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As filed with the Securities and Exchange Commission on December 30, 1999
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CVF TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 87-0429335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
916 Center Street
Lewiston, New York 14092
(716) 754-7883
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Jeffrey I. Dreben, Chairman, President and Chief Executive Officer
916 Center Street
Lewiston, New York 14092
(716) 754-7883
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
John J. Zak, Esq.
Christine A. Bonaguide, Esq.
Hodgson, Russ, Andrews, Woods & Goodyear, LLP
One M & T Plaza, Suite 2000
Buffalo, New York 14203
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Approximate date of commencement of proposed sale to the public: from time
to time after this Registration Statement becomes effective.
If the only securities on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
______________________.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
Title of each class of Proposed maximum Proposed maximum
securities to Amount to be offering price aggregate Amount of
be registered registered per share (1) offering price registration fee
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Common Stock, $0.001 par value (2) 2,333,333 $2.65625 $6,197,915.78 $1,636.25
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
Common Stock, $0.001 par value (3) 420,000 $2.65625 $1,115,625.00 $ 294.53
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
Common Stock, $0.001 par value (4) 317,202 $2.65625 $ 842,567.81 $ 222.44
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
TOTAL 3,070,535 $2,153.22
- --------------------------------------- ----------------------- ------------------- ------------------------- ----------------------
<FN>
(1) Estimated pursuant to Rule 457(c) for purposes of calculating the fee.
(2) Issuable upon conversion of Registrant's Series B 6% Convertible Preferred Stock.
(3) Issuable as payment of dividends on Registrant's Series B 6% Convertible
Preferred Stock. Represents the maximum amount of dividends payable for
three years assuming a market price for the Common Stock of $1.50 per
share.
(4) Issuable upon exercise of certain Warrants to acquire Common Stock issued
in connection with the sale of Registrant's Series B 6% Convertible
Preferred Stock.
</TABLE>
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Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
CVF TECHNOLOGIES CORPORATION
3,070,535 SHARES OF COMMON STOCK
The stockholders of CVF Technologies Corporation listed on page 15 of this
prospectus are offering 3,070,535 shares of our Common Stock. These shares will
have been previously issued upon the conversion of our Series B 6% Convertible
Preferred Stock, as payment of dividends on the Series B Preferred Stock and
upon exercise of Common Stock Purchase Warrants. We will receive no proceeds
from the shares of Common Stock offered by this prospectus.
The selling stockholders may offer their shares at prevailing market prices
in public transactions on The American Stock Exchange or in privately negotiated
transactions. No period of time has been fixed within which the shares may be
offered or sold.
The Common Stock is listed on The American Stock Exchange under the symbol
"CNV".
The address of our principal executive offices is 916 Center Street,
Lewiston, New York 14092 and our telephone number (716) 754-7883.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is December __, 1999.
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TABLE OF CONTENTS
RISK FACTORS ............................................................... 6
USE OF PROCEEDS ........................................................... 13
THE COMPANY ............................................................... 13
SELLING STOCKHOLDERS ...................................................... 15
PLAN OF DISTRIBUTION ...................................................... 16
LEGAL MATTERS ............................................................. 17
EXPERTS ................................................................... 17
WHERE YOU CAN FIND MORE INFORMATION ABOUT US .............................. 18
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ............................ 20
NOTE REGARDING FORWARD-LOOKING STATEMENTS ................................. 22
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus. You must not rely on any information or representations not
contained in this prospectus, if given or made, as having been authorized by us.
This prospectus is not an offer or solicitation with respect to these shares in
any jurisdiction in which such offer or solicitation would be unlawful. The
delivery of this prospectus does not mean that there has been no change in our
affairs or that the information in this prospectus is correct at any time
subsequent to its date.
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RISK FACTORS
An investment in our Common Stock is very risky. You may lose the entire
amount of your investment. Prior to making an investment decision, you should
carefully review this entire prospectus and consider the following risk factors:
WE INVEST IN EARLY STAGE AND START-UP COMPANIES THAT HAVE LIMITED OPERATING
HISTORIES, REQUIRE LONG-TERM INVESTMENT AND MAY NOT GENERATE A RETURN ON OUR
INVESTMENT.
Our business is to acquire significant holdings in early stage and start-up
companies, primarily in the technology area, and to assist in their management.
These companies are subject to various risks common to early-stage and start-up
companies, including lack of a customer base, lack of name recognition and
credibility, the need to hire experienced management and the need to develop and
refine the plan of operation of the business. A number of these companies'
products have only recently been introduced to the market or have not yet been
commercially exploited. Accordingly, several of these companies have limited
operating histories upon which investors can base an evaluation of their
businesses and prospects.
Investments of the kind we make involve a long-term commitment. Early-stage
companies may require three to five years or longer in order to mature and
generate returns to investors. We do not know whether any of our companies will
mature and generate returns or permit us to recoup invested capital. Our ability
to achieve an acceptable rate of return on any particular investment is subject
to a number of risk factors often beyond our control, including increased
competition and lack of market share, quality of management, cyclical or uneven
financial results, technological obsolescence and regulatory delays. As well,
losses on unsuccessful companies are often realized before gains on successful
companies are realized. An investment in our Common Stock is only appropriate
for investors able to make a long-term commitment and with the capacity to
absorb a loss of some or all of their investment.
OUR FINANCIAL RESULTS AND THE STOCK VALUE OF OUR ASSETS ARE DEPENDENT UPON
THE COMPANIES IN WHICH WE INVEST.
The value of our Common Stock is based on the value of the securities of
the companies we invest in and therefore the value of our Common Stock will
increase or decrease with the value of these companies. If the companies in
which we invest are not successful, our financial results will be materially
adversely affected and the value of our assets will decline.
LACK OF MARKET FOR SECURITIES OF COMPANIES IN WHICH WE INVEST.
Our profitability and financial results are dependent on the companies'
activities and financial results. Certain of these companies are consolidated
with us for financial reporting purposes and have not yet achieved profitable
operations. As a result, we have sustained operating losses, on a consolidated
basis, in fiscal years 1996, 1997 and 1998 and expect to incur an operating loss
in fiscal year 1999. We do not know whether we will be able to achieve operating
profitability on a quarterly or annual basis in the future.
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The majority of the companies in which we invest are private companies and,
as such, our investments are not readily marketable. As such, we may not be able
to sell our investment in these companies at an acceptable price or at all.
THERE ARE SEVERAL TECHNOLOGY-RELATED RISKS WHICH MAY APPLY TO US AND THE
COMPANIES IN WHICH WE INVEST.
The companies in which we have invested and companies in which we may in
the future invest are developing products that will likely require significant
additional development, testing and financial support prior to
commercialization. We do not know whether such products will be successfully
developed, can be capable of being produced in commercial quantities at
reasonable costs or can be successfully marketed. The likelihood of our
long-term success must be considered in light of the expenses, difficulties and
delays frequently encountered in connection with the development of new
technology and the competitive environments of the technology industry.
Summarized below are certain risks generally applicable to companies in the
technology industry.
The Industries of the Companies in Which We Have Invested Are Subject to
Rapid Change. The markets for many of products of the companies in which we have
invested are generally characterized by rapid and significant technological
advancements, the frequent introduction of new products utilizing new
technologies, changes in customer needs and demands and evolving industry
standards. The adoption of new technologies or industry standards can render
their products obsolete and unmarketable. This presents substantial risks for us
because their products typically have lengthy development and sales cycles.
These companies also may not be successful in developing and marketing
enhancements to their products or in developing new products that respond to
technological changes, evolving industry standards or customer requirements.
They may also experience difficulties with new products, and their enhancements
or new products may not adequately address the requirements of the marketplace
or achieve any significant degree of market acceptance.
The Companies in Which We Have Invested Operate in Highly Competitive
Industries. The markets for the products of the companies in which we have
invested are intensely competitive. Many of the current and potential
competitors of these companies have longer operating histories and substantially
greater financial, technical and marketing resources and name recognition.
Current or potential competitors may develop products comparable or superior to
those developed by these companies or adapt more quickly than them to new
technologies, evolving industry standards, new product introductions or changing
customer requirements.
The Products of the Companies in Which We Have Currently Invested May
Contain Defects Which Could Lead to Product Liability Claims by Third Parties.
Many of the products offered by the companies in which we have invested may
contain design defects that are difficult to detect and correct. We do not know
whether errors will be found in new products after commencement of commercial
shipments or, if discovered, whether we will be able to successfully correct
such errors in a timely manner or at all. In addition, despite testing, some
design defects or errors may only become apparent in the products after they
have been shipped, which could result in loss of or delay in market acceptance
of these products. Alleviating such errors and failures in these products could
require significant
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expense. Moreover, the reputational harm resulting from product errors and
failures would be damaging to their business.
The Companies in Which We Have Invested May be Subject to Fluctuations in
Operating Results and Their Products Typically Have Lengthy Sales Cycles.
Companies in the technology industry typically experience significant
fluctuations in quarterly or annual results caused by a number of factors.
Products are often included as part of a complex and time-consuming bid process
that is subject to numerous delays and approvals that are beyond our control.
For these and other reasons, the sales cycles associated with the products of
these companies are often lengthy and subject to significant delays. To the
extent that implementation of their products is delayed for any reason, the
ability of these companies to recognize revenue with respect to any contract may
be impaired, which in turn could materially adversely affect their quarterly or
annual operating results. Quarterly sales and operating results also depend
generally on the volume and timing of orders within the quarter. The tendency of
sales in the technology industry to occur late in fiscal quarters and the
ability of these companies to fill orders received within the quarter, all of
which are difficult to forecast and manage, could have a material adverse effect
on their quarterly and annual results. Operating results are also affected by
the mix of distribution channels through which products are sold, the mix of
products, the mix of international and North American revenues, regulatory
changes, foreign currency exchange rates, the timing and level of capital
expenditures of customers and general economic conditions. As a result, the
magnitude of quarterly fluctuations may not become evident until late in, or
after the close of, a particular quarter. The operating expenses of these
companies are based in part on expectations as to future revenue levels and to a
large extent may be fixed in the short term; therefore, a shortfall in quarterly
sales could lead to a quarterly operating loss.
We and the Companies in Which We Have Invested May be Subject to Year 2000
Business Risks. Many existing computer programs use only two digits to identify
a year in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
year 2000. The "year 2000" issue affects virtually all companies and
organizations. We and, to our best knowledge, the companies in which we have
invested, are currently identifying year 2000 issues related to internal
systems. We do not know whether we or any of these companies will experience
unanticipated material costs caused by undetected errors or defects in internal
systems. Delays in the implementation or a failure to identify year 2000 issues
could result in material adverse consequences including delays in the delivery
or sale of products. In addition to internal systems, the products of these
companies may contain undetected errors or defects stemming from the year 2000
issue. We do not know whether their products contain such undetected errors or
that a product will be able to function when it is integrated with noncompliant
products, including third party hardware and software.
The customers of these companies are also impacted by the year 2000 issue.
Should customers and potential customers be required to allocate substantial
resources to resolve their specific year 2000 problems, then they could
experience a reduced demand for their products and services.
WE MAY NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS.
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Each of the companies in which we have invested generally requires
additional capital to meet its business plans. We intend to actively assist
these companies in obtaining additional capital, from either our own resources
or other participants. To meet such capital requirements, we will consider
additional public or private financing (including the issuance of additional
equity securities). We also require additional capital to invest in new
companies. We do not know whether additional funding will be available or, if
available, that it will be available on terms acceptable to us. Several of these
companies rely on our financial support, which includes the accrual of interest
on debt instruments, and without additional financial support from us or other
investors, may cease operations.
WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES, THE
LOSS OF WHOM COULD HAVE A DETRIMENTAL EFFECT ON THE MARKET PRICE OF OUR STOCK.
Our plan of business development and our day-to-day operations rely heavily
on the experience of Jeffrey Dreben, the Chairman of the Board, President and
Chief Executive Officer, and Robert Nally, the Chief Operating Officer, Chief
Technology Officer, Secretary and Treasurer, neither of whom have signed
employment agreements with us. The loss of either of them could adversely affect
the success of our operations and strategic plans and, consequently, have a
detrimental effect on the market price of our stock. Our success will also
depend on our and the ability of the companies in which we have invested to
attract and retain highly qualified management and technical personnel. We do
not know whether we or those companies will be successful in attracting and
retaining qualified personnel as necessary, and the failure to do so could have
a material adverse effect on us.
CERTAIN OF THE COMPANIES IN WHICH WE HAVE CURRENTLY INVESTED ARE SUBJECT TO
VARIOUS ENVIRONMENTAL LAWS AND REGULATIONS WITH WHICH THEY MUST COMPLY.
Certain of the operations of the companies in which we have invested are
subject to various comprehensive laws and regulations related to protection of
the environment. Such laws and regulations, among other things, regulate the
nature of treatment that these companies can provide. Because these companies
provide their customers with services designed to protect the environment by
cleaning and removing materials or substances at their customers' sites that
must be properly handled, recycled or, in some cases, removed for proper
disposal, these companies are subject to regulations which impose liability on
persons involved in handling, processing or transporting hazardous materials.
These requirements may also be imposed as conditions of operating permits or
licenses that are subject to renewal, modification or revocation. These laws and
regulations have become and are likely to continue to become increasingly
stringent. Existing laws and regulations, and new laws and regulations, may
require these companies to modify, supplement, replace or curtail their
operating methods at costs which may be substantial without any corresponding
increase in revenues. In addition, the demand for certain of their environmental
services may be adversely affected by the amendment or repeal of federal, state
or provincial laws and regulations.
THERE IS A RISK THAT THE VALUE OF TRADEMARKS AND OTHER PROPRIETARY RIGHTS
OWNED BY THE COMPANIES IN WHICH WE HAVE INVESTED COULD BE DIMINISHED BY IMPROPER
USE BY OTHERS.
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We believe our success and competitive position depend significantly upon
the proprietary technology owned by the companies in which we have invested.
These companies generally rely on a combination of patent, trademark and trade
secret laws and non-disclosure agreements and other contractual provisions to
establish, maintain and protect their proprietary rights, all of which afford
only limited protection. Certain of them have patents and registered trademarks
and pending patent and trademark applications which cover certain aspects of
their technology and business. We do not know whether any pending or future
patent or trademark applications will be granted in respect of these companies'
technology and business or whether any current or future patents or trademarks
will be challenged, invalidated or circumvented or whether the rights granted
under such patents or trademarks will provide competitive advantages to these
companies. In addition, until recently, these companies have not generally
sought patent protection for their products. Their inability to adequately
protect their proprietary rights could have a material adverse effect on us.
Moreover, effective patent and trade secret protection may be unavailable or
limited in certain foreign countries, making greater the possibility of
misappropriation of proprietary technology. The steps these companies have taken
to protect their proprietary technology may not prevent misappropriation of such
technology and such protections may not preclude competitors from developing
products with functionality or features similar to their products.
Although we do not believe that any of these companies are infringing the
intellectual property rights of others, claims of infringement are becoming
increasingly common as the number of products and competitors in the technology
industry grows, the functionality of products in different industry segments
overlaps, and legal protections, including patents, are applied to products made
by their competitors. Third parties may assert that the products of the
companies in which we have invested infringe, or may infringe, the proprietary
rights of third parties. The defense of any such claims, with or without merit,
could be time consuming, result in costly litigation and diversion of technical
and management personnel, cause product shipment delays or require these
companies to develop non-infringing technology or enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to us or at all.
WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK.
To date, we have not paid any cash dividends on our Common Stock, and we do
not intend to do so in the foreseeable future. Rather, we intend to use any
future earnings to fund our operations and the growth of our business.
IN ORDER TO FINANCE FUTURE ACQUISITIONS, WE MAY BE REQUIRED TO RAISE
ADDITIONAL FUNDS BY ISSUING SECURITIES ON TERMS WHICH WOULD DILUTE YOUR INTEREST
IN US.
In order to fund our growth, we will need to obtain financing through an
additional offering of our equity securities or by incurring indebtedness. Such
funds may not be available on terms acceptable to us. Furthermore, future
investors may seek and obtain, and we may be required to offer, investment terms
which are substantially better than those granted to existing investors. The
issuance of securities on such terms would dilute the interests of existing
stockholders.
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PURSUANT TO OUR AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS WE
DEEM APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO
CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A
COMMON STOCKHOLDER.
Our authorized capital consists of 50,500,000 shares of capital stock of
which 125,000 shares are undesignated preferred stock. Our Board of Directors,
without any action by the stockholders, may designate and issue the undesignated
preferred shares in such classes or series as it deems appropriate and establish
the rights, preferences and privileges of such shares, including dividends,
liquidation and voting rights. The ability of our Board of Directors to
designate and issue such undesignated shares could impede or deter an
unsolicited tender offer or takeover proposal. Further, the issuance of
additional shares having preferential rights could adversely affect the voting
power and other rights of holders of Common Stock.
POTENTIAL CURRENCY FLUCTUATION BETWEEN THE U.S. DOLLAR AND THE CANADIAN
DOLLAR, AND OTHER CURRENCY FLUCTUATIONS, COULD ADVERSELY AFFECT US.
Although our consolidated financial statements are reported in U.S.
dollars, a significant portion of the sales and operating costs of the companies
in which we have currently invested are denominated in Canadian dollars.
Significant long term fluctuations in relative currency values could adversely
affect our results of operations. In particular, we may be adversely affected by
the weakening of the U.S. dollar against the Canadian dollar. International
sales by these companies also entail risks associated with currency
fluctuations. As international sales increase, risks associated with currency
fluctuations may increase. Given the number of currencies that may be involved,
the constantly changing currency exposures and the substantial volatility of
currency exchange rates, we cannot predict the effect of exchange rate
fluctuations upon future operating results of these companies. Neither we nor
any of these companies engage in hedging transactions to cover currency
exposure.
