Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Registration of Securities by a Small-Business 84± 341K
Issuer
2: EX-1 Underwriting Agreement 2± 12K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 2± 11K
Liquidation or Succession
4: EX-3 Articles of Incorporation/Organization or By-Laws 31± 114K
5: EX-4 Instrument Defining the Rights of Security Holders 11± 45K
6: EX-5 Opinion re: Legality 1 6K
7: EX-6 Opinion re: Discount on Capital Shares 2± 11K
8: EX-7 Opinion re: Liquidation Preference 8± 37K
9: EX-8 Opinion re: Tax Matters 31± 115K
10: EX-9 Voting Trust Agreement 12± 45K
EX-8 — Opinion re: Tax Matters
VALUE HOLDINGS, INC.
(incorporated under the laws of the State of Florida)
10% CONVERTIBLE DEBENTURE
Value Holdings, Inc. ( VHI ), for value received,
acknowledges itself indebted to and unconditionally promises to pay
to the order of Roycap Inc. ( Roycap ) and the other Holders, if
any, the principal sum of One Million Dollars ($1,000,000) (U.S.)
(the Original Principal Amount ) (or such part thereof as remains
outstanding) on August 8, 2002, or such earlier date as all or any
part of the principal amount hereof may become due in accordance
with the provisions hereof, and all other amounts now or in the
future payable under this 10% Convertible Debenture (hereinafter
referred to as the "Debenture") from time to time (including,
without limitation, interest on the principal amount and other
amounts due hereunder) in the amounts, at the times and in the
manner set forth herein.
INTERPRETATION
Definitions
In this Debenture:
affiliate has the meaning given to such term in the Business
Corporations Act (Ontario);
Applicable Law means, in respect of any Person, property,
transaction or event, all applicable laws, statutes, rules, by-laws
and regulations, and all applicable official directives, orders,
judgments and decrees of Governmental Bodies;
Business Day means any day other than Saturday, Sunday or any
statutory holiday on which banks are generally open for business in
Toronto, Ontario;
Common Stock means the shares of common stock of VHI, as same may
be converted, exchanged, redesignated, reclassified, subdivided,
consolidated, reorganized or otherwise changed from time to time;
Debt of any Person means all indebtedness or liabilities of a
Person for and in respect of borrowed money, including, without
limitation, obligations with respect to bankers' acceptances,
letters of credit and letters of guarantee and all such
indebtedness or liabilities which are directly or indirectly
guaranteed by such Person or which such Person has agreed
(contingently or otherwise) to purchase or otherwise acquire, but
does not include trade payables or other indebtedness incurred by
a Person in the ordinary course of business;
Default means any event or condition which, upon notice, lapse of
time, or both, would constitute an Event of Default;
Event of Default has the meaning attributed to such term in
Section 6.1;
Excluded Taxes means any taxes now or hereafter imposed, levied,
collected, withheld or assessed on a Holder by Canada or any other
jurisdiction in which that Holder is subject to Tax as a result of
the Holder (i) carrying on a trade or business in Canada and/or
such other jurisdiction or being deemed to do so, or having a
permanent establishment in Canada and/or such other jurisdiction;
(ii) being organized under the laws of Canada or such other
jurisdiction; (iii) being resident or deemed to be resident in
Canada or such other jurisdiction or (iv) not dealing at arm's
length with VHI or any other Holder, but does not include any
sales, goods or services Tax payable under the laws of any such
jurisdiction with respect to any goods or services made available
by a Holder to VHI under this Debenture or any withholding tax
payable under the laws of the United States of America or Canada;
Governmental Body means any government, parliament, legislature,
or any regulatory authority, agency, commission or board of any
government, parliament or legislature, or any court or (without
limitation to the foregoing) any other law, regulation or
rule-making entity, having or purporting to have jurisdiction in
the relevant circumstances, or any Person acting or purporting to
act under the authority of any of the foregoing (including, without
limitation, any arbitrator);
Holders means Roycap, so long as it continues to hold this
Debenture or a portion of the Principal Amount, and any assignee of
this Debenture who becomes a holder of this Debenture or a portion
of the Principal Amount, in accordance with Section 8.6 of this
Debenture, so long as such assignee continues to hold this
Debenture or a portion of the Principal Amount, and "Holder" means
any one of them;
Lien means any mortgage, debenture, pledge, hypothec, lien,
charge, assignment by way of security, consignment, lease,
hypothecation, security interest or other security agreement, trust
or arrangement having the effect of security for the payment of any
debt, liability or obligation;
Loan Documents means, collectively, this Debenture, the
Subscription Agreement, the VHI GSA, the Series II Warrants and the
Registration Rights Agreement and any other agreements, instruments
and documents delivered from time to time (both before and after
the date of this Debenture) to Roycap by VHI in connection with
this Debenture, in each case as amended, restated or replaced from
time to time, and "Loan Document" means any one of them;
Majority Holders means Holders holding, in the aggregate, a
minimum of 66_% of the Principal Amount outstanding from time to
time;
Material Subsidiaries means, collectively, Network Forest
Products Limited and 471372 Ontario Limited;
Maturity Date means August 8, 2002, or such earlier date as this
Debenture may become due, whether by acceleration or otherwise;
Obligations means all of the obligations to repay the Principal
Amount, all interest thereon, and other amounts payable to the
Holders pursuant to the Loan Documents and all obligations of VHI
to perform the covenants set out in the Loan Documents;
Original Principal Amount has the meaning attributed to such term
in the first paragraph of this Debenture;
Permitted Encumbrances means the following:
Liens for taxes, rates, assessments or other governmental charges
or levies or otherwise created by statute not yet due, or if due,
the validity of which is being contested diligently and in good
faith by appropriate proceedings;
the Liens created by any of the Loan Documents;
other Liens agreed to in writing by the Majority Holders; and
Liens in respect of current indebtedness of VHI to General Motors
Acceptance Corporation up to a maximum of $58,500,000; and
Liens in respect of any present and future bank operating lines of
credit, term debt and other indebtedness and all security granted
from time to time in connection therewith which is subordinate to
this Debenture;
Person means any individual, partnership, limited partnership,
joint venture, syndicate, sole proprietorship, company or
corporation with or without share capital, unincorporated
association, trust, trustee, executor, administrator or other legal
personal representative or Governmental Body,
Principal Amount means the principal amount outstanding under
this Debenture from time to time, being the Original Principal
Amount as increased or decreased pursuant to the terms and
conditions of this Debenture;
Rateable Portion means, at a particular time, in respect of each
Holder the proportion that the Principal Amount of this Debenture
then owing to such Holder bears to the aggregate Principal Amount
of this Debenture then outstanding;
Registration Rights Agreement means the agreement dated the date
hereof between VHI and Roycap, substantially in the form attached
as Schedule A to the Debenture, as amended, restated or replaced
from time to time;
Roycap means Roycap Inc. or any successor entity;
Roycap s Counsel means the firm of Fogler, Rubinoff LLP or such
other counsel as Roycap may appoint with respect to this Debenture
and the matters contemplated hereby;
Security has the meaning attributed to such term in Section
;
Series II Warrants means the Warrants to acquire a convertible
debenture and Series I warrant of the Corporation in the form
attached as Schedule B to the Subscription Agreement;
Subscription Agreement means the agreement between VHI and Roycap
dated the date hereof pursuant to which Roycap has subscribed for
this Debenture;
Taxes means all taxes of any kind or nature whatsoever including,
without limitation, income taxes, sales taxes, levies, stamp taxes,
royalties, duties, and all fees, deductions and withholdings
imposed, levied, collected, withheld or assessed as of the date
hereof or at any time in the future, by any Governmental Body of or
within Canada or any other jurisdiction whatsoever having power to
tax, together with penalties, fines and interest thereon;
VHI means Value Holdings, Inc. and any successor entity; and
VHI GSA means the general security agreement dated the date
hereof by VHI in favour of Roycap substantially in the form
attached as Schedule B to the Subscription Agreement, as amended,
restated or replaced from time to time.
