UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
T/F PURIFINER, INC.
-----------------------------------------
(Name of Issuer)
Common Stock, $0.001 Par Value
-----------------------------------------
(Title of Class of Securities)
872405105
-----------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
(212) 872-1000
-----------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 26, 1998
-----------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter disclosure
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Continued on following page(s)
Page 1 of 67 Pages
Exhibit Index: Page 13
<PAGE>
Page 2 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QUANTUM INDUSTRIAL PARTNERS LDC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Cayman Islands
7 Sole Voting Power
Number of 2,479,091
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 2,479,091
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
OO; IV
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH MANAGEMENT INVESTOR, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 2,479,091
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 2,479,091
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
PN; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
QIH MANAGEMENT, INC.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 2,479,091
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 2,479,091
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Soros Fund Management LLC
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 2,479,091
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 2,479,091
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
OO; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 6 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
George Soros (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 2,479,091
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
2,479,091
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 7 of 67 Pages
SCHEDULE 13D
CUSIP No. 872405105
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Stanley F. Druckenmiller (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 2,479,091
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
2,479,091
11 Aggregate Amount Beneficially Owned by Each Reporting Person
2,479,091
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[_]
13 Percent of Class Represented By Amount in Row (11)
37.48%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 8 of 67 Pages
This Amendment No. 1 to Schedule 13D relates to shares of
Common Stock, $0.001 par value per share (the "Shares"), of T/F Purifiner, Inc.
(the "Issuer"). This Amendment No. 1 supplementally amends the initial statement
on Schedule 13D dated June 30, 1997 (the "Initial Statement") filed by the
Reporting Persons. This Amendment No. 1 is being filed by the Reporting Persons
to report that one of the Reporting Persons has entered into certain agreements
with the Issuer pursuant to which the number of Shares of which the Reporting
Persons may be deemed the beneficial owners has increased by more than one
percent of the total outstanding Shares. Capitalized terms used herein but not
defined shall have the meanings ascribed to them in the Initial Statement. The
Initial Statement is supplementally amended as follows.
Item 3. Source and Amount of Funds or Other Consideration.
On June 19, 1997, QIP purchased from the Issuer a promissory
note in the original principal amount of $2,000,000 (the "Note"), a copy of the
form of which is attached as Exhibit G to the Initial Statement. On January 26,
1998 the Issuer issued a promissory note (the "Exchange Note"), a copy of the
form of which is attached hereto as Exhibit I and incorporated herein by
reference in response to this Item 3, in exchange for cancellation of the Note
pursuant to the note exchange agreement (the "Note Exchange Agreement"), a copy
of which is attached hereto as Exhibit J and incorporated herein by reference in
response to this Item 3. Pursuant to the terms of the Exchange Note, the
principal amount of the Exchange Note, or any portion thereof may, at any time
and at or before the close of business on January 1, 2003, be converted into
Shares at a conversion price of $2.75 per Share, subject to certain customary
anti-dilution provisions and other conditions. Further, the Exchange Note is
redeemable at the option of the Issuer at any time, in whole or in part, upon
not less than thirty (30) nor more than sixty (60) days' notice, at 100%
principal amount thereof, plus accrued and unpaid interest.
In addition, on January 26, 1998, QIP purchased from the
Issuer a promissory note in the principal amount of $500,000 (the "$500,000
Note"), a copy of the form a which is attached hereto as Exhibit K and
incorporated herein by reference in response to this Item 3, pursuant to the
note purchase agreement (the "Note Purchase Agreement"), a copy of which is
attached hereto as Exhibit L and incorporated herein by reference in response to
this Item 3. Pursuant to the terms of the $500,000 Note, the principal amount of
the $500,000 Note, or any portion thereof may, at any time and at or before the
close of business on January 1, 2003, be converted into Shares at a conversion
price of $2.75 per Share, subject to certain customary anti-dilution provisions
and other conditions. Further, the $500,000 Note is redeemable at the option of
the Issuer at any time, in whole or in part, upon not less than thirty (30) nor
more than sixty (60) days' notice, at 100% principal amount thereof, plus
accrued and unpaid interest.
Section 1 of the Rights Agreement, a copy of which is
attached as Exhibit F to the Initial Statement, was amended pursuant to
Amendment No. 1 to Registration Rights Agreement, a copy of which is attached
hereto as Exhibit M and incorporated herein by reference in response to this
Item 3, to include Shares issuable pursuant to the Exchange Note and the
$500,000 Note as "Registrable Securities."
The Shares held for the account of QIP may be held through
margin accounts maintained with brokers, which extend margin credit as and when
required to open or carry positions in their margin accounts, subject to
applicable federal margin regulations, stock exchange rules and such firms'
credit policies. The Shares which may be held in the margin accounts are pledged
as collateral security for the repayment of debit balances in the respective
accounts.
<PAGE>
Page 9 of 67 Pages
Item 4. Purpose of Transaction.
All of the Shares reported herein as having been acquired
for or disposed of from the account of QIP were acquired or disposed of for
investment purposes. Neither the Reporting Persons nor, to the best of their
knowledge, any of the other individuals identified in response to Item 2, has
any plans or proposals that relate to or would result in any of the transactions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Mr. Soros, Mr. Druckenmiller and SFM LLC reserve the right
to acquire, or cause to be acquired, additional securities of the Issuer, to
dispose, or cause to be disposed of, such securities at any time or to formulate
other purposes, plans or proposals regarding the Issuer or any of its
securities, to the extent deemed advisable in light of general investment and
trading policies of the Reporting Persons and/or the SFM Clients, market
conditions or other factors.
Item 5. Interest in Securities of the Issuer.
(a) Each of the Reporting Persons may be deemed the
beneficial owner of the 2,479,091 Shares held for the account of QIP
(approximately 37.48% of the total number of Shares which would be outstanding
assuming the exercise or conversion of all of the derivative securities held for
the account of QIP).
(b) (i) Each of QIP, QIHMI (pursuant to QIP's constituent
documents), QIH Management (by virtue of its position as sole general partner of
QIHMI) and SFM LLC (pursuant to the terms of the QIP Contract) may be deemed to
have the sole power to direct the voting and disposition of the 2,479,091 Shares
held for the account of QIP (assuming the exercise or conversion of all of the
derivative securities held for the account of QIP).
(ii) Pursuant to the terms of the QIP Contract and as a
result of the positions held by Mr. Soros and Mr. Druckenmiller with SFM LLC,
each of Mr. Soros and Mr. Druckenmiller may be deemed to have shared power to
direct the voting and disposition of the 2,479,091 Shares held for the account
of QIP (assuming the exercise or conversion of all of the derivative securities
held for the account of QIP).
(c) Except for the transactions described in Item 3
and Item 6 hereto, there have been no transactions with respect to the Shares
since November 30, 1997 (60 days prior to the date hereof) by any of the
Reporting Persons.
(d) The shareholders of QIP, including Quantum
Industrial Holdings, Ltd., a British Virgin Islands international business
company, have the right to participate in the receipt of dividends from, or
proceeds from the sale of, the Shares held for the account of QIP in accordance
with their ownership interests in QIP.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
From time to time each of the Reporting Persons and/or the
SFM Clients may lend portfolio securities to brokers, banks or other financial
institutions. These loans typically obligate the borrower to return the
securities, or an equal amount of securities of the same class, to the lender
and typically provide that the borrower is entitled to exercise voting rights
<PAGE>
Page 10 of 67 Pages
and to retain dividends during the term of the loan. From time to time to the
extent permitted by applicable law, each of such persons or entities may borrow
the Shares for the purpose of effecting, and may effect, short sale
transactions, and may purchase securities for the purpose of closing out short
positions in such securities.
Robert Soros, an employee of SFM LLC, is also a director of
the Issuer.
Except as set forth herein and as described in Items 3
hereto, which is incorporated in this Item 6 by reference, the Reporting Persons
and the SFM Clients do not have any contracts, arrangements, understandings or
relationships with respect to any securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
A. Power of Attorney dated as of January 1, 1997 granted by Mr.
Soros in favor of Mr. Sean C. Warren and Mr. Michael C. Neus (filed as Exhibit A
to the Initial Statement and incorporated herein by reference).
B. Power of Attorney dated as of January 1, 1997 granted by Mr.
Druckenmiller in favor of Mr. Sean C. Warren and Mr. Michael C. Neus (filed as
Exhibit B to the Initial Statement and incorporated herein by reference).
C. Joint Filing Agreement dated June 30, 1997 by and among QIP,
QIHMI, QIH Management, SFM LLC, Mr. Soros and Mr. Druckenmiller (filed as
Exhibit C to the Initial Statement and incorporated herein by reference).
D. Power of Attorney dated May 23, 1996 granted by QIP in favor
of Mr. Gary Gladstein, Mr. Sean Warren and Mr. Michael Neus (filed as Exhibit D
to the Initial Statement and incorporated herein by reference).
E. Securities Purchase Agreement dated as of June 19, 1997 by
and among the Issuer, Taylor, Ford and QIP (filed as Exhibit E to the Initial
Statement and incorporated herein by reference).
F. Registration Rights Agreement dated as of June 19, 1997 by
and among the Issuer and QIP (filed as Exhibit F to the Initial Statement and
incorporated herein by reference).
G. Form of Issuer's Promissory Note (filed as Exhibit G to the
Initial Statement and incorporated herein by reference).
H. Warrant issued by Issuer to QIP (filed as Exhibit H to the
Initial Statement and incorporated herein by reference).
I. Form of Exchange Promissory Note.
J. Note Exchange Agreement dated January 26, 1998 by and among
the Issuer and QIP.
K. Form of $500,000 Note.
L. Note Purchase Agreement dated January 26, 1998 by and among
the Issuer and QIP
M. Amendment No. 1 to Registration Rights Agreement dated
January 26, 1998, between the Issuer and QIP.
<PAGE>
Page 11 of 67 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: January 29, 1998
QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
QIH MANAGEMENT INVESTOR, L.P.
By: QIH Management, Inc.,
its General Partner
By: /S/ MICHAEL C. NEUS
----------------------------------
Michael C. Neus
Vice President
QIH MANAGEMENT, INC.
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Vice President
SOROS FUND MANAGEMENT LLC
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Assistant General Counsel
<PAGE>
Page 12 of 67 Pages
GEORGE SOROS
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
STANLEY F. DRUCKENMILLER
By: /S/ MICHAEL C. NEUS
---------------------------------------
Michael C. Neus
Attorney-in-Fact
<PAGE>
Page 13 of 67 Pages
EXHIBIT INDEX
Page No.
--------
I. Form of Issuer's $2,000,000 Exchange Promissory
Note.......................................................... 14
J. Note Exchange Agreement dated January 26, 1998 by and
among T/F Purifiner, Inc. and Quantum Industrial
Partners LDC.................................................. 29
K. Form of Issuer's $500,000 Promissory Note....... 40
L. Note Purchase Agreement dated January 26, 1998 by and
among T/F Purifiner, Inc. and Quantum Industrial
Partners LDC.................................................. 54
M. Amendment No. 1 to Registration Rights Agreement dated
January 26, 1998, between T/F Purifiner, Inc. and
Quantum Industrial Partners LDC .............................. 65
Page 14 of 67 Pages
EXHIBIT I
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED OR DISPOSED EXCEPT IN COMPLIANCE WITH SUCH ACT
AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
US $2,000,000 New York, New York
January 26, 1998
T/F PURIFINER, INC.
12% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2003
T/F Purifiner, Inc., a Delaware corporation (the "Issuer"),
for value received hereby promises to pay to Quantum Industrial Partners LDC or
registered assigns (the "Holder") the principal amount of TWO MILLION DOLLARS
($2,000,000) plus any accrued and unpaid interest at such place or such bank
account in the United States of America as the Holder may from time to time
direct on January 1, 2003 in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
This Security is issued pursuant to a Note Exchange
Agreement dated as of January 26, 1998 by and between the Issuer and the Holder
(the "Exchange Agreement"). This Security is transferable and assignable at any
time, in whole or in part, to one or more purchasers or other persons. The
Issuer agrees to issue from time to time replacement Securities in the form
hereof to facilitate such transfers and assignments. In addition, after delivery
of an indemnity in form and substance satisfactory to the Issuer, the Issuer
also agrees to issue replacement Securities for the Security which have been
lost, stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register
(the "Register") in which shall be entered the names and addresses of the
registered holder(s) of the Security and particulars of all transfers of the
Security. The ownership of the Security shall be proven by the Register. For the
purpose of paying interest and principal on the Security, the Issuer shall be
entitled to rely on the name(s) and address(es) in the Register and
notwithstanding anything to the contrary contained in this Security, no Event of
Default (as defined below) shall occur under Section 6 if payment of principal
is made in accordance with the names and addresses and particulars contained in
the Register.