OUR STOCK PRICE AND THE STOCK MARKETS MAY EXPERIENCE VOLATILITY.
In recent years, the stock markets have experienced extreme price and
volume fluctuations and market prices for securities of many companies have
experienced wide fluctuations, not necessarily related to the operating
performance of such companies. Further, from time to time, the market price of
our Common Stock has been affected and may continue to be affected by various
factors, including announcements of new investments; major announcements by the
companies in which we have currently invested and new commercial products,
product licenses or patents; the development of proprietary rights by these
companies or their competitors; actual or anticipated variations in our
operating results due to a number of factors including, among others, the level
of development expenses, change in financial estimates by securities analysts,
and conditions and trends in the information and environmental technologies
areas; general market conditions; and other factors. As a result, it is possible
that our operating results will be below the expectations of market analysts and
investors, which likely would have an adverse effect on the prevailing market
price of our Common Stock. The prevailing market price of our Common Stock may
also be adversely affected by future sales of our Common Stock by current
stockholders. We cannot predict the effect, if any, that sales of our Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the
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possibility that substantial amounts of our Common Stock may be sold in the
public market may adversely affect prevailing market prices for our Common Stock
and could impair our ability to raise capital though the sale of our equity
securities.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the Common Stock by the
selling stockholders.
THE COMPANY
Business.
We are in the business of selecting, developing and managing early stage
and start-up companies that exploit proprietary or other unique technologies. We
try to acquire significant holdings in these companies to assist in their
management and to finance their growth by assisting them in obtaining additional
capital, either from us or other sources.
We have interests in the following operating companies: Biorem Technologies
Inc., Healthy Elements, Gemprint Corporation, Solaria Research Enterprises Ltd.,
Dantec Corporation, Petrozyme Technologies Inc., Ecoval Inc., TurboSonic
Technologies Inc. and RDM Corporation.
Biorem is an Ontario corporation based in Waterloo, Ontario, Canada that
develops, manufactures and sells industrial bioremediation and biofilter
technology products for a variety of industrial applications, including
remediation of organic toxic chemicals in soil and ground water, treatment of
industrial waste streams and odor elimination at composting, rendering and food
processing plants. We own a 69% interest in Biorem.
Healthy Elements is an Ontario partnership operating retail stores and an
online site which offer natural health and food products, nutritional
supplements and health services, including naturopathic and homeopathic medicine
and chiropractic services, as well as products manufactured by Ecoval. We own a
61% economic interest and a 69.25% voting interest in Elements through our
wholly-owned subsidiary, Grand Island Marketing, Inc.
Gemprint is an Ontario corporation that develops and sells diamond and
precious gem identification technology products and services to the retail and
wholesale jewelry markets. These products and services allow diamonds and other
gems to be uniquely identified non-invasively using a low power laser imaging
system proprietary to Gemprint. We own a 67% interest in Gemprint.
Solaria is an Ontario corporation based in Waterloo, Ontario, Canada that
develops, manufactures and sells high-efficiency, programmable
microprocessor-based electronic controllers for direct current motors used in
battery powered industrial vehicles. We own a 74.67% interest in Solaria.
Dantec is an Ontario corporation based in Waterloo, Ontario, Canada that
develops, manufactures and sells advanced process control technologies,
primarily to the food processing industry. We own a 54% interest in Dantec.
Petrozyme is an Ontario corporation based in Guelph, Ontario, Canada that
develops and sells proprietary technologies for the treatment of petroleum-based
wastes and for petroleum recovery to the petroleum production and refining
industries. We own a 50% interest in Petrozyme.
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Ecoval is a Quebec corporation based in Montreal, Quebec, Canada and
develops, manufactures and sells a range of all-natural, environmentally safe
fertilizers, herbicides, fungicides, insecticides and growth regulants under the
"Nature's Glory" brand. We own a 27% interest in Ecoval.
TurboSonic Technologies, through its Ontario subsidiary based in Waterloo,
Ontario, Canada, develops, manufactures and sells high performance air pollution
control systems and nozzle products which utilize Turbosonic's proprietary
technologies to a range of industries worldwide. We own an indirect 13% interest
in Turbosonic principally through our ownership of shares of its Canadian
subsidiary which are exchangeable for shares of Turbosonic.
RDM is an Ontario corporation based in Waterloo, Ontario, Canada that
develops and sells technologies which enable secure and accurate payments over
the Internet through electronic checks and check reading and imaging devices for
point of sale paper check transactions. We own an 18% interest in RDM.
The Form of Our Investments.
We negotiate the form that our investment will take with each company,
taking into account the financing needs of the company, our ability to play an
active role in the business in collaboration with the business' existing
management team, the potential for significant rates of return on our investment
and tax considerations. We generally will not invest in a company unless we can
exert some degree of influence on its operations. Our investments may take the
form of debt (with or without conversion features), debt with warrants to
acquire common shares or debt with participation in cash flow or earnings,
preferred shares (with or without conversion features) or common shares. Some of
our investments may involve a combination of these features.
Our Investments.
Each of the companies in which we have currently invested has its own
business plan and financial reporting systems. Each has also completed the
development of its original products, has set up markets and distribution
channels, has sold products and has put management teams in place and/or is
currently working to strengthen and expand its management teams. Most are also
working to improve their marketing capabilities. Additional capital required by
these companies is primarily for expansion of sales and marketing and
continuation of research and development to enable them to realize their
commercial potential over the next three to five years. As is common with
early-stage technology companies, these companies have historically operated at
a loss or at a break-even. Most are expected to operate at a loss for the
foreseeable future. Some may show losses due to substantial investment in
research and development. Thus, these companies will require additional
financing from us or other sources in order to continue operations.
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SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock owned
by the selling stockholders as of December 30, 1999 and after giving effect to
this offering. We will not receive any proceeds from the sale of the Common
Stock by the selling stockholders.
Because the selling stockholders may offer all, some or none of their
Common Stock, we cannot provide a definitive estimate as to the number of shares
that they will hold after such offering and the following table has been
prepared on the assumption that all shares of Common Stock offered under this
prospectus will be sold.
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Shares Beneficially
Owned Before Offered by Owned After
Name Offering Selling Shareholder Offering
<S> <C> <C> <C> <C>
The Shaar Fund Ltd. 2,968,717 2,968,717 (1) 0
Amin I. Ismail 20,364 20,364 (2) 0
Avalon Research Group Inc. 81,454 81,454 (3) 0
<FN>
(1) Represents 215,384 shares issuable upon exercise of Warrants, 2,333,333
shares issuable upon conversion of the Series B Preferred Stock and a
maximum of 420,000 shares issuable as payment of dividends on the Series B
Preferred Stock.
(2) Represents 20,364 shares issuable upon exercise of a warrant granted as a
finders fee on the offering of the Series B Preferred Stock (a "Broker's
Warrant").
(3) Represents 81,454 shares issuable upon exercise of a warrant granted as a
finders fee on the offering of the Series B Preferred Stock (a "Broker's
Warrant").
</TABLE>
15
<PAGE> 16
PLAN OF DISTRIBUTION
We are registering the shares offered by this prospectus on behalf of the
selling stockholders. As used in this section, the term "selling stockholders"
includes donees, pledgees, transferees and other successors in interest selling
shares they receive from a selling stockholder after the date of this
prospectus. We will pay all costs and expenses in connection with the
preparation of this prospectus and the registration of the shares offered by it.
Any brokerage commissions and similar selling expenses attributable to the sale
of shares will be borne by the selling stockholders.
The selling stockholders may sell shares at various times in one or more
types of transactions (which may include block transactions) on The American
Stock Exchange, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares or a
combination of such methods of sale, at market prices prevailing at the time of
sale or at negotiated prices. These transactions may or may not involve brokers
or dealers. The selling stockholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of the shares, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling stockholders.
The selling stockholders may sell shares directly to purchasers or to or
through broker-dealers, who may act as agents or principals. These
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or purchasers of the shares. This
compensation may be in excess of customary commissions.
We have agreed to indemnify certain of the selling stockholders and other
persons against certain liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act. Certain selling
stockholders have agreed to indemnify us and other persons against certain
liabilities in connection with the offering of the shares, including liabilities
arising under the Securities Act.
The selling stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares they sell while acting
as principals might be deemed to be underwriting discounts or commissions under
the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act. We have informed them
that the anti-manipulative provisions of Regulation M promulgated under the
Securities Exchange Act of 1934, as amended, may apply to their sales in the
market.
Selling stockholders also may sell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of that Rule.
16
<PAGE> 17
LEGAL MATTERS
Legal matters relating to the validity of the shares offered by this
prospectus will be passed upon for us by Hodgson, Russ, Andrews, Woods &
Goodyear LLP, Buffalo, New York.
EXPERTS
Ernst & Young LLP, our independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-KSB for the year
ended December 31, 1998, as set forth in their report on those financial
statements. Our consolidated financial statements are incorporated by reference
into this prospectus in reliance on Ernst & Young LLP's report given on their
authority as experts in accounting and auditing.
17
<PAGE> 18
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
Federal securities law requires us to file information with the Securities
and Exchange Commission concerning our business and operations. Accordingly, we
file annual, quarterly and special reports, proxy statements and other
information with the Commission. You can inspect and copy this information at
the Public Reference Room maintained by the Commission at Judiciary Plaza, 450
5th Street, N.W., Washington, D.C. 20549.
You can receive additional information about the operation of the
Commission's Public Reference Facilities by calling the Commission at
1-800-SEC-0330. The Commission also maintains a website at that contains
reports, proxy and information statements and other information regarding
companies that, like us, file electronically with the Commission.
The Commission allows us to "incorporate by reference" information that has
been filed with it, which means that we can disclose important information to
you by referring you to the other information we have filed with the Commission.
The information that we incorporate by reference is considered to be part of
this prospectus, and related information that we file with the Commission will
automatically update and supersede information we have included in this
prospectus. We also incorporate by reference any future filings we make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, until the selling stockholders sell all of their shares
or until their registration rights expire. This prospectus is part of a
registration statement that we filed with the Commission (Registration No.
333-_______). The following are specifically incorporated herein by reference:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998;
2. Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
3. The description of Common Stock included under the caption "Securities to
be Registered" in our registration statement on Form 10-SB, File No.
000-29266, dated February 12, 1997 (as amended on February 26, 1997, May
30, 1997 and August 22, 1997), including any amendments or reports filed
for the purpose of updating such description.
You (and any of your beneficial owners) can request a free copy of the
above filings or any filings subsequently incorporated by reference into this
prospectus by writing or calling us at the following address:
CVF Technologies Corporation
Attention: Jeffrey I. Dreben
916 Center Street
Lewiston, New York 14092
(716) 754-7883
18
<PAGE> 19
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or amendment to this prospectus.
We have not authorized anyone else to provide you with different information or
additional information. Selling stockholders are offering to sell, and seeking
offers to buy, shares only in jurisdictions where offers and sales are
permitted. You should not assume that the information in this prospectus, or any
supplement or amendment to this prospectus, is accurate at any date other than
the date indicated on the cover page of such documents.
19
<PAGE> 20
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Article VIII of our bylaws provides for the indemnification of our officers
and directors to the extent authorized by the Nevada Revised Statutes. Section
78.7502(1) of the Nevada Revised Statutes allows us to indemnify any person made
or threatened to be made a party to any action, except an action by us or in our
right, by reason of the fact that he or she is or was a director, officer,
employee or agent of, or is or was serving at our request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred in connection with the action, suit or proceeding if the person acted
in good faith and in a manner which he or she reasonably believed to be in or
not opposed to our best interests, and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct was unlawful. Article VIII of our
charter provides for indemnification of such a person to the full extent
provided by the Nevada Revised Statutes, as amended from time to time.
Under Section 78.7502(2), a similar standard of care applies to derivative
actions by us or in our right, except that indemnification is limited solely to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of the action and court approval of the indemnification is required
where the person seeking indemnification has been found liable to us.
In addition, Section 78.751(2) allows us to advance payment of
indemnifiable expenses prior to final disposition of a proceeding. Decisions as
to the payment of indemnification are made by a majority of the Board of
Directors at a meeting at which a quorum of disinterested directors is present,
or by written opinion of special legal counsel or by the stockholders.
Section 78.751(3) provides that the power to indemnify is not exclusive of
any rights granted under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 78.752 of the Nevada Revised Statutes and Section 8.06 of our
Bylaws enable us to purchase and maintain insurance for our present and former
directors, officers, employees and agents. Accordingly, we have provided
liability insurance for each director and officer for certain losses arising
from claims or charges made against him or her while acting in his or her
capacity as our director or officer, including liabilities under federal
securities laws.
Additionally, Article V of our charter limits the liability of our
directors under certain circumstances. Article V states:
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (b) the
payment of distributions in violation of section 78.300 of the Nevada Revised
Statutes.
20
<PAGE> 21
The Registration Rights Agreement, dated as of October 8, 1999, between us
and The Shaar Fund Ltd., contains provisions under which we have agreed to
indemnify the selling stockholders and each underwriter, if any, which
facilitates the disposition of the shares, and their respective officers and
directors and each person who controls any selling stockholder or underwriter,
in certain circumstances against certain liabilities, including liabilities
arising under the Securities Act. Each selling stockholder has agreed (and each
underwriter, if any, shall agree) to indemnify us and our directors, officers
and each person who controls us in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, or otherwise, we have been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
21
<PAGE> 22
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference in this prospectus are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes," "anticipates," "expects," "estimates," "may,"
"will" or similar terms. Forward-looking statements also include projections of
financial performance, statements regarding management's plans and objectives
and statements concerning any assumption relating to the foregoing. Important
factors regarding our business, operations and competitive environment which may
cause actual results to vary materially from these forward-looking statements
are discussed under the caption "Risk Factors."
22
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the issuance and distribution of
the shares registered hereby are set forth in the following table:
SEC registration fee $ 2,153.22
AMEX additional listing fee $17,500.00
Legal fees and expenses $25,000.00
Accounting fees and expenses $ 5,000.00
Miscellaneous $ 5,346.78
Total $55,000.00
Item 15. Indemnification of Directors and Officers.
Article VIII of Registrant's bylaws provides for the indemnification of
officers and directors of Registrant to the extent authorized by the Nevada
Revised Statutes. Section 78.7502(1) of the Nevada Revised Statutes allows
Registrant to indemnify any person made or threatened to be made a party to any
action except an action by or in the right of Registrant, by reason of the fact
that he or she is or was a director, officer, employee or agent of Registrant,
or is or was serving at the request of Registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding if he or she acted in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of Registrant, and, with respect to any criminal proceeding,
had no reasonable cause to believe his or her conduct was unlawful. Article VIII
of Registrant's charter provides for indemnification of such person to the full
extent provided by the Nevada Revised Statutes, as amended from time to time.
Under Section 78.7502(2), a similar standard of care applies to derivative
actions, except that indemnification is limited solely to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of the
action and court approval of the indemnification is required where the person
seeking indemnification has been found liable to Registrant.
In addition, Section 78.751(2) allows Registrant to advance payment of
indemnifiable expenses prior to final disposition of the proceeding in question.
Decisions as to the payment of indemnification are made by a majority of the
Board of Directors at a meeting at which a quorum of disinterested directors is
present, or by written opinion of special legal counsel or by the stockholders.
Section 78.751(3) provides that the power to indemnify is not exclusive of
any rights granted under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
II-1
<PAGE> 24
Section 78.752 of the Nevada Revised Statutes and Section 8.06 of
Registrant's Bylaws enable Registrant to purchase and maintain insurance for its
present and former directors, officers, employees and agents. Accordingly,
Registrant has provided liability insurance for each director and officer for
certain losses arising from claims or charges made against him or her while
acting in his or her capacity as a director or officer of Registrant, including
liabilities under federal securities laws.
The above discussion of Registrant's bylaws and Sections 78.7502, 78.751
and 78.752 of the Nevada Revised Statutes is not intended to be comprehensive
and is qualified in its entirety by such bylaws and statute.
Additionally, Article V of Registrant's charter limits the liability of
Registrant's directors under certain circumstances. Article V states:
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (b) the
payment of distributions in violation of section 78.300 of the Nevada Revised
Statutes.
The Registration Rights Agreement, dated as of October 8, 1999, between
Registrant and The Shaar Fund Ltd., contains provisions under which Registrant
has agreed to indemnify the selling stockholders and each underwriter, if any,
which facilitates the disposition of the shares, and their respective officers
and directors and each person who controls any selling stockholder or
underwriter, in certain circumstances against certain liabilities, including
liabilities arising under the Securities Act. Each selling stockholder has
agreed (and each underwriter, if any, shall agree) to indemnify Registrant and
its directors, officers and each person who controls Registrant in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
Item 16. Exhibits.
Exhibit No. Description
- ----------- -----------
2 Amended and Restated Certificate of Designation of Series B 6%
Convertible Preferred Stock.
4.1 Common Stock Purchase Warrant dated October 8, 1999 in favor of
the Shaar Fund Ltd.
4.2 Common Stock Purchase Warrant dated October 8, 1999 in favor of
Amin I. Ismail.
4.3 Common Stock Purchase Warrant dated October 8, 1999 in favor of
Avalon Research Group Inc.
5 Opinion of Hodgson, Russ, Andrews, Woods & Goodyear, LLP.
10.1 Securities Purchase Agreement between the Registrant and The
Shaar Fund Ltd dated October 8, 1999.
10.2 Registration Rights Agreement between the Registrant and The
Shaar Fund Ltd dated October 8, 1999.
II-2
<PAGE> 25
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Hodgson, Russ, Andrews, Woods & Goodyear, LLP
(included in Exhibit 5).