Invalidity, etc.
Each of the provisions contained in this Debenture is distinct
and severable and a declaration of invalidity, illegality or
unenforceability of any such provision or part thereof by a court
of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
Headings, etc.
The inclusion of a table of contents and the insertion of
headings in this Debenture and the division of this Debenture into
articles, sections, subsections and paragraphs are for convenience
of reference only and shall not affect the construction or
interpretation hereof.
Schedules, etc.
The following are the schedules attached to this Debenture:
Schedule A - Registration Rights Agreement
Schedule B - VHI General Security Agreement
Schedule C - Notice of Conversion
Governing Law
This Debenture shall be governed by and construed in
accordance with the laws of the Province of Canada and the federal
laws of Canada applicable therein.
Attornment
The parties hereto irrevocably submit and attorn to the
non-exclusive jurisdiction of the courts of the Province of Ontario
for all matters arising out of or in connection with this
Debenture.
Currency
Except as otherwise expressly provided, all monetary amounts
in this Debenture are stated in and will be paid in currency of the
United States of America.
Actions on Days Other Than Business Days
Except as otherwise specifically provided herein, where any
payment is required to be made or any other action is required to
be taken on a particular day and such day is not a Business Day
and, as a result, such payment cannot be made or action cannot be
taken on such day, then this Debenture shall be deemed to provide
that such payment shall be made or such action shall be taken on
the first Business Day after such day.
Gender and Number
In this Debenture, unless the context otherwise requires,
words importing the singular include the plural and vice versa and
words importing gender include all genders.
Invalidity of Provisions
Each of the provisions contained in this Debenture is distinct
and severable and a declaration of invalidity or unenforceability
of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any
other provision hereof. To the extent permitted by applicable law,
the parties waive any provision of law which renders any provision
of this Debenture invalid or unenforceable in any respect. The
parties shall engage in good faith negotiations to replace any
provision which is declared invalid or unenforceable with a valid
and enforceable provision, the economic effect of which comes as
close as possible to that of the invalid or unenforceable provision
which it replaces.
INTEREST
Interest Rate
Interest shall accrue on the outstanding Principal Amount of
this Debenture at a rate of 10% per annum.
Calculation and Payment of Interest
Interest on the outstanding Principal Amount shall accrue from
day to day, both before and after default, demand, maturity and
judgment, and shall be calculated on the basis of the actual number
of days elapsed and on the basis of a year of 365 days. Interest
shall be payable on this Debenture quarterly in arrears on the last
Business Day of October, January, April and July in each year
commencing October , 2000 until the Maturity Date, but shall
compound on a monthly basis on the last day of each month and
thereafter interest shall accrue on such compounded interest at the
rate set out in Section 2.1.
PAYMENTS
Place of Payment
All payments of principal, interest and fees or other amounts
payable hereunder by VHI shall be made directly by VHI to the
Holder by way of delivery of a certified cheque or bank draft or by
wire transfer, as the Holder may from time to time direct, at the
Holder s office at 4100 Yonge Street, Suite 504, Toronto, Ontario
M2P 2G2 (or at such other place as the Holder may designate from
time to time by notice in writing to VHI) or to such account or
other address as the Holder may from time to time specify to VHI.
Repayment of the Debenture
Subject to the terms and conditions of this Debenture, VHI shall
not be required but shall be entitled, to make payments of
principal on this Debenture prior to the Maturity Date pursuant to
the provisions of subsection 3.2(b) hereof. On the Maturity Date,
the Principal Amount of this Debenture then outstanding, together
with all accrued and unpaid interest and other amounts payable
under this Debenture, shall be due and payable in full.
VHI shall be entitled to make prepayments of the whole or any part
of the Principal Amount upon 30 days written notice delivered to
the Holder provided that:
interest on the Principal Amount so prepaid is paid in full on the
Prepayment Date;
the notice exercising the prepayment right herein (the Redemption
Notice ) specifies the Principal Amount to be prepaid and the date
(the Prepayment Date ) VHI intends to make the prepayment;
the amount required to repay the principal so prepaid shall be 105%
of the Principal Amount specified in the notice referred to above;
and
prior to the Prepayment Date, the Holder has not exercised its
conversion rights set out in Article 9 hereof.
VHI shall forfeit its rights to make any and all prepayments
hereunder unless within 5 Business Days of delivery of any
Redemption Notice, VHI has delivered to the Holders the amounts
required to prepay the Principal Amount (and all interest hereon)
on the Prepayment Date.
Application of Repayments and Prepayments
Any amounts prepaid or repaid shall not be reborrowed. All
amounts prepaid or repaid shall, except as otherwise specified
herein, be applied firstly in reduction of the accrued and unpaid
interest then outstanding, secondly, in reduction of any other
additional amount (other than principal) required to be paid
pursuant to the terms hereof, and thereafter in reduction of the
Principal Amount of this Debenture then outstanding.
Payments Generally
All payments in respect of this Debenture (in respect of
principal, interest or otherwise) shall be made by VHI to the
Holders in the manner stipulated in Section 3.1 no later than noon
(Toronto time) on the due date thereof. Any payments received after
such time shall be considered for all purposes as having been made
on the next following Business Day unless the Majority Holders
otherwise agree in writing.
Maximum Rate of Interest
Notwithstanding anything herein or in any Loan Document to the
contrary:
In the event that any provision of this Debenture or any other Loan
Documents would oblige VHI to make any payment of interest or other
amount payable to the Holders in an amount or calculated at a rate
which would be prohibited by law or would result in a receipt by
the Holders of interest at a criminal or prohibited rate (as such
terms are construed under the Criminal Code (Canada) or any other
applicable law), then notwithstanding such provision, such amount
or rate shall be deemed to have been adjusted with the same effect
as if adjusted at the date hereof to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law
or so result in a receipt by the Holders of interest at a criminal
or prohibited rate, such adjustment to be effected to the extent
necessary in each case, as follows:
firstly, by reducing any fees and other amounts which would
constitute interest for the purposes of Section 347 of the Criminal
Code (Canada) or any other applicable law; and
secondly, by reducing the amount or rate of interest exigible under
Article 2 of this Debenture.
If, as a result of the provisions of subsection 3.5(a), an amount
payable to the Holders at a particular time must be reduced as set
out therein, VHI shall retain the amount of such reduction (the
"Reduced Amount") and shall invest the Reduced Amount in 91 day
Government of Canada treasury bills (which will be held by the
Holders as security for the Obligations) and, subject to subsection
3.5(a), pay to the Holders the Reduced Amount on the first
anniversary date the Reduced Amount was so retained and so on from
time to time until the earlier of:
the date such amount has been paid in full; or
the date when all other Obligations under this Debenture have been
paid in full;
whereupon the Reduced Amount remaining, if any, (after payment or
application to any other outstanding Obligations hereunder
(to the extent not otherwise satisfied in accordance with Section
3.2 hereof)), is to be paid to VHI and the security interest of the
Holders in respect of such Reduced Amount shall be released and
discharged.
If, notwithstanding the provisions of subsection 3.5(a) and after
giving effect to all adjustments contemplated thereby, the Holders
shall receive an amount in excess of the maximum permitted by that
section, the Holders may hold such excess and all proceeds thereof
as security for the due and punctual payment of all the
Obligations, without in any way derogating from any rights of set
off that the Holders may have.