No provision of this Security shall alter or impair the
obligations of the Issuer, which are absolute and unconditional, to pay the
principal of and interest on this Security at the place, times, rate, and in the
currency, herein prescribed.
<PAGE>
Page 15 of 67 Pages
1. Principal and Interest
----------------------
The principal of this Security shall bear interest at the
rate of 12% per annum (the "Interest Rate") which shall accrue from the most
--------------
recent Interest Payment Date to which interest has been paid on this Security,
or if no interest has been paid on this Security from December 19, 1997 until
payment in full of the principal amount has been made and be payable in cash
quarterly on April 1, July 1, October 1 and January 1 of each year (an "Interest
--------
Payment Date"), commencing on April 1, 1998, to the Holder hereof until the
- -------------
principal amount is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment will be paid
to the Holder of the Security at the close of business on the Record Date for
the interest payable on such Interest Payment Date. The "Record Date" for any
-----------
interest payment is the close of business on March 15, June 15, September 15 or
December 15, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such Interest is payable; provided,
---------
however, that at the option of the Company, on any Interest Payment Date,
- -------
interest may, in lieu of being paid in cash, accrue and be added to the
principal balance of this Security. "Business Day" means any day except a
-------------
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized by law to close.
Any amounts that have become due and payable hereunder and
remain unpaid by the Issuer shall accrue interest thereafter until payment in
full of such amount at the rate of fifteen percent (15%) (the "Default Rate")
-------------
per annum and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate,
will be computed on the basis of a fraction, the denominator of which is 360 and
the numerator of which is the actual number of days elapsed from the date such
interest becomes due and payable.
Each of the Interest Rate and the Default Rate shall be
effective both before and after any judgment may be rendered in a court of
competent jurisdiction, provided, however, that if either the Interest Rate or
Default Rate is deemed to be in excess of the amount permitted to be charged by
the Issuer under applicable laws, the Holder shall be entitled to collect an
Interest Rate or Default Rate, as the case may be, only at the highest rate
permitted by law, and any interest collected by the Holder in excess of such
lawful amount shall be deemed a payment in reduction of the Principal Amount
then outstanding under this Security and shall be so applied.
2. Subordination
-------------
The payment obligations evidenced by this Security shall be
subordinate to any indebtedness of the Issuer for cash advanced by any bank or
other financial institution ("Bank Debt") but shall rank senior to all other
----------
indebtedness of the Issuer. The Issuer shall not issue, directly or indirectly,
any indebtedness which is senior to the indebtedness evidenced by this Security
unless such indebtedness is Bank Debt.
3. Redemption
----------
A. Optional Redemption. This Security will be redeemable
at the option of the Issuer at any time, in whole or in part, upon not less than
thirty (30) nor more than sixty (60) days' notice, at 100% principal amount
thereof, plus accrued and unpaid interest.
2
<PAGE>
Page 16 of 67 Pages
At least thirty (30) days but not more than sixty (60) days
before a redemption date, the Issuer shall send a notice of redemption,
first-class mail, postage prepaid, facsimile with answer back and courier to
follow to the Holder(s) of this Security to be redeemed at the address(es) of
the Holder as they appear in the Register.
If this Security is redeemed subsequent to a Record Date
with respect to any Interest Payment Date specified above and on or prior to
such Interest Payment Date, then any accrued interest will be paid on such
Interest Payment Date to the Holder of the Security on such Record Date.
B. Mandatory Redemption. The Security will be redeemable
at the option of the Holder(s) in whole or in part at any time on or after the
earlier of (i) January 1, 2001 and (ii) the date on which the Issuer raises cash
proceeds aggregating at least $10 million from any transaction or series of
transactions involving the sale of debt, equity or assets (a "Put Date") upon
not less than five (5) business days written notice to the Issuer at 100%
principal amount thereof, plus accrued and unpaid interest. The Issuer covenants
and agrees that it will immediately (but in any event within one (1) Business
Day) advise the Holder of the occurrence of any Put Date described in clause
(ii) above.
4. Affirmative Covenants of Issuer
-------------------------------
A. Visits and Inspections. The Issuer will permit the
Holder, upon reasonable notice, to (i) visit and inspect the properties of the
Issuer during business hours, (ii) inspect and make extracts from and copies of
its books and records, and (iii) discuss with and obtain information from its
principal officers, its business, assets, liabilities, financial position,
results of operations and business prospects. The Issuer will also permit the
Holder to discuss with its respective auditors its businesses, assets,
liabilities, financial positions, results of operations and business prospects.
B. Reporting. The Issuer will make available or cause to be
made available to each Holder as soon as practicable (except to the extent such
Holder specifically requests otherwise):
(i) all annual, quarterly and periodic reports prescribed
by Sections 13, 14 and 15(d) of the Exchange Act
(whether or not the Issuer is subject to such
requirements);
(ii) all reports furnished to the Issuer's board members and
securityholders;
(iii)any reports (including management reports) submitted
to the Issuer by the Issuer's independent public
accountants;
(iv) a copy of the annual budget for the Issuer (in no event
later than 60 days after the commencement of each
fiscal year) and any material amendment thereto;
3
<PAGE>
Page 17 of 67 Pages
(v) notice of the commencement of and progress of any
material proceedings or investigations by or before any
governmental body, court or arbitrator against, or to
the extent known to the Issuer, in any other way
relating adversely to the Issuer;
(vi) notice of any material adverse change with respect to
the business, financial position, results of operations
or prospects of the Issuer;
(vii)notice and details of any default or the occurrence or
non-occurrence of any event which constitutes, or which
with the passage of time or giving of notice or both
would constitute a default by the Issuer under any
material agreement other than this Agreement to which
the Issuer is party or by which any of its properties
may be bound;
(viii) such other information or reports relating to the
Issuer as the Holder may reasonably request.
C. Reservation and Issuance of Common Stock. The Issuer
covenants that it will at all times reserve and keep available out of its
authorized shares of Common Stock par value $.001 per share (the "Common
------
Stock"), free from preemptive rights, solely for the purpose of issue upon
- -----
conversion of the Securities as herein provided, such number of shares of the as
shall then be issuable upon the conversion of all outstanding shares of the
Securities into Common Stock. The Issuer covenants that all shares of Common
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
D. Compliance With Governmental Requirements. The Issuer
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or State law, or any
national securities exchange, before such shares may be issued upon conversion,
the Issuer will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
E. Notification of Certain Matters. The Issuer shall
notify the Holders promptly (and in any event no later than 10 days prior to any
applicable record date) of any proposal for the authorization or issuance of
rights or other distributions to securityholders, any subdivision, combination
or reclassification affecting the capital stock, any merger or consolidation
affecting the Issuer, the voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any sale or transfer of any significant portion of
the Issuer's assets.
5. Negative Covenants
------------------
A. Restricted Payments. Without the written consent of a
majority of holders of an aggregate principal amount of the Securities
outstanding (the "Majority Holders"), the Issuer will not make to any Person (i)
----------------
any dividend or other payment or distribution on any capital stock of the
Issuer; (ii) any payment on account of the purchase, redemption, retirement or
other acquisition of any shares of the Issuer's capital stock any option,
4
<PAGE>
Page 18 of 67 Pages
warrant or other right to acquire shares of the Issuer's capital stock, or (iii)
any defeasance, redemption, repurchase or other acquisition or retirement for
value prior to scheduled maturity of any indebtedness ranked pari passu or
---- -----
subordinate in right of payment to the Securities and having a maturity date
subsequent to the maturity of the Securities. "Person" means an individual,
------
corporation, limited liability company, partnership, association, trust or other
entity or organizations, including a government or political subdivision or an
agency or instrumentality thereof.
B. Transactions with Affiliates. Without the written
consent of the Majority Holders, the Issuer shall not conduct any business or
enter into any transactions or series of similar transactions with an Affiliate
of the Issuer or any legal or beneficial owner of 5% or more of any class of
capital stock of the Issuer with an Affiliate of such owner unless the terms of
such business transaction or series of transactions are set forth in writing and
as favorable to the Issuer as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's length
dealings with an unrelated third person. For purposes of this paragraph B,
Quantum Industrial Partners LDC shall not be deemed to be and Affiliate.
Notwithstanding the foregoing, the Issuer shall not make, or cause any other
party to make, any loans to any shareholders of the Company. The Company further
agrees that it will not enter into any transaction with any Affiliate or any
legal or beneficial owner of 5% or more of any class of capital stock of the
Company or an Affiliate or family member of such person unless the terms of such
transaction have been presented to and approved by the Board of Directors of the
Issuer. "Affiliate" of any Person means any other Person directly or indirectly
---------
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
----------- ----------
foregoing.
C. Amendment to Certain Documents. The Issuer shall not
enter into any amendment of, or agree to or accept or consent to any waiver of
any of the material provisions of its certificate of incorporation (including
any certificate of designation) or By-laws.
5
<PAGE>
Page 19 of 67 Pages
6. Default
-------
The occurrence of any of the following events or conditions
shall constitute an event of default (each an "Event of Default") with respect
----------------
to the Issuer of this Security:
(a) Any amounts due under this Security are not paid on the
day after the due date therefore.
(b) The Issuer or any subsidiary of the Issuer (i) shall
commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets,
or Issuer shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Issuer any
case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of ninety (90)
days.
(c) The Issuer shall fail to perform any agreement or
covenant on its part contained herein or in the Exchange
Agreement.
(d) Any default by the Issuer or any subsidiary with
respect to any indebtedness (whether existing or hereinafter
created) which would permit the holder thereof to declare such
indebtedness to be due and payable prior to its stated maturity.
Upon the occurrence and during the continuance of an Event
of Default, the Holder will have the option, upon notice to the Issuer, of
declaring the principal amount hereunder together with unpaid accrued interest
thereon to be immediately due and payable.
The Issuer agrees to pay on demand all of the Holder's costs
and expenses, including without limitation reasonable attorneys' fees, in
connection with the collection of any sums due the Holder, the enforcement or
protection of its rights hereunder, any amendment to this Security or any waiver
hereunder or under the Exchange Agreement.
No failure on the part of the Holder or other holders hereof
to exercise any right or remedy hereunder, whether before or after the happening
of a default shall constitute a waiver thereof, and no waiver of any past
default shall constitute waiver of any future default or of any acceptance of a
past due installment, or indulgence granted from time to time shall be construed
to be a waiver of the right to insist upon prompt payment thereafter or to
impose late charges retroactively or prospectively, or shall be deemed to be a
novation of this Security or as a reinstatement of the debt evidenced hereby or
as a waiver of such right or acceleration or any other right, or be construed so
as to preclude the exercise of any right which the Holder may have, whether by
the laws of the State of New York, by agreement or otherwise; and the Issuer
hereby expressly waives the benefit of any statute or rule of law or equity
which would produce a result contrary to or in conflict with the foregoing.
6
<PAGE>
Page 20 of 67 Pages
7. Conversion
----------
Subject to and upon compliance with the provisions of this
Section, the principal amount of this Security, or any portion thereof may, at
any time and at or before the close of business on January 1, 2003, or
thereafter if any Event of Default shall occur and be continuing, be converted
into duly authorized, validly issued, fully-paid and nonassessable shares of
Common Stock at $2.75 per share (the "Conversion Price"), or, in case an
-----------------
adjustment in the Conversion Price and the securities or other property issuable
upon conversion has taken place pursuant to Section 8 hereof, then at the
applicable Conversion Price and in such securities or other property as so
adjusted, upon surrender of the Security or Securities, the principal amount of
which is so to be converted, to the Issuer at any time during usual business
hours at the Issuer's offices, accompanied by a written notice of election to
convert as provided in the form attached hereto and, if so required by the
Issuer, by a written instrument or instruments of transfer in form satisfactory
to the Issuer duly executed by the registered holder or his attorney duly
authorized in writing.
No payment or adjustment will be made for dividends on any
Common Stock except as provided in Section 8 hereof. On conversion of a
Security, that portion of any interest accrued and unpaid interest attributable
to the period from December 19, 1997 to the Conversion Date with respect to the
converted Security shall not be canceled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through delivery of the
Common Stock, in exchange for the Security being converted pursuant to the
provisions hereof. If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total Principal Amount of the Securities converted.
