0.50 01/26/03 Form SB-2
Ismael Rodriguez 12,500 01/26/98 12,500 $0.50 01/26/03 Form S-8
Jason Roth 18,750 01/26/98 18,750 $0.50 01/26/03 Form S-8
Jack Bal 37,500 08/14/98 37,500 $0.75 08/14/03 Form S-8
Felicity Pook 7,500 02/23/99 7,500 $0.75 02/23/04 Form S-8
Gordon Friesen 50,000 01/18/99 50,000 $0.75 01/18/04 Form SB-2
David Sass 100,000 05/19/99 100,000 $4.00 05/19/04 Form SB-2
John Robertson 300,000 05/21/99 300,000 $4.00 05/21/04 Form S-8
David Sass 200,000 05/21/99 200,000 $4.00 05/21/04 Form SB-2
Russ Gallagher 100,000 06/23/99 100,000 $4.00 06/23/04 Form SB-2
IP Equity Inc. 125,000 06/23/99 125,000 $5.00 06/23/04 Form SB-2
Anna Wallace 17,400 11/01/99 17,400 $5.00 11/01/04 Form S-8
Voga Wallace 17,500 11/01/99 17,500 $5.00 11/01/04 Form S-8
Richard Butler 15,000 11/01/99 15,000 $5.00 11/01/04 Form S-8
Kelly Robertson 100,000 11/01/99 100,000 $5.00 11/01/04 Form S-8
James Vandeberg 100,000 11/05/99 100,000 $4.00 11/05/04 Form S-8
Jennifer Lorette 100,000 11/05/99 100,000 $4.00 11/05/04 Form S-8
Donna Moroney 50,000 11/05/99 50,000 $4.00 11/05/04 Form S-8
Cheryl Kelemen 25,000 11/05/99 25,000 $4.00 11/05/04 Form S-8
Carol Coleman 25,000 11/12/99 25,000 $4.00 11/12/04 Form S-8
21
Name of Shareholder Name and Issue Date Number of Conversion or Expiration Registration
Class of Common Stock Exercise Date Rights
Derivative Into which Price
Securities Derivative
Securities are
Convertible
Cristian Rodriguez 25,000 11/12/99 25,000 $4.00 11/12/04 Form S-8
Jason Roth 25,000 11/12/99 25,000 $4.00 11/12/04 Form S-8
Iouri Savenkov 10,000 11/12/99 10,000 $4.00 11/12/04 Form S-8
Grigori Efimov 10,000 11/12/99 10,000 $4.00 11/12/04 Form S-8
Chelsea Schwab 10,000 11/12/99 10,000 $4.00 11/12/04 Form S-8
Jennifer Will 5,000 11/12/99 5,000 $4.00 11/12/04 Form S-8
Michael Kuiack 15,000 11/12/99 15,000 $4.00 11/12/04 Form S-8
Alexandra Kanezaki 10,000 11/12/99 10,000 $4.00 11/12/04 Form S-8
Voga Wallace 12,500 11/29/99 12,500 $5.00 11/29/04 Form S-8
Anna Wallace 12,500 11/29/99 12,500 $5.00 11/29/04 Form S-8
Mallory M. Parmerlee Trust Share 5,000 07/26/99 5,000 $4.00 04/30/00 N/A
5,000 07/26/99 5,000 $6.00 04/30/01 Form SB-2
Shawn Lampman 12,500 07/26/99 12,500 $4.00 04/30/00 N/A
12,500 07/26/99 12,500 $6.00 04/30/01 Form SB-2
Joe Ebner 25,000 07/26/99 25,000 $4.00 04/30/00 N/A
25,000 07/26/99 25,000 $6.00 04/30/01 Form SB-2
Dave A. Hanson 5,000 07/26/99 5,000 $4.00 04/30/00 N/A
5,000 07/26/99 5,000 $6.00 04/30/01 Form SB-2
F.S.D.R.H. Trust 12,500 07/26/99 12,500 $4.00 04/30/00 N/A
12,500 07/26/99 12,500 $6.00 04/30/01 Form SB-2
Gene Cartwright Living Trust 25,000 07/26/99 25,000 $4.00 04/30/00 N/A
12/20/91 25,000 07/26/99 25,000 $6.00 04/30/01 Form SB-2
T. Kozub 5,000 07/26/99 5,000 $4.00 04/30/00 N/A
5,000 07/26/99 5,000 $6.00 04/30/01 Form SB-2
The Sunrise Trust 15,000 07/26/99 15,000 $4.00 04/30/00 N/A
15,000 07/26/99 15,000 $6.00 04/30/01 Form SB-2
Edward Keeney 3,000 07/26/99 3,000 $4.00 04/30/00 N/A
3,000 07/26/99 3,000 $6.00 04/30/01 Form SB-2
22
Name of Shareholder Name and Issue Date Number of Conversion or Expiration Registration
Class of Common Stock Exercise Date Rights
Derivative Into which Price
Securities Derivative
Securities are
Convertible
T.H. Scheer 13,150 07/26/99 13,150 $4.00 04/30/00 N/A
13,150 07/26/99 13,150 $6.00 04/30/01 Form SB-2
David Fan 6,600 07/26/99 6,600 $4.00 04/30/00 N/A
6,600 07/26/99 6,600 $6.00 04/30/01 Form SB-2
Ladislav Korcek 2,000 07/26/99 2,000 $4.00 04/30/00 N/A
2,000 07/26/99 2,000 $6.00 04/30/01 Form SB-2
K & D Equities Inc. 400,000 11/15/99 400,000 $3.50 04/15/01 Form SB-2
Garry Savage 100,000 12/01/99 100,000 $4.00 12/01/02 Form SB-2
Garry Savage 150,000 12/01/99 150,000 $4.00 12/01/04 N/A
Gary Savage 150,000 12/01/99 150,000 $5.00 12/01/04 N/A
23