Any amount or rate of interest referred to in this Section 3.5
shall be determined in accordance with generally accepted actuarial
practices and principles over the scheduled term of this Debenture
(or over such shorter term as may be required by Section 347 of the
Criminal Code (Canada)) and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries
appointed by Roycap (who shall in no event be a member of the
auditors or accountants of Roycap or VHI or any of their
affiliates) shall be conclusive for the purposes of such
determination, absent manifest error.
Illegality
If any Applicable Law coming into force after the date hereof,
or if any change in any existing Applicable Law or in the
interpretation or application thereof by any court or Governmental
Body, now or hereafter makes it unlawful for the Holders to have
subscribed for or hold this Debenture or to give effect to its
obligations in respect thereof, the Holders may, by written notice
thereof to VHI, declare their obligations under this Debenture to
be terminated, and VHI shall prepay, within the time required by
such law the Principal Amount of this Debenture together with
accrued interest thereon and any other amounts owing under this
Debenture as may be applicable to the date of such payment. If any
such event shall, in the opinion of the Holders, only affect part
of this Debenture, the remainder of this Debenture shall be
unaffected and the obligations of VHI under the Loan Documents
shall continue.
Indemnity
Except in respect of gross negligence or wilful misconduct on
the part of a Holder, VHI shall indemnify each such Holder, both
before and after an Event of Default, for all losses, costs,
expenses, damages and liabilities (including, without limitation,
any loss, cost, expense, damage or liability sustained by the
Holder in connection with the liquidation or re-employment in whole
or in part of deposits or funds borrowed or acquired by it to
subscribe for this Debenture) which any Holder may sustain or
incur: (i) if VHI fails to give any notice required to be given by
it hereunder, in the manner and at the time specified herein, or
(ii) as a consequence of any failure by VHI to repay any
Obligations when required by the terms of this Debenture or any
other Default or Event of Default hereunder. A certificate of any
Holder setting forth the amounts necessary to indemnify the Holder
in respect of such losses, costs, expenses, damages or liabilities
shall be prima facie evidence of the amounts owing under this
Section 3.7, absent manifest error.
This Debenture shall not and does not create a partnership or
other joint venture between the parties. VHI shall indemnify each
Holder, both before and after an Event of Default, for all losses,
costs, expenses, damages and liabilities which Roycap or any Holder
may sustain or incur as a result of any finding by a Governmental
Body that the Agent or such Holder and VHI are partners as a
result of or arising in connection with the subscription for and
issuance of this Debenture.
Change in Circumstances
If the introduction of or any change in any Applicable Law
relating to any Holder, or any change in the interpretation or
application thereof by any Governmental Body or compliance by any
Holder with any request or direction of any Governmental Body:
subjects such Holder to, or causes the withdrawal or termination of
a previously granted exemption with respect to, any Taxes or
changes the basis of taxation of payments due to any Holder or
increases any existing Taxes on payments of amounts owing to the
Holder (other than Taxes of application to the overall income of
such Holder);
imposes, modifies or deems applicable any reserve, liquidity, cash
margin, capital, special deposit, deposit insurance or assessment,
or any other regulatory or similar requirement against assets held
by, or deposits in or for the account of, or loans by, or any other
acquisition of funds for loans by, such Holder;
imposes on such Holder or requires there to be maintained by the
Holder any capital adequacy or additional capital requirement
(including, without limitation, a requirement which affects such
Holder's allocation of capital resources to its obligations) in
respect of such Holder's obligations hereunder; or
imposes on such Holder any other condition or requirement with
respect to this Debenture (other than Taxes of application to the
overall income of such Holder);
and such occurrence has the effect of:
increasing the cost to such Holder of agreeing to make or making,
maintaining or funding this Debenture or any portion thereof;
reducing the amount of the Obligations owing to such Holder;
directly or indirectly reducing the effective return to such Holder
under this Debenture or on its overall capital as a result of
entering into this Debenture or as a result of any of the
transactions or obligations contemplated by this Debenture (other
than a reduction resulting from a higher rate of income tax being
imposed on such Holder's overall income); or
causing such Holder to make any payment or to forego any interest,
fees or other return on or calculated by reference to
any sum received or receivable by such Holder hereunder;
then, such Holder shall so advise VHI by way of a certificate of an
officer of such Holder setting forth, with sufficient particulars
(including for greater certainty, the details of calculations
relevant thereto), the facts relevant to the application of this
Section 3.8, and, absent manifest error in such officer's
certificate, VHI shall promptly upon demand pay or cause to be paid
to such Holder such additional amounts as shall be sufficient to
fully indemnify such Holder for such additional cost, reduction,
payment, foregone interest or other return. A certificate of such
Holder documenting the relevant calculations and submitted to VHI
by the Holder shall be conclusive and binding for all purposes,
absent manifest error.
Following any such payment VHI may request such Holder attempt
to sell and assign its interest hereunder, to the extent same is
commercially reasonable, to an assignee permitted under Section 8.6
hereof to whom the provisions of this Section 3.8 will not have
application. Upon receipt of such a request such Holder will use
commercially reasonable efforts to effect such sale and assignment
provided that:
in no case shall such Holder be required to sell or assign its
interest hereunder for less than fair market value as determined by
the Holder acting reasonably;
in no case shall such Holder be required to sell or assign less
than all its interest hereunder;
in no case shall such Holder be required to sell or assign its
interest hereunder for an amount which would give such Holder a
return of less than 10% per annum on the portion of the Principal
Amount owned by such Holder;
such Holder shall have received releases from all appropriate
Persons; and
if an agreement is not executed with a purchaser within 30 days of
the request by VHI or if such an agreement is executed but the sale
and assignment does not occur within 60 days of the request by VHI,
such Holder shall have no further obligation pursuant to this
paragraph.
SECURITY
Security
As security (the Security ) for the due and punctual payment
of all of the Obligations, VHI acknowledges that it has delivered
to the Holder the VHI GSA.
Further Assurances - Security
VHI shall take such action and execute and deliver to the
Holders such documents and instruments as the Holders shall
reasonably request, and register, file or record the same (or a
notice or financing statement in respect thereof) in all offices
where such registration, filing or recording is, in the opinion of
the Holders or the Holder's Counsel, necessary or advisable to
constitute, perfect and maintain the Security in all jurisdictions
reasonably required by the Holder, in each case as soon as possible
after the request therefor by the Holder, and in each case in form
and substance satisfactory to the Holder.
Security Effective Notwithstanding Date of Advance
The Security shall be effective and the undertakings in this
Debenture and the other Loan Documents with respect thereto shall
be continuing, whether the monies hereby or thereby secured or any
part thereof shall be advanced before or after or at the same time
as the creation of any such Security or before or after or upon the
date of execution of this Debenture. The Security shall not be
affected by any payments on this Debenture, but shall constitute
continuing security to the Holder for the Obligations from time to
time.
No Merger
The Security shall not merge in any other security. No
judgment obtained by or on behalf of or the Holder shall in any way
affect any of the provisions of this Debenture or the Security.
For greater certainty, no judgment obtained by or on behalf of the
Holder shall in any way affect the obligation of VHI to pay
interest or other amounts at the rates, times and in the manner
provided in this Debenture.
Releases and Discharges
The Holder agrees that it will promptly execute and deliver,
at the expense of VHI, instruments of release, discharges or
priority, as the case may be, as are required upon payment in full
of the Obligations.