As promptly as practicable after the surrender, as herein
provided, of any Security or securities for conversion, the Issuer shall deliver
or cause to be delivered at its said office or agency to or upon the written
order of the holder of the Security or securities so surrendered a certificate
or certificates representing the number of duly authorized, validly issued,
fully-paid and nonassessable shares of Common Stock, into which such Security or
Securities may be converted in accordance with the provisions of Section 7.
Prior to delivery of such certificate or certificates, the Issuer shall require
a written notice at its said office or agency from the Holder of the Security or
securities so surrendered stating that the holder irrevocably elects to convert
such Security or Securities, or, if less than the entire principal amount
thereof is to be converted, stating the portion thereof to be converted. Such
notice shall also state the name or names (with address and social security or
other taxpayer identification number) in which said certificate or certificates
are to be issued. Such conversion shall be deemed to have been made at the time
that such Security or Securities shall have been surrendered for conversion and
such notice shall have been received by the Issuer, the rights of the holder of
such Security or Securities as a Securityholder shall cease at such time, the
person or persons entitled to receive the shares of Common Stock, upon
conversion of such Security or Securities shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time. In the case of any Security which is converted in part only, upon such
conversion, the Issuer shall execute and deliver to the holder thereof, as
requested by such holder, a new Security or securities of authorized
denominations in aggregate principal amount equal to the unconverted portion of
such Security.
7
<PAGE>
Page 21 of 67 Pages
8. Adjustment of Conversion Price
------------------------------
The Conversion Price in effect at any time shall be subject
to adjustment from time to time upon the happening of certain events, as
follows:
(i) In case the Issuer shall at any time after the date
hereof (1) declare or pay a dividend in shares of Common Stock or
make a distribution of Common Stock, (2) subdivide its
outstanding shares of Common Stock, (3) combine its outstanding
shares of Common Stock into a smaller number of shares of Common
Stock or (4) issue any shares of its capital stock in a
reclassification of Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Issuer is the continuing entity), the number of shares
of Common Stock purchasable upon conversion immediately prior
thereto shall be adjusted so that the Holder of the Securities
shall be entitled to receive the number shares of Common Stock or
other securities of the Issuer which he would have owned or have
been entitled to receive after the happening of any of the events
described above, had conversion occurred immediately prior to the
happening of such event or any record date with respect thereto.
An adjustment made pursuant to this paragraph (i) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(ii) In case the Issuer shall at any time after the date
hereof issue rights, options or warrants to all holders of its
outstanding Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share which is
lower at the record date mentioned below than the higher (A) of
the market price per share of the Common Stock (as defined in
Section (v) below) and (B) the Conversion Price, then the number
of shares of Common Stock thereafter purchasable upon conversion
shall be determined by multiplying the number of shares of Common
Stock theretofore purchasable upon conversion by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on the record date for determining stockholders
entitled to receive such rights, options or warrants plus the
number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be
the number of shares of Common Stock outstanding on the record
date for determining stockholders entitled to receive such
rights, options or warrants plus the number of shares which the
aggregate offering price of the total number of shares of Common
Stock so offered would purchase at the current market price per
share of Common Stock at such record date. Such adjustment shall
be made whenever such rights, options or warrants are issued, and
shall become effective as of immediately after the record date
for the determination of stockholders entitled to receive such
rights, options or warrants.
(iii)In case the Issuer shall at any time after the date
hereof distribute to all holders of its shares of Common Stock
evidences of its indebtedness or assets (including securities and
cash dividends not paid out of funds legally available for the
payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer or not made in the ordinary course of
8
<PAGE>
Page 22 of 67 Pages
business), but excluding dividends or distributions referred to
in Section (i) above or rights or options or warrants referred to
in Section (ii) above, then in each case the number of shares of
Common Stock thereafter purchasable upon conversion shall be
determined by multiplying the number of shares of Common Stock
theretofore purchasable upon conversion by a fraction, of which
the numerator shall be then current market price per share of
Common Stock (as defined in Section (v) below) on the date of
such distribution, and of which the denominator shall be then
current market price per share of Common Stock, less then fair
value (as reasonably determined in good faith by the Board of
Directors of the Issuer, whose reasonable determination shall be
conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or
securities or warrants applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is
made, and shall become effective on the date of distribution
retroactive to the record date for the determination o
shareholders entitled to receive such distribution.
(iv) In case the Issuer shall at any time after the date
hereof issue shares of Common Stock, or rights, options, warrants
or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding (A)
shares, rights, options, warrants or convertible or exchangeable
securities issued in any of the transactions described in
Sections (i) through (iii) above and (B) 42,650 options
contemplated to be issued to G & S Technologies, Inc., as
described in Schedule 3.8 to the Exchange Agreement, a price per
share of Common Stock (as determined in accordance with Section
(v) below) that is lower than the higher of (A) the current
market value per share of Common Stock (as determined in
accordance with Section (v) below) on the date of such sale or
issuance or on the date of the agreement for such sale or
issuance (whichever is more) and (B) the Conversion Price, then
in each case the number of shares of Common Stock thereafter
purchasable upon conversion shall be increased by multiplying the
number of shares of Common Stock theretofore purchasable upon the
conversion by a fraction, the numerator of which shall be (I) the
total number of shares of Common Stock issuable in connection
with such sale and issuance, and the denominator of which shall
be (II) the number of shares of Common Stock that the aggregate
consideration received (determined as provided below) for such
sale or issuance would purchase at the higher of the prices
referred to in (A) and (B) above. Such adjustment shall be made
successively whenever such an issuance is made. For the purposes
of such adjustments, the shares of Common Stock that the holder
of such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall
be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Issuer
therefor shall be deemed to be the consideration received by the
Issuer, plus the consideration or premiums stated in such rights,
options, warrants or convertible or exchangeable securities to be
paid for the shares of Common Stock covered thereby. In case the
issuer shall sell and issue shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Common Stock,
for a consideration consisting, in whole or in part, of property
9
<PAGE>
Page 23 of 67 Pages
other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration received by the
Issuer" for purposes of the first sentence of this Section (iv),
the Board of Directors of the Issuer shall determine, on a
reasonable basis and in good faith, the fair value of such
property. In case the Issuer shall sell and issue rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock together with one or more other securities as part
of a unit at a price per unit, then in determining the "price per
share of Common Stock" and the consideration received by the
Issuer for purposes of the first sentence of this Section (iv),
the Board of Directors shall determine, on a reasonable basis and
in good faith, the fair value of the rights, options, warrants or
convertible or exchangeable securities then being sold as part of
such unit.
(v) For the purpose of any computation under sections (ii)
through (iv) above, the current market price per share of Common
Stock at any date shall be the average of the current market
value of Common Stock for the 20 consecutive trading days
commencing 30 trading days prior to such date; provided, that, if
-------- ----
the Common Stock is not then publicly traded, the current market
price per share shall be the average of the market value of the
Common Stock of the last 20 consecutive trading days prior to the
last day of trading; provided, however that such date is not
earlier than 180 days prior to the date as of which such price is
required to be determined, and otherwise such price shall be
determined by an opinion of a nationally recognized independent
investment bank selected by the mutual agreement of the Issuer
and the Holder. In the case of rights, options, warrants or
convertible or exchangeable securities, the price per share of
Common Stock shall be determined by dividing (x) the total amount
received or receivable by the Issuer in consideration of the sale
and issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to
the Issuer upon exercise or conversion or exchange thereof, by
(y) the total number of shares of Common Stock covered by such
rights, options, warrants or convertible or exchangeable
securities.
(vi) No adjustment in the number of shares of Common Stock
convertible hereunder shall be required unless such adjustment
would result in an increase or decrease of at least one percent
(1%) of the number of shares of Common Stock for which shares of
the Securities are convertible; provided, that any adjustments
-------- ----
which by reason of this Section (vi) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. Whenever an adjustment shall be made pursuant to (i)
through (v) above, the Conversion Price shall be adjusted
accordingly. All calculations shall be made to the nearest
one-thousandth of a share.
(vii)No adjustment in the number of shares of Common Stock
received upon conversion need be made under Sections (ii) through
(iv) above if the Issuer issues or distributes to the Holder of
the Securities shares of Common Stock, the shares, rights,
options, warrants, or evidences of indebtedness or assets
10
<PAGE>
Page 24 of 67 Pages
referred to in those Sections which such Holder would have been
entitled to receive had this conversion not occurred prior to the
happening of such event or the record date with respect thereto.
(viii) For the purpose of this Section 8, the term "shares
of Common Stock" shall mean (i) Common Stock of the Issuer, or
(ii) any other class of stock resulting from successive changes
or reclassifications of such shares consisting solely of changes
in par value, or from par value to no par value, or from no par
value to par value. In the event that at any time, as a result of
an adjustment made pursuant to clause (ii) above, the Holders
shall become entitled to receive any securities of the Issuer
other than shares of Common Stock, thereafter the number of such
other shares so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
shares of Common Stock contained in Section (i) through (iv)
above, and the other provisions of this Section 8 shall apply on
like terms to any such other securities.
(ix) Except as provided in Sections (i) through (iii) above,
no adjustment in respect of any dividends shall be made during
the term of the Securities or upon the conversion of the
Securities.
(x) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges with respect to which an
adjustment shall have been made pursuant to Section (ii) or (iv)
above, if any rights, options, warrants or conversion or exchange
privileges thereof have not been exercised, the number of shares
of Common Stock purchasable upon conversion will, upon such
expiration, be readjusted and will thereafter be such as it would
have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the
only shares of Common Stock so issued were the shares of Common
Stock, if any, actually issued or sold upon the exercise of such
rights, options or warrants or conversion or exchange rights and
(ii) such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Issuer upon such
exercise, conversion or exchange plus the aggregate
consideration, if any actually received by the Issuer for the
issuance, sale or grant of all such rights, options or warrants,
whether or not exercised.
Whenever the number of shares purchasable upon conversion
shall be adjusted as required by the provisions of this Section 8, the Issuer
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officers'
certificate showing the adjusted number of shares determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment and the
manner of computing such adjustment. Each such officers' certificate shall be
signed by the chairman, president or chief financial officer of the Issuer and
by the secretary or any assistant secretary of the Issuer. Each such officers'
certificate shall be made available at all reasonable times for inspection by
any holder of shares of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first-class mail, of such certificate to
the each of the Holders.
11
<PAGE>
Page 25 of 67 Pages
9. Reclassification, Reorganization, Consolidation or Merger
---------------------------------------------------------
In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the Issuer (other than a
subdivision or combination of the outstanding Common Stock and other than a
change in the par value of Common Stock) or in case of any consolidation or
merger of the Issuer with or into another corporation (other than a merger with
a subsidiary in which merger the Issuer is the continuing corporation and that
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon conversion) or
in case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Issuer as an entirety or substantially as an
entirety, the Issuer shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter, by converting such Holder's shares of the securities, to receive in
lieu of the receipt of shares of Common Stock the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, capitalization, reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that would have been received upon conversion immediately prior to
such reclassification, capitalization, reorganization, change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments in respect of such shares of stock and other securities and property
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Security. The foregoing provisions of this paragraph shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capitalization reorganization or reclassification, consolidation, merger, sale
or conveyance, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for, or of, a security
of the Issuer other than Common Stock, any such issue shall be treated as an
issue of Common Stock covered by the provisions of Paragraph (iv) of Section 8.
10. Miscellaneous
-------------
This Security shall be deemed to be a contract under the
laws of the State of New York, and for all purposes shall be construed in
accordance with the laws of said State, without regard to any conflict of law
provisions. The parties hereto, including all guarantors or endorsers, hereby
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Security, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence without notice. The
Holder of this Security by acceptance of this Security agrees to be bound by the
provisions of this Security which are expressly binding on such Holder.
In determining whether the holders of the requisite
aggregate principal amount of Securities have concurred in any direction,
consent or waiver under this Security, Securities which are owned by the Issuer
or any other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer or any other obligor on the Securities shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; provided that
--------
12
<PAGE>
Page 26 of 67 Pages
any Securities owned by Quantum Industrial Partners LDC or any Affiliate thereof
shall be deemed outstanding for purposes of making such a determination.
The Issuer may not assign any of its rights or delegate any
of its obligations under this Security (or any part thereof) without the prior
written consent of the Holder.
The Issuer represents, warrants and covenants to Holder that
it shall use its last efforts to repay this Security in accordance with the
terms hereof.
The Section headings herein are for convenience only and
shall not affect the construction hereof.
13
<PAGE>
Page 27 of 67 Pages
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed under its corporate seal.
T/F PURIFINER, INC.
