U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): March 5, 2002
UPGRADE INTERNATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
WASHINGTON 000- 27649 58-2441311
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
1411 FOURTH AVE., SUITE 629; SEATTLE, WASHINGTON 98101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 903-3116
ITEM 5. OTHER EVENTS
Upgrade International Corporation has entered into a debt financing
agreement with an institutional syndicator to obtain up to $15 million in
working capital for Upgrade and its affiliated companies.
The debt instrument is for a seven-year term with the principal due at
maturity, and interest payable quarterly commencing in year three of the
financing. The loan is secured by the issuance of 40 million shares of Upgrade
stock, which was issued under Rule 144A. These shares will carry a different
CUSIP number from the Company's Common Stock. These shares are restricted for a
three year period, and can only be traded among qualified institutional
investors. Upon repayment of the credit facility, the shares are to be returned
to the Company. The Company also retains the right to substitute the collateral
after 18 months of the credit facility has transpired. In the event of default,
there are standstill provisions which would prevent certain actions by the
Company's board of directors until such time as a credit agreement with onerous
default provisions comes into force. The Company also must maintain one quarters
interest in reserve in a specified account, as well as maintain a collateral
value in excess of 20% of the amounts borrowed. Failure to do so, constitutes a
"soft default" which if uncured, grants voting rates at both meetings of
shareholders of the shares pledged, and the votes of the company executives at
board of directors meetings to the parties in custody of the shares. The Company
does maintain the right to add additional shares of stock, issued under 144A to
the collateral pool.
After consultation with the Company's accountants, management concluded
that in accordance with Statement of Financial Accounting Standards No. 128,
Earnings Per Share, the shares issued as collateral will be considered
contingently returnable shares, and will, therefore, not be included in the
earnings-per-share calculations or as outstanding.
Additionally, the OTC:BB has indicated that if shares are traded between
qualified institutional investors under Rule 144A, these shares are not included
in the reported days volume.
In addition, Upgrade has agreed to place 5,000,000 common shares under Rule
506 of Regulation D with the syndicator, as a reserve for private placements, at
market, with investors as designated by the syndicator. These shares of common
stock have not been registered under the Securities Act of 1933 and may not be
offered or sold in the United States absent registration or an applicable
exemption under registration requirements.
This disclosure is qualified in its entirety by reference to the debt
financing custody agreement attached hereto as Exhibit 4.1, which includes all
terms of the debt.
This disclosure is not an offer to sell securities or a solicitation of an
offer to buy securities. Sales will be made only to investors with preexisting
contacts with the Company and its authorized representatives. No money or other
consideration is being solicited or will be accepted by way of this disclosure.
Any public offer of the Company's common stock will be made only by means of a
prospectus filed with the SEC.
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ITEM 7. EXHIBITS
Exhibit No. Description
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4.1 Master Agreement to Provide Financing and Custodial Services
10.1 Master Agreement to Provide Financing and Custodial Services (See
exhibit 4.1)
10.2 Press Release Regarding Financing
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UPGRADE INTERNATIONAL CORPORATION
By: /s/ Howard A. Jaffe Date: 3/15/02
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Name:
Title:
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Exhibit Index
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Exhibit No. Description
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4.1 Master Agreement to Provide Financing and Custodial Services
10.1 Master Agreement to Provide Financing and Custodial Services (See
exhibit 4.1)
10.2
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