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CONFIDENTIAL
MEMORANDUM
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DATE:
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SEPTEMBER
30, 2005
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TO:
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BRENT
LOKASH
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CC:
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DOUG
MASON
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FROM:
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BRUCE
MORLEY
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RE:
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Consulting
Agreements and Lease Negotiations
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Further to
the directors meeting on Thursday, September 29, 2005, the
following summarizes the terms agreed to by the parties with
respect to certain amendments to the consulting/legal services
agreements (collectively, the “Agreements”) between
Clearly Canadian and Criterion Capital Corporation (Doug
Mason’s company) and Bruce E. Morley Law Corporation (Bruce
Morley’s company), as well as the terms agreed to with
respect to Clearly Canadian’s lease (the “Lease”)
with Beachfront Enterprises Limited Partnership
(“Beachfront”). The terms summarized below are subject
to the parties completing definitive agreements with proper
consideration of any applicable tax and securities
issues.
1.
Agreements with Criterion Capital Corporation
(“Criterion”) and Bruce E. Morley Law Corporation
(“Law Corp”)
Clearly
Canadian currently has Agreements, as amended, with Criterion and
Law Corp which provide in part for the following termination
compensation as of December 31, 2005:
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Criterion:
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The payment
of $
200,000 US and the issuance of 150,000 fully vested
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stock options
at an exercise price of $ 1.00 US per share
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Law
Corp:
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The payment
of $
150,000 US and the issuance of 100,000 fully vested
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stock options
at an exercise price of $ 1.00 US per share
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Criterion
and Law Corp are willing to amend the current Agreements to provide
for the following compensation, in lieu of the termination
compensation referred to above:
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Agreement with
Criterion :
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1)
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The issuance of 100,000
shares and the payment of $67,000US.
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2)
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Clearly Canadian’s
shares are presently trading at approximately $1.20US per share,
however, for the purposes of the amendment with Criterion, the
shares issued to Criterion will be valued by Clearly Canadian at a
deemed price of $2.00US per share. Accordingly, if Clearly
Canadian’s shares are trading at less than $2.00US per share
by January 2, 2006 (based on the 10 trading day average preceding
January 2, 2006), Clearly Canadian will pay Criterion the
difference between the average trading price as of January 2, 2006
and $2.00US per share, which payment can, at the election of
Clearly Canadian, be made in cash or in shares (based on the 10
trading average preceding January 2, 2006) and such cash or share
payment is to be paid to Criterion by January 6, 2006.
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3)
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With respect to
Criterion’s 150,000 stock options, one-third thereof (50,000
options) are to vest at this time with the remaining two-thirds of
such options (100,000 options) (the “Remaining Criterion
Options”) to vest if Clearly Canadian is
“profitable” (based on normalized EBITDA, to be
defined). Specifically, in order for the Remaining Criterion
Options to vest, Clearly Canadian will
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1
need to be profitable for
the month of July, 2006 (ie. following completion of the first six
months of the 2006 year) and Clearly Canadian will need to maintain
such profitability by being profitable for the third quarter of
2006 (ie. for the quarter ended September 30, 2006). If Clearly
Canadian is not profitable for July 2006 and for the third quarter
of 2006, then the Remaining Criterion Options shall be surrendered
to the Company by Criterion. However, if Clearly Canadian
terminates its agreement with Criterion for any reason prior to
September 30, 2006, then the Remaining Criterion Options shall vest
as of the date of such termination and, in accordance with the
terms of Clearly Canadian’s stock option plan, will expire 12
months from the date of such termination if not
exercised.
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1)
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The issuance of 75,000
shares and the payment of $58,500Cdn.
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2)
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Clearly Canadian’s
shares are presently trading at approximately $1.20US per share,
however, for purposes of the amendment with Law Corp, the shares
issued to Law Corp will be valued by Clearly Canadian at a deemed
price of $2.00US per share. Accordingly, if Clearly
Canadian’s shares are trading at less than $2.00US per share
by January 2, 2006 (based on the 10 trading day average preceding
January 2,
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