[Seal]
By __________________________________
Name:
Title
Dated: ___________ __, 1998
Attest:
______________________________
14
<PAGE>
Page 28 of 67 Pages
[FORM OF CONVERSION NOTICE]
12% Senior Subordinated Convertible Note due 2003
To: T/F Purifiner, Inc.
The undersigned owner of this Security hereby: (i)
irrevocably exercises the option to convert this Security, or the portion hereof
below designated, for shares of Common Stock, par value $.01 per share ("Common
------
Stock"), of T/F Purifiner, Inc. in accordance with the terms of this Security
- -----
and (ii) directs that such shares of Common Stock deliverable upon the
conversion, together with any check in payment for fractional shares and any
Security(ies) representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated: ___________________
Name: _______________________________________
_________________________________________________
Signature
Principal Amount to be Converted: (if less than
all)
$ ____________________________________________
Fill in for registration of shares if to be delivered, and
of Securities if to be issued, otherwise than to and in the name of the
registered holder.
_________________________________________________
Social Security or Other
Taxpayer Identification Number
_________________________________________________
(Name)
_________________________________________________
(Street Address)
_________________________________________________
(City, State and Zip Code)
15
Page 29 of 67 Pages
EXHIBIT J
NOTE EXCHANGE AGREEMENT
AGREEMENT dated as of January 26, 1998 among Quantum Industrial
Partners LDC, a Cayman Islands exempted limited liability duration company
("QIP") and T/F Purifiner, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, pursuant to a certain Securities Purchase Agreement dated
June 19, 1997 by and between QIP and the Company, QIP purchased from the
Company, among other things, a promissory note in the original principal amount
of $2,000,000 dated as of June 19, 1997, a copy of which is attached hereto as
Exhibit A (the "Original Note");
- ---------
WHEREAS, the Company desires to issue the Exchange Note (as
hereinafter defined) in payment for the Original Note and has requested that QIP
accept the exchange; and
WHEREAS, QIP is willing to exchange the Original Note for the Exchange
Note on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Encumbrances" means all voting trusts, arrangements, stockholder
agreements, proxies, liens, encumbrances, transfer restrictions, preemptive
rights, security, interests or community property rights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Note" shall have the meaning set forth in Section 2.1
hereof.
"Material Adverse Effect" means a material adverse effect on the
assets, properties, business, prospects, operations or condition, financial or
otherwise, of the Company.
<PAGE>
Page 30 of 67 Pages
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Agreement" means the Registration Rights Agreement
between the Company and QIP dated as of June 19, 1997, as amended by that
amendment dated as of the date hereof (the "Amendment"), in the form attached
hereto as Exhibit B.
"SEC Documents" means all documents required to have been filed by the
Company with the SEC under Sections 13, 14(a) and 15(d) of the Exchange Act
since its registration of its Common Stock under Section 12(g) of the Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
PURCHASE AND SALE
2.1 Exchange of the Original Note. The Company hereby agrees to issue
the Company's 12% Senior Subordinated Convertible Note in the aggregate
principal amount of $2,000,000, in the form attached hereto as Exhibit C (the
"Exchange Note"), in exchange for the Original Note, subject to the terms and
conditions herein set forth, and QIP hereby agrees to exchange the Original Note
for the Exchange Note, subject to the terms and conditions herein set forth.
2.2 Closing. The closing (the "Closing") of the issuance of the
Exchange Note in exchange for the Original Note shall take place at the offices
of Akin, Gump, Strauss, Hauer & Feld, L.LP., 590 Madison Avenue, New York, New
York 10022 on the date hereof. All transactions at the Closing shall be deemed
to take place simultaneously. At the Closing:
(a) QIP shall deliver to the Company the Original Note duly endorsed.
(b) The Company shall issue and deliver to QIP the Exchange Note duly
registered in the name of QIP.
(c) The Company shall deliver to an account designated by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., the amounts owed it pursuant to Section 6.2.
Additionally, in connection with the closing of the transactions
contemplated hereby, the Company and QIP shall enter into the Amendment and each
shall make the closing deliveries required thereby pursuant to Article VI,
Closing Deliveries.
2
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Page 31 of 67 Pages
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to QIP that:
3.1 Corporate Existence and Power; Capitalization. The Company is a
corporation duly incorporated and validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers required to
carry on its business as now being conducted. The Company has no subsidiaries.
The Company is authorized or duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities make such
qualification necessary. The capitalization of the Company as of the date hereof
is set forth on Schedule 3.1 hereto. The SEC Documents describe accurately all
outstanding stock options, warrants and other rights to purchase any equity
securities of the Company. Except as set forth on Schedule 3.1, there are no
outstanding options, warrants, rights to subscribe to, or securities or rights
convertible or exercisable into or exchangeable for any shares of capital stock
of the Company or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock other than pursuant to the Exchange
Note.
3.2 Corporate Authorization. The execution, delivery and performance
by the Company of this Agreement, the Exchange Note and the Amendment and the
consummation by the Company of the transactions contemplated hereby and thereby,
are within the Company's corporate power and have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement, the
Exchange Note and the Amendment have each been duly and validly executed by the
Company and constitute the valid and binding agreements of the Company, each
enforceable against the Company in accordance with its terms.
3.3 Governmental and Court Authorization. The execution, delivery and
performance by the Company of this Agreement, the Exchange Note and the
Amendment require no consent, approval or authorization of, or filing,
registration or qualification with, any governmental body, agency, official,
court or other authority that has not been obtained or made.
3.4 Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Exchange Note and the Amendment do not and will
not (A) contravene or conflict with the Company's certificate of incorporation
or by-laws, or (B) (i) contravene or conflict with or constitute a violation of
any provision of any federal or state law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company, (ii) require any
consent, approval or other action by any Person or constitute a default under or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of the Company or to a loss of any benefit to which the Company is
entitled under any provision of any agreement, contract, indenture, lease or
other instrument binding upon the Company or any license, franchise, permit or
other similar authorization held by the Company or (iii) result in the creation
or imposition of any Encumbrances on the Exchange Note.
3.5 SEC Documents; Disclosure Documents. Each report or proxy
statement delivered to QIP is a true and complete copy of such document as filed
by the Company with the SEC. The Company has delivered to QIP all SEC Documents
3
<PAGE>
Page 32 of 67 Pages
filed with the SEC since January 1, 1994. The Company has filed in a timely
manner all documents that the Company was required to file with the SEC under
Sections 13, 14(a) and 15(d) of the Exchange Act since its registration of its
Common Stock under Section 12(g) of the Exchange Act. As of their respective
filing dates, all SEC Documents filed by the Company with the SEC complied in
all material respects with the Exchange Act or the Securities Act, as
applicable. None of the SEC Documents as of their respective dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the financial position of the Company at the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring adjustments).
3.6 Due Authorization and Validity of the Exchange Note. The Exchange
Note has been duly authorized and when delivered against payment therefor as
contemplated hereby will be validly issued, fully paid and non-assessable and
will not be subject to any preemptive or similar rights. The Common Stock
issuable upon conversion of the Exchange Note has been reserved for issuance
and, when issued upon conversion of the Exchange Note, will be validly issued,
fully paid and non-assessable and will not be subject to any preemptive or
similar rights.
3.7 Absence of Certain Changes. Except for liquidity issues which
have been fully disclosed by the Company to QIP, in connection with QIP's
representation on the Board of Directors of the Company or otherwise, since
September 30, 1997, there has been no Material Adverse Effect.
3.8 Litigation. Except as set forth in the SEC Documents or as set
forth in Schedule 3.8, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of their respective properties before any court or
arbitrator or any governmental body, agency, official or authority which (i)
could reasonably be expected to have a Material Adverse Effect or (ii) in any
manner would enjoin, alter, call into question, affect or delay the transactions
contemplated by this Agreement.
3.9 FIRPTA. The Company is not a "United States real property holding
corporation" within the meaning of Section 896(c)(2) of the Internal Revenue
Code of 1986, as amended.
3.10 No Undisclosed Liabilities. The Company has no liabilities or
obligations not disclosed in the SEC Documents and those incurred in the
ordinary course of the Company's business since September 30, 1997.
3.11 No Brokers. The Company has taken no action which would give rise
to any claim by any Person for brokerage commissions, finders' fees or similar
payments by QIP relating to this Agreement or the transactions contemplated
thereby.
4
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Page 33 of 67 Pages
3.12 Disclosure. No representation, warranty or statement made by the
Company in this Agreement, the Registration Agreement or any agreement,
certificate, statement or document furnished by or on behalf of the Company in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, misleading.
3.13 Transactions with Affiliates. Except as set forth in the SEC
Documents or as set forth in Schedule 3.13, there are no business relationships
or related party transactions that would be required to be disclosed therein by
Item 404 of Regulation S-K of the SEC that are not so disclosed.
3.14 Intellectual Property. Except as disclosed in the SEC Documents
or Schedule 3.14 hereto:
(a) the Company owns, possesses, controls or is licensed under,
such patents (or applications therefor), trademarks and service marks (and
registrations thereof), copyrights (and registrations thereof), utility models,
inventions, know-how, trade secrets, and other intellectual property (all of
aforesaid referred to as "Necessary Intellectual Property Rights") as are
necessary for the operation of the business now conducted or operated by the
Company, including but not limited to the property listed on Schedule 3.14;
(b) to the knowledge of Company all Necessary Intellectual
Property Rights are valid and subsisting and the Company is unaware of any fact
which, individually or in the aggregate, would materially detrimentally affect
the validity, ownership or enforceability of the Necessary Intellectual Property
Rights;
(c) the Company is not aware of, or has not received notice of,
any asserted right with respect to any of the Necessary Intellectual Property
Rights which, if determined unfavorably with respect to the interests of the
Company would have a Material Adverse Effect;
(d) the Company is unaware of any patent, trademark, copyright
or other intellectual property license to which the Company is a party as
licensor or licensee, which has been revoked, terminated or canceled, or which
is likely or subject to being revoked, terminated or canceled, where the
revocation, cancellation or termination would have a Material Adverse Effect;
and
(e) the Company has not been notified or advised, has not been
the recipient of a claim, or is otherwise not aware, that any activity of the
Company infringes or violates the patent, trademark, copyright or other
intellectual property right of any third party.
5
<PAGE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QIP
QIP hereby represents and warrants, to the Company as of the date
hereof that:
4.1 Organization; Existence. QIP is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
and QIP has all necessary corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now being conducted.
4.2 Corporate Authorization. The execution, delivery and performance
by QIP of this Agreement and the Amendment and the consummation by QIP of the
transactions contemplated hereby and thereby are within QIP's corporate powers
and have been duly authorized by all necessary corporate or other action on the
part of QIP.
4.3 Governmental and Court Authorization. The execution, delivery and
performance by QIP of this Agreement and the Amendment require no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental body, agency, official, court or authority that has not been
obtained or made.
4.4 Non-Contravention. The execution, delivery and performance by QIP
of this Agreement and the Amendment do not and will not (A) contravene or
conflict with the certificate of incorporation or bylaws of it or (B) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
it.
4.5 Purchase for Investment; Legends.
(a) The Exchange Note is being acquired for its own account, and not
with a view to public distribution in violation of the Securities Act.
Notwithstanding the foregoing, QIP shall have the right at all times to sell or
otherwise dispose of all or any part of the Exchange Note or the Common Stock
issuable upon conversion of the Exchange Note pursuant to a registration, or
exemption therefrom, under the Securities Act. It is an "accredited investor" as
defined in Rule 501 under the Securities Act.
(b) Upon original issuance thereof, and until such time as the same
is no longer required under the applicable requirements of the Securities Act,
the Exchange Note (and all Common Stock issued in exchange therefor or
substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
6
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Page 35 of 67 Pages
ARTICLE V
COVENANTS
5.1 Registration. If and to the extent required by the Registration
Agreement, the Company agrees that it will register the Common Stock issuable
upon conversion of the Exchange Note for sale under federal and state securities
laws in accordance with the Registration Agreement.
5.2 Transactions with Affiliates. So long as the Exchange Note is
outstanding, without QIP's written consent, the Company shall not conduct any
business or enter into any transaction or series of similar transactions with
any Affiliate of the Company or any legal or beneficial owner of 5% or more of
any class of capital stock of the Company with an affiliate of such owner unless
the terms of such business, transaction or series of transactions are set forth
in writing and as favorable to the Company as terms that would be obtainable at
the time for a comparable transaction or series of similar transactions in arm's
length dealings with an unrelated third person. For purposes of this Section
5.2, the Buyer shall not be deemed to be an Affiliate. Notwithstanding the
foregoing, so long as the Exchange Note is outstanding, the Company shall not
make, or cause any other party to make, any loans to any shareholders of the
Company. The Company further agrees that it will not enter into any transaction
with any Affiliate or legal or beneficial owner of 5% or more of any class of
capital stock of the Company or an Affiliate or family member of such person
unless the terms of such transaction have been presented to and approved by the
Board of Directors of the Company.