24 Power of Attorney (included on Page II-4).
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than Registrant's payment of expenses incurred or paid by a
director, officer or controlling person of Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to: (i) include
any prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement; and (iii)
include any additional or changed material information on the plan of
distribution;
(2) To treat, for determining liability under the Securities Act, each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering; and
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
- ---------------------------
*To be supplied by amendment.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the Town of Lewiston, State of New York, on December 30, 1999.
CVF TECHNOLOGIES CORPORATION
By:/s/ Jeffrey I. Dreben
-----------------------------------
Jeffrey I. Dreben, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Jeffrey
I. Dreben or Robert Miller, each or either of them, such person's true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution for such person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as such person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jeffrey I. Dreben Chairman of the Board, December 30, 1999
- -------------------------- President, Chief Executive
Jeffrey I. Dreben Officer and Director
(Principal Executive Officer)
/s/ Robert Nally Chief Operating Officer, December 30, 1999
- -------------------------- Chief Technology Officer,
Robert Nally Secretary, Treasurer, Director
/s/ George Khouri Director December 30, 1999
- --------------------------
George Khouri
/s/ Robert Glazier Director December 30, 1999
- --------------------------
Robert Glazier
/s/ Robert Miller Chief Financial Officer December 30, 1999
- -------------------------- (Principal Financial
Robert Miller and Accounting Officer)
</TABLE>
II-4
<PAGE> 27
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2 Amended and Restated Certificate of Designation of Series B 6%
Convertible Preferred Stock.
4.1 Common Stock Purchase Warrant dated October 8, 1999 in favor of
the Shaar Fund Ltd.
4.2 Common Stock Purchase Warrant dated October 8, 1999 in favor of
Amin I. Ismail.
4.3 Common Stock Purchase Warrant dated October 8, 1999 in favor of
Avalon Research Group Inc.
5 Opinion of Hodgson, Russ, Andrews, Woods & Goodyear, LLP.
10.1 Securities Purchase Agreement between the Registrant and The
Shaar Fund Ltd. dated October 8, 1999.
10.2 Registration Rights Agreement between the Registrant and The
Shaar Fund Ltd. dated October 8, 1999.
23.1 Consent of Ernst & Young LLP.*
- ---------------------------
*To be supplied by amendment.
II-5
<PAGE> 1
EXHIBIT 2
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION
OF
SERIES B 6% CONVERTIBLE PREFERRED STOCK
OF
CVF TECHNOLOGIES CORPORATION
-----------------------------------------------------
Pursuant to Section 78.1955 of the
Private Corporation Law of the State of Nevada
The undersigned, being the President and Secretary of CVF Technologies
Corporation, a Nevada corporation (the "Corporation"), do hereby certify that:
(i) on October 5, 1999, the Corporation filed with the Nevada Secretary of State
a Certificate of Designation of Series B 6% Convertible Preferred Stock (the
"Original Certificate of Designation"); (ii) the Board of Directors of the
Corporation has adopted a resolution to amend and restate the Original
Certificate of Designation to read in its entirety as set forth in this
Certificate; and (iii) the sole stockholder holding all of the issued and
outstanding shares of Series B 6% Convertible Preferred Stock has approved, by
written consent, the amendments to and restatement of the Original Certificate
of Designation as set forth in this Certificate and that as of the date of this
Certificate there are no classes or series of stock senior to the Series B 6%
Convertible Preferred Stock.
Therefore, the Original Certificate of Designation is hereby amended
and restated to read in its entirety as follows:
The Corporation, hereby certifies that the following resolutions were
adopted by the Board of Directors of the Corporation on October 5, 1999 pursuant
to authority of the Board of Directors as required by Section 78.1955 of the
Private Corporation Law of the State of Nevada:
"RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (the "BOARD OF
DIRECTORS" or the "BOARD") in accordance with the provisions of its
Articles of Incorporation, the Board of Directors hereby authorizes a
series of the Corporation's previously authorized Preferred Stock, par
value $0.001 per share (the "PREFERRED STOCK"), and hereby states the
designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:"
The Corporation further certifies, that on October 12, 1999, the Board
of Directors and sole stockholder of all issued and outstanding shares of Series
B 6% Convertible Preferred Stock of CVF Technologies Corporation, adopted and
approved resolutions to amend and restate the Original Certificate of
Designation to read in its entirety as follows:
<PAGE> 2
- 2 -
Series B 6% Convertible Preferred Stock:
ARTICLE 1
DEFINITIONS
The terms defined in this Article whenever used in this Certificate of
Designation have the following respective meanings:
(a) "ADDITIONAL CAPITAL SHARES" has the meaning set forth in Section
6.1(c).
(b) "AFFILIATE" has the meaning ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
(c) "AMEX" means the American Stock Exchange.
(d) "BUSINESS DAY" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York are authorized or obligated to
close.
(e) "CAPITAL SHARES" means the Common Shares and any other shares of
any other class or series of common stock, whether now or hereafter authorized
and however designated, which have the right to participate in the distribution
of earnings and assets (upon dissolution, liquidation or winding-up) of the
Corporation.
(f) "COMMON SHARES" or "COMMON STOCK" means shares of common stock, par
value $0.001 per share, of the Corporation.
(g) "COMMON STOCK ISSUED AT CONVERSION", when used with reference to
the securities issuable upon conversion of the Series B Preferred Stock, means
all Common Shares now or hereafter Outstanding and securities of any other class
or series into which the Series B Preferred Stock hereafter shall have been
changed or substituted, whether now or hereafter created and however designated.
(h) "CONVERSION DATE" means any day on which all or any portion of
shares of the Series B Preferred Stock is converted in accordance with the
provisions hereof.
(i) "CONVERSION NOTICE" means a written notice of conversion
substantially in the form annexed hereto as Annex I.
(j) "CONVERSION PRICE" means on any date of determination the
applicable price for the conversion of shares of Series B Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
<PAGE> 3
- 3 -
(k) "CONVERSION RATIO" means on any date of determination the
applicable percentage of the Market Price for conversion of shares of Series B
Preferred Stock into Common Shares on such day as set forth in Section 6.1.
(l) "CORPORATION" means CVF Technologies Corporation, a Nevada
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Corporation's
assets, or otherwise.
(m) "CURRENT MARKET PRICE" means on any date of determination the
closing sale price of a Common Share on such day as reported on the Amex;
provided, if such security is not listed or admitted to trading on the Amex, the
closing sale price or closing bid price, as the case may be, as reported on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing bid price of such security on the over-the-counter market on the day in
question as reported by Bloomberg LP, or a similar generally accepted reporting
service, as the case may be.
(n) "DEFAULT DIVIDEND RATE" is equal to the Dividend Rate plus an
additional 4% per annum.
(o) "DIVIDEND PERIOD" means each of (a) the period commencing on and
including the Issue Date and ending on and including December 31, 1999 and (b)
each period commencing on and including the day after the immediately preceding
Dividend Payment Due Date and ending on and including the immediately subsequent
Dividend Payment Due Date.
(p) "DIVIDEND PAYMENT DUE DATE" means June 30 and December 31 of each
year.
(q) "DIVIDEND RATE" means 6% per annum, computed on the basis of a
360-day year.
(r) "HOLDER" means The Shaar Fund Ltd., any successor thereto, or any
Person or Persons to whom the Series B Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(s) "INVESTMENT AMOUNTS" means $3,500,000.
(t) "ISSUE DATE" means, as to any share of Series B Preferred Stock,
the date of issuance of such share.
(u) "JUNIOR SECURITIES" means all capital stock of the Corporation
except for the Series B Preferred Stock.
<PAGE> 4
- 4 -
(v) "LIQUIDATION PREFERENCE" means, with respect to a share of the
Series B Preferred Stock, an amount equal to the sum of (i) the Stated Value
thereof, plus (ii) an amount equal to 30% of such Stated Value, plus (iii) the
aggregate of all accrued and unpaid dividends on such share of Series B
Preferred Stock until the most recent Dividend Payment Due Date; provided that,
in the event of an actual liquidation, dissolution or winding up of the
Corporation, the amount referred to in clause (iii) above shall be calculated by
including accrued and unpaid dividends to the actual date of such liquidation,
dissolution or winding up, rather than the Dividend Payment Due Date referred to
above.
(w) "MANDATORY CONVERSION DATE" has the meaning set forth in Section
6.9.
(x) "MARKET PRICE" per Common Share means the arithmetic mean of the
closing sale prices of the Common Shares as reported on the Amex for the ten
Trading Days immediately preceding the Conversion Date or other date of
determination, as the case may be.
(y) "OPTIONAL REDEMPTION PRICE" has the meaning set forth in Section
6.5.
(z) "OUTSTANDING", when used with reference to Common Shares or Capital
Shares (collectively, "SHARES"), means, on any date of determination, all issued
and outstanding Shares, and includes all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or indirectly owned or
held by or for the account of the Corporation or any Subsidiary of the
Corporation shall not be deemed "OUTSTANDING" for purposes hereof.
(aa) "PERSON" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(bb) "REDEMPTION DATE" has the meaning set forth in Section 6.6.
(cc) "REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated a date even herewith between the Corporation and The
Shaar Fund Ltd.
(dd) "SEC" means the United States Securities and Exchange Commission.
(ee) "SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder, all as in effect at the time.
(ff) "SECURITIES PURCHASE AGREEMENT" means that certain Securities
Purchase Agreement dated as of a date even herewith between the Corporation and
The Shaar Fund Ltd.
<PAGE> 5
- 5 -
(gg) "SERIES B PREFERRED SHARES" or "SERIES B PREFERRED STOCK" means
the shares of Series B 6% Convertible Preferred Stock, par value $0.001 per
share, of the Corporation or such other convertible Preferred Stock exchanged
therefor.
(hh) "STATED VALUE" has the meaning set forth in Article 2.
(ii) "SUBSIDIARY" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(jj) "TRADING DAY" means any day on which purchases and sales of
securities listed on the Amex are reported thereon and on which no event which
results in a material suspension or limitation of trading of the Common Shares
on the Amex has occurred.
(kk) "VALUATION EVENT" has the meaning set forth in Section 6.1.
(ll) "VALUATION PERIOD" means the period of ten Trading Days
immediately preceding the Conversion Date; provided, however, that if a
Valuation Event occurs during a Valuation Period on a date less than five
Trading Days before the Conversion Date, the Valuation Period shall be extended
until the date five Trading Days after the occurrence of the Valuation Event.
All references to "CASH" or "$" herein means currency of the United
States of America.
ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 350,000 shares of
Preferred Stock, shall be Series B 6% Convertible Preferred Stock (the "SERIES B
PREFERRED STOCK") and the stated value shall be $10 per share (the "STATED
VALUE").
ARTICLE 3
RANK
The Series B Preferred Stock shall rank prior to any other capital
stock of the Corporation.
ARTICLE 4
DIVIDENDS
(a) (i) The Holder shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds
legally available for the payment of dividends, dividends
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at the Dividend Rate on the Stated Value of each share of Series B
Preferred Stock on and as of each Dividend Payment Due Date with
respect to each Dividend Period; provided, however, that if any
dividend is not paid in full on any Dividend Payment Due Date,
dividends shall thereafter accrue and be payable at the Default
Dividend Rate on the Stated Value of each share of Series B Preferred
Stock until all accrued dividends are paid in full. Dividends on the
Series B Preferred Stock shall be cumulative from the date of issue,
whether or not declared for any reason, including if such declaration
is prohibited under any outstanding indebtedness or borrowings of the
Corporation or any of its Subsidiaries, or any other contractual
provision binding on the Corporation or any of its Subsidiaries, and
whether or not there shall be funds legally available for the payment
thereof.
(ii) Each dividend shall be payable in equal semi-annual
amounts on each Dividend Payment Due Date, commencing December 31,
1999, to the Holders of record of shares of the Series B Preferred
Stock, as they appear on the stock records of the Corporation at the
close of business on such record date, not more than 60 days or less
than ten days preceding the payment dates thereof, as shall be fixed by
the Board of Directors. Accrued and unpaid dividends for any past
Dividend Period may be declared and paid at any time, without reference
to any Dividend Payment Due Date, to Holders of record, not more than
15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(iii) At the option of the Corporation, the dividend shall be
paid either (x) in cash or (y) through the issuance of duly and validly
authorized and issued, fully paid and nonassessable shares of the
Common Stock valued at the Market Price and registered for resale in
open market transactions on the Registration Statement (as defined in
the Registration Rights Agreement), which Registration Statement shall
then be effective under the Securities Act; provided, however, that if
no funds are legally available for the payment of cash dividends on the
Series B Preferred Stock, dividends shall be paid as provided in clause
(y) above.
(b) Except as provided in Section 4(d) hereof, the Holder shall not be
entitled to any dividends in excess of the cumulative dividends, as herein
provided, on the Series B Preferred Stock.
(c) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon any Junior Securities, nor shall any
Junior Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of or pursuant to provisions contained in an employee incentive or
benefit plan (including a stock option plan) of the Corporation or any
Subsidiary), for any consideration by the Corporation, directly or indirectly,
nor shall any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any Junior Securities, unless in each case (i) the
full cumulative dividends required to be paid in cash on all outstanding shares
of the Series B Preferred Stock shall have been paid or set apart for payment
for all past Dividend Periods with respect to the Series B Preferred Stock and
(ii) sufficient funds shall have been paid or set apart for the payment
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of the dividend for the current Dividend Period with respect to the Series B
Preferred Stock.
(d) If the Corporation shall at any time or from time to time after the
Issue Date declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of the Corporation or
any of its Subsidiaries by way of dividend or spin-off) on shares of its Common
Stock, then, and in each such case, in addition to the dividend obligation of
the Corporation specified in paragraph (a) of this Article 4, the Corporation
shall declare, order, pay and make the same dividend or distribution to each
Holder of Series B Preferred Stock as would have been made with respect to the
number of Common Shares the Holder would have received had it converted all of
its Series B Preferred Shares, and exercised the Warrant held by it in full for
all the Common Shares then underlying the Warrant, immediately prior to such
dividend or distribution.
ARTICLE 5
LIQUIDATION PREFERENCE; MERGERS, CONSOLIDATIONS, ETC.
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up, no distribution shall be made to the holders of
any shares of capital stock of the Corporation upon liquidation, dissolution or
winding-up unless prior thereto, the Holders of shares of Series B Preferred
Stock, subject to this Article 5, shall have received the Liquidation Preference
with respect to each share.
(b) In case the Corporation shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another Person (where the
Company is not the survivor or where there is a change in or distribution with
respect to the Common Stock of the Company), sell, convey, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
Person, or effectuate a transaction or series of related transactions in which
more than 50% of the voting power of the Corporation is disposed of (each, a
"FUNDAMENTAL CORPORATE CHANGE") and, pursuant to the terms of such Fundamental
Corporate Change, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of any
nature whatsoever (including warrants or other subscription or purchase rights)
in addition to or in
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lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then each Holder of Series B Preferred Stock shall have the
right thereafter, at its sole option, either (x) to require the Corporation to
deem such Fundamental Corporate Change to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
Fundamental Corporate Change an amount equal to the Liquidation Preference with
respect to each outstanding share of Series B Preferred Stock in cancellation
thereof, (y) to receive the number of shares of common stock of the successor or
acquiring corporation or of the Corporation, if it is the surviving corporation,
and Other Property as is receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock into which
such Series B Preferred Stock may be converted at the Conversion Price
applicable immediately prior to such Fundamental Corporate Change or (z) require
the Corporation, or such successor, resulting or purchasing corporation, as the
case may be, to, without benefit of any additional consideration therefor, to
execute and deliver to the Holder shares of its Preferred Stock with substantial
identical rights, preferences, privileges, powers, restrictions and other terms
as the Series B Preferred Stock equal to the number of shares of Series B
Preferred Stock held by such Holder immediately prior to such Fundamental
Corporate Change; provided, that all Holders of Series B Preferred Stock shall
be deemed to elect the option set forth in clause (x) above if at least a
majority in interest of such Holders elect such option. The foregoing provisions
of this Section 5(b) shall similarly apply to successive Fundamental Corporate
Changes.
ARTICLE 6
CONVERSION OF PREFERRED STOCK
SECTION 6.1 CONVERSION; CONVERSION PRICE
At the option of the Holder, the shares of Series B Preferred Stock may
be converted, either in whole or in part, into Common Shares (calculated as to
each such conversion to the nearest 1/100th of a share) at any time and from
time to time on or following the date which is six months after the Issue Date
until the date which is nine months thereafter at a Conversion Price per share
of Common Stock equal to 85% of the Market Price; provided that on or following
the date which is nine months after the Issue Date until the date which is 12
months thereafter the Conversion Price per share of Common Stock shall be equal
to 82.5% of the Market Price; and provided, further, that on or following the
date which is 12 months after the Issue Date until the date which is 15 months
thereafter the Conversion Price per share of Common Stock shall be equal to 80%
of the Market Price; and provided, further, that on or following the date which
is 15 months after the Issue Date the Conversion Price per share of Common Stock
shall be equal to 78% of the Market Price; and provided, further, that if the
Corporation's Common Stock is delisted off the Amex for any reason, then any
remaining unconverted Series B Preferred Stock may be converted, at the sole
option of the Holder, at a Conversion Price per share of Common Stock equal to
50% of the Market Price.
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Notwithstanding the foregoing, the Holder shall only be entitled to
convert the Series B Preferred Stock at a time when the Market Price is below
$3.00 subject to the following restrictions:
(i) If the Market Price is below $3 per share for a period of
1 day up to 30 days after the Issue Date (whether or not
consecutively), the Holders of Series B Preferred Stock, in the
aggregate, shall have the right to convert up to an aggregate amount of
Series B Preferred Stock having a Stated Value equal to 20% of the
Investment Amount at a time when the Market Price is below $3.