COVENANTS
Affirmative Covenants
So long as any Obligations remain outstanding, VHI covenants
and agrees to and in favour of the Holders that:
Punctual Payment. VHI shall pay or cause to be paid or performed
all Obligations falling due hereunder on the dates and in the
manner specified herein;
Existence. VHI shall do or cause to be done all things necessary or
desirable to maintain its existence in its present jurisdiction of
incorporation and the existence of each of the Material
Subsidiaries in its present jurisdiction of incorporation and to
maintain each of their power and capacity to own its properties and
assets;
Compliance with Applicable Law and Contracts. VHI shall comply
with, and shall cause each of the Material Subsidiaries to comply
with, the requirements of all Applicable Law in all material
respects (including for greater certainty, all applicable
securities laws and stock exchange requirements), all obligations
which, if contravened, could give rise to a Lien over any of its
property, and all other agreements to which it is a party or by
which it or any of its properties may be bound;
Notifications and Modifications. VHI shall notify the Holder
promptly of (i) any change of the name of any of VHI or either of
the Material Subsidiaries or of the chief executive office or place
of business of VHI or either of the Material Subsidiaries;
Payment of Taxes and Claims. VHI shall, and shall cause each of the
Material Subsidiaries to:
pay and discharge all Taxes payable by it;
withhold and collect all Taxes required to be withheld and
collected by it and remit such Taxes to the appropriate
Governmental Body at the time and in the manner required; and
pay and discharge all obligations incidental to any trust imposed
upon it by statute which, if unpaid, might become a Lien upon any
of its property;
in each case unless being contested in good faith by
appropriate proceedings;
Notice of Litigation and Other Matters. VHI shall, as soon as
practicable after it shall become aware of the same, give notice to
the Holders of the following events:
the commencement of any action, proceeding, arbitration or
investigation against or in any other way relating adversely to it
or either of the Material Subsidiaries;
any development which may reasonably be expected to have a material
adverse effect upon its property, financial condition or prospects
or on its ability to perform the Obligations under any Loan
Document; and
any Default or Event of Default, or the occurrence or nonoccurrence
of any event which constitutes a material default under any other
agreement to which VHI or either of the Material Subsidiaries is a
party or by which any of them or any of their properties may be
bound, giving in each case the details thereof and specifying the
action proposed to be taken with respect thereto;
Financial Reporting. VHI shall:
as soon as practicable and in any event within 45 days after the
end of each respective fiscal quarter (excluding the fourth
quarter) deliver to the Holders the interim unaudited consolidated
financial statements of VHI and each of the Material Subsidiaries;
as soon as practicable and in any event within 90 days after the
end of each of its fiscal year, deliver to the Holders annual
audited consolidated financial statements of VHI and each of the
Material Subsidiaries; and
deliver or cause to be delivered to the Holder copies of: (i) all
materials forwarded by VHI or any Material Subsidiary from time to
time to its shareholders; and (ii) all materials filed by such a
company from time to time with any securities regulatory authority
or stock exchange and made or to be made available to the general
public at the time such materials are forwarded or filed, as the
case may be;
Status of Company. VHI shall maintain its status as a company that
trades its securities on the OTC Bulletin Board;
Officers Certificate. VHI shall deliver to the Holders, together
with the financial statements in subsection 5.1(g), an officer's
certificate certifying (i) that such financial statements were
prepared in accordance with generally accepted accounting
principles and fairly, completely and accurately present the
financial condition of the relevant entities and the financial
information presented therein for the period and as at the date
thereof, and (ii) that no Default or Event of Default has occurred
hereunder or, if any Default or Event of Default has occurred,
specifying the relevant particulars and the period of existence
thereof and the action taken or proposed to be taken by VHI with
respect thereto;
Other Financial Information. As soon as practicable following a
request therefor from any Holder, VHI shall furnish to the Holder,
such financial or other reasonable information relevant to the
ability of VHI or any Material Subsidiary to perform their
respective obligations under any Loan Documents to which they are
a party as the Holder may reasonably request from time to time;
Consents and Approvals. VHI shall take all steps that are necessary
to obtain any approvals or consents required now or in the future
to permit any asset over which the Holders have or may have a
security interest to be transferable to the Holders and by them to
any other Person free of any restrictions in transfer;
Registration Obligations. Within 30 days following the date
hereof, VHI shall file with the United States Securities and
Exchange Commission (the SEC ) a registration statement on Form
S-3 or any other available form (the Resale Registration Statement
) in respect of (i) all of the shares of Common Stock in which this
Debenture is convertible, (ii) all of the shares of Common Stock
underlying the debenture issuable upon exercise of the Series II
Warrant of VHI granted to Roycap on the date hereof, and (iii) all
of the shares of Common Stock underlying the Series I Warrant of
VHI to be granted to Roycap upon the exercise of the Series II
Warrant. VHI will use its best efforts to cause the Resale
Registration Statement to become effective 90 days following the
date hereof. VHI agrees that within 5 days after receipt of a no
review or no further comments letter from the SEC, it will take all
appropriate measures necessary to cause the Resale Registration
Statement to be declared effective. In the event that the Resale
Registration Statement is not declared effective within such
period, VHI shall continue to use its best efforts to cause the
Resale Registration Statement to become effective;
Collateral Matters. VHI shall take all steps within its control to
cause each Material Subsidiary and any other Person not to take any
step or omit to take any step which could adversely affect the
assets over which the Holders have or may have a security interest
or impair the ability to realize on or the value of such assets;
and
SEC Matters. VHI hereby represents and warrants that no order
ceasing or suspending trading in any securities of VHI or
prohibiting the sale of the securities underlying this Debenture or
the trading of any of VHIOs issued securities has been issued and
no proceedings for such purpose are pending or, to the best of the
knowledge of VHI, threatened. Other than a registration statement
which has been abandoned or withdrawn by VHI, the SEC has never
neglected or failed to declare effective a registration statement
of VHI. VHI has no reason to believe that, other than usual
comments to be resolved in the ordinary course, the Resale
Registration Statement will not be declared effective by the SEC.
Holder Entitled to Perform Covenants
If VHI fails to perform any covenant contained in Section 5.1,
or in any other provision of any Loan Document, the Holder may, in
its discretion, perform any such covenant capable of being
performed by it and if any such covenant requires the payment of
money it may make such payments. All sums so expended by the Holder
shall be deemed to form part of the Obligations, shall bear
interest at the same rate as the Principal Amount from time to time
and shall be payable by VHI on demand.
Negative Covenants
So long as any Obligations remain outstanding, VHI covenants
and agrees to and in favour of the Holders that it shall not
without the consent of the Majority Holders, such consent not to be
unreasonably withheld, and it shall not permit either of the
Material Subsidiaries without the consent of the Majority Holders,
such consent not to be unreasonably withheld, to:
Distributions. Declare or pay any dividends on, or make any
distribution or payment (including interest) in respect of, or
apply any of its property to the purchase, repayment, redemption or
cancellation of, any of its shares, or make any loans or other
disbursements to its shareholders, which would impair in any manner
the Security;
Sell or Encumber Property. Sell, transfer or otherwise dispose of
any of its properties or assets, or create, grant, assume or suffer
to exist any Lien upon any of its properties or assets other than
Permitted Encumbrances;
Indebtedness. Incur, guarantee, assume or otherwise become or
continue to be liable for any Debt other than Debt under the Loan
Documents and the Permitted Encumbrances;
Reorganizations. Enter into any transaction (including by way of
reorganization, consolidation, amalgamation, liquidation, transfer,
sale or otherwise) whereby all or any portion of its undertaking,
property and assets would become the property of any other Person
or, in the case of any such amalgamation, of the continuing
corporation resulting therefrom;
Compensation. Pay compensation, including all salaries, bonuses,
commission and other compensation of any kind whatsoever (excluding
dividends and normal benefits), to shareholders, directors and
officers of VHI or any Persons related to any of them in excess of
market rates;
Filings of Registration Statements. Other than the Resale
Registration Statement, file with the SEC any registration
statement or other document which purports to make any shares of
Common Stock freely-tradeable until such time as the Resale
Registration Statement is declared effective; and
Charter Documents. Amend its articles, by-laws or any other
constating documents where such amendment would impair in any
manner the Security;
provided that, none of the foregoing negative covenants given by
VHI pursuant to this Section 5.3 shall preclude VHI from carrying
on its business in the ordinary course, being generally the
business of purchasing from and selling to Persons who deal at
armOs length to VHI business entities as going concerns and
financing of any such acquisition activities by way of equity and
debt financing transactions, so long as none of such business
activities of VHI impair in any manner the Security or involve the
creation of security ranking senior or pari passu with this
Debenture and the Security or VHIOs ability to perform the
Obligations. In this regard, Roycap acknowledges that VHI is
presently involved in pending acquisition transactions with the
following businesses in the Province of Ontario: Cutler Forest
Products, ABS Woodworking Limited, MGI Packers Inc., Continental
Trading Company Inc. and Maple Freezers Inc., each of which VHI
represents to Roycap is at armOs length to it.
