Taken from RB-Interesting
From I believe Longtooth, FWIW
4.9
Form of 5% Secured Promissory Note due April 18, 2002 in the amount of
$1,200,000 entered into with Immanuel Kant International Limited.*
The (*) indicates the form is included with the Prospectus.
Some of the significant terms:
Prepayment penalty is $120K (10%) Plus Accrued Interest. Any prepayment
must be in full.
Default occurs if trading on Edig is suspended for more than 1 trading
day.
But here's the real kicker in the terms of the note... a beaut of a
term:
4. Financings. Through and including the 360(th) day following the date
of this Note, Maker may not directly or indirectly, offer, sell or grant
any option to purchase (or announce any offer, sale, grant or any option
to purchase) any of its Common Stock or other securities which entitle
the holder thereof to receive
Common Stock, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable for Common
Stock.
[So it would appear that Edig isn't allowed to sell any common stock or
anything convertable to common for 360 days ..i.e. until Jan 13, 2003.
BUT... read on... there are some very tightly bound exceptions
provided:]
The restrictions specified in this Section 4 shall not apply to [i.e.
exceptions are:]
[1st Exception:] (i) securities issued as compensation or pursuant to
stock options granted to employees, officers and directors of the Maker
pursuant to any stock option or other similar plan duly adopted by the
Maker, or
[But then comes the 1st interesting & perhaps enlightening exception:]
[2nd Exception:] (ii) securities issued pursuant to or in a connection
with a merger, acquisition or business combination by or with the Maker
or
[AND if exception (ii) didn't raise your eyebrows, then here's the
sweetener... this has got to get you going... not to mention
concerned...]
[3rd Exception:] (iii) securities offered or sold in a single
transaction [which meet the following 3 conditions (x, y, & z):]
(x)exempt from the registration requirements of the Securities Act of
1933, as amended, and
(y) resulting in net proceeds to Maker of not less than $10,000,000 and
at a price that is not directly or indirectly, presently or at any later
time,
discounted to the market price of the Common Stock at the time of such
offering [i.e. result in at least $10M net proceeds and sold at no less
than Market Price], and
(z) not issued in tandem with any options, warrants or other rights to
acquire additional securities of Maker or securities convertible into or
exchangeable for securities of Maker.
[What exception (iii) says is that Edig is allowed to sell common stock
ONLY in a SINGLE TRANSACTION for AT LEAST $10M at Market
Price, but which must be EXEMPT from Registration Requirements and which
can't be sold or offered with any other options or warrants.
Strange condition in as much as Edig then immediately proceeds to
register 20M shares in a Shelf registration (so does this meet or not
meet
the exception (iii) condition (x) which requires that the shares be
exempt from registration??? If it meets that condition, then it's o.k...
but if this
is specifically designed to not meet the requirement, then Edig has
purposefully defaulted and the Co. belongs to the Note holder! I assume
therefore that the registration requirement refers to that which relates
to having the newly sold shares registered for resale... in other words,
the
exception to the offering of common stock is that it must be sold in ONE
TRANSACTION worth at least $10M, at market price, and so that it
doesn't have to be registered for resale. This is exactly what the Shelf
registration does.
Therefore, this Note's condition is that Edig cannot sell shares for a
360 day period (Until on or about Jan 13, 2003) except in ONE
TRANSACTION, for at LEAST $10M, at MARKET PRICEs! So Guess WHAT!!!???
EDIG IS FORCED TO SELL AT MARKET PRICE ALL
AT ONCE!!!! WHICH will FORCE THE PRICE to SMITHERENES if thru a
Broker/Dealer... or force somebody to buy $10M worth of Edig
stock at the then prevailing market price... and they get ONE SHOT at
it... "single transaction".
Looks like the Note holder has Edig between a rock and hard-place for a
year! To raise the money to pay back the loan by due date (Apr 18),
Edig has to sell stock. BUT, they have to do it all at once for at least
$10M at market price... which imo will drop the market price to about
$0.50
(which is why Edig got 20M shares in the shelf offering... to raise $10M
in the event that they have to sell all 20M shares to raise the $10M...
&
will also be used for repayment of the $1.32M needed to repay the
loan).]
In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, Payee will be entitled to
specific performance of Maker's obligations under this Section 4.
Maker agrees that monetary damages may not be adequate compensation for
any loss incurred by reason of any breach of obligations
described in this Section 4 and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy
at law would be adequate. The obligations and agreements contained in
this Section 4 shall survive through the period expressed in this
Section 4 [i.e. 360 days], regardless of any payment, prepayment or
Event of Default under this Note.
8. Use of Proceeds [of the Loan] Note Maker shall use the proceeds from
this Note hereunder for working capital purposes and not for the
satisfaction of any portion of Maker's or Subsidiary's debt (other than
payment of trade payables in the ordinary course of Maker's business
and prior practices), [& not] to redeem any of Maker's equity or
equity-equivalent securities or to settle any outstanding litigation.
Watch OUT FOLKS... this is the "small print"... it'll kill you every
time.
AI