5.3 Restricted Payments. So long as the Exchange Note is outstanding,
the Company will not, without the prior written consent of QIP, (i) declare or
pay any dividend or make any other payment or distribution on account of any
capital stock of the Company, (ii) purchase redeem or otherwise acquire or
retire for value any capital stock of the Company or (iii) except for
indebtedness set forth on Schedule 5.3 that the Company is already committed to
retiring, purchase, redeem, defease or otherwise acquire or retire for value any
indebtedness that is subordinate or pari passu to the Note (each a "Restricted
Payment").
ARTICLE VI
CLOSING DELIVERIES
Simultaneously with the execution and delivery of this Agreement, the
following deliveries shall be made:
6.1 Amendment to Registration Rights Agreement. QIP and the Company
shall enter into the Amendment.
6.2 Reimbursement. The Company shall have reimbursed QIP for its
out-of-pocket costs and expenses incurred in connection with the closing of the
transactions contemplated by this Agreement and the Amendment.
7
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Page 36 of 67 Pages
6.3 Officer's Certificate. The Company shall deliver a certificate
from its Secretary attesting to the authenticity of the following documents: (i)
the certificate of incorporation of the Company; (ii) the by-laws of the
Company; and (iii) the resolutions of the Company authorizing the issuance of
the Exchange Note and the exchange of the Original Note therefore and the
reservation of shares of Common Stock issuable upon conversion of the Exchange
Note.
6.4 Opinion. The Company shall cause Atlas, Pearlman, Trop & Borkson,
P.A., to deliver to QIP an opinion in the form attached hereto as Exhibit C.
---------
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing.
7.2 Indemnification. The Company shall indemnify and hold harmless
QIP (and its directors, officers, employees, Affiliates and permitted assigns)
from and against all losses, liabilities, charges, damages, deficiencies, costs
and expenses (including interest, penalties and attorney's fees and
disbursements) (collectively, "Loss"), sustained or incurred by QIP based upon
or arising out of (i) any inaccuracy or defect or breach of any representation
or warranty by the Company in this Agreement or (ii) any failure by the Company
to perform or observe any term or covenant of this Agreement or the Registration
Agreement required to be performed by it, and will reimburse QIP for any
reasonable legal or other expenses incurred by it in connection with the
investigating or defending of any Loss.
8
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Page 37 of 67 Pages
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices, requests and other communications to any
part hereunder shall be in writing (including telecopy or similar writing) and
shall be effective upon receipt and shall be given, if to QIP, to:
Quantum Industrial Partners LDC
c/o Curacao Corporation Company, N.V.
Kaya Flamboyan
Willemstad, Curacao
Netherlands, Antilles
Fax: 599-9-322-001
with a copy to:
Soros Fund Management
888 Seventh Avenue
New York, New York 10106
Attention: Michael Neus
Fax: (212) 664-0544
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Edward D. Sopher
Fax: (212) 872-1002
If the Company to:
T/F Purifiner, Inc.
3036 High Ridge Road
Suite 100
Boyton Beach, Florida 33426
Attention: Keith T.J. Hart
Fax: (561) 547-4025
with a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center - Suite 1900
200 East Los Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Jim Schneider
Fax: (954) 523-1952
9
<PAGE>
Page 38 of 67 Pages
or to such other address or Person as any of the parties may designate by
written notice hereunder.
8.2 Amendments: No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by QIP and the Company, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law;
8.3 Expenses. All reasonable costs and expenses incurred by QIP in
connection with this Agreement and the Amendment shall be paid by the Company.
8.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
8.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
8.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
8.7 Entire Agreement. This Agreement, the Exchange Note and the
Amendment constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.
8.8 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought against
either of the parties in the courts of the State of New York in New York City,
or, if it has or can acquire jurisdiction, in the United States District Court
for the Southern District of New York, and each of the parties hereby consents
to the jurisdiction of such courts (and of the appropriate appellate courts) in
any such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of New York.
10
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Page 39 of 67 Pages
8.9 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
QUANTUM INDUSTRIAL PARTNERS LDC
By: ____________________________
Name:
Title:
T/F PURIFINER, INC.
By: ____________________________
Name:
Title:
11
Page 40 of 67 Pages
EXHIBIT K
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED OR DISPOSED EXCEPT IN COMPLIANCE WITH SUCH ACT
AND THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
US $500,000 New York, New York
January 26, 1998
T/F PURIFINER, INC.
12% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2003
T/F Purifiner, Inc., a Delaware corporation (the "Issuer"),
------
for value received hereby promises to pay to Quantum Industrial Partners LDC or
registered assigns (the "Holder") the principal amount of FIVE HUNDRED THOUSAND
DOLLARS ($500,000) plus any accrued but unpaid interest at such place or such
bank account in the United States of America as the Holder may from time to time
direct on January 1, 2003 in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
This Security is issued pursuant to a Note Purchase
Agreement dated as of January 26, 1998 by and between the Issuer and the Holder
(the "Purchase Agreement"). This Security is transferable and assignable at any
------------------
time, in whole or in part, to one or more purchasers or persons. The Issuer
agrees to issue from time to time replacement Securities in the form hereof to
facilitate such transfers and assignments. In addition, after delivery of an
indemnity in form and substance satisfactory to the Issuer, the Issuer also
agrees to issue replacement Securities for the Security which have been lost,
stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register
(the "Register") in which shall be entered the names and addresses of the
--------
registered holder(s) of the Security and particulars of all transfers of the
Security. The ownership of the Security shall be proven by the Register. For the
purpose of paying interest and principal on the Security, the Issuer shall be
entitled to rely on the name(s) and address(es) in the Register and
notwithstanding anything to the contrary contained in this Security, no Event of
Default (as defined below) shall occur under Section 6 if payment of principal
is made in accordance with the names and addresses and particulars contained in
the Register.
No provision of this Security shall alter or impair the
obligations of the Issuer, which are absolute and unconditional, to pay the
principal of and interest on this Security at the place, times, rate, and in the
currency, herein prescribed.
<PAGE>
Page 41 of 67 Pages
1. Principal and Interest
----------------------
The principal of this Security shall bear interest at the
rate of 12% per annum (the "Interest Rate") which shall accrue from the most
--------------
recent Interest Payment Date to which interest has been paid on this Security,
or if no interest has been paid on this Security from the date hereof until
payment in full of the principal amount has been made and be payable in cash
quarterly on April 1, July 1, October 1 and January 1 of each year (an "Interest
--------
Payment Date"), commencing on April 1, 1998, to the Holder hereof until the
- -------------
principal amount is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment will be paid
to the Holder of the Security at the close of business on the Record Date for
the interest payable on such Interest Payment Date. The "Record Date" for any
-----------
interest payment is the close of business on March 15, June 15, September 15 or
December 15, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such Interest is payable; provided,
--------
however, that at the option of the Company, on any Interest Payment Date,
- -------
interest may, in lieu of being paid in cash, accrue and be added to the
principal balance of this Security. "Business Day" means any day except a
-------------
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized by law to close.
Any amounts that have become due and payable hereunder and
remain unpaid by the Issuer shall accrue interest thereafter until payment in
full of such amount at the rate of fifteen percent (15%) (the "Default Rate")
-------------
per annum and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate,
will be computed on the basis of a fraction, the denominator of which is 360 and
the numerator of which is the actual number of days elapsed from the date such
interest becomes due and payable.
Each of the Interest Rate and the Default Rate shall be
effective both before and after any judgment may be rendered in a court of
competent jurisdiction, provided, however, that if either the Interest Rate or
-------- -------
Default Rate is deemed to be in excess of the amount permitted to be charged by
the Issuer under applicable laws, the Holder shall be entitled to collect an
Interest Rate or Default Rate, as the case may be, only at the highest rate
permitted by law, and any interest collected by the Holder in excess of such
lawful amount shall be deemed a payment in reduction of the Principal Amount
then outstanding under this Security and shall be so applied.
2. Subordination
-------------
The payment obligations evidenced by this Security shall be
subordinate to any indebtedness of the Issuer for cash advanced by any bank or
other financial institution ("Bank Debt") but shall rank senior to all other
----------
indebtedness of the Issuer. The Issuer shall not issue, directly or indirectly,
any indebtedness which is senior to the indebtedness evidenced by this Security
unless such indebtedness is Bank Debt.
2
<PAGE>
Page 42 of 67 Pages
3. Redemption
----------
A. Optional Redemption. This Security will be redeemable at the
option of the Issuer at any time, in whole or in part, upon not less than thirty
(30) nor more than sixty (60) days' notice, at 100% principal amount thereof,
plus accrued and unpaid interest.
At least thirty (30) days but not more than sixty (60) days
before a redemption date, the Issuer shall send a notice of redemption,
first-class mail, postage prepaid, or facsimile with answer back and courier to
follow, to the Holder(s) of this Security to be redeemed at the address(es) of
the Holder as they appear in the Register.
If this Security is redeemed subsequent to a Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on such Interest
Payment Date to the Holder of the Security on such Record Date.
B. Mandatory Redemption. The Security will be redeemable at the
option of the Holder(s) in whole or in part at any time on or after the earlier
of (i) January 1, 2001 and (ii) the date on which the Issuer raises cash
proceeds aggregating at least $10 million from any transaction or series of
transactions involving the sale of debt, equity or assets (a "Put Date") upon
--------
not less than five (5) business days written notice to the Issuer at 100%
principal amount thereof, plus accrued and unpaid interest. The Issuer covenants
and agrees that it will immediately (but in any event within one (1) Business
Day) advise the Holder of the occurrence of any Put Date described in clause
(ii) above.
4. Affirmative Covenants of Issuer
-------------------------------
A. Visits and Inspections. The Issuer will permit the Holder,
upon reasonable notice, to (i) visit and inspect the properties of the Issuer
during business hours, (ii) inspect and make extracts from and copies of its
books and records, and (iii) discuss with and obtain information from its
principal officers, its business, assets, liabilities, financial position,
results of operations and business prospects. The Issuer will also permit the
Holder to discuss with its respective auditors its businesses, assets,
liabilities, financial positions, results of operations and business prospects.
B. Reporting. The Issuer will make available or cause to be
made available to each Holder as soon as practicable (except to the extent such
Holder specifically requests otherwise):
(i) all annual, quarterly and periodic reports prescribed
by Sections 13, 14 and 15(d) of the Exchange Act
(whether or not the Issuer is subject to such
requirements);
(ii) all reports furnished to the Issuer's board members and
securityholders;
3
<PAGE>
Page 43 of 67 Pages
(iii)any reports (including management reports) submitted
to the Issuer by the Issuer's independent public
accountants
(iv) a copy of the annual budget for the Issuer (in no event
later than 60 days after the commencement of each
fiscal year) and any material amendment thereto;
(v) notice of the commencement of and progress of any
material proceedings or investigations by or before any
governmental body, court or arbitrator against, or to
the extent known to the Issuer, in any other way
relating adversely to the Issuer;
(vi) notice of any material adverse change with respect to
the business, financial position, results of operations
or prospects of the Issuer;
(vii)notice and details of any default or the occurrence or
non-occurrence of any event which constitutes, or which
with the passage of time or giving of notice or both
would constitute a default by the Issuer under any
material agreement other than this Agreement to which
the Issuer is party or by which any of its properties
may be bound;
(viii) such other information or reports relating to the
Issuer as the Holder may reasonably request.
C. Reservation and Issuance of Common Stock. The Issuer
covenants that it will at all times reserve and keep available out of its
authorized shares of Common Stock par value $.001 per share (the "Common
------
Stock"), free from preemptive rights, solely for the purpose of issue upon
- -----
conversion of the Securities as herein provided, such number of shares of the as
shall then be issuable upon the conversion of all outstanding shares of the
Securities into Common Stock. The Issuer covenants that all shares of Common
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
D. Compliance With Governmental Requirements. The Issuer
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or State law, or any
national securities exchange, before such shares may be issued upon conversion,
the Issuer will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
E. Notification of Certain Matters. The Issuer shall notify the
Holders promptly (and in any event no later than 10 days prior to any applicable
record date) of any proposal for the authorization or issuance of rights or
other distributions to securityholders, any subdivision, combination or
reclassification affecting the capital stock, any merger or consolidation
affecting the Issuer, the voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any sale or transfer of any significant portion of
the Issuer's assets.