EVENTS OF DEFAULT AND REMEDIES
Events of Default
The occurrence of any of the following events shall constitute an
Event of Default:
default by VHI in payment of principal when due, or of interest,
fees or any other amounts owing under this Debenture unless such
default is remedied within 3 Business Days after notice thereof by
the Holder to VHI;
default by VHI or either of the Material Subsidiary in the
performance or observance of any covenant, condition or obligation
contained in any Loan Document to which it is a party (other than
a default specified in subsection 6.1(a) unless such default, if
capable of being remedied, is remedied within 10 days after notice
thereof by the Holder to VHI;
any representation or warranty made by VHI in any Loan Document is
found to be false or incorrect in any material respect when made or
deemed to have been made;
VHI or either of the Material Subsidiaries admits its inability to
pay its debts generally as they become due or otherwise
acknowledges its insolvency;
VHI or either of the Material Subsidiaries institutes any
proceeding or takes any action or executes any agreement to
authorize its participation in or commencement of any proceeding:
seeking to adjudicate it a bankrupt or insolvent; or
seeking liquidation, dissolution, winding up, reorganization,
arrangement, protection, relief or composition of it or any of its
property or debt or making a proposal with respect to it under any
law relating to bankruptcy, insolvency, reorganization or
compromise of debts or other similar laws (including, without
limitation, any application under the Companies' Creditors
Arrangement Act (Canada) or any reorganization, arrangement or
compromise of debt under the laws of its jurisdiction of
incorporation);
any proceeding is commenced against or affecting VHI or either of
the Material Subsidiaries:
seeking to adjudicate it a bankrupt or insolvent;
seeking liquidation, dissolution, winding up, reorganization,
arrangement, protection, relief or composition of it or any of its
property or debt or making a proposal with respect to it under any
law relating to bankruptcy, insolvency, reorganization or
compromise of debts or other similar laws (including, without
limitation, any reorganization, arrangement or compromise of debt
under the laws of its jurisdiction of incorporation); or
seeking appointment of a receiver, trustee, agent, custodian or
other similar official for it or for any part of its properties and
assets;
and such proceeding is not being contested in good faith by
appropriate proceedings or, if so contested, remains outstanding,
undismissed or unstayed more than 30 days from the institution of
such first mentioned proceeding;
any creditor of VHI or either of the Material Subsidiaries, or any
other Person, shall privately appoint a receiver, trustee or
similar official for any part of the properties and assets of VHI
or either of the Material Subsidiaries or any substantial part of
the properties of any of them, and such appointment is not being
contested in good faith and by appropriate proceedings or, if so
contested, such appointment continues for more than 30 days;
any execution, distress or other enforcement process, whether by
court order or otherwise, becomes enforceable against any property
and assets of VHI or either of the Material Subsidiaries which,
when added to such other amounts then enforceable against the
property and assets of them, exceeds $200,000;
any judgment or order for the payment of money shall be rendered
against VHI or either of the Material Subsidiaries which, when
added to such other amounts then outstanding in respect of any
similar judgment or order, exceeds $200,000 and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or (ii) there shall not be any period
during which a stay of enforcement of such judgment or order by
reason of pending appeal or otherwise shall not be in effect;
a cease trading order, stop trading order or similar order,
direction or ruling shall be issued by any Governmental Body in
respect of the Common Stock and be outstanding for a period of 20
days or any other event or circumstance shall occur which could
reasonably be expected to materially restrict the ability of the
Holder to realize on the Substitute Shares;
all of the issued and outstanding voting shares of Network Forest
Products Limited cease to be owned directly by VHI;
Robert Ziner ceases to own directly or indirectly all the common
shares of 11341125 Ontario Limited or ceases to own securities of
VHI which carry votes which are sufficient to elect a majority of
the directors of VHI;
if, at any time after execution and delivery thereof, any Loan
Document ceases to be a legal, valid and binding obligation of the
respective party thereto or if any Loan Document is declared by a
court or tribunal of competent jurisdiction to be null and void or
the validity, binding nature or enforceability thereof is contested
by any of the parties thereto (other than the Holders), or VHI or
either of the Material Subsidiaries denies in writing that it has
any or further liability or obligations under any Loan Document to
which it is a party;
a material adverse change shall occur in the financial condition,
assets or prospects of (i) the Material Subsidiaries taken as a
whole; or (ii) VHI; or
VHI is in default of any requirements necessary to maintain its
status as a company which trades its securities on the OTC Bulletin
Board or is in default of any regulatory requirements of the SEC,
the Securities Act of 1933, as amended, or the regulations and
rules made thereunder.
Remedies Upon Default
Upon the occurrence of any Event of Default, any Holder may,
and at the direction of the Majority Holders shall, by notice given
to VHI:
declare all Obligations to be immediately due and payable, in which
case the Obligations may only be paid in cash;
failing payment in cash of all the Obligations by VHI within 5 days
of the occurrence of the Event of Default (which notice period
shall run contemporaneously with, and shall not be in addition to,
any other notice period required by law), realize upon all or any
part of the Security; and
failing payment in cash of all the Obligations by VHI within 5 days
of the occurrence of the Event of Default (which notice period
shall run contemporaneously with, and shall not be in addition to,
any other notice period required by law), take such actions and
commence such proceedings as may be permitted at law or in equity
(whether or not provided for herein or in the other Loan Documents)
at such times and in such manner as any Holder (at the direction of
the Majority Holders in their sole discretion) may consider
expedient, all without, except as may be required by Applicable
Law, any additional notice, presentment, demand, protest, notice of
protest, dishonour or any other action. The rights and remedies of
the Holders hereunder are cumulative and are in addition to and not
in substitution for any other rights or remedies provided by
Applicable Law or by any of the Loan Documents.
Distributions
All distributions under or in respect of any of the Loan
Documents shall be held by the Holders on account of the
Obligations without prejudice to any claim by the Holders for any
deficiency after such distributions are received by any Holder, and
VHI shall remain liable for any such deficiency. Except as provided
in Section hereof, all such distributions may be applied to such
part of the Obligations as is determined by the Holders in their
sole discretion. The Holders may at any time change any
appropriation of any such distributions or other moneys received by
the Holders and reapply the same to any other part of the
Obligations as the Holders may see fit, notwithstanding any
previous application.
ADMINISTRATION OF LOAN
Action by and Consent of Holders; Waiver and Amendments
Subject to subsection 7.1(c) where the terms of this Debenture, any
of the other Loan Documents or the Related Documents refer to any
action to be taken hereunder or thereunder by the Holders or to any
such action that requires the consent or other determination of the
Holders, the action taken by and the consent or other determination
given or made by the Majority Holders shall, except to the extent
that this Debenture expressly provides to the contrary, constitute
the action or consent or other determination of the Holders herein
or therein referred to.
Subject in each case to subsection 7.1(c), this Debenture and any
other Loan Document may be amended only if VHI and the Majority
Holders so agree in writing, any consent under this Debenture or
any other Loan Document shall be given only by a Holder (at the
direction of the Majority Holders) in writing, the Related
Documents may be amended only if the Majority Holders so agree in
writing and any Event of Default may be waived before or after it
occurs only if a Holder (at the direction of the Majority Holders)
so agrees in writing. Any amendment, consent or waiver so made
shall be binding upon all of the Holders.