(ii) If the Market Price is below $3 per share for a period of
31 days up to 60 days after the Issue Date (whether or not
consecutively), the Holders of Series B Preferred Stock, in the
aggregate, shall have the right to convert up to an aggregate amount of
Series B Preferred Stock having a Stated Value equal to 40% of the
Investment Amount at a time when the Market Price is below $3.
(iii) If the Market Price is below $3 per share for a period
of 61 days up to 90 days after the Issue Date (whether or not
consecutively), the Holders of Series B Preferred Stock, in the
aggregate, shall have the right to convert up to an aggregate amount of
Series B Preferred Stock having a Stated Value equal to 60% of the
Investment Amount at a time when the Market Price is below $3.
(iv) If the Market Price is below $3 per share for a period of
91 days up to 120 days after the Issue Date (whether or not
consecutively), the Holders of Series B Preferred Stock, in the
aggregate, shall have the right to convert up to an aggregate amount of
Series B Preferred Stock having a Stated Value equal to 80% of the
Investment Amount at a time when the Market Price is below $3.
(v) If the Market Price is below $3 per share for a period of
121 days up to 150 days after the Issue Date (whether or not
consecutively), the Holders of Series B Preferred Stock, in the
aggregate, shall have the right to convert up to an aggregate amount of
Series B Preferred Stock having a Stated Value equal to 100% of the
Investment Amount at a time when the Market Price is below $3.
(vi) For the purpose of this paragraph, in the event that
within 30 days after the date on which the Market Price is below $3 per
share for the first time after the Issue Date, the Market Price is $3
or more, the Market Price shall be deemed to be below $3 for 30 days.
The restrictions on conversion specified in the immediately preceding
paragraph shall not apply (A) from and after the occurrence of a Valuation Event
and (B) during any period that the Corporation's Common Stock is delisted from
the Amex (unless the Corporation's Common Stock shall be listed at such time on
the New York Stock Exchange or the Nasdaq National Market
<PAGE> 10
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System). In addition, notwithstanding anything herein to the contrary, at any
time that the restrictions on conversion specified in the immediately preceding
paragraph shall apply, the Holder shall have the right to convert any and all
shares of Series B Preferred Stock utilizing a Market Price of $3.00.
At the Corporation's option, the amount of accrued and unpaid dividends
as of the Conversion Date shall not be subject to conversion but instead may be
paid in cash as of the Conversion Date; if the Corporation elects to convert the
amount of accrued and unpaid dividends at the Conversion Date into Common Stock,
the Common Stock issued to the Holder shall be valued at the applicable
Conversion Price.
The number of shares of Common Stock due upon conversion of Series B
Preferred Stock shall be (x) the number of shares of Series B Preferred Stock to
be converted, multiplied by (y) the Stated Value plus accrued and unpaid
dividends, to the extent the Corporation does not elect to pay, and pay, accrued
and unpaid dividends in cash, and divided by (z) the applicable Conversion
Price.
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice thereof to each Holder. Notwithstanding anything
to the contrary contained herein, if a Valuation Event occurs during any
Valuation Period, the Holder may convert some or all of its Series B Preferred
Stock, at its sole option, at a Conversion Price equal to the Current Market
Price on any Trading Day during the Valuation Period.
A "VALUATION EVENT" shall mean an event in which the Corporation takes
any of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "ADDITIONAL CAPITAL
SHARES"), otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans and agreements
consistent with those presently in effect and issuances under presently
outstanding warrants, options or convertible securities;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
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(e) issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares and the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible, exchangeable or exercisable securities shall
be less than the Current Market Price in effect immediately prior to such
issuance;
(f) announces or effects a Fundamental Corporate Change;
(g) makes a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for the payment of dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
(h) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Sections 6.1(a)
through 6.1(g) hereof, inclusive, which, in the opinion of the Holder determined
in good faith, would have a material adverse effect upon the rights of the
Holder at the time of any conversion of the Preferred Stock or is reasonably
likely to result in a decrease in the Market Price.
SECTION 6.2 EXERCISE OF CONVERSION PRIVILEGE
(a) Conversion of the Series B Preferred Stock may be exercised, in
whole or in part, by the Holder by telecopying an executed and completed
Conversion Notice to the Corporation. Each date on which a Conversion Notice is
telecopied to the Corporation in accordance with the provisions of this Section
6.2 shall constitute a Conversion Date. The Corporation shall convert the
Preferred Stock and issue the Common Stock Issued at Conversion, and all voting
and other rights associated with the beneficial ownership of the Common Stock
Issued at Conversion shall vest with the Holder, effective as of the Conversion
Date at the time specified in the Conversion Notice. The Conversion Notice also
shall state the name or names (with addresses) of the Persons who are to become
the holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver the shares of Series B Preferred Stock to
the Corporation by express courier within 30 days following the date on which
the telecopied Conversion Notice has been transmitted to the Corporation. Upon
surrender for conversion, the Preferred Stock shall be accompanied by a proper
assignment thereof to the Corporation or be endorsed in blank. As promptly as
practicable after the receipt of the Conversion Notice as aforesaid, but in any
event not more than five Business Days after the Corporation's receipt of such
Conversion Notice, the Corporation shall (i) issue the Common Stock issued at
Conversion in accordance with the provisions of this Article 6, and (ii) cause
to be mailed for delivery by overnight courier to the Holder (x) a certificate
or certificate(s) representing the number of Common Shares to which the Holder
is entitled by virtue of such conversion, (y) cash, as provided in Section 6.3,
in respect of any fraction of a Common Share issuable upon such conversion and
(z) if the Corporation chooses to pay accrued and unpaid
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dividends in cash, cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series B Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series B Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.3), to surrender the Series B Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
(b) If, at any time (i) the Corporation challenges, disputes or denies
the right of the Holder hereof to effect the conversion of the Series B
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party commences any lawsuit or proceeding or otherwise asserts any claim
before any court or public or governmental authority which seeks to challenge,
deny, enjoin, limit, modify, delay or dispute the right of the Holder hereof to
effect the conversion of the Series B Preferred Stock into Common Shares, then
the Holder shall have the right, by written notice to the Corporation, to
require the Corporation to promptly redeem the Series B Preferred Stock for cash
at a redemption price equal to 135% of the Stated Value thereof together with
all accrued and unpaid dividends thereon (the "MANDATORY PURCHASE AMOUNT").
Under any of the circumstances set forth above, the Corporation shall be
responsible for the payment of all costs and expenses of the Holder, including
reasonable legal fees and expenses, as and when incurred in disputing any such
action or pursuing its rights hereunder (in addition to any other rights of the
Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. sec. 101 et seq.
(the "BANKRUPTCY COde"). In the event the Corporation is a debtor under the
Bankruptcy Code, the Corporation hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. sec. 362 in respect of the
Holder's conversion privilege. The Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. sec. 362 in
respect of the conversion of the Series B Preferred Stock. The Corporation
agrees, without cost or expense to the Holder, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. sec. 362.
SECTION 6.3 FRACTIONAL SHARES
No fractional Common Shares or scrip representing fractional Common
Shares shall be issued upon conversion of the Series B Preferred Stock. Instead
of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series B Preferred Stock, the
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Corporation shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction.
SECTION 6.4 ADJUSTMENTS TO CONVERSION RATIO
For so long as any shares of the Series B Preferred Stock are
outstanding, if the Corporation issues and sells pursuant to an exemption from
registration under the Securities Act (A) Common Shares at a purchase price on
the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price on the date of issuance thereof that
is lower than the Conversion Price for the Holder on such date, except for
warrants or options issued pursuant to employee stock option agreements or stock
incentive agreements of the Corporation, or (C) convertible, exchangeable or
exercisable securities with a right to exchange at lower than the Current Market
Price on the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements, then the Conversion Ratio shall be reduced to equal
the lowest of any such lower rates.
SECTION 6.5 OPTIONAL REDEMPTION
At any time after the date of issuance of the Series B Preferred Stock
until the Mandatory Conversion Date (as defined below), the Corporation, upon
notice delivered to the Holder as provided in Section 6.6, may redeem, in cash,
the Series B Preferred Stock in whole or in part (but only with respect to such
shares as to which the Holder has not theretofore furnished a Conversion Notice
in compliance with Section 6.2), at 120% of the Stated Value thereof (the
"OPTIONAL REDEMPTION PRICE"), together with all accrued and unpaid dividends
thereon to the date of redemption (the "REDEMPTION DATE"); provided, however,
that the Corporation may only redeem the Series B Preferred Stock under this
Section 6.5 if the Current Market Price is less than the Current Market Price on
the Issue Date. Except as set forth in this Section 6.5, the Corporation shall
not have the right to redeem the Series B Preferred Stock.
SECTION 6.6 NOTICE OF REDEMPTION
Notice of redemption pursuant to Section 6.5 shall be provided by the
Corporation to the Holder in writing (by registered mail or overnight courier at
the Holder's last address appearing in the Corporation's security registry) not
less than 10 nor more than 15 days prior to the Redemption Date, which notice
shall specify the Redemption Date and refer to Section 6.5 (including a
statement of the Current Market Price per Common Share) and this Section 6.6.
SECTION 6.7 SURRENDER OF PREFERRED STOCK
Upon any redemption of the Series B Preferred Stock pursuant to
Sections 6.5 and 6.6, the Holder shall either deliver the Series B Preferred
Stock by hand to the Corporation at its principal executive offices or surrender
the same to the Corporation at such address by express courier within 14 days
after the date that the Buyer receives payment therefore. Payment of the
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Optional Redemption Price shall be made by the Corporation to the Holder by wire
transfer of immediately available funds to such account(s) as the Holder shall
specify to the Corporation. If payment of such Optional Redemption Price is not
made in full by the Redemption Date, the Holder shall again have the right to
convert the Series B Preferred Stock as provided in Article 6 hereof.
SECTION 6.8 MANDATORY CONVERSION
On the third anniversary of the Issue Date (the "MANDATORY CONVERSION
DATE"), the Corporation shall convert all Series B Preferred Stock outstanding,
at the Conversion Price utilizing the Stated Value (plus accrued and unpaid
dividends) as the value of each share of Series B Preferred Stock, into Common
Stock which is registered for resale in open market transactions on the
Registration Statement (as defined in the Registration Rights Agreement), which
Registration Statement shall then be effective under the Securities Act.
SECTION 6.9 CERTAIN CONVERSION LIMITATIONS
(a) Notwithstanding anything herein to the contrary, the Holder shall
not have the right, and the Corporation shall not have the obligation, to
convert all or any portion of the Series B Preferred Stock (and the Corporation
shall not have the right to pay dividends on the Series B Preferred Stock in
shares of Common Stock) if and to the extent that the issuance to the Holder of
shares of Common Stock upon such conversion (or payment of dividends) would
result in the Holder being deemed the "beneficial owner" of more than 5% of the
then Outstanding shares of Common Stock within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then Outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"REDEMPTION SHARES") of Series B Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
Outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series B Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series B Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) 125% of the Stated Value
of the Redemption Shares and (ii) any accrued and unpaid dividends to the date
of such redemption.
(b) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the rules of the Amex or
such other stock market with which the Corporation shall be required to comply,
but only to the extent required thereby, the Corporation shall not issue shares
of Common Stock (i) upon conversion of any shares of Series B Preferred Stock or
(ii) as a dividend on the Series B Preferred Stock, if such issuance of Common
Stock, when added to the number of shares of Common Stock previously issued by
the Corporation
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(i) upon conversion of shares of the Series B Preferred Stock, (ii) upon
exercise of the Warrants issued pursuant to the terms of the Securities Purchase
Agreement and (iii) in payment of dividends on the Series B Preferred Stock,
would equal or exceed 20% of the number of shares of the Corporation's Common
Stock which were issued and Outstanding on the Issue Date (the "MAXIMUM ISSUANCE
AMOUNT"). In the event that a properly executed Conversion Notice is received by
the Corporation which would require the Corporation to issue shares of Common
Stock equal to or in excess of the Maximum Issuance Amount, the Corporation
shall honor such conversion request by (i) converting the number of shares of
Series B Preferred Stock stated in the Conversion Notice not in excess of the
Maximum Issuance Amount and (ii) redeeming the number of shares of Series B
Preferred Stock stated in the Conversion Notice equal to or in excess of the
Maximum Issuance Amount in cash at a price equal to 125% of the Stated Value of
the shares of Series B Preferred Stock to be so redeemed, together with all
accrued and unpaid dividends thereon. In the event that the Corporation shall
elect to pay a dividend in shares of Common Stock which would require the
Corporation to issue shares of Common Stock equal to or in excess of the Maximum
Issuance Amount, the Corporation shall pay (i) a dividend in shares of Common
Stock equal to one less than an amount which would result in the Corporation
issuing shares equal to the Maximum Issuance Amount and (ii) the balance of the
dividend in cash.
ARTICLE 7
VOTING RIGHTS
The Holders of the Series B Preferred Stock have no voting power,
except as otherwise provided by the Private Corporation Law of the State of
Nevada ("NPCL"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder of
Series B Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding, the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
To the extent that under the NPCL the vote of the Holders of the Series
B Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least 85% of the outstanding
<PAGE> 16
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shares of Series B Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of 85% of the outstanding shares of
Series B Preferred Stock (except as a higher percentage may be required under
the NPCL) shall constitute the approval of such action by the class. To the
extent that under the NPCL Holders of the Series B Preferred Stock are entitled
to vote on a matter with holders of Common Stock, voting together as one class,
each share of Series B Preferred Stock shall be entitled to a number of votes
equal to the number of shares of Common Stock into which it is then convertible
using the record date for the taking of such vote of shareholders as the date as
of which the Conversion Price is calculated. Holders of the Series B Preferred
Stock shall be entitled to notice of all shareholder meetings or written
consents (and copies of proxy materials and other information sent to
shareholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's by-laws and the NPCL.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series B Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the NPCL) of the Holders of at least 85% of the then
outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series
B Preferred Stock;
(b) create any new class or series of capital stock having a preference
over the Series B Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("SENIOR SECURITIES") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series B Preferred Stock;
(c) increase the authorized number of shares of Series B Preferred
Stock; or
(d) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the Holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event Holders of least 85% of the then outstanding shares of
Series B Preferred Stock agree to allow the Corporation to alter or change the
rights, preferences or privileges of the shares of Series Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series B Preferred Stock,
then the Corporation will deliver notice of such approved change to the Holders
of the Series Preferred Stock that did not agree to such alteration or change
(the "DISSENTING HOLDERS") and Dissenting Holders shall have the right for a
period of 30 days to convert pursuant to the terms of this Certificate of
Designation as in effect prior to such alteration or change or continue to hold
their shares of Series B Preferred Stock.
<PAGE> 17
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Notwithstanding anything to the contrary herein, if at any time the
Corporation shall "spin-off" certain of its assets or businesses by
transferring, directly or indirectly, such assets or businesses to a Subsidiary
of the Corporation ("SPINCO") and making a dividend (the "SPIN-OFF DIVIDEND") to
the Corporation's stockholders of the shares of capital stock of Spinco, then
prior to making the Spin-off Dividend, the Corporation shall cause Spinco to
issue to each Holder that number of shares of preferred stock of Spinco with
substantially identical rights, preferences, privileges, powers, restrictions
and other terms as the Series B Preferred Stock equal to the number of shares of
Series B Preferred Shares held by such Holder immediately prior to the Spin-off
Dividend.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Loss, Theft, Destruction of Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of shares of Series B Preferred Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series B Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series B Preferred Stock, new shares of Series
B Preferred Stock of like tenor. The Series B Preferred Stock shall be held and
owned upon the express condition that the provisions of this Section 9.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series B Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
SECTION 9.2 Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the Series B
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series B Preferred Stock
for the purpose of receiving payment of dividends on the Series B Preferred
Stock, for the conversion of the Series B Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series B Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
SECTION 9.3 Notice of Certain Events
In the case of the occurrence of any event described in Sections 5(b),
6.5 or 6.6 of this Certificate of Designation, the Corporation shall cause to be
mailed to the Holder of the Series B Preferred Stock at its last address as it
appears in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such 20 days
<PAGE> 18
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notice is not possible, at the earliest possible date prior to any such record,
effective or expiration date), a notice stating (x) the date on which a record
is to be taken for the purpose of such corporate action, or if a record is not
to be taken, the date as of which the Holders of record of Series B Preferred
Stock to be entitled to such dividend, distribution, issuance or granting of
rights, options or warrants are to be determination or the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and (y) the date as
of which it is expected that Holders of record of Series B Preferred Stock will
be entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding-up.
SECTION 9.4 Register
The Corporation shall keep at its principal office a register in which
the Corporation shall provide for the registration of the Series B Preferred
Stock. Upon any transfer of the Series B Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the Series B
Preferred Stock register.
SECTION 9.5 Withholding
To the extent required by applicable law, the Corporation may withhold
amounts for or on account of any taxes imposed or levied by or on behalf of any
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Series B Preferred Stock.
SECTION 9.6 Headings
The headings of the Articles and Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
SECTION 9.7 Severability
If any provision of this Certificate of Designation, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (ii) the
remainder of this Certificate of Designation and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 19
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its duly authorized officers on October 12, 1999.
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
Name: Jeffrey I. Dreben
Title: President
By: /s/ Robert Nally
Name: Robert Nally
Title: Secretary
<PAGE> 20
ANNEX I
FORM OF CONVERSION NOTICE
TO: CVF Technologies Corporation
916 Center Street
Lewiston, New York 14092
The undersigned owner of this Series B 6% Convertible
Preferred Stock (the "SERIES B PREFERRED STOCK") issued by CVF Technologies
Corporation (the "CORPORATION") hereby irrevocably exercises its option to
convert __________ shares of the Series B Preferred Stock into shares of the
common stock, par value $0.001 per share ("COMMON STOCK"), of the Corporation in
accordance with the terms of the Certificate of Designation. The undersigned
hereby instructs the Corporation to convert the number of shares of the Series B
Preferred Stock specified above into Shares of Common Stock Issued at Conversion
in accordance with the provisions of Article 6 of the Certificate of
Designation. The undersigned directs that the Common Stock issuable and
certificates therefor deliverable upon conversion, the Series B Preferred Stock
recertificated, if any, not being surrendered for conversion hereby, together
with any check in payment for fractional Common Stock, be issued in the name of
and delivered to the undersigned unless a different name has been indicated
below. All capitalized terms used and not defined herein have the respective
meanings assigned to them in the Certificate of Designation. So long as the
Series B Preferred Stock shall have been surrendered for conversion hereby, the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a Holder
of the Series B Preferred Stock shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion shall be issuable shall be
deemed to have become the holder or holders of record of the Common Shares
represented thereby and all voting and other rights associated with the
beneficial ownership of such Common Shares shall at such time vest with such
Person or Persons.
Date and time:_______________________________
_______________________________________
Signature
(vii) Fill in for registration of Series B Preferred Stock:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Please print name and address (including zip code number)
<PAGE> 1
Exhibit 4.1
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 215,384
Warrant No. 1
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
CVF Technologies Corporation
THIS IS TO CERTIFY THAT The Shaar Fund Ltd., or registered
assigns, is entitled, at any time from the Closing Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from CVF
Technologies Corporation, a Nevada corporation (the "COMPANY"), 215,384 shares
of Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
per share equal to 110% of the Market Price, subject to adjustment as specified
herein, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
1. DEFINITIONS
As used in this Common Stock Purchase Warrant (this
"WARRANT"), the following terms have the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"BOOK VALUE" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
as of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by Ernst & Young LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
"BUSINESS DAY" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
<PAGE> 2
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"CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Common Stock, par value $0.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date, as set forth in
the first paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall mean October 8, 2002.
"FULLY DILUTED OUTSTANDING" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
<PAGE> 3
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"HOLDER" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"MARKET PRICE" per Common Share means the average of the
closing prices of the Common Shares as reported on the Amex for the five trading
days immediately preceding the Closing Date.
"OTHER PROPERTY" shall have the meaning set forth in Section
4.4.
"OUTSTANDING" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement dated a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock
which are, or which upon their issuance on their exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities
Purchase Agreement dated as of a date even herewith between the Company and The
Shaar Fund Ltd., as it may be amended from time to time.
"TRANSFER" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section
9.2.
"WARRANT PRICE" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
<PAGE> 4
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"WARRANT STOCK" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
"WARRANTS" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE
From and after the Closing Date and until 5:00 p.m., New York
time, on the Expiration Date, Holder may exercise this Warrant, on any Business
Day, for all or any part of the number of shares of Common Stock purchasable
hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 916 Center Street,
Lewiston, New York 14092 or at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) to the extent such exercise is not being effected through a
Cashless Exercise, payment of the Warrant Price in cash or wire transfer or
cashier's check drawn on a United States bank and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, the Company shall, as promptly as practicable, and in any event within
five Business Days thereafter, execute or cause to be executed and deliver or
cause to be delivered to Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall request in the
notice and shall be registered in the name of Holder or, subject to Section 9,
such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the notice, together with the cash or check or
checks and this Warrant, is received by the Company as described above and all
taxes required to be paid by Holder, if any, pursuant to Section 2.2 prior to
the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name
<PAGE> 5
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of any Person who acquired this Warrant (or part hereof) or any Warrant Stock
otherwise than in accordance with this Warrant.
Simultaneously with the exercise of this Warrant, payment in
full of the Warrant Price may be made, at the option of the Holder, (i) by
payment of the Warrant Price in cash or by wire transfer or cashier's check
drawn on a United States bank, (ii) by the surrender (which surrender shall be
evidenced by cancellation of the number of Warrants represented by any
certificate(s) evidencing the Warrants (the "WARRANT CERTIFICATE") presented in
connection with a Cashless Exercise of a Warrant or Warrants (represented by one
or more Warrant Certificates), and without payment of the Warrant Price in cash,
for such number of shares equal to the product of (1) the number of shares for
which such Warrant is exercisable with payment in cash of the Warrant Price as
of the date of exercise and (2) the Cashless Exercise Ratio or (iii) by any
combination of (i) and (ii). For purposes of this Agreement, the "CASHLESS
EXERCISE RATIO" shall equal a fraction, the numerator of which is the excess of
the Current Market Price per share of the Common Stock on the date of exercise
over the Warrant Price per share as of the date of exercise and the denominator
of which is the Current Market Price per share of the Common Stock on the date
of exercise. An exercise of a Warrant in accordance with the immediately
preceding sentences is herein called a "CASHLESS EXERCISE." Upon surrender of a
Warrant Certificate representing more than one Warrant in connection with the
Holder's option to elect a Cashless Exercise, the number of shares deliverable
upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio
multiplied by the product of (a) the number of Warrants that the Holder
specifies is to be exercised pursuant to a Cashless Exercise and (b) the number
of shares for which such Warrant is then exercisable (without giving effect to
the Cashless Exercise option). All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
2.2 PAYMENT OF TAXES AND CHARGES
All shares of Common Stock issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
2.3 FRACTIONAL SHARES
The Company shall not be required to issue a fractional share
of Common Stock upon exercise of any Warrant. As to any fraction of a share
which Holder would otherwise be entitled to
<PAGE> 6
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purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Market
Price per share of Common Stock as of the Closing Date.
2.4 CONTINUED VALIDITY
A holder of shares of Common Stock issued upon the exercise of
this Warrant, in whole or in part (other than a holder who acquires such shares
after the same have been publicly sold pursuant to a Registration Statement
under the Securities Act or sold pursuant to Rule 144 thereunder), shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 9, 10 and 14 of this Warrant.
The Company will, at the time of exercise of this Warrant, in whole or in part,
upon the request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all such
rights; provided, however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER
Subject to compliance with Section 9, transfer of this Warrant
and all rights hereunder, in whole or in part, shall be registered on the books
of the Company to be maintained for such purpose, upon surrender of this Warrant
at the principal office of the Company referred to in Section 2.1 or the office
or agency designated by the Company pursuant to Section 12, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
3.2 DIVISION AND COMBINATION
Subject to Section 9, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office or agency
of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1 and with Section 9, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
<PAGE> 7
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3.3 EXPENSES
The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrants or Warrants under this
Section 3.
3.4 MAINTENANCE OF BOOKS
The Company agrees to maintain, at its aforesaid office or
agency, books for the registration and the registration of transfer of the
Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS
If at any time the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive any dividend or
other distribution of:
<PAGE> 8
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(a) cash;
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any
<PAGE> 9
- 9 -
dispute shall be resolved by an investment banking firm of recognized national
standing selected by the Company and acceptable to Holder.
4.4 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS
In case the Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.4, "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.4 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.5 Other Action Affecting Common Stock
In case at any time or from time to time the Company shall
take any action in respect of its Common Stock, other than any action described
in this Section 4, which would have a materially adverse effect upon the rights
of Holder, the number of shares of Common Stock and/or the purchase price
thereof shall be adjusted in such manner as may be equitable in the
circumstances,
<PAGE> 10
- 10 -
as determined in good faith by the Board of Directors of the Company.
4.6 Certain Limitations
Notwithstanding anything herein to the contrary, the Company
agrees not to enter into any transaction which, by reason of any adjustment
hereunder, would cause the Current Warrant Price to be less than the par value
per share of Common Stock.
5. NOTICES TO HOLDER
5.1 Notice of Adjustments
Whenever the number of shares of Common Stock for which this
Warrant is exercisable, or whenever the price at which a share of such Common
Stock may be purchased upon exercise of the Warrants, shall be adjusted pursuant
to Section 4, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights referred to in Section 4.2), specifying the
number of shares of Common Stock for which this Warrant is exercisable and (if
such adjustment was made pursuant to Section 4.4 or 4.5) describing the number
and kind of any other shares of stock or Other Property for which this Warrant
is exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by Holder.
5.2 Notice of Corporate Action
If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
<PAGE> 11
- 11 -
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
<PAGE> 12
- 12 -
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of record of such holders, the Company will in
each case take such a record and will take such record as of the close of
business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1 Restrictive Legend
(a) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration
<PAGE> 13
- 13 -
statement relating to such securities has been filed by the Company and declared
effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES
AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
9.2 Notice of Proposed Transfers
Prior to any Transfer or attempted Transfer of any Warrants or
any shares of Restricted Common Stock, the Holder shall give ten days' prior
written notice (a "TRANSFER NOTICE") to the Company of Holder's intention to
effect such Transfer, describing the manner and circumstances of the proposed
Transfer, and obtain from counsel to Holder who shall be reasonably satisfactory
to the Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(a), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in Section 9.1(b), unless
<PAGE> 14
- 14 -
in the opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act. Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2(a) that such opinion is reasonably satisfactory.
9.3 REQUIRED REGISTRATION
Pursuant to the terms and conditions set forth in Registration
Rights Agreement, the Company shall prepare and file with the Commission not
later than the 90th day after the Closing Date, a Registration Statement
relating to the offer and sale of the Common Stock issuable upon exercise of the
Warrants and shall use its best efforts to cause the Commission to declare such
Registration Statement effective under the Securities Act as promptly as
practicable but no later than 180 days after the Closing Date.
9.4 TERMINATION OF RESTRICTIONS
Notwithstanding the foregoing provisions of Section 9, the
restrictions imposed by this Section upon the transferability of the Warrants,
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE
WITHIN WARRANT CONTAINED IN SECTION 9 HEREOF
TERMINATED ON __________, _____, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
<PAGE> 15
- 15 -
9.5 LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any
securities exchange or quotation system, it will, at its expense, list thereon,
maintain and, when necessary, increase such listing of, all shares of Common
Stock issued or, to the extent permissible under the applicable securities
exchange rules, issuable upon the exercise of this Warrant so long as any shares
of Common Stock shall be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
<PAGE> 16
- 16 -
14. MISCELLANEOUS
14.1 NONWAIVER AND EXPENSES
No course of dealing or any delay or failure to exercise any
right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2 NOTICE GENERALLY
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three days after the date of deposit in the United States mails, as
follows:
(a) if to the Company, to:
CVF Technologies Corporation
916 Center Street
Lewiston, NY 14092
Attention: Jeffrey I. Dreben
(716) 754-7883
(716) 754-7606 (Fax)
with a copy to:
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Attention: John J. Zak, Esq.
(716) 848-1253
(716) 849-0349 (Fax)
<PAGE> 17
- 17 -
(b) if to the Holder, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7771
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3 INDEMNIFICATION
The Company agrees to indemnify and hold harmless Holder from
and against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
14.4 REMEDIES
Holder in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under Section 9 of this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of Section 9 of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
<PAGE> 18
- 18 -
14.5 SUCCESSORS AND ASSIGNS
Subject to the provisions of Sections 3.1 and 9, this Warrant
and the rights evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
14.6 AMENDMENT
This Warrant and all other Warrants may be modified or amended
or the provisions hereof waived with the written consent of the Company and
Holder.
14.7 SEVERABILITY
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall only be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.8 HEADINGS
The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
14.9 GOVERNING LAW
This Warrant shall be governed by the laws of the State of New
York, without regard to the provisions thereof relating to conflicts of law.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 19
- 19 -
In Witness Whereof, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: October 8, 1999
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
-------------------------------
Name: Jeffrey I. Dreben
Title: President
Attest:
By: /s/ Robert Nally
---------------------------------
Name: Robert Nally
Title: Secretary
<PAGE> 20
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of __________ shares of Common Stock of
CVF Technologies Corporation and herewith makes payment therefor, all at the
price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to
________________________________________________________________________________
whose address is
________________________________________________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
---------------------------------------
(Name of Registered Owner)
---------------------------------------
(Signature of Registered Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription
must correspond with the name as written
upon the face of the within Warrant in every
particular, without alteration or
enlargement or any change whatsoever.
<PAGE> 21
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- ---------------------------- ------------
and does hereby irrevocably constitute and appoint
________________________________________________________________________________
attorney-in-fact to register such transfer on the books of CVF Technologies
Corporation maintained for the purpose, with full power of substitution in the
premises.
Dated:____________________________________
---------------------------------------
(Print Name)
---------------------------------------
(Signature)
---------------------------------------
(Print Name of Witness)
---------------------------------------
(Witness's Signature)
NOTICE: The signature on this assignment
must correspond with the name as written
upon the face of the within Warrant in every
particular, without alteration or
enlargement or any change whatsoever.
<PAGE> 1
Exhibit 4.2
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
COMMON STOCK PURCHASE WARRANT
To Purchase 20,364 Shares of Common Stock of
CVF Technologies Corporation
This Is To Certify That Amin I. Ismail, or registered assigns, is
entitled, at any time from the Closing Date (as hereinafter defined) to the
Expiration Date (as hereinafter defined), to purchase from CVF Technologies
Corporation, a Nevada corporation (the "COMPANY"), 20,364 shares of Common Stock
(as hereinafter defined and subject to adjustment as provided herein), in whole
or in part, including fractional parts, at a purchase price per share equal to
110% of the Market Price (as hereinafter defined), subject to adjustment as
specified herein, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
1. DEFINITIONS
As used in this Common Stock Purchase Warrant (this "WARRANT"), the
following terms have the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"BOOK VALUE" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
(assuming the payment of the exercise prices for such shares) by Ernst & Young
LLP or any other firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"CLOSING DATE" shall have the meaning set forth in the Securities
Purchase Agreement.
<PAGE> 2
- 2 -
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Common Stock, par value $0.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date, as set forth in the
first paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall means October 8, 2002.
"FULLY DILUTED OUTSTANDING" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
<PAGE> 3
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"HOLDER" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"MARKET PRICE" per Common Share means the average of the closing prices
of the Common Shares as reported on the Amex for the five trading days
immediately preceding the Closing Date.
"OTHER PROPERTY" shall have the meaning set forth in Section 4.4.
"OUTSTANDING" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock which are,
or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"TRANSFER" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section 9.2.
"WARRANT PRICE" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"WARRANT STOCK" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
<PAGE> 4
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"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE
From and after the Closing Date and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 916 Center Street, Lewiston,
New York 14092 or at the office or agency designated by the Company pursuant to
Section 12, (i) a written notice of Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
(ii) to the extent such exercise is not being effected through a Cashless
Exercise, payment of the Warrant Price in cash or wire transfer or cashier's
check drawn on a United States bank and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A duly executed by Holder or its agent or attorney. Upon
receipt of the items referred to in clauses (i), (ii) and (iii) above, the
Company shall, as promptly as practicable, and in any event within five Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Section 9, such other
name as shall be designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any
<PAGE> 5
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Person who acquired this Warrant (or part hereof) or any Warrant Stock otherwise
than in accordance with this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of
the Warrant Price may be made, at the option of the Holder, (i) by payment of
the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank, (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any certificate(s)
evidencing the Warrants (the "WARRANT CERTIFICATE") presented in connection with
a Cashless Exercise of a Warrant or Warrants (represented by one or more Warrant
Certificates), and without payment of the Warrant Price in cash, for such number
of shares equal to the product of (1) the number of shares for which such
Warrant is exercisable with payment in cash of the Warrant Price as of the date
of exercise and (2) the Cashless Exercise Ratio or (iii) by any combination of
(i) and (ii). For purposes of this Agreement, the "CASHLESS EXERCISE RATIO"
shall equal a fraction, the numerator of which is the excess of the Current
Market Price per share of the Common Stock on the date of exercise over the
Warrant Price per share as of the date of exercise and the denominator of which
is the Current Market Price per share of the Common Stock on the date of
exercise. An exercise of a Warrant in accordance with the immediately preceding
sentences is herein called a "CASHLESS EXERCISE." Upon surrender of a Warrant
Certificate representing more than one Warrant in connection with the Holder's
option to elect a Cashless Exercise, the number of shares deliverable upon a
Cashless Exercise shall be equal to the Cashless Exercise Ratio multiplied by
the product of (a) the number of Warrants that the Holder specifies is to be
exercised pursuant to a Cashless Exercise and (b) the number of shares for which
such Warrant is then exercisable (without giving effect to the Cashless Exercise
option). All provisions of this Agreement shall be applicable with respect to an
exercise of a Warrant Certificate pursuant to a Cashless Exercise for less than
the full number of Warrants represented thereby.
2.2 PAYMENT OF TAXES AND CHARGES
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
<PAGE> 6
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2.3 FRACTIONAL SHARES
The Company shall not be required to issue a fractional share of Common
Stock upon exercise of any Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
2.4 CONTINUED VALIDITY
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be
entitled with respect to such shares to all rights to which it would have been
entitled as Holder under Sections 9, 10 and 14 of this Warrant. The Company
will, at the time of exercise of this Warrant, in whole or in part, upon the
request of Holder, acknowledge in writing, in form reasonably satisfactory to
Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
<PAGE> 7
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3.2 DIVISION AND COMBINATION
Subject to Section 9, this Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
3.3 EXPENSES
The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrants or Warrants under this Section 3.
3.4 MAINTENANCE OF BOOKS
The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
<PAGE> 8
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then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS
If at any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
<PAGE> 9
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(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Company and acceptable to Holder.
4.4 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be
<PAGE> 10
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performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of Common Stock for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.4,
"COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.4 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.5 OTHER ACTION AFFECTING COMMON STOCK
In case at any time or from time to time the Company shall take any
action in respect of its Common Stock, other than any action described in this
Section 4, which would have a materially adverse effect upon the rights of
Holder, the number of shares of Common Stock and/or the purchase price thereof
shall be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
4.6 CERTAIN LIMITATIONS
Notwithstanding anything herein to the contrary, the Company agrees not
to enter into any transaction which, by reason of any adjustment hereunder,
would cause the Current Warrant Price to be less than the par value per share of
Common Stock.
5. NOTICES TO HOLDER
5.1 NOTICE OF ADJUSTMENTS
Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.2), specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and kind
<PAGE> 11
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of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by Holder.
5.2 NOTICE OF CORPORATE ACTION
If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
<PAGE> 12
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6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
<PAGE> 13
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8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1 RESTRICTIVE LEGEND
(a) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
<PAGE> 14
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(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES
AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
9.2 NOTICE OF PROPOSED TRANSFERS
Prior to any Transfer or attempted Transfer of any Warrants or any
shares of Restricted Common Stock, the Holder shall give ten days' prior written
notice (a "TRANSFER NOTICE") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(a), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in Section 9.1(b), unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act. Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2(a) that such opinion is reasonably satisfactory.
9.3 REQUIRED REGISTRATION
The Company shall prepare and file with the Commission not later than
the 90th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable
thereafter.
9.4 TERMINATION OF RESTRICTIONS
Notwithstanding the foregoing provisions of Section 9, the restrictions
imposed by this Section upon the transferability of the Warrants, the Warrant
Stock and the Restricted Common Stock (or Common Stock issuable upon the
exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant
<PAGE> 15
- 15 -
Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii)
when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such shares may be transferred without registration
thereof under the Securities Act. Whenever the restrictions imposed by Section 9
shall terminate as to this Warrant, as hereinabove provided, the Holder hereof
shall be entitled to receive from the Company upon written request of the
Holder, at the expense of the Company, a new Warrant bearing the following
legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
__________, _____, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.5 LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the
<PAGE> 16
- 16 -
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. MISCELLANEOUS
14.1 NONWAIVER AND EXPENSES
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2 NOTICE GENERALLY
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
<PAGE> 17
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(a) if to the Company, to:
CVF Technologies Corporation
916 Center Street
Lewiston, NY 14092
Attention: Jeffrey I. Dreben
(716) 754-7883
(716) 754-7606 (Fax)
with a copy to:
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Attention: John J. Zak, Esq.
(716) 848-1253
(716) 849-0349 (Fax)
(b) if to the Holder, to:
Amin I. Ismail
c/o Avalon Research Group Inc.
1900 Glades Road, Suite 201
Boca Raton, Florida 33431
Attention: Andrew Ismail
(561) 447-4044
(561) 447-8809 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3 INDEMNIFICATION
The Company agrees to indemnify and hold harmless Holder from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
<PAGE> 18
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14.4 REMEDIES
Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Section 9 of this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
14.5 SUCCESSORS AND ASSIGNS
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
14.6 AMENDMENT
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
14.7 SEVERABILITY
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
14.8 HEADINGS
The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
14.9 GOVERNING LAW
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflicts of law.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 19
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In Witness Whereof, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: October 8, 1999
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
----------------------------------
Name: Jeffrey I. Dreben
Title: President
Attest:
By: /s/ Robert Nally
----------------------------
Name: Robert Nally
Title: Secretary
<PAGE> 20
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of __________ shares of Common Stock of CVF
Technologies Corporation and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to
whose address is ______________________________________________________
and, if such shares of Common Stock shall not include all of the shares
of Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
-----------------------------------------
(Name of Registered Owner)
-----------------------------------------
(Signature of Registered Owner)
-----------------------------------------
(Street Address)
-----------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this
subscription must correspond with
the name as written upon the face of
the within Warrant in every
particular, without alteration or
enlargement or any change
whatsoever.
<PAGE> 21
EXHIBIT B
ASSIGNMENT FORM
For Value Received the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
---------------------------- ------------
and does hereby irrevocably constitute and appoint______________________________
attorney-in-fact to register such transfer on the books of CVF Technologies
Corporation maintained for the purpose, with full power of substitution in the
premises.
Dated:___________________
-----------------------------------------
(Print Name)
-----------------------------------------
(Signature)
-----------------------------------------
(Print Name of Witness)
-----------------------------------------
(Witness's Signature)
NOTICE: The signature on this assignment must
correspond with the name as written upon the
face of the within Warrant in every particular,
without alteration or enlargement or any change
whatsoever.
<PAGE> 1
Exhibit 4.3
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
COMMON STOCK PURCHASE WARRANT
To Purchase 81,454 Shares of Common Stock of
CVF Technologies Corporation
This Is To Certify That Avalon Research Group Inc., or registered
assigns, is entitled, at any time from the Closing Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from CVF
Technologies Corporation, a Nevada corporation (the "COMPANY"), 81,454 shares of
Common Stock (as hereinafter defined and subject to adjustment as provided
herein), in whole or in part, including fractional parts, at a purchase price
per share equal to 110% of the Market Price (as hereinafter defined), subject to
adjustment as specified herein, all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Common Stock Purchase Warrant (this "WARRANT"), the
following terms have the respective meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"BOOK VALUE" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
(assuming the payment of the exercise prices for such shares) by Ernst & Young
LLP or any other firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"CLOSING DATE" shall have the meaning set forth in the Securities
Purchase Agreement.
<PAGE> 2
- 2 -
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Common Stock, par value $0.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date, as set forth in the
first paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall means October 8, 2002.
"FULLY DILUTED OUTSTANDING" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
<PAGE> 3
- 3 -
"HOLDER" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"MARKET PRICE" per Common Share means the average of the closing prices
of the Common Shares as reported on the Amex for the five trading days
immediately preceding the Closing Date.
"OTHER PROPERTY" shall have the meaning set forth in Section 4.4.
"OUTSTANDING" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock which are,
or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and The Shaar
Fund Ltd., as it may be amended from time to time.
"TRANSFER" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section 9.2.
"WARRANT PRICE" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"WARRANT STOCK" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
<PAGE> 4
- 4 -
"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE
From and after the Closing Date and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 916 Center Street, Lewiston,
New York 14092 or at the office or agency designated by the Company pursuant to
Section 12, (i) a written notice of Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
(ii) to the extent such exercise is not being effected through a Cashless
Exercise, payment of the Warrant Price in cash or wire transfer or cashier's
check drawn on a United States bank and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A duly executed by Holder or its agent or attorney. Upon
receipt of the items referred to in clauses (i), (ii) and (iii) above, the
Company shall, as promptly as practicable, and in any event within five Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Section 9, such other
name as shall be designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any
<PAGE> 5
- 5 -
Person who acquired this Warrant (or part hereof) or any Warrant Stock otherwise
than in accordance with this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of
the Warrant Price may be made, at the option of the Holder, (i) by payment of
the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank, (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any certificate(s)
evidencing the Warrants (the "WARRANT CERTIFICATE") presented in connection with
a Cashless Exercise of a Warrant or Warrants (represented by one or more Warrant
Certificates), and without payment of the Warrant Price in cash, for such number
of shares equal to the product of (1) the number of shares for which such
Warrant is exercisable with payment in cash of the Warrant Price as of the date
of exercise and (2) the Cashless Exercise Ratio or (iii) by any combination of
(i) and (ii). For purposes of this Agreement, the "CASHLESS EXERCISE RATIO"
shall equal a fraction, the numerator of which is the excess of the Current
Market Price per share of the Common Stock on the date of exercise over the
Warrant Price per share as of the date of exercise and the denominator of which
is the Current Market Price per share of the Common Stock on the date of
exercise. An exercise of a Warrant in accordance with the immediately preceding
sentences is herein called a "CASHLESS EXERCISE." Upon surrender of a Warrant
Certificate representing more than one Warrant in connection with the Holder's
option to elect a Cashless Exercise, the number of shares deliverable upon a
Cashless Exercise shall be equal to the Cashless Exercise Ratio multiplied by
the product of (a) the number of Warrants that the Holder specifies is to be
exercised pursuant to a Cashless Exercise and (b) the number of shares for which
such Warrant is then exercisable (without giving effect to the Cashless Exercise
option). All provisions of this Agreement shall be applicable with respect to an
exercise of a Warrant Certificate pursuant to a Cashless Exercise for less than
the full number of Warrants represented thereby.
2.2 PAYMENT OF TAXES AND CHARGES
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
<PAGE> 6
- 6 -
2.3 FRACTIONAL SHARES
The Company shall not be required to issue a fractional share of Common
Stock upon exercise of any Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
2.4 CONTINUED VALIDITY
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be
entitled with respect to such shares to all rights to which it would have been
entitled as Holder under Sections 9, 10 and 14 of this Warrant. The Company
will, at the time of exercise of this Warrant, in whole or in part, upon the
request of Holder, acknowledge in writing, in form reasonably satisfactory to
Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
<PAGE> 7
- 7 -
3.2 DIVISION AND COMBINATION
Subject to Section 9, this Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
3.3 EXPENSES
The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrants or Warrants under this Section 3.
3.4 MAINTENANCE OF BOOKS
The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS
If at any time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
<PAGE> 8
- 8 -
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS
If at any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 4.1.
4.3 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
<PAGE> 9
- 9 -
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Company and acceptable to Holder.
4.4 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be
<PAGE> 10
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performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of Common Stock for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.4,
"COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.4 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
4.5 OTHER ACTION AFFECTING COMMON STOCK
In case at any time or from time to time the Company shall take any
action in respect of its Common Stock, other than any action described in this
Section 4, which would have a materially adverse effect upon the rights of
Holder, the number of shares of Common Stock and/or the purchase price thereof
shall be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
4.6 CERTAIN LIMITATIONS
Notwithstanding anything herein to the contrary, the Company agrees not
to enter into any transaction which, by reason of any adjustment hereunder,
would cause the Current Warrant Price to be less than the par value per share of
Common Stock.
5. NOTICES TO HOLDER
5.1 NOTICE OF ADJUSTMENTS
Whenever the number of shares of Common Stock for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of the Warrants, shall be adjusted pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.2), specifying the number of shares of
Common Stock for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and kind
<PAGE> 11
- 11 -
of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
Section 14.2. The Company shall keep at its office or agency designated pursuant
to Section 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by Holder.
5.2 NOTICE OF CORPORATE ACTION
If at any time:
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
<PAGE> 12
- 12 -
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
<PAGE> 13
- 13 -
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this Section 9.
9.1 RESTRICTIVE LEGEND
(a) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows until such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
<PAGE> 14
- 14 -
(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES
AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
9.2 NOTICE OF PROPOSED TRANSFERS
Prior to any Transfer or attempted Transfer of any Warrants or any
shares of Restricted Common Stock, the Holder shall give ten days' prior written
notice (a "TRANSFER NOTICE") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(a), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in Section 9.1(b), unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act. Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2(a) that such opinion is reasonably satisfactory.
9.3 REQUIRED REGISTRATION
The Company shall prepare and file with the Commission not later than
the 90th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable
thereafter.
9.4 TERMINATION OF RESTRICTIONS
Notwithstanding the foregoing provisions of Section 9, the restrictions
imposed by this Section upon the transferability of the Warrants, the Warrant
Stock and the Restricted Common Stock (or Common Stock issuable upon the
exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant
<PAGE> 15
- 15 -
Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii)
when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such shares may be transferred without registration
thereof under the Securities Act. Whenever the restrictions imposed by Section 9
shall terminate as to this Warrant, as hereinabove provided, the Holder hereof
shall be entitled to receive from the Company upon written request of the
Holder, at the expense of the Company, a new Warrant bearing the following
legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
__________, _____, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.5 LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the
<PAGE> 16
- 16 -
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. MISCELLANEOUS
14.1 NONWAIVER AND EXPENSES
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2 NOTICE GENERALLY
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
<PAGE> 17
- 17 -
(a) if to the Company, to:
CVF Technologies Corporation
916 Center Street
Lewiston, NY 14092
Attention: Jeffrey I. Dreben
(716) 754-7883
(716) 754-7606 (Fax)
with a copy to:
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Attention: John J. Zak, Esq.
(716) 848-1253
(716) 849-0349 (Fax)
(b) if to the Holder, to:
Avalon Research Group Inc.
1900 Glades Road, Suite 201
Boca Raton, Florida 33431
Attention: Andrew Ismail
(561) 447-4044
(561) 447-8809 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3 INDEMNIFICATION
The Company agrees to indemnify and hold harmless Holder from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
<PAGE> 18
- 18 -
14.4 REMEDIES
Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Section 9 of this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
14.5 SUCCESSORS AND ASSIGNS
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
14.6 AMENDMENT
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
14.7 SEVERABILITY
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
14.8 HEADINGS
The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
14.9 GOVERNING LAW
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflicts of law.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 19
- 19 -
In Witness Whereof, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: October 8, 1999
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
-------------------------------------
Name: Jeffrey I. Dreben
Title: President
Attest:
By: /s/ Robert Nally
-----------------------------
Name: Robert Nally
Title: Secretary
<PAGE> 20
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of __________ shares of Common Stock of CVF
Technologies Corporation and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to
whose address is ______________________________________________________
and, if such shares of Common Stock shall not include all of the shares
of Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
-----------------------------------------
(Name of Registered Owner)
-----------------------------------------
(Signature of Registered Owner)
-----------------------------------------
(Street Address)
-----------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this
subscription must correspond with
the name as written upon the face of
the within Warrant in every
particular, without alteration or
enlargement or any change
whatsoever.
<PAGE> 21
EXHIBIT B
ASSIGNMENT FORM
For Value Received the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
---------------------------- ------------
and does hereby irrevocably constitute and appoint
____________________________________ attorney-in-fact to register such transfer
on the books of CVF Technologies Corporation maintained for the purpose, with
full power of substitution in the premises.
Dated:___________________
-----------------------------------------
(Print Name)
-----------------------------------------
(Signature)
-----------------------------------------
(Print Name of Witness)
-----------------------------------------
(Witness's Signature)
NOTICE: The signature on this assignment must
correspond with the name as written upon the
face of the within Warrant in every particular,
without alteration or enlargement or any change
whatsoever.
<PAGE> 1
EXHIBIT 5
HODGSON, RUSS, ANDREWS, WOODS &
GOODYEAR, LLP One M&T Plaza,
Suite 2000
Buffalo, New York 14203
December 30, 1999
CVF Technologies Corporation
916 Center Street
Lewiston, New York 14092
Ladies and Gentlemen:
Re: Registration Statement on Form S-3
----------------------------------
We are delivering this opinion at your request in connection with the
registration by CVF Technologies Corporation (the "Company") under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
thereunder, of (1) 2,333,333 shares of the Company's common stock, par value
$0.001 per share (the "Common Stock"), issuable upon conversion of the Company's
Series B Convertible Preferred Stock (the "Series B Preferred Stock") (the
"Conversion Shares"), (2) 420,000 shares of Common Stock, issuable as payment of
dividends with respect to the Series B Preferred Stock, representing the maximum
amount of dividends payable for three years assuming a market price for the
Common Stock of $1.50 per share (the "Dividend Shares"), (3) 215,384 shares of
Common Stock issuable on exercise of certain outstanding warrants (the
"Purchaser Warrants") issued in connection with the Series B Preferred Stock
(the "Purchaser Warrant Shares") and (4) 101,818 shares of Common Stock issuable
upon the exercise of warrants (the "Broker's Warrants") granted as a finders fee
on the offering of the Series B Preferred Stock (the "Broker's Warrant Shares"),
for sale by the selling security holders identified in the prospectus (the
"Prospectus") forming a part of the above-referenced registration statement (the
"Registration Statement").
The opinions set forth in this letter are based upon (1) our review of
(a) the Securities Purchase Agreement dated October 8, 1999 between the Company
and The Shaar Fund Ltd. (the "Securities Purchase Agreement"), (b) the Purchaser
Warrants, (c) the Broker's Warrants, (d) the Registration Rights Agreement dated
October 8, 1999 between the Company and The Shaar Fund Ltd., (e) originals, or
copies authenticated to our satisfaction, of the Company's Articles of
Incorporation, as amended, its Bylaws, as amended, and records of certain of its
corporate proceedings and (f) such other certificates, opinions and instruments
we have deemed necessary and (2) our review of published sources of law as we
have deemed necessary.
Subject to the qualifications set forth in this letter, it is our
opinion that:
<PAGE> 2
1. The Conversion Shares have been duly authorized and reserved for issuance
and, when issued and delivered upon conversion of the Series B Preferred Stock,
will be validly issued, fully paid and non-assessable.
2. The Dividend Shares have been duly authorized and reserved for issuance
and, when issued and delivered as payment of dividends on the Series B Preferred
Stock, will be validly issued, fully paid and non-assessable.
3. The Purchaser Warrant Shares have been duly authorized and reserved for
issuance and, when issued and sold upon exercise of the Purchaser Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable.
4. The Broker's Warrant Shares have been duly authorized and reserved for
issuance and, when issued and sold upon exercise of the Broker's Warrants in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this letter as Exhibit 5 to the
Registration Statement and the reference to this firm in the Prospectus under
the caption "Legal Matters."
Very truly yours,
HODGSON, RUSS, ANDREWS, WOODS & GOODYEAR, LLP
By: /s/ John J. Zak
----------------------------------------
John J. Zak
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October 8, 1999 (this
"AGREEMENT"), by and between CVF Technologies Corporation, a Nevada corporation,
with principal executive offices located at 916 Center Street, Lewiston, New
York 14092 (the "COMPANY"), and The Shaar Fund Ltd. ("BUYER").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) 350,000 shares of the Company's Series B 6% Convertible
Preferred Stock, par value $0.001 per share (collectively, the "PREFERRED
SHARES"), and (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit A to purchase 215,384 shares of Common Stock (as defined below)
(collectively, the "WARRANTS");
WHEREAS, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Designation of Series B 6%
Convertible Preferred Stock in the form attached hereto as Exhibit B-1 (the
"CERTIFICATE OF DESIGNATION"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK" or
"COMMON SHARES"); and
WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of three years
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. TRANSACTION. Buyer hereby agrees to purchase from the Company, and
the Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Preferred
Shares and the Warrants to purchase 215,384 shares of Common Stock.
B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$3,500,000 (the "PURCHASE PRICE"). Simultaneously with the execution of this
Agreement, Buyer shall pay the Purchase Price by wire transfer of immediately
available funds to the escrow agent (the "ESCROW AGENT") identified in those
certain Escrow Instructions of even date herewith, a copy of which is attached
hereto as Exhibit C (the "ESCROW INSTRUCTIONS"). Simultaneously with the
execution of this Agreement, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which Buyer is purchasing, to the Escrow Agent or its
designated depository. By
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executing and delivering this Agreement, Buyer and the Company each hereby
agrees to observe the terms and conditions of the Escrow Instructions, all of
which are incorporated herein by reference as if fully set forth herein.
C. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of immediately available funds to:
The Bank of New York
48 Wall Street
New York, NY 10038
ABA No.: 021000018
For the Account of: Cadwalader, Wickersham & Taft
Trust Account IOLA Fund
Account No.: 0902061070
II. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common
Stock issuable upon exercise of the Warrants (the "WARRANT SHARES"), the Common
Stock, if any, issuable in payment of dividends on the Preferred Shares (the
"DIVIDEND SHARES"), and the Common Stock issuable upon conversion or redemption
of the Preferred Shares (the "CONVERSION SHARES" and, collectively with the
Preferred Shares, the Warrants, the Warrant Shares and the Dividend Shares, the
"SECURITIES") for its own account, for investment purposes only and not with a
view towards or in connection with the public sale or distribution thereof in
violation of the Securities Act.
B. Buyer is (i) an "ACCREDITED INVESTOR" within the meaning of Rule 501
of Regulation D under the Securities Act, (ii) experienced in making investments
of the kind contemplated by this Agreement, (iii) capable, by reason of its
business and financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the loss of its
investment in the Securities.
C. Buyer understands that the Securities are being offered and sold by
the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "COMMISSION") or any
state securities commission.
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E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
F. Prior to the conversion of all the Preferred Shares into Common
Stock, neither Buyer nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter into, any put option, short
position or other similar instrument or position with respect to the Common
Stock and neither Buyer nor any of its affiliates nor any person acting on its
or their behalf will use at any time shares of Common Stock acquired pursuant to
this Agreement to settle any put option, short position or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement; provided, however, that nothing in this Section II.F. shall
operate to forbid Buyer or any of its affiliates or any Person acting on its or
their behalf from selling, or entering into any other transaction with respect
to, the Common Stock contemporaneously with or following such date and time as
the Person or Persons in whose name or names the Common Stock Delivered at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall have vested with such Person or Persons.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. CAPITALIZATION.
1. The authorized capital stock of the Company consists solely
of: (x) 50,000,000 shares of Common Stock, of which 6,720,628 shares
are issued and outstanding and 434,700 shares are issued and held in
treasury on the date hereof; and (y) 500,000 shares of preferred stock,
of which 25,000 shares are designated Redeemable Series A Preferred
Stock, par value $0.001 per share, and are issued and outstanding. As
of the date hereof, the Company has 840,000 outstanding stock options
to purchase shares of Common Stock and warrants outstanding to purchase
1,052,507 shares of Common Stock.
2. The Conversion Shares, the Dividend Shares and the Warrant
Shares have been duly and validly authorized and reserved for issuance
by the Company, and when issued by the Company upon conversion of, or
in lieu of cash dividends on, the Preferred Shares and on exercise of
the Warrants will be duly and validly issued, fully paid and
nonassessable and will not subject the holder thereof to personal
liability by reason of being such holder.
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3. Except as disclosed on Schedule III.A.3 there are no
preemptive, subscription, "call," right of first refusal or other
similar rights to acquire any capital stock of the Company or any of
its Material Subsidiaries or other voting securities of the Company
that have been issued or granted to any person or any other obligations
of the Company or any of its Material Subsidiaries to issue, grant,
extend or enter into any security, option, warrant, "call," right,
commitment, agreement, arrangement or undertaking with respect to any
of their respective capital stock.
4. Schedule III.A.4. hereto lists all the subsidiaries of the
Company. All of the subsidiaries of the Company of which the Company
owns, directly or indirectly, more than 20% of the capital stock,
partnership or membership interests or other equity interests are
identified on Schedule III.A.4. as "Material Subsidiaries" (the
"MATERIAL SUBSIDIARIES"). Except as disclosed on Schedule III.A.4.
hereto, the Company does not own or control, directly or indirectly,
any interest in any corporation, partnership, limited liability
company, unincorporated business organization, association, trust or
other business entity.
5. The Company has delivered to Buyer complete and correct
copies of the Certificate of Incorporation and the By-Laws of the
Company and the Material Subsidiaries, in each case as amended to the
date of this Agreement. Except as set forth on Schedule III.A.4, the
Company has delivered to Buyer true and complete copies of all minutes
of the Board of Directors of the Company (the "BOARD OF DIRECTORS")
since October 1, 1996.
B. ORGANIZATION; REPORTING COMPANY STATUS.
1. Each of the Company and each of the Material Subsidiaries
is a corporation duly organized, validly existing and in good standing
under the laws of the state of jurisdiction in which it is incorporated
and is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would reasonably be expected to have a
material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operations of the
Company and the Material Subsidiaries taken as a whole or on the
consummation of any of the transactions contemplated by this Agreement
(a "MATERIAL ADVERSE EFFECT").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"). The Common Stock is listed and traded on the American
Stock Exchange (the "AMEX") and the Company has not received any notice
regarding, and to its knowledge there is no threat of, the termination
or discontinuance of the eligibility of the Common Stock for such
listing.
C. AUTHORIZATION. The Company (i) has duly and validly authorized and
reserved for issuance 5,722,031 shares of Common Stock, sufficient in number for
the conversion of and the payment of dividends (in lieu of cash payments) on the
350,000 Preferred Shares and the exercise of the Warrants, and (ii) at all times
from and after the date hereof shall have a sufficient number of shares of
Common Stock duly and validly authorized and reserved for issuance to satisfy
the
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conversion of Preferred Shares, the payment of dividends (in lieu of cash
payments) on the Preferred Shares and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Preferred Shares, the Conversion Shares, the Dividend
Shares and the Warrant Shares upon the conversion of, and payment of dividends
on, the Preferred Shares and the exercise of the Warrants, respectively. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Certificate of Designation and
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company and notwithstanding the commencement of any case under 11 U.S.C.
sec. 101 et seq. (the "BANKRUPTCY CODE"). In the event the Company is a debtor
under the Bankruptcy Code, the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. sec. 362 in respect
of the conversion of the Preferred Shares and the exercise of the Warrants. The
Company agrees, without cost or expense to Buyer, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. sec. 362. Schedule
III.C. hereto sets forth (i) all issuances and sales by the Company since
December 31, 1998 of its capital stock, and other securities convertible,
exercisable or exchangeable for capital stock of the Company, (ii) the amount of
such securities sold, including any underlying shares of capital stock, (iii)
the purchaser thereof, (iv) the amount paid therefor, and (v) the material terms
of all outstanding capital stock of the Company (other than the Common Stock).
D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Nevada Secretary of State's office, the issuance of the
Preferred Shares and the Warrants and the issuance and reservation for issuance
of the Conversion Shares, the Dividend Shares and the Warrant Shares), have been
duly authorized by all necessary corporate action on the part of the Company.
Each of the Documents has been duly and validly executed and delivered by the
Company and the Certificate of Designation has been duly filed with the Nevada
Secretary of State's office by the Company and each Document constitutes a valid
and binding obligation of the Company enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying
such laws. The Securities have been duly and validly authorized for issuance by
the Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"DOCUMENTS" means (i) this Agreement; (ii) the Registration Rights Agreement of
even date herewith between the Company and
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Buyer, a copy of which is annexed hereto as Exhibit D (the "REGISTRATION RIGHTS
AGREEMENT"); (iii) the Certificate of Designation; (iv) the Warrants; and (v)
the Escrow Instructions.
E. VALIDITY OF ISSUANCE OF THE SECURITIES. As of the Closing Date, the
Preferred Shares and the Warrants, and the Conversion Shares, the Dividend
Shares and the Warrant Shares upon their issuance in accordance with the
Certificate of Designation, respectively, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal, tag-along rights, drag-along rights or other
similar rights.
F. NON-CONTRAVENTION. Except as set forth on Schedule III.F. hereto,
the execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, including, without limitation, the filing of
the Certificate of Designation with the Nevada Secretary of State's office, do
not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien (as defined below)
upon any of the properties or assets of the Company or any of its Material
Subsidiaries under, or result in the termination of, or require that any consent
be obtained or any notice be given with respect to, (i) the Certificate of
Incorporation or By-Laws of the Company or the comparable charter or
organizational documents of any of its Material Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or permit applicable to the Company or any of its Material
Subsidiaries or their respective properties or assets, or (iii) any Law (as
defined below) applicable to the Company or any of its Material Subsidiaries or
their respective properties or assets.
G. APPROVALS. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Shares or the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. COMMISSION FILINGS. The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the Commission under the Securities Act and the Exchange Act
since October 1, 1996 (the "COMMISSION FILINGS"). As of their respective dates,
(i) the Commission Filings complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the Commission promulgated thereunder applicable to
such Commission Filings, and (ii) none of the Commission Filings contained at
the time of their filing any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and
<PAGE> 7
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complied with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, have been prepared in
accordance with generally accepted accounting principles in the United States
("GAAP") (except in the case of the unaudited statements, as permitted by Form
10-Q under the Exchange Act) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the consolidated financial position of the Company and its Material Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments that in the aggregate are not
material and to any other adjustment described therein).
I. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date
(as defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company and the Material Subsidiaries having or reasonably
likely to have a Material Adverse Effect, there has not existed any condition
having or reasonably likely to have a Material Adverse Effect, and the Company
and the Material Subsidiaries have conducted their respective businesses only in
the ordinary course.
J. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic or industry conditions known to the public
generally) that has not been fully disclosed in writing to Buyer that (i)
reasonably could be expected to have a Material Adverse Effect or (ii)
reasonably could be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to the Documents.
K. ABSENCE OF LITIGATION. Except as set forth on Schedule
III.K, there are (i) no suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its Material
Subsidiaries, (ii) no complaints, lawsuits, charges or other proceedings pending
or, to the knowledge of the Company, threatened in any forum by or on behalf of
any present or former employee of the Company or any of its Material
Subsidiaries, any applicant for employment or classes of the foregoing alleging
breach of any express or implied contract of employment, any applicable law
governing employment or the termination thereof or other discriminatory,
wrongful or tortuous conduct in connection with the employment relationship, or
(iii) no judgments, decrees, injunctions or orders of any governmental entity or
arbitrator outstanding against the Company or any Material Subsidiary.
L. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Schedule III.L, no "EVENT OF DEFAULT" (as defined in any agreement or instrument
to which the Company is a party) and no event which, with notice, lapse of time
or both, would constitute an Event of Default (as so defined), has occurred and
is continuing.
M. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The
Company has delivered to Buyer true and complete copies of the (i) audited
balance sheet of the Company and the Material Subsidiaries as at December 31,
1998, 1997 and 1996, respectively, and the related audited statements of income,
changes in stockholders' equity and cash flows for the three fiscal years ended
<PAGE> 8
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December 31, 1998 including the related notes and schedules thereto and (ii)
unaudited balance sheets of the Company and the Material Subsidiaries and the
statements of income, changes in stockholders' equity and cash flows for each
fiscal quarter ended since December 31, 1998 including the related notes and
schedules, all certified by the chief financial officer of the Company
(collectively, the "FINANCIAL STATEMENTS"), and all management letters, if any,
from the Company's independent auditors relating to the dates and periods
covered by the Financial Statements. Each of the Financial Statements is
complete and correct in all material respects, has been prepared in accordance
with GAAP (subject, in the case of the interim Financial Statements, to normal
year end adjustments and the absence of footnotes), and fairly presents the
financial position, results of operations and cash flows of the Company as at
the dates and for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at December 31, 1998 is hereinafter referred to
as the "BALANCE SHEET" and December 31, 1998 is hereinafter referred to as the
"BALANCE SHEET DATE". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date.
N. COMPLIANCE WITH LAWS; PERMITS. Each of the Company and each
of its Material Subsidiaries has complied and is in compliance with all laws,
rules, regulations, codes, ordinances and statutes (collectively, "LAWS")
applicable to it or to the conduct of its business. The Company possesses all
material permits, approvals, authorizations, licenses, certificates and consents
from all public and governmental authorities which are necessary to conduct its
business.
O. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule
III.O. hereto, neither the Company nor any of its officers, directors or
"AFFILIATES" (as such term is defined in Rule 12b-2 under the Exchange Act) nor
any family member of any officer, director or Affiliate of the Company has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company or any of the Material Subsidiaries. Except as set
forth on Schedule III.O. hereto, neither the Company nor any of its officers,
directors or Affiliates nor any family member of any officer, director or
Affiliate of the Company (i) owns any direct or indirect interest constituting
more than a 1% equity (or similar profit participation) interest in, or controls
or is a director, officer, partner, member or employee of, or consultant to or
lender to or borrower from, or has the right to participate in the profits of,
any person or entity which is (x) a competitor, supplier, customer, landlord,
tenant, creditor or debtor of the Company or any Material Subsidiary, (y)
engaged in a business related to the business of the Company or any Material
Subsidiary, or (z) a participant in any transaction to which the Company or any
Material Subsidiary is a party or (ii) is a party to any contract, agreement,
commitment or other arrangement with the Company or any Material Subsidiary.
P. INSURANCE. Each of the Company and each of the Material
Subsidiaries maintains property and casualty, general liability, workers'
compensation, environmental hazard, personal injury and other similar types of
insurance with financially sound and reputable insurers that is
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adequate, consistent with industry standards and the Company's historical claims
experience. Each of the Company and each of the Material Subsidiaries has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company or the Material Subsidiaries)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force.
Q. SECURITIES LAW MATTERS. Assuming the accuracy of the
representations and warranties of Buyer set forth in Section II hereof, the
offer and sale by the Company of the Securities is exempt from (i) the
registration and prospectus delivery requirements of the Securities Act and the
rules and regulations of the Commission thereunder and (ii) the registration
and/or qualification provisions of all applicable state securities and "blue
sky" laws. Other than pursuant to an effective registration statement under the
Securities Act, the Company has not issued, offered or sold the Preferred Shares
or any shares of Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Shares or Common Stock, or any
securities convertible into or exchangeable or exercisable for the Preferred
Shares or Common Stock or any such other securities) within the one-year next
preceding the date hereof, except as disclosed on Schedule III.Q. hereto or
otherwise previously disclosed in writing to Buyer, and the Company shall not
directly or indirectly take, and shall not permit any of its directors, officers
or Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares and the Warrants (and the Conversion
Shares and the Warrant Shares) as contemplated by this Agreement. No form of
general solicitation or advertising has been used or authorized by the Company
or any of its officers, directors or Affiliates in connection with the offer or
sale of the Preferred Shares and the Warrants (and the Conversion Shares and the
Warrant Shares) as contemplated by this Agreement or any other agreement to
which the Company is a party.
R. Environmental Matters. Except as set forth on Schedule
III.R.6 hereto:
1. The Company, the Material Subsidiaries and their
respective operations are in compliance with all applicable
Environmental Laws and all permits (including terms, conditions, and
limitations therein) issued pursuant to Environmental Laws or
otherwise;
2. Each of the Company and each of the Material
Subsidiaries has all permits, licenses, waivers, exceptions, and
exemptions required under all applicable Environmental Laws necessary
to operate its business;
3. Each of the Company and each of the Material
Subsidiaries is not the subject of any outstanding written order of or
agreement with any governmental authority or person respecting (i)
Environmental Laws or permits, (ii) Remedial Action or (iii) any
Release or threatened Release of Hazardous Materials;
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4. Each of the Company and each of the Material
Subsidiaries has not received any written communication alleging that
it may be in violation of any Environmental Law or any permit issued
pursuant to any Environmental Law, or may have any liability under any
Environmental Law;
5. Each of the Company and each of the Material
Subsidiaries does not have any liability, contingent or otherwise, in
connection with any presence, treatment, storage, disposal or Release
of any Hazardous Materials whether on property owned or operated by the
Company and the Material Subsidiaries or property of third parties, and
the Company and the Material Subsidiaries have not transported, or
arranged for transportation of, any Hazardous Materials for treatment
or disposal of any property except, in each case, in compliance in all
material respects with applicable Environmental Laws;
6. To the Company's knowledge, there are no
investigations of the business, operations, or currently or previously
owned, operated or leased property of the Company and the Material
Subsidiaries pending or threatened which could lead to the imposition
of any case or liability pursuant to any Environmental Law;
7. There is not located at any of the properties
owned or operated by the Company and the Material Subsidiaries any (A)
underground storage tanks, (B) asbestos-containing material or (C)
equipment containing polychlorinated biphenyls; and,
8. Each of the Company and the Material Subsidiaries
has provided to Buyer all environmentally related assessments, audits,
studies, reports, analyses, and results of investigations that have
been performed with respect to the currently or previously owned,
leased or operated properties or activities of the Company and the
Material Subsidiaries.
9. There are no liens arising under or pursuant to
any Environmental Law on any real property owned, operated, or leased
by the Company and the Material Subsidiaries, and no action of any
governmental authority has been taken or, to the knowledge of the
Company, is in process of being taken which could subject any of such
properties to such liens, and the Company and the Material Subsidiaries
have not and is not expected to be required to place any notice or
restriction relating to the presence of Hazardous Material at any real
property owned, operated, or leased by it in any deed to such property.
10. Neither the Company nor any of the Material
Subsidiaries owns, operates, or leases any hazardous waste generation,
treatment, storage, or disposal facility, as such terms are used
pursuant to the RCRA and related or analogous state, local, or foreign
law. None of the properties owned, operated, or leased by the Company,
the Material Subsidiaries or any predecessor thereof are now, or were
in the past, used in any part as a dump, landfill, or disposal site,
and neither Company, the Material Subsidiaries nor any predecessor
thereof have filled any wetlands.
<PAGE> 11
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11. The purchase that is the subject of this
Agreement will not require any governmental approvals under
Environmental Laws, including those that are triggered by sales or
transfers of businesses or real property, including, as examples and
without limitation, the New Jersey Industrial Site Recovery Act, N.J.
Stat. 13:1K-7 et seq., and the Connecticut Transfer of Establishments
Act, Conn. Gen. Stat. sec. 22a-134 et seq.
12. There is no currently existing requirement or
requirement to be imposed in the future by any Environmental Law or
Environmental Permit which could result in the incurrence of a cost
that could be reasonably expected to have a Material Adverse Effect.
13. Each of the Company and the Material Subsidiaries
has disclosed to Buyer all other acts or conditions that could result
in any material costs or liabilities under Environmental Laws.
For purposes of this Section III.R.:
"ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or common law as now or hereafter in effect in
any way relating to the protection of human health, safety or welfare, or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act, and the Occupational Safety and Health Act, and
the regulations promulgated pursuant thereto.
"HAZARDOUS MATERIAL" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including petroleum,
gasoline, and any other petroleum product, by-product, fraction or derivative,
asbestos or asbestos-containing material, lead-containing paint, water, or
plumbing, polychlorinated biphenyls, radioactive materials and radon;
"RELEASE" means any placement, release, spill, filtration,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
migration, or leaching to, through, or under the indoor or outdoor environment,
or into, through, under, or out of any property;
"REMEDIAL ACTION" means all actions to (x) clean up, remove,
remediate, treat or in any other way address any Hazardous Material; (y) prevent
or contain the Release of any Hazardous Material; or (z) perform studies and
investigations or post-remedial monitoring and care in relation to (x) and (y)
above.
S. LABOR MATTERS. Neither the Company nor any of the Material
Subsidiaries is party to any labor or collective bargaining agreement and there
are no labor or collective bargaining agreements which pertain to employees of
the Company. No employees of the Company or the Material Subsidiaries are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions
<PAGE> 12
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seeking a representation proceeding presently pending or, to the Company's
knowledge, threatened to be brought or filed, with the National Labor Relations
Board or other labor relations tribunal. There is no organizing activity
involving the Company or the Material Subsidiaries pending or to the Company's
knowledge, threatened by any labor organization or group of employees of the
Company or the Material Subsidiaries. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material grievances or other labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or the Material Subsidiaries. There are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or the Material Subsidiaries.
T. ERISA MATTERS. All Plans maintained by the Company, its
Material Subsidiaries and ERISA Affiliates are listed in Schedule III.T. and
copies of all documentation relating to such Plans (including, but not limited
to, copies of written Plans, written descriptions of oral Plans, summary plan
descriptions, trust agreements, the three most recent annual returns, employee
communications and IRS determination letters) have been delivered or made
available for review by the Buyer. Each Plan has at all times been maintained
and administered in all material respects in accordance with its terms and the
requirements of applicable law, including ERISA and the Code, and each Plan
intended to qualify under Section 401(a) of the Code has at all times since its
adoption been so qualified, and each trust which forms a part of any such plan
has at all times since its adoption been tax-exempt under Section 501(a) of the
Code. The Company, its Material Subsidiaries and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company, its Material Subsidiaries or any ERISA Affiliate was required to file a
report with the PBGC, and the present value of all liabilities under each
Pension Plan (based on those assumptions used to fund such Plans) listed in
Schedule III.T. did not, as of the most recent annual valuation date applicable
thereto, exceed the value of the assets of such Pension Plan. None of the
Company, its Material Subsidiaries or ERISA Affiliates has incurred, or
reasonably expects to incur, any Withdrawal Liability with respect to any
Multi-employer Plan that could result in a Material Adverse Effect. None of the
Company, its Material Subsidiaries or ERISA Affiliates has received any
notification that any Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise. No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company or its Material Subsidiaries under Title
IV of ERISA to any party with respect to any Plan, or with respect to any other
Plan presently or heretofore maintained or contributed to by any ERISA
Affiliate. Neither the Company, its Material Subsidiaries, or ERISA Affiliate
has incurred any liability for any tax imposed under section 4971 through 4980B
of the Code or civil liability under section 502(i) or (l) of ERISA. No suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of plan activities and any other claim which could reasonably be
expected to result in a material liability or expense to the Company, its
Material Subsidiaries or ERISA Affiliates) has been brought or, to the knowledge
of the Company, threatened against or with
<PAGE> 13
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respect to any Plan and there are no facts or circumstances known to the
Company, its Material Subsidiaries or ERISA Affiliates that could reasonably be
expected to give rise to any such suit, action or other litigation. All
contributions to Plans that were required to be made under such Plans have been
made, and all benefits accrued under any unfunded Plan have been paid, accrued
or otherwise adequately reserved in accordance with generally accepted
accounting principles, all of which accruals under unfunded Plans are as
disclosed in Schedule III.T., and the Company, its Material Subsidiaries and
ERISA Affiliates have each performed all material obligations required to be
performed under all Plans. The execution, delivery and performance of this
Agreement, the Note, the Warrants and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the offer, issue and sale by the Company and its Material
Subsidiaries, and the purchase by the Buyer, of the Preferred Shares, the
Conversion Shares, the Warrants, the Warrant Shares and Dividend Shares) will
not involve any "prohibited transaction" within the meaning of ERISA or the Code
with respect to any Plan.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "INTERNAL REVENUE
CODE").
"MULTI-EMPLOYER PLAN" means a multi-employer plan as defined
in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate
(other than one considered an ERISA Affiliate only pursuant to subsection (m) or
(o) of Section 414 of the Internal Revenue Code) is making or accruing an
obligation to make contributions, or has within any of the preceding six plan
years made or accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA,
including any Pension Plan.
<PAGE> 14
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"PENSION PLAN" means any pension plan (other than a
Multi-employer Plan) subject to the provision of Title IV of ERISA or Section
412 of the Internal Revenue Code that is maintained for employees of the
Company, its Material Subsidiaries, or any ERISA Affiliate.
"REPORTABLE EVENT" means any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan
"WITHDRAWAL LIABILITY" means liability to a Multi-employer
Plan as a result of a complete or partial withdrawal from such Multi-employer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. TAX MATTERS.
1. The Company has filed all material Tax Returns
which it is required to file under applicable Laws; all such Tax
Returns are true and accurate in all material respects and have been
prepared in compliance with all applicable Laws; the Company has paid
all Taxes due and owing by it (whether or not such Taxes are required
to be shown on a Tax Return) and has withheld and paid over to the
appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder,
creditor or other third parties; and since the Balance Sheet Date, the
charges, accruals and reserves for Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the
books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date
hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction.
There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with
respect to the Company; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority;
and, except as disclosed above, no written notice indicating an intent
to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority. There are no
material unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Internal Revenue Code or
any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes
in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Internal
Revenue Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Internal Revenue Code.
<PAGE> 15
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3. The Company has not made an election under Section
341(f) of the Internal Revenue Code. The Company is not liable for the
Taxes of another person that is not a subsidiary of the Company under
(A) Treas. Reg. Section 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or successor, (C) by
contract or indemnity or (D) otherwise. The Company is not a party to
any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible under
Section 280G of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
V. PROPERTY. Except as set forth on Schedule III.V, each of
the Company and each of the Material Subsidiaries has good and marketable title
to all of its assets and properties material to the conduct of its business,
free and clear of any liens, pledges, security interests, claims, encumbrances
or other restrictions of any kind (collectively, "LIENS"). With respect to any
assets or properties it leases, each of the Company and its Material
Subsidiaries holds a valid and subsisting leasehold interest therein, free and
clear of any Liens, is in compliance, in all material respects, with the terms
of the applicable lease, and enjoys peaceful and undisturbed possession under
such lease. All of the assets and properties of the Company and its Material
Subsidiaries that are material to the conduct of business as presently conducted
or as proposed to be conducted by it are in good operating condition and repair.
The inventory of the Company and its Material Subsidiaries is in good and
marketable condition, does not include any material quantity of items which are
obsolete, damaged or slow moving, and is salable (or may be leased) in the
normal course of business as currently conducted by it.
W. INTELLECTUAL PROPERTY. The Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III.W. hereto. Except
as set forth on Schedule III.W, the Company has all
<PAGE> 16
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right, title and interest in all of the Intangibles, free and clear of any and
all Liens. The Company is not infringing upon or in conflict with any right of
any other person with respect to any Intangibles. Except as disclosed on
Schedule III.W. hereto, (i) no claims have been asserted by any individual,
partnership, corporation, unincorporated organization or association, limited
liability company, trust or other entity (collectively, a "PERSON") contesting
the validity, enforceability, use or ownership of any Intangibles, and the
Company has no knowledge of any basis for such claim, and (ii) neither the
Company nor the Material Subsidiaries has any knowledge of infringement or
misappropriation of the Intangibles by any third party.
X. CONTRACTS. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understanding,
written or oral (collectively, "CONTRACTS") which are material to the business
and operations of the Company and the Material Subsidiaries are in full force
and effect and constitute legal, valid and binding obligations of the Company
and the Material Subsidiaries and, to the best knowledge of the Company, the
other parties thereto; the Company and the Material Subsidiaries and, to the
best knowledge of the Company, each other party thereto, have performed in all
material respects all obligations required to be performed by them under the
Contracts, and no material violation or default exists in respect thereof, nor
any event that with notice or lapse of time, or both, would constitute a default
thereof, on the part of the Company and the Material Subsidiaries or, to the
best knowledge of the Company, any other party thereto; none of the Contracts is
currently being renegotiated; and the validity, effectiveness and continuation
of all Contracts will not be materially adversely affected by the transactions
contemplated by this Agreement.
Y. REGISTRATION RIGHTS. Except as set forth on Schedule III.Y,
no Person has, and as of the Closing (as defined below), no Person shall have,
demand, "piggy-back" or other rights to cause the Company to file any
registration statement under the Securities Act, relating to any of its
securities or to participate in any such registration statement.
Z. DIVIDENDS. The timely payment of dividends on the Preferred
Shares as specified in the Certificate of Designation is not prohibited by the
Certificate of Incorporation or By-Laws of the Company or any agreement,
contract, documents or other undertaking to which the Company or any of the
Material Subsidiaries is a party.
AA. INVESTMENT COMPANY ACT. Neither the Company nor any of the
Material Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"), nor
is the Company nor any of the Material Subsidiaries directly or indirectly
controlled by or acting on behalf of any Person which is an "investment company"
within the meaning of the Investment Company Act.
BB. BUSINESS PLAN. Any business information of the Company
previously submitted to Buyer in any form, including the projections contained
therein, was prepared by the senior management of the Company in good faith and
is based on assumptions that the Company believes are reasonable. The Company is
not aware of any fact or condition that could reasonably be expected to result
in the Company not achieving the results described in such business plan.
<PAGE> 17
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CC. YEAR 2000 COMPLIANCE. The Company is currently reviewing
its products, business and operations that could be adversely affected by the
risk that computer applications used by the Company and the Material
Subsidiaries may be unable to recognize and properly perform date-sensitive
functions involving dates prior to and after December 31, 1999 (the "YEAR 2000
PROBLEM"). The Company believes its internal information and business systems
will be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000. In addition, the Company is currently surveying those
vendors, suppliers and other third parties (collectively, the "OUTSIDE PARTIES")
with which the Company and the Material Subsidiaries do business and whose
failure to adequately address the Year 2000 Problem could reasonably be expected
to adversely affect the business and operations of the Company and the Material
Subsidiaries. Based upon the aforementioned internal review and surveys of the
Outside Parties as of the date of this Agreement, the Year 2000 Problem has not
resulted in, and is not reasonably expected to have, a Material Adverse Effect.
DD. INTERNAL CONTROLS AND PROCEDURES. The Company maintains
accurate books and records and internal accounting controls that provide
reasonable assurance that (i) all transactions to which the Company or each of
the Material Subsidiaries is a party or by which its properties are bound are
executed with management's authorization; (ii) the reported accountability of
the Company's and the Material Subsidiaries' assets is compared with existing
assets at regular intervals; (iii) access to the Company's and the Material
Subsidiaries' assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which each of the Company and the
Material Subsidiaries is a party or by which its properties are bound are
recorded as necessary to permit preparation of the financial statements of the
Company in accordance with GAAP.
EE. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of
its Material Subsidiaries nor any of their respective directors, officers or, to
their respective knowledge, other employees has (i) used any company funds for
any unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person with
respect to the company matters.
FF. NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
GG. FINDER'S FEE. There are no finder's fee, brokerage
commission or like payment in connection with the transactions contemplated by
this Agreement for which Buyer is liable or responsible.
<PAGE> 18
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IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that,
upon issuance pursuant to this Agreement, the Securities (including any
Dividends Shares, Conversion Shares or the Warrant Shares) shall have endorsed
thereon a legend in substantially the following form (and a stop-transfer order
may be placed against transfer of the Preferred Shares, the Warrant Shares and
the Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS."
B. FILINGS. The Company shall make all necessary Commission
Filings and "blue sky" filings required to be made by the Company in connection
with the sale of the Securities to Buyer as required by all applicable Laws, and
shall provide a copy thereof to Buyer promptly after such filing.
C. REPORTING STATUS. So long as Buyer beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. USE OF PROCEEDS. The Company shall use the net proceeds
from the sale of the Securities (excluding amounts paid by the Company for
Buyer's out-of-pocket costs and expenses whether or accounted for or incurred in
connection with the transactions contemplated by this Agreement (including the
fees and disbursements of Buyer's legal counsel) and finder's fees in connection
with such sale) solely for general corporate and working capital purposes.
E. LISTING. Except to the extent the Company lists its Common
Stock on The New York Stock Exchange or the Nasdaq National Market System, the
Company shall use its best efforts to maintain its listing of the Common Stock
on the Amex. If the Common Stock is delisted from the Amex, the Company will use
its best efforts to list the Common Stock on the most liquid national securities
exchange or quotation system that the Common Stock is qualified to be listed on.
F. RESERVED CONVERSION SHARES. The Company at all times from
and after the date hereof shall have such number of shares of Common Stock duly
and validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of dividends on, the Preferred Shares and
the exercise in full of the Warrants.
<PAGE> 19
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G. RIGHT OF FIRST REFUSAL. If, during the period commencing
on the date hereof and ending three years after the Closing Date (the "RIGHT OF
FIRST REFUSAL PERIOD"), the Company should propose (the "PROPOSAL") to issue
Common Stock or securities convertible into Common Stock at a price less than
the Current Market Price (as defined in the Certificate of Designation), or
debt at less than par value or having an effective annual interest rate in
excess of 9.9% (each a "RIGHT OF FIRST REFUSAL SECURITY" and collectively, the
"RIGHT OF FIRST REFUSAL SECURITIES"), in each case on the date of issuance the
Company shall be obligated to offer such Right of First Refusal Securities to
Buyer on the terms set forth in the Proposal (the "OFFER") and Buyer shall have
the right, but not the obligation, to accept such Offer on such terms. The
Company shall provide written notice to Buyer of any Proposal, setting forth in
full the terms and conditions thereof, and Buyer shall then have 10 business
days to accept or reject the Offer in writing. If the Company issues any Right
of First Refusal Securities during the Right of First Refusal Period but fails
to: (i) notify Buyer of the Proposal, (ii) offer Buyer the opportunity to
complete the transaction as set forth in the Proposal, or (iii) enter into and
consummate an agreement to issue such Right of First Refusal Securities to
Buyer on the terms and conditions set forth in the Proposal, after Buyer has
accepted the Offer, then the Company shall pay to Buyer, as liquidated damages,
an amount equal to 10% of the amount paid to the Company for the Right of First
Refusal Securities. The foregoing Right of First Refusal is and shall be senior
in right to any other right of first refusal issued by the Company to any other
Person.
H. INFORMATION. Each of the parties hereto acknowledges and
agrees that Buyer shall not be provided with, nor be given access to, any
material non-public information relating to the Company and the Material
Subsidiaries.
I. EXEMPTION FROM INVESTMENT COMPANY ACT. The Company shall
conduct its business, and shall cause the Material Subsidiaries to conduct their
businesses, in a manner so that neither the Company nor any Material Subsidiary
shall become an "investment company" within the meaning of the Investment
Company Act.
J. ACCOUNTING AND RESERVES. The Company shall maintain a
standard and uniform system of accounting and shall keep proper books and
records and accounts in which full, true and correct entries shall be made of
its transactions, all in accordance with GAAP applied on a consistent basis
through all periods, and shall set aside on such books for each fiscal year all
such proper reserves for depreciation, obsolescence, amortization, bad debts and
other purposes in connection with its operations as are required by such
principles so applied.
K. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
of its Material Subsidiaries shall, directly or indirectly, enter into any
transaction or agreement with any stockholder, officer director or Affiliate of
the Company or family member of any officer, director or Affiliate of the
Company, unless the transaction or agreement is (i) reviewed and approved by a
majority of Disinterested Directors (as defined below) and (ii) on terms no less
favorable to the Company or the applicable Material Subsidiary than those
obtainable from a non-affiliated person. A "DISINTERESTED DIRECTOR" shall mean
an individual who is not and who has not been an officer or
<PAGE> 20
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employee of the Company and who is not a member of the family of, controlled by
or under common control with, any such officer or employee.
L. ISSUANCES OF ADDITIONAL CONVERTIBLE PREFERRED SHARES OR
CONVERTIBLE