4
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Page 44 of 67 Pages
5. Negative Covenants
------------------
A. Restricted Payments. Without the written consent of a
majority of holders of an aggregate principal amount of the Securities
outstanding (the "Majority Holders"), the Issuer will not make to any Person (i)
----------------
any dividend or other payment or distribution on any capital stock of the
Issuer; (ii) any payment on account of the purchase, redemption, retirement or
other acquisition of any shares of the Issuer's capital stock any option,
warrant or other right to acquire shares of the Issuer's capital stock, or (iii)
any defeasance, redemption, repurchase or other acquisition or retirement for
value prior to scheduled maturity of any indebtedness ranked pari passu or
subordinate in right of payment to the Securities and having a maturity date
subsequent to the maturity of the Securities. "Person" means an individual,
------
corporation, limited liability company, partnership, association, trust or other
entity or organizations, including a government or political subdivision or an
agency or instrumentality thereof.
B. Transactions with Affiliates. Without the written consent of
the Majority Holders, the Issuer shall not conduct any business or enter into
any transactions or series of similar transactions with an Affiliate of the
Issuer or any legal or beneficial owner of 5% or more of any class of capital
stock of the Issuer with an Affiliate of such owner unless the terms of such
business transaction or series of transactions are set forth in writing and as
favorable to the Issuer as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's length
dealings with an unrelated third person. For purposes of this paragraph B, the
Quantum Industrial Partners LDC shall not be deemed to be an Affiliate. The
Issuer shall not make, or cause any other party to make, any loans to
shareholders of the Issuer. The Issuer further agrees that it will not enter
into any transaction with any Affiliate or legal or beneficial owner of 5% or
more of any class of capital stock of the Issuer or and Affiliate or family
member of such Person unless the terms of such transaction have been presented
to and approved by the Board of Directors of the Issuer. "Affiliate" of any
---------
Person means any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such Person. For the purposes
of this definition, "control" when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
----------- ----------
C. Amendment to Certain Documents. The Issuer shall not enter
into any amendment of, or agree to or accept or consent to any waiver of any of
the material provisions of its certificate of incorporation (including any
certificate of designation) or By-laws.
5
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Page 45 of 67 Pages
6. Default
-------
The occurrence of any of the following events or conditions shall
constitute an event of default (each an "Event of Default") with respect to the
----------------
Issuer of this Security:
(a) Any amounts due under this Security are not paid on the day
after the due date therefore.
(b) The Issuer or any subsidiary of the Issuer (i) shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Issuer shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against Issuer any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety
(90) days.
(c) The Issuer shall fail to perform any agreement or covenant
on its part contained herein or in the Purchase Agreement.
(d) Any default by the Issuer or any subsidiary with respect to
any indebtedness (whether existing or hereinafter created) which would
permit the holder thereof to declare such indebtedness to be due and
payable prior to its stated maturity.
Upon the occurrence and during the continuance of an Event of
Default, the Holder will have the option, upon notice to the Issuer, of
declaring the principal amount hereunder together with unpaid accrued interest
thereon to be immediately due and payable.
The Issuer agrees to pay on demand all of the Holder's costs and
expenses, including without limitation reasonable attorneys' fees, in connection
with the collection of any sums due the Holder, the enforcement or protection of
its rights hereunder, any amendment to this Security or any waiver hereunder or
under the Purchase Agreement.
No failure on the part of the Holder or other holders hereof to
exercise any right or remedy hereunder, whether before or after the happening of
a default shall constitute a waiver thereof, and no waiver of any past default
shall constitute waiver of any future default or of any acceptance of a past due
installment, or indulgence granted from time to time shall be construed to be a
waiver of the right to insist upon prompt payment thereafter or to impose late
charges retroactively or prospectively, or shall be deemed to be a novation of
this Security or as a reinstatement of the debt evidenced hereby or as a waiver
of such right or acceleration or any other right, or be construed so as to
preclude the exercise of any right which the Holder may have, whether by the
laws of the State of New York, by agreement or otherwise; and the Issuer hereby
expressly waives the benefit of any statute or rule of law or equity which would
produce a result contrary to or in conflict with the foregoing.
7
<PAGE>
Page 46 of 67 Pages
7. Conversion
----------
Subject to and upon compliance with the provisions of this
Section, the principal amount of this Security or any portion thereof may, at
any time and at or before the close of business on January 1, 2003, or
thereafter if any Event of Default shall occur and be continuing, be converted
into duly authorized, validly issued, fully-paid and nonassessable shares of
Common Stock at $2.75 per share (the "Conversion Price"), or, in case an
-----------------
adjustment in the Conversion Price and the securities or other property issuable
upon conversion has taken place pursuant to Section 8 hereof, then at the
applicable Conversion Price and in such securities or other property as so
adjusted, upon surrender of the Security or Securities, the principal amount of
which is so to be converted, to the Issuer at any time during usual business
hours at the Issuer's offices, accompanied by a written notice of election to
convert as provided in the form attached hereto and, if so required by the
Issuer, by a written instrument or instruments of transfer in form satisfactory
to the Issuer duly executed by the registered holder or his attorney duly
authorized in writing.
No payment or adjustment will be made for dividends on any Common
Stock except as provided in Section 8 hereof. On conversion of a Security, that
portion of any interest accrued and unpaid interest attributable to the period
from the date of the Security to the Conversion Date with respect to the
converted Security shall not be canceled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through delivery of the
Common Stock, in exchange for the Security being converted pursuant to the
provisions hereof. If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total Principal Amount of the Securities converted.
As promptly as practicable after the surrender, as herein
provided, of any Security or securities for conversion, the Issuer shall deliver
or cause to be delivered at its said office or agency to or upon the written
order of the holder of the Security or securities so surrendered a certificate
or certificates representing the number of duly authorized, validly issued,
fully-paid and nonassessable shares of Common Stock, into which such Security or
Securities may be converted in accordance with the provisions of Section 7.
Prior to delivery of such certificate or certificates, the Issuer shall require
a written notice at its said office or agency from the Holder of the Security or
securities so surrendered stating that the holder irrevocably elects to convert
such Security or Securities, or, if less than the entire principal amount
thereof is to be converted, stating the portion thereof to be converted. Such
notice shall also state the name or names (with address and social security or
other taxpayer identification number) in which said certificate or certificates
are to be issued. Such conversion shall be deemed to have been made at the time
that such Security or Securities shall have been surrendered for conversion and
such notice shall have been received by the Issuer, the rights of the holder of
such Security or Securities as a Securityholder shall cease at such time, the
person or persons entitled to receive the shares of Common Stock, upon
conversion of such Security or Securities shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time. In the case of any Security which is converted in part only, upon such
conversion, the Issuer shall execute and deliver to the holder thereof, as
requested by such holder, a new Security or securities of authorized
denominations in aggregate principal amount equal to the unconverted portion of
such Security.
8. Adjustment of Conversion Price
------------------------------
The Conversion Price in effect at any time shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
7
<PAGE>
Page 47 of 67 Pages
(i) In case the Issuer shall at any time after the date hereof
(1) declare or pay a dividend in shares of Common Stock or make a
distribution of Common Stock, (2) subdivide its outstanding shares of
Common Stock, (3) combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock or (4) issue any shares of
its capital stock in a reclassification of Common Stock (including any
such reclassification in connection with a consolidation or merger in
which the Issuer is the continuing entity), the number of shares of
Common Stock purchasable upon conversion immediately prior thereto
shall be adjusted so that the Holder of the Securities shall be
entitled to receive the number shares of Common Stock or other
securities of the Issuer which he would have owned or have been
entitled to receive after the happening of any of the events described
above, had conversion occurred immediately prior to the happening of
such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (i) shall become effective immediately
after the effective date of such event retroactive to the record date,
if any, for such event.
(ii) In case the Issuer shall at any time after the date hereof
issue rights, options or warrants to all holders of its outstanding
Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share which is lower at the record date
mentioned below than the higher (A) of the market price per share of
the Common Stock (as defined in Section (v) below) and (B) the
Conversion Price, then the number of shares of Common Stock thereafter
purchasable upon conversion shall be determined by multiplying the
number of shares of Common Stock theretofore purchasable upon
conversion by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on the record date for
determining stockholders entitled to receive such rights, options or
warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the denominator shall be
the number of shares of Common Stock outstanding on the record date
for determining stockholders entitled to receive such rights, options
or warrants plus the number of shares which the aggregate offering
price of the total number of shares of Common Stock so offered would
purchase at the current market price per share of Common Stock at such
record date. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective as of
immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
(iii)In case the Issuer shall at any time after the date hereof
distribute to all holders of its shares of Common Stock evidences of
its indebtedness or assets (including securities and cash dividends
not paid out of funds legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Issuer or
not made in the ordinary course of business), but excluding dividends
or distributions referred to in Section (i) above or rights or options
or warrants referred to in Section (ii) above, then in each case the
number of shares of Common Stock thereafter purchasable upon
conversion shall be determined by multiplying the number of shares of
Common Stock theretofore purchasable upon conversion by a fraction, of
which the numerator shall be then current market price per share of
Common Stock (as defined in Section (v) below) on the date of such
distribution, and of which the denominator shall be then current
market price per share of Common Stock, less then fair value (as
reasonably determined in good faith by the Board of Directors of the
8
<PAGE>
Page 48 of 67 Pages
Issuer, whose reasonable determination shall be conclusive) of the
portion of the assets or evidences of indebtedness so distributed or
of such subscription rights or securities or warrants applicable to
one share of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination o
shareholders entitled to receive such distribution.
(iv) In case the Issuer shall any time after the date hereof sell
and issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding (A)
shares, rights, options, warrants or convertible or exchangeable
securities issued in any of the transactions described in Sections (i)
through (iii) above and (B) 42,650 options contemplated to be issued
to G & S Technologies, Inc. as described in Schedule 3.8 the Purchase
Agreement), a price per share of Common Stock (as determined in
accordance with Section (v) below) that is lower than the higher of
(A) the current market value per share of Common Stock (as determined
in accordance with Section (v) below) on the date of such sale or
issuance or on the date of the agreement for such sale or issuance
(whichever is less) and (B) the Conversion Price, then in each case
the number of shares of Common Stock thereafter purchasable upon
conversion shall be increased by multiplying the number of shares of
Common Stock theretofore purchasable upon the conversion by a
fraction, the numerator of which shall be (I) the total number of
shares of Common Stock issuable in connection with such sale and
issuance, and the denominator of which shall be (II) the number of
shares of Common Stock that the aggregate consideration received
(determined as provided below) for such sale or issuance would
purchase at the higher of the prices referred to in (A) and (B) above.
Such adjustment shall be made successively whenever such an issuance
is made. For the purposes of such adjustments, the shares of Common
Stock that the holder of such rights, options, warrants, or
convertible or exchangeable securities shall be entitled to subscribe
for or purchase shall be deemed to be issued and outstanding as of the
date of such sale and issuance and the consideration received by the
Issuer therefor shall be deemed to be the consideration received by
the Issuer, plus the consideration or premiums stated in such rights,
options, warrants or convertible or exchangeable securities to be paid
for the shares of Common Stock covered thereby. In case the issuer
shall sell and issue shares of Common Stock or rights, options,
warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase Common Stock, for a consideration
consisting, in whole or in part, of property other than cash or its
equivalent, then in determining the "price per share of Common Stock"
and the "consideration received by the Issuer" for purposes of the
first sentence of this Section (iv), the Board of Directors of the
Issuer shall determine, on a reasonable basis and in good faith, the
fair value of such property. In case the Issuer shall sell and issue
rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common
Stock together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per share of Common
Stock" and the consideration received by the Issuer for purposes of
the first sentence of this Section (iv), the Board of Directors shall
determine, on a reasonable basis and in good faith, the fair value of
the rights, options, warrants or convertible or exchangeable
securities then being sold as part of such unit.
9
<PAGE>
Page 49 of 67 Pages
(v) For the purpose of any computation under sections (ii)
through (iv) above, the current market price per share of Common Stock
at any date shall be the average of the current market value of Common
Stock for the 20 consecutive trading days commencing 30 trading days
prior to such date; provided, that, if the Common Stock is not then
-------- ----
publicly traded, the current market price per share shall be the
average of the market value of the Common Stock of the last 20
consecutive trading days prior to the last day of trading; provided,
however that such date is not earlier than 180 days prior to the date
as of which such price is required to be determined, and otherwise
such price shall be determined by an opinion of a nationally
recognized independent investment bank selected by the mutual
agreement of the Issuer and the Holder. In the case of rights,
options, warrants or convertible or exchangeable securities, the price
per share of Common Stock shall be determined by dividing (x) the
total amount received or receivable by the Issuer in consideration of
the sale and issuance of such rights, options, warrants or convertible
or exchangeable securities, plus the total consideration payable to
the Issuer upon exercise or conversion or exchange thereof, by (y) the
total number of shares of Common Stock covered by such rights,
options, warrants or convertible or exchangeable securities.
(vi) No adjustment in the number of shares of Common Stock
convertible hereunder shall be required unless such adjustment would
result in an increase or decrease of at least one percent (1%) of the
number of shares of Common Stock for which shares of the Securities
are convertible; provided, that any adjustments which by reason of
-------- ----
this Section (vi) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. Whenever an
adjustment shall be made pursuant to (i) through (v) above, the
Conversion Price shall be adjusted accordingly. All calculations shall
be made to the nearest one-thousandth of a share.
(vii)No adjustment in the number of shares of Common Stock
received upon conversion need be made under Sections (ii) through (iv)
above if the Issuer issues or distributes to the Holder of the
Securities shares of Common Stock, the shares, rights, options,
warrants, or evidences of indebtedness or assets referred to in those
Sections which such Holder would have been entitled to receive had
this conversion not occurred prior to the happening of such event or
the record date with respect thereto.
(viii) For the purpose of this Section 8, the term "shares of
Common Stock" shall mean (i) Common Stock of the Issuer, or (ii) any
other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment
made pursuant to clause (ii) above, the Holders shall become entitled
to receive any securities of the Issuer other than shares of Common
Stock, thereafter the number of such other shares so receivable upon
conversion shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock contained in
Section (i) through (iv) above, and the other provisions of this
Section 8 shall apply on like terms to any such other securities.
10
<PAGE>
Page 50 of 67 Pages
(ix) Except as provided in Sections (i) through (iii) above, no
adjustment in respect of any dividends shall be made during the term
of the Securities or upon the conversion of the Securities.
(x) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges with respect to which an adjustment
shall have been made pursuant to Section (ii) or (iv) above, if any
rights, options, warrants or conversion or exchange privileges thereof
have not been exercised, the number of shares of Common Stock
purchasable upon conversion will, upon such expiration, be readjusted
and will thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such rights, options or warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if
any, were issued or sold for the consideration actually received by
the Issuer upon such exercise, conversion or exchange plus the
aggregate consideration, if any actually received by the Issuer for
the issuance, sale or grant of all such rights, options or warrants,
whether or not exercised.
Whenever the number of shares purchasable upon conversion shall be
adjusted as required by the provisions of this Section 8, the Issuer shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officers'
certificate showing the adjusted number of shares determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment and the
manner of computing such adjustment. Each such officers' certificate shall be
signed by the chairman, president or chief financial officer of the Issuer and
by the secretary or any assistant secretary of the Issuer. Each such officers'
certificate shall be made available at all reasonable times for inspection by
any holder of shares of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first-class mail, of such certificate to
the each of the Holders.
9. Reclassification, Reorganization, Consolidation or Merger
---------------------------------------------------------
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Issuer (other than a
subdivision or combination of the outstanding Common Stock and other than a
change in the par value of Common Stock) or in case of any consolidation or
merger of the Issuer with or into another corporation (other than a merger with
a subsidiary in which merger the Issuer is the continuing corporation and that
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon conversion) or
in case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Issuer as an entirety or substantially as an
entirety, the Issuer shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter, by converting such Holder's shares of the securities, to receive in
lieu of the receipt of shares of Common Stock the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, capitalization, reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that would have been received upon conversion immediately prior to
such reclassification, capitalization, reorganization, change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments in respect of such shares of stock and other securities and property
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Security. The foregoing provisions of this paragraph shall
11
<PAGE>
Page 51 of 67 Pages
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capitalization reorganization or reclassification, consolidation, merger, sale
or conveyance, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for, or of, a security
of the Issuer other than Common Stock, any such issue shall be treated as an
issue of Common Stock covered by the provisions of Paragraph (iv) of Section 8.
10. Miscellaneous
This Security shall be deemed to be a contract under the laws of
the State of New York, and for all purposes shall be construed in accordance
with the laws of said State, without regard to any conflict of law provisions.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Security, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence without notice. The
Holder of this Security by acceptance of this Security agrees to be bound by the
provisions of this Security which are expressly binding on such Holder.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Security, Securities which are owned by the Issuer or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Issuer or any other obligor on the Securities shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; provided that
--------
any Securities owned by Quantum Industrial Partners LDC or any Affiliate thereof
shall be deemed outstanding for purposes of making such a determination.
The Issuer may not assign any of its rights or delegate any of
its obligations under this Security (or any part thereof) without the prior
written consent of the Holder.
The Issuer represents, warrants and covenants to Holder that it
shall use its last efforts to repay this Security in accordance with the terms
hereof.
The Section headings herein are for convenience only and shall
not affect the construction hereof.
12
<PAGE>
Page 52 of 67 Pages
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under its corporate seal.
T/F PURIFINER, INC.
[Seal]
By __________________________________
Name:
Title:
Dated: ___________ __, 1998
Attest:
_______________________________
13
<PAGE>
Page 53 of 67 Pages
[FORM OF CONVERSION NOTICE]
12% Senior Subordinated Convertible Note due 2003
To: T/F Purifiner, Inc.
The undersigned owner of this Security hereby: (i) irrevocably
exercises the option to convert this Security, or the portion hereof below
designated, for shares of Common Stock, par value $.01 per share ("Common
------
Stock"), of T/F Purifiner, Inc. in accordance with the terms of this Security
- -----
and (ii) directs that such shares of Common Stock deliverable upon the
conversion, together with any check in payment for fractional shares and any
Security(ies) representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated: ________________
Name: _______________________________________
_________________________________________________
Signature
Principal Amount to be Converted: (if less than
all)
$________________________________________________
Fill in for registration of shares if to be delivered, and of
Securities if to be issued, otherwise than to and in the name of the registered
holder.
_________________________________________________
Social Security or Other
Taxpayer Identification Number
_________________________________________________
(Name)
_________________________________________________
(Street Address)
_________________________________________________
(City, State and Zip Code)
14
Page 54 of 67 Pages
EXHIBIT L
NOTE PURCHASE AGREEMENT
AGREEMENT dated as of January 26, 1998 among Quantum Industrial
Partners LDC, a Cayman Islands exempted limited liability duration company (the
"Buyer") and T/F Purifiner, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, Buyer desires to purchase the Note (as hereinafter defined)
on the terms and subject to the conditions set forth herein; and
WHEREAS, the Company desires to sell the Note to the Buyer on the
terms and subject to the conditions herein set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Encumbrances" means all voting trusts, arrangements, stockholder
agreements, proxies, liens, encumbrances, transfer restrictions, preemptive
rights, security, interests or community property rights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Material Adverse Effect" means a material adverse effect on the
assets, properties, business, prospects, operations or condition, financial or
otherwise, of the Company.
"Note" shall have the meaning set forth in Section 2.1 hereof.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Agreement" means the Registration Rights Agreement
between the Company and the Buyer dated as of June 19, 1997, as amendment by
<PAGE>
Page 55 of 67 Pages
that certain amendment dated as of the date hereof (the "Amendment"), in the
form attached hereto as Exhibit A.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all documents required to have been filed by the
Company with the SEC under Sections 13, 14(a) and 15(d) of the Exchange Act
since its registration of its Common Stock under Section 12(g) of the Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of the Note. The Company hereby agrees to sell
to the Buyer and, subject to the terms and conditions herein set forth, the
Buyer agrees to purchase from the Company, the Company's 12% Senior Subordinated
Convertible Note in the aggregate principal amount of $500,000, in the form
attached hereto as Exhibit B (the "Note").
---------
2.2 Closing. The closing (the "Closing") of the purchase and sale of
the Note shall take place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.LP., 590 Madison Avenue, New York, New York 10022 on the date hereof. All
transactions at the Closing shall be deemed to take place simultaneously. At the
Closing:
(a) The Buyer shall deliver to the Company $500,000 in cash or
other immediately available funds to an account designated by the Company.
(b) The Company shall deliver to the Buyer, the Note duly
registered in the name of the Buyer.
(c) The Company shall deliver to an account designated by Akin,
Gump, Strauss, Hauer & Feld, L.L.P., the amounts owed it pursuant to Section
6.2.
Additionally, in connection with the closing of the transactions contemplated
hereby, the Company and the Buyer shall enter into the Amendment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and watrrants to the Buyer that:
3.1 Corporate Existence and Power; Capitalization. The Company is a
corporation duly incorporated and validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers required to
carry on its business as now being conducted. The Company has no subsidiaries.
The Company is authorized or duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities make such
2
<PAGE>
Page 56 of 67 Pages
qualification necessary. The capitalization of the Company as of the date hereof
is set forth on Schedule 3.1 hereto. The SEC Documents describe accurately all
outstanding stock options, warrants and other rights to purchase any equity
securities of the Company. Except as set forth on Schedule 3.1, there are no
outstanding options, warrants, rights to subscribe to, or securities or rights
convertible or exercisable into or exchangeable for any shares of capital stock
of the Company or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock other than pursuant to the Note.
3.2 Corporate Authorization. The execution, delivery and performance
by the Company of this Agreement, the Note and the Amendment and the
consummation by the Company of the transactions contemplated hereby and thereby,
are within the Company's corporate power and have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement, the Note
and the Amendment have each been duly and validly executed by the Company and
constitute the valid and binding agreements of the Company, each enforceable
against the Company in accordance with its terms.
3.3 Governmental and Court Authorization. The execution, delivery and
performance by the Company of this Agreement, the Note and the Amendment require
no consent, approval or authorization of, or filing, registration or
qualification with, any governmental body, agency, official, court or other
authority that has not been obtained or made.
3.4 Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Note and the Amendment do not and will not (A)
contravene or conflict with the Company's certificate of incorporation or
by-laws, or (B) (i) contravene or conflict with or constitute a violation of any
provision of any federal or state law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company, (ii) require any consent,
approval or other action by any Person or constitute a default under or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of the Company or to a loss of any benefit to which the Company is
entitled under any provision of any agreement, contract, indenture, lease or
other instrument binding upon the Company or any license, franchise, permit or
other similar authorization held by the Company or (iii) result in the creation
or imposition of any Encumbrances on the Note.
3.5 SEC Documents; Disclosure Documents. Each report or proxy
statement delivered to the Buyer is a true and complete copy of such document as
filed by the Company with the SEC. The Company has delivered to the Buyer all
SEC Documents filed with the SEC since January 1, 1994. The Company has filed in
a timely manner all documents that the Company was required to file with the SEC
under Sections 13, 14(a) and 15(d) of the Exchange Act since its registration of
its Common Stock under Section 12(g) of the Exchange Act. As of their respective
filing dates, all SEC Documents filed by the Company with the SEC complied in
all material respects with the Exchange Act or the Securities Act, as
applicable. None of the SEC Documents as of their respective dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") complied as to form in all material respects with applicable
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accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the financial position of the Company at the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring adjustments).
3.6 Due Authorization and Validity of the Note. The Note has been
duly authorized and when delivered against payment therefor as contemplated
hereby will be validly issued, fully paid and non-assessable and will not be
subject to any preemptive or similar rights. The Common Stock issuable upon
conversion of the Note has been reserved for issuance and, when issued upon
conversion of the Note, will be validly issued, fully paid and non-assessable
and will not be subject to any preemptive or similar rights.
3.7 Absence of Certain Changes. Except for liquidity issues which
have been fully disclosed by the Company to QIP, in connection with QIP's
representation on the Board of Directors or otherwise, since September 30, 1997,
there has been no Material Adverse Effect.
3.8 Litigation. Except as set forth in the SEC Documents or as
set-forth in Schedule 3.8 hereto, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of their respective properties before
any court or arbitrator or any governmental body, agency, official or authority
which (i) could reasonably be expected to have a Material Adverse Effect or (ii)
in any manner would enjoin, alter, call into question, affect or delay the
transactions contemplated by this Agreement.
3.9 FIRPTA. The Company is not a "United States real property holding
corporation" within the meaning of Section 896(c)(2) of the Internal Revenue
Code of 1986, as amended.
3.10 No Undisclosed Liabilities. The Company has no liabilities or
obligations not disclosed in the SEC Documents and those incurred in the
ordinary course of the Company's business since September 30, 1997.
3.11 No Brokers. The Company has taken no action which would give rise
to any claim by any Person for brokerage commissions, finders' fees or similar
payments by the Buyer relating to this Agreement or the transactions
contemplated thereby.
3.12 Disclosure. No representation, warranty or statement made by the
Company in this Agreement, the Registration Agreement or any agreement,
certificate, statement or document furnished by or on behalf of the Company in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, misleading.
3.13 Transactions with Affiliates. Except as set forth in the SEC
Documents or as set forth in Schedule 3.13, there are no business relationships
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or related party transactions that would be required to be disclosed therein by
Item 404 of Regulation S-K of the SEC that are not so disclosed.
3.14 Intellectual Property. Except as disclosed in the SEC Documents
or Schedule 3.14 hereto:
(a) the Company owns, possesses, controls or is licensed under, such
patents (or applications therefor), trademarks and service marks (and
registrations thereof), copyrights (and registrations thereof), utility models,
inventions, know-how, trade secrets, and other intellectual property (all of
aforesaid referred to as "Necessary Intellectual Property Rights") as are
necessary for the operation of the business now conducted or operated by the
Company, including but not limited to the property listed on Schedule 3.14;
(b) to the knowledge of Company all Necessary Intellectual Property
Rights are valid and subsisting and the Company is unaware of any fact which,
individually or in the aggregate, would materially detrimentally affect the
validity, ownership or enforceability of the Necessary Intellectual Property
Rights;
(c) the Company is not aware of, or has not received notice of, any
asserted right with respect to any of the Necessary Intellectual Property Rights
which, if determined unfavorably with respect to the interests of the Company
would have a Material Adverse Effect;
(d) the Company is unaware of any patent, trademark, copyright or
other intellectual property license to which the Company is a party as licensor
or licensee, which has been revoked, terminated or canceled, or which is likely
or subject to being revoked, terminated or canceled, where the revocation,
cancellation or termination would have a Material Adverse Effect; and
(e) the Company has not been notified or advised, has not been the
recipient of a claim, or is otherwise not aware, that any activity of the
Company infringes or violates the patent, trademark, copyright or other
intellectual property right of any third party.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants, to the Company as of the
date hereof that:
4.1 Organization; Existence. The Buyer is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and the Buyer has all necessary corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now being conducted.
4.2 Corporate Authorization. The execution, delivery and performance
by the Buyer of this Agreement and the Amendment and the consummation by the
Buyer of the transactions contemplated hereby and thereby are within the Buyer's
corporate powers and have been duly authorized by all necessary corporate or
other action on the part of the Buyer.
4.3 Governmental and Court Authorization. The execution, delivery and
performance by the Buyer of this Agreement and the Amendment require no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental body, agency, official, court or authority that has not been
obtained or made.
4.4 Non-Contravention. The execution, delivery and performance by the
Buyer of this Agreement and the Amendment do not and will not (A) contravene or
conflict with the certificate of incorporation or bylaws of it or (B) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
it.
4.5 Purchase for Investment; Legends.
(a) The Note is being acquired for its own account, and not with
a view to public distribution in violation of the Securities Act.
Notwithstanding the foregoing, the Buyer shall have the right at all times to
sell or otherwise dispose of all or any part of the Note or the Common Stock
issuable upon conversion of the Note pursuant to a registration, or exemption
therefrom, under the Securities Act. It is an "accredited investor" as defined
in Rule 501 under the Securities Act.
(b) Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Note (and all Common Stock issued in exchange therefor or substitution
thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
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ARTICLE V
COVENANTS
5.1 Registration. If and to the extent required by the Registration
Agreement, the Company agrees that it will register the Common Stock issuable
upon conversion of the Note for sale under federal and state securities laws in
accordance with the Registration Agreement.
5.2 Transactions with Affiliates. So long as the Note is outstanding,
without the Buyer's written consent, the Company shall not conduct any business
or enter into any transaction or series of similar transactions with any
Affiliate of the Company or any legal or beneficial owner of 5% or more of any
class of capital stock of the Company with an Affiliate of such owner unless the
terms of such business, transaction or series of transactions are set forth in
writing and as favorable to the Company as terms that would be obtainable at the
time for a comparable transaction or series of similar transactions in arm's
length dealings with an unrelated third person. For purposes of this Section
5.2, the Buyer shall be not deemed to be an Affiliate. Notwithstanding the
foregoing, so long as the Note is outstanding, the Company shall not make, or
cause any other party to make, any loans to any shareholders of the Company. The
Company further agrees that it will not enter into any transaction with any
Affiliate or any legal or beneficial owner of 5% or more of any class of capital
stock of the Company or an Affiliate or family member of such person unless the
terms of such transaction have been presented to and approved by the Board of
Directors of the Company.
5.3 Restricted Payments. So long as the Note is outstanding, the
Company will not, without the prior written consent of the Buyer, (i) declare or
pay any dividend or make any other payment or distribution on account of any
capital stock of the Company, (ii) purchase redeem or otherwise acquire or
retire for value any capital stock of the Company or (iii) except for
indebtedness as set forth on Schedule 5.3 that the Company is already committed
to retiring, purchase, redeem, defease or otherwise acquire or retire for value
any indebtedness that is subordinate or pari passu to the Note (each a
"Restricted Payment").
5.4 Proceeds of Financing. The proceeds of the sale of the Note will
be used by the Company for (i) general operating expenses of the Company and
(ii) to repay a former shareholder loan of $103,501.16 to the estate of Willard
Taylor.
ARTICLE VI
CLOSING DELIVERIES
Simultaneously with the execution and delivery of this Agreement, the
following deliveries shall be made:
6.1 Amendment to Registration Rights Agreement. The Buyer and the
Company shall enter into the Amendment.
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6.2 Reimbursement. The Company shall have reimbursed the Buyer for
its out-of-pocket costs and expenses incurred in connection with the closing of
the transactions contemplated by this Agreement and the Amendment, provided,
however, that in no such event shall reimbursement for out-of-pocket costs and
expenses exceed $1,000.
6.3 Officer's Certificate. The Company shall deliver a certificate
from its Secretary attesting to the authenticity of the following documents: (i)
the certificate of incorporation of the Company; (ii) the by-laws of the
Company; and (iii) the resolutions of the Company authorizing the sale of the
Note and the reservation of shares of Common Stock issuable upon conversion of
the Note.
6.4 Opinion. The Company shall cause Atlas, Pearlman, Trop & Borkson,
P.A., to deliver to the Buyer an opinion in the form attached hereto as Exhibit
-------
C.
- -
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing.
7.2 Indemnification. The Company shall indemnify and hold harmless
the Buyer (and its directors, officers, employees, Affiliates and permitted
assigns) from and against all losses, liabilities, charges, damages,
deficiencies, costs and expenses (including interest, penalties and attorney's
fees and disbursements) (collectively, "Loss"), sustained or incurred by the
Buyer based upon or arising out of (i) any inaccuracy or defect or breach of any
representation or warranty by the Company in this Agreement or (ii) any failure
by the Company to perform or observe any term or covenant of this Agreement or
the Registration Agreement required to be performed by it, and will reimburse
the Buyer for any reasonable legal or other expenses incurred by it in
connection with the investigating or defending of any Loss.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices, requests and other communications to any
part hereunder shall be in writing (including telecopy or similar writing) and
shall be effective upon receipt and shall be given, if to the Buyer, to:
8
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Quantum Industrial Partners LDC
c/o Curacao Corporation Company, N.V.
Kaya Flamboyan
Willemstad, Curacao
Netherlands, Antilles
Fax: 599-9-322-001
with a copy to:
Soros Fund Management
888 Seventh Avenue
New York, New York 10106
Attention: Michael Neus
Fax: (212) 664-0544
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Edward D. Sopher
Fax: (212) 872-1002
If the Company to:
T/F Purifiner, Inc.
3036 High Ridge Road
Suite 100
Boyton Beach, Florida 33426
Attention: Keith T.J. Hart
Fax: (561) 547-4025
with a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
New River Center - Suite 1900
200 East Los Olas Boulevard
Fort Lauderdale, Florida 33301
Attention: Jim Schneider
Fax: (954) 523-1952
or to such other address or Person as any of the parties may designate by
written notice hereunder.
8.2 Amendments: No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
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amendment, by the Buyer and the Company, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law;
8.3 Expenses. All reasonable costs and expenses incurred by the Buyer
in connection with this Agreement and the Amendment shall be paid by the
Company.
8.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
8.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
8.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
8.7 Entire Agreement. This Agreement, the Note and the Amendment
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.
8.8 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought against
either of the parties in the courts of the State of New York in New York City,
or, if it has or can acquire jurisdiction, in the United States District Court
for the Southern District of New York, and each of the parties hereby consents
to the jurisdiction of such courts (and of the appropriate appellate courts) in
any such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of New York.
8.9 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
QUANTUM INDUSTRIAL PARTNERS LDC
By: _______________________________________
Name:
Title:
T/F PURIFINER, INC.
By: _______________________________________
Name:
Title:
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Page 65 of 67 Pages
EXHIBIT M
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1, dated as of January 26, 1998, is by and between
T/F PURIFINER, INC., a Delaware corporation (the "Company"), and QUANTUM
INDUSTRIAL PARTNERS LDC, a Cayman Islands limited duration company (the
"Investor") .
WHEREAS, the Company and the Investor entered into a Registration
Rights Agreement, dated as of June 19, 1997 (the "Registration Agreement");
WHEREAS, in order to induce the Investor to enter into those
transactions contemplated by that Note Purchase Agreement dated as of January
26, 1998 by and between the Company and the Investor (the "Note Purchase
Agreement") and that Note Exchange Agreement by and between the Company and the
Investor dated as of January 26, 1998 (the "Note Exchange Agreement"), the
Company has agreed to provide registration rights with respect to the shares of
common stock of the Company, par value $.001 per share (the "Common Stock"),
issuable upon exercise of the securities issued to the Investor pursuant to the
Note Purchase Agreement and the Note Exchange Agreement;
WHEREAS, the Company and the Investor desire to amend the Registration
Agreement in connection with the foregoing;
NOW, THEREFORE, the parties, intending to be legally bound, hereby
agree as follows:
1. Section 1 of the Registration Agreement is hereby amended and
restated in its entirety as follows:
'1. Securities Subject to this Agreement
------------------------------------
The term "Registrable Securities" shall mean (i)
shares of the Common Stock issued and sold to the
Investor pursuant to the Securities Purchase
Agreement, (ii) shares of Common Stock issuable
upon exercise of the warrant (the "Warrant")
issued to the Investor pursuant to the Securities
Purchase Agreement, that are from time to time
held by the Investor or any subsequent holder
thereof (the "Warrant Holders"), (iii) shares of
Common Stock issuable upon the conversion of the
12% Senior Subordinated Convertible Note in the
aggregate principal amount of $500,000 issued to
the Investor pursuant to the Note Purchase
<PAGE>
Page 66 of 67 Pages
dated as of January 26, 1998 by and between the
Company and the Investor, that are from time to
time held by the Investor or any subsequent holder
thereof (the "Note Holders"), (iv) shares of
Common Stock issuable upon the conversion of the
12% Senior Subordinated Convertible Note in the
aggregate principal amount of $2,000,000 issued to
the Investor pursuant to the Note Exchange
Agreement dated as of January 26, 1998 by and
between the Company and the Investor, that are
from time to time held by the Investor or any
subsequent holder thereof (the "Exchange Note
Holders"; and together with the Warrant Holders
and the Note Holders, the "Holders"), and (v)
shares of Common Stock issued or issuable to the
Holders by way of a dividend, stock split or other
distribution or in connection with a combination
of shares, recapitalization, merger,
consolidation, reorganization or otherwise;
provided, that such securities shall cease to be
--------
Registrable Securities when (a) a registration
statement with respect to the sale of such
securities shall have become effective under the
Securities Act and such securities shall have been
disposed of in accordance with such registration
statement, (b) they shall cease to be outstanding
or (c) they are distributed to the public pursuant
to Rule 144 (or any similar provision then in
effect) under the Securities Act.'
2. Except as expressly amended hereby, the Registration Agreement,
and all rights and obligations of the Investor and the Company, thereunder,
shall remain in full force and effect. This amendment shall not, except as
expressly provided herein, be deemed to be a consent to any waiver or
modification of any other terms or provisions of the Registration Agreement.
3. This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Amendment shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
QUANTUM INDUSTRIAL PARTNERS LDC
By: _____________________________
Name:
Title:
T/F PURIFINER, INC.
By: _____________________________
Name:
Title:
3