Any amendment or waiver which changes or relates to:
the term of this Debenture;
the amount or dates of payment of principal, interest or other
amounts payable hereunder;
the amount or dates of payment of any fees;
the release or discharge of any of the Security except in
connection with a prepayment or repayment made in accordance with
the provisions hereof;
the definition of Majority Holders ; or
this Section 7.1;
shall require the agreement of all of the Holders and also (in the
case of an amendment) of VHI.
Any waiver and any consent by any Holder under any provision of
this Debenture, any other Loan Document or the Related Documents
may be given subject to any conditions thought fit by the Person
giving that waiver or consent.
Redistribution of Payments
Any payment received by the Holders shall be distributed to
the Holders in their respective Rateable Portions. A Holder (a
Remitting Holder ) which obtains any payment (whether voluntary,
involuntary, by way of set-off or otherwise) on account of its
portion of this Debenture which has not been paid to the other
Holders in accordance with their respective Rateable Portions
shall, and VHI hereby irrevocably authorizes any such Holder to,
remit such payment or portion thereof to the Holders in accordance
with their respective Rateable Portions. In any such case, the
Remitting Holder shall be deemed for all purposes not to have
received from VHI that payment so remitted, and the Holder or
Holders (the Receiving Holders ) receiving such payment or
portions thereof upon a redistribution thereof shall be deemed for
the purposes hereof to have received such payment or portion
thereof (as the case may be) from VHI. If all or part of any such
payment made by such Remitting Holder shall be recovered by VHI
from such Remitting Holder, such amount so paid by such Remitting
Holder to the Receiving Holders shall forthwith be repaid by the
Receiving Holders to the Remitting Holder. VHI shall and does
hereby waive any defence, counterclaim or right of set-off which it
may have against any Holder with respect to any such payment so
received by any such Holder.
Taking and Enforcement of Remedies
Each of the Holders hereby acknowledges that, to the extent
permitted by Applicable Law, the remedies provided hereunder, under
the other Loan Documents and under the Related Documents to the
Holders are for the benefit of the Holders collectively and acting
together and not severally and further acknowledges that its rights
hereunder and thereunder are to be exercised collectively by the
Holders upon the instructions of the Majority Holders.
Accordingly, notwithstanding any of the provisions contained herein
or therein, each of the Holders hereby covenants and agrees that it
shall not be entitled to take any action with respect to this
Debenture, including, without limitation, any election of remedies
in respect of an Event of Default hereunder, unless any such action
shall be taken only upon the instructions of the Majority Holders
as provided herein. Each of the Holders further covenants and
agrees, that, upon any such instructions being given by the
Majority Holders, it shall cooperate fully to the extent requested
in any collective realization hereunder including, without
limitation, the appointment of a receiver and manager to act for
their collective benefit.
Each of the Holders and VHI further covenants and agrees that all
proceeds from the exercise of the rights and remedies provided
hereunder, under the other Loan Documents, to the extent permitted
by Applicable Law, are held for the benefit of all of the Holders
and, after deduction therefrom of all costs of realization, shall
be shared among the Holders proportionately based upon the
respective aggregate amounts of the Obligations which are
outstanding to each of the Holders at the relevant time or times of
sharing. To the extent any Holder receives or is entitled to
receive any amount hereunder in excess of the amount of the
Obligations owed to it hereunder it shall hold such excess in trust
on behalf of and for the benefit of the other Holders entitled
thereto.
Fees and Expenses
VHI shall pay to the Holders on demand all reasonable costs
and expenses of the Holders and its agents and any receiver or
receiver-manager appointed by it or by a court in connection with
this Debenture, including, without limitation:
the preparation of this Debenture, any actual or proposed amendment
or modification hereof or thereof or any waiver hereunder or
thereunder and all instruments supplemental or ancillary thereto,
obtaining advice as to a Holder's rights and responsibilities under
this Debenture; and
the defence, establishment, protection or enforcement of any of the
rights or remedies of a Holder under this Debenture;
including, without limitation, all of the reasonable fees, expenses
and disbursement of legal counsel to a Holder incurred in
connection therewith.
GENERAL
Reliance and Non-Merger
All covenants, agreements, representations and warranties of
VHI made herein or in any other Loan Document or in any certificate
or other document signed by any of its directors or officers and
delivered by or on behalf of VHI pursuant hereto or thereto are
material, shall be deemed to have been relied upon by each Holder
notwithstanding any investigation heretofore or hereafter made by
the Holders or counsel to or any employee or other representative
of any of them and shall survive the execution and delivery of this
Debenture and the other Loan Documents until VHI shall have
satisfied and performed all of its obligations hereunder.
Amendment and Waiver
No amendment or waiver of any provision of any Loan Document
or consent to any departure by VHI from any provision thereof is
effective unless it is in writing and signed by an officer of the
Holders in accordance with the provisions of Section 7.1. Such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is
given.
Notices
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be given by
hand-delivery as hereinafter provided. Any such notice shall be
deemed to have been received at the time it is delivered to the
applicable address noted below either to the individual designated
below or to a senior employee of the addressee at such address with
responsibility for matters to which the information relates.
Notice may also be given by telecopier (with proof of transmission
obtained by sender) provided same is transmitted to all fax numbers
listed below: Notice of change of address shall also be governed
by this section. Notices and other communications shall be
addressed as follows:
(a) to VHI, at:
2307 Douglas Road
Suite 400
Miami, Florida 33145
Attention: President
Faxes: (561) 679-8478
(416) 926-8941
(305) 446-4959
(305) 447-8770
65 Passmore Avenue
Toronto, Ontario M1S 3C6
Fax: (416) 297-0598
with a copy to:
Aird & Berlis
181 Bay Street, BCE Place
Suite 1800
Toronto, Ontario M5J 2T9
Attention: Stephen K. Young
Fax: (416) 863-1515
Jonathan D. Leinwand, P.A.
3370 NE 190th Street
Suite 1805
Aventura, Florida 33180
Fax: (954) 252-4265
(b) if to Roycap, at:
4100 Yonge Street
Suite 504
Toronto, Ontario M2P 2G2
Fax: (416) 221-1253
with a copy to:
Fogler, Rubinoff LLP
Barristers and Solicitors
Suite 4400, Royal Trust Tower
Toronto-Dominion Centre
Toronto, Ontario M5K 1G8
Attention: Michael Slan
Fax: (416) 941-8852
Time
Time is of the essence of the Loan Documents.
Further Assurances
Whether before or after the happening of an Event of Default,
VHI shall at its own expense do, make, execute or deliver, or cause
to be done, made, executed or delivered by other Persons, all such
further acts, documents and things in connection with the Loan
Documents as the Holders may reasonably require from time to time
for the purpose of giving effect to the Loan Documents including,
without limitation, for the purpose of facilitating the enforcement
of the Security all promptly upon the request of the Holders.
Assignment
This Debenture and the other Loan Documents shall enure to the
benefit of and be binding upon the parties hereto and thereto,
their respective successors and any permitted assignee of some or
all of the parties' rights or obligations under this Debenture and
the other Loan Documents as permitted under this section.
VHI shall not assign all or any part of its rights or benefits
under this Debenture or any of the other Loan Documents.
Entire Agreement
This Debenture and the other Loan Documents constitute the
entire agreement between the parties pertaining to the subject
matter described therein. There are no warranties, conditions, or
representations (including any that may be implied by statute) and
there are no agreements in connection with such subject matter
except as specifically set forth or referred to in the Loan
Documents. No reliance is placed on any warranty, representation,
opinion, advice or assertion of fact made either prior to,
contemporaneous with, or after entering into the Loan Documents, or
any amendment or supplement thereto, by any party to the Loan
Documents or its directors, officers, partners, employees or
agents, where applicable, to any other party to the Loan Documents
or its directors, officers, partners, employees or agents, where
applicable, except to the extent that the same has been reduced to
writing and included as a term of the Loan Documents, and none of
the parties to the Loan Documents has been induced to enter into
the Loan Documents or any amendment or supplement by reason of any
such warranty, representation, opinion, advice or assertion of
fact. Accordingly, there shall be no liability, either in tort or
in contract, assessed in relation to any such warranty,
representation, opinion, advice or assertion of fact, except to the
extent contemplated above.
CONVERSION OF DEBENTURE
Conversion Privileges. The Holders shall have the right, at
any time prior to the receipt by the Holders of the repayment of
the Principal Amount (even after notice of prepayment has been
given and the amount necessary to repay the Principal Amount in
accordance with subsection 3.2(c)) the Time of Expiry to convert
the whole or any part of the Principal Amount into fully paid and
non-assessable Common Stock of VHI as follows at a conversion rate
equal to the least of:
the closing bid price for the Common Stock on the day prior to the
date hereof, which rate is equal to one (1) share of Common Stock
of VHI for each $0.195 of the Principal Amount;
eighty-five percent (85%) of the average closing bid price of the
shares of Common Stock for the 5 lowest of the immediately 22
consecutive trading days prior to the trading day on which the
written notice of the exercise of the conversion right herein is
transmitted by the Holder to VHI; and
in the event the Resale Registration Statement is not declared
effective on or before the date which is 120 days following the
date hereof (the "Deadline"), the lowest closing bid price at which
a trade of shares of Common Stock is made on the OTC Bulletin Board
(or such other principal stock exchange, quotation system or
over-the-counter market that the shares of Common Stock trade)
during the period commencing on the Deadline and ending on the date
the Resale Registration Statement is declared or ordered effective
by the SEC.
Manner of Exercise of Right to Convert. The Holders desiring
to convert this Debenture in whole or in part into shares of Common
Stock shall deliver to VHI at its principal executive offices the
notice in the form attached hereto as Schedule C. Notice may be
delivered in the manner set out in Section 8.3 hereof. Thereupon,
such Holder shall be entitled to be entered into the books of VHI
as at the date the Notice is sent as the holder of the number of
shares of Common Stock into which this Debenture is convertible in
accordance with the provisions of this Article 6, and as soon as
practical thereafter and in any event not less than 2 Business Days
thereafter, VHI shall, deliver to the Holder, or his nominee a
certificate or certificates for such shares of Common Stock and if
applicable a cheque for any amount payable under Section 6.4.
Such certificates shall not bear any restrictive legends save and
except as required by law. Upon delivery of such Certificate, the
Holder shall surrender this Debenture to VHI. In the event the
Holder converts only part of this Debenture, then at such time at
this Debenture is surrendered to VHI, VHI shall without charge,
forthwith deliver to the Holder a new Debenture in an aggregate
Principal Amount equal to the unconverted part of the Principal
Amount of this Debenture so surrendered.
Adjustment of Conversion Price. The Conversion Price in
effect at any date shall be subject to adjustment from time to time
as follows:
if and whenever at any time prior to the repayment of the
Principal Amount, VHI shall:
subdivide or redivide the outstanding Common Stock into
a greater number of shares; or
reduce, combine or consolidate the outstanding Common
Stock into a smaller number of shares, or
(iii) issue shares of Common Stock to the holders of all or
substantially all of the Common Stock by way of a stock dividend,
the Conversion Price in effect on the Effective Date of such
subdivision, redivision, reduction, combination or consolidation or
on the record date for such issue of Common Stock by way of a stock
dividend, as the case may be, shall in the case of any of the
events referred to in (i) above be decreased in proportion to the
number of outstanding Shares of Common Stock resulting from such
subdivision, redivision or dividend, or shall, in the case of any
of the events referred to in (ii) above, be increased in proportion
to the number of outstanding shares of Common Stock resulting from
such reduction, combination or consolidation. Such adjustment
shall be made successively whenever any event referred to in this
subsection (a) shall occur. Any such issue of Common Stock by way
of a stock dividend shall be deemed to have been made on the record
date for the stock dividend for the purpose of calculating the
number of outstanding Shares under subsections (b) and (c) of this
Section .
If and whenever at any time prior to the Time of Expiry VHI shall
fix a record date for the issuance of rights or warrants to all or
substantially all the holders of its outstanding Common Stock
entitling them, for a period expiring not more than 45 days after
such record date, to subscribe for or purchase Common Stock (or
securities convertible into or exchangeable for Common Stock) at a
price per share (or having a conversion or exchange price per
share) less than 90% of the Current Market Price of a Share of
Common Stock on such record date, the Conversion Price shall be
adjusted immediately after such record date so that it shall equal
the price determined by multiplying the Conversion Price in effect
on such record date by a fraction, of which the numerator shall be
the total number of Shares of Common Stock outstanding on such
record date plus a number of Shares of Common Stock equal to the
number arrived at by dividing the aggregate price of the total
number of additional Shares of Common Stock offered for
subscription or purchase (or the aggregate conversion or exchange
price of the convertible or exchangeable securities so offered) by
such Current Market price per Common Stock, and of which the
denominator shall be the total number of Common Stock outstanding
on such record date plus the total number of additional Common
Stock offered for subscription or purchase (or into which the
convertible or exchangeable securities so offered are convertible
or exchangeable). Such adjustment shall be made successively
whenever such a record date is fixed. To the extent that any such
rights or warrants are not so issued or any such rights or warrants
are not exercised prior to the expiration thereof, the Conversion
Price shall be re-adjusted to the Conversion Price which would then
be in effect if such record date had not been fixed or to the
Conversion Price which would then be in effect based upon the
number of Common Stock (or securities convertible into or
exchangeable for Common Stock) actually issued upon the exercise of
such rights or warrants, as the case may be.
If and whenever at any time prior to the Time of Expiry VHI shall
fix a record date for the making of a distribution to all or
substantially all the holders of its outstanding Common Stock of
(i) shares of any class other than Common Stock or (ii) rights,
options or warrants (excluding rights, options or warrants
entitling the holders thereof for a period of not more than 45 days
to subscribe for or purchase Common Stock or securities convertible
into Common Stock) or (iii) evidences of its indebtedness or (iv)
assets (excluding cash dividends paid in the ordinary course) then,
in each such case, the Conversion Price shall be adjusted
immediately after such record date so that is shall equal the price
determined by multiplying the Conversion Price in effect on such
record date by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding on such record
date multiplied by the Current Market Price per Common Stock on
such record date, less the fair market value (as determined by the
Holder, acting reasonably, which determination shall, absent
manifest error, be conclusive) of such shares or rights, options or
warrants or evidences or indebtedness or assets so distributed, and
of which the denominator shall be the total number of shares of
Common Stock outstanding on such record date multiplied by such
Current Market Price per Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed. To the
extent that such distribution is not so made, the Conversion Price
shall be re-adjusted to the Conversion Price which would then be in
effect if such record date had not been fixed or to the Conversion
Price which would then be in effect based upon such shares or
rights, options or warrants or evidences of indebtedness or assets
actually distributed, as the case may be.
For the purpose of any computation under subsections (b) or (c) of
this section, the "Current Market Price" per Common Stock at any
date shall be the weighted average trading price (based on a board
lot) of the Common Stock expressed in U.S. dollars for the twenty
(20) consecutive trading days ending not more than five Business
Days prior to the date for which such market price is being
determined (or, if no trading price is reported for any such day,
the average of the bid and ask prices for such day) on such market
in which the Common Stock is then trading; provided that if the
Common Shares are not listed on any stock exchange but are traded
in an over-the-counter market, the weighted average trading price
at which the Common Shares have trades shall be the weighted
average trading price on each of the twenty (20) consecutive
trading days, or such lesser number of days in which a market
exists for the securities, ending not more than five days prior to
such date, as furnished in writing to VHI by an independent
nationally recognized investment dealer selected by VHI for that
purpose, or such other party as may be mutually agreed, provided
that if such stock exchange or over-the-counter market is other
than in the United States, such weighted average trading price
shall be converted from the applicable currency of such exchange or
market to U.S. dollars on the basis of the average spot rate for
converting such currency into U.S dollars as quoted by the Federal
Reserve System of the United States during such twenty (20) day
trading period; provided further that if the Common Stock are not
listed on any stock exchange or traded in an over-the-counter
market, the Current Market Price shall be the fair market value of
a Common Stock at such date, as determined by an independent
nationally recognized investment dealer selected by the Holder for
that purpose, or such other party as may be mutually agreed. The
weighted average price shall be determined by dividing the
aggregate sale price of all Common Stock sold on the said exchanges
or in the said trading days, or such lesser number of days in which
a market exists for the securities, by the total number of Common
Stock so sold.
In the case of any reclassification or change (other than a change
resulting only from consolidation or subdivision) of the Common
Stock or in case of any amalgamation, consolidation or merger of
VHI with or into any other corporation, or in the case of any sale
of all or substantially all the properties and assets of VHI or
either of the Material Subsidiaries to any other corporation, the
Conversion Price shall be adjusted so that each Debenture shall,
after such reclassification, change, amalgamation, consolidation,
merger or sale, be convertible into the number of shares or the
number, kind or amount of other securities or property of VHI, or
such continuing, successor or purchaser corporation, as the case
may be, which the holder thereof would have been entitled to
receive as a result of such reclassification, change, amalgamation,
consolidation, merger or sale if on the effective date thereof he
had been the holder of the number of shares of Common Stock into
which this Debenture was convertible prior to the effective date of
such reclassification, change, amalgamation, consolidation, merger
or sale. No such reclassification, change, amalgamation,
consolidation, merger or sale shall be carried into effect unless,
in the opinion of the Holder, all necessary steps shall have been
taken to ensure that the Holder shall thereafter be entitled to
receive such number of shares or other securities or property of
VHI, or such continuing, successor or purchasing corporation, as
the case may be, subject to adjustment thereafter in accordance
with provisions similar, as nearly as may be, to those contained in
this Section .
The adjustments provided for in this Section are cumulative and
shall apply to successive subdivisions, redivisions, reductions,
combinations, consolidations, distributions, issues or other events
resulting in any adjustment under the provisions of this section,
provided that, notwithstanding any other provision of this section,
no adjustment of the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in
the Conversion Price then in effect; provided however, that any
adjustments which by reason of this subsection 9.3(f) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment.
In the event of any question arising with respect to the
adjustments provided in this Section 9.3, such question shall be
conclusively determined by a firm of chartered accountants
appointed by VHI and acceptable to the Holder; such accountants
shall have access to all necessary records of the VHI and such
determination shall, absent manifest error, be binding upon the VHI
and the Holder.
No Requirement to Issue Fractional Shares
VHI shall not be required to issue fractional shares upon the
conversion of Debentures pursuant to this Article. If any
fractional interest in a share of Common Stock would, except for
the provisions of this section, be deliverable upon the conversion
of any Principal Amount of this Debenture, VHI shall, in lieu of
delivering any certificate representing such fractional interest,
satisfy such fractional interest by paying to the Holder an amount
equal (computed to the nearest cent) to the appropriate fraction of
the value (being the last reported sale price or, if none, the mean
between the closing bid and ask quotations on the over-the-counter
market) of a Common Stock on the business day next preceding the
date of conversion provided that VHI shall not be required to issue
a cheque for any such amount which is less than $5.00.
VHI to Reserve Shares
VHI covenants with the Holders that it will at all times reserve
and keep available out of its authorized Common Stock, solely for
the purpose of issue upon conversion of this Debenture as in this
Article provides, and conditionally allot to Holders who may
exercise their conversion rights hereunder, such number of Shares
of Common Stock as shall then be issuable upon the conversion of
all outstanding Debentures. VHI covenants with the Holder that all
Common Stock which shall be so issuable shall be duly and validly
issued as fully-paid and non-assessable.
Taxes and Charges on Conversion
VHI will from time to time promptly pay or make provision
satisfactory to the Holder for the payment of any and all taxes and
charges which may be imposed by the laws of the State of Florida
(except income tax or security transfer tax, if any) which shall be
payable with respect to the issuance or delivery to the Holders,
upon the exercise of their right to conversion, of Common Stock
pursuant to the terms of this Debenture.
Certificate as to Adjustment
VHI shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in
Section , deliver an Officer's Certificate to the Holder specifying
the nature of the event and the amount of the adjustment and
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based, which certificate
and the amount of the adjustment specified therein shall be
verified by an opinion of a firm of chartered accountants appointed
by VHI and acceptable to the Holder and, when approved by the
Holder, shall be conclusive and binding on all parties in interest.
When so approved, VHI shall forthwith give notice to the Holders in
the manner provided in Section specifying the event requiring such
adjustment or readjustment and the results thereof, including the
resulting Conversion Price; provided that, if VHI has given notice
under Section covering all the relevant facts in respect of such
event and if the Holder approves, no such notice need be given
under this Section .
Notice of Special Matters
VHI covenants with the Trustee that so long as any Debenture
remains outstanding, it will give notice in writing to the Holders
in the manner provided in this section , of its intention to fix a
record date for any event referred to in subsection (a), (b) or
(c) which may give rise to an adjustment in the Conversion Price,
and, in each case, such notice shall specify the particulars of
such event and the record date and the effective date for such
event; provided that VHI shall only be required to specify in such
notice such particulars of such event as shall have been fixed and
determined on the date on which such notice is given. Such notice
shall be given not less than ten (10) days in each case prior to
such applicable record date.
IN WITNESS WHEREOF this Debenture has been executed by VHI
hereto this 9th day of August, 2000.
VALUE HOLDINGS, INC.
Per:
Per:
Schedule A
Schedule B
Schedule C
FORM OF ELECTION OF CONVERSION PRIVILEGE
TO: Value Holdings, Inc.
The undersigned hereby irrevocably elects to convert
$_____________________ principal amount of the within Debenture
into ___________ shares of Common Stock at the Conversion Price in
accordance with the terms and conditions of the within Debenture.
Such conversion is calculated in accordance with Section 9.1 of the
within Debenture on the basis of the least of:
(i) $0.195;
(ii) eighty-five percent (85%) of the average closing bid price of
the shares of Common Stock for the 5 lowest of the 22 consecutive
trading days prior to the trading day on which this notice is
transmitted, which is $________; and
(iii) in the event the Resale Registration Statement is
not declared effective on or before the Deadline, the lowest price
at which a trade of shares of Common Stock is made on the OTC
Bulletin Board (or such other principal stock exchange, quotation
system or over-the-counter market that the shares of Common Stock
trade) during the period commencing on the Deadline and ending on
the date the Resale Registration Statement is declared or ordered
effective by the SEC
Please issue share certificates for said shares of Common Stock as
follows:
Name:
____________________________________
Address:
____________________________________
____________________________________
Date:
____________________________________
Signed:
____________________________________
40
C:\TEMP\Deben8.wpd
Dates Referenced Herein
| This ‘SB-2’ Filing | | Date | | Other Filings |
|---|
| |  |
| | 8/8/02 | | None on these Dates |
| Filed on: | | 11/17/00 |
| List all Filings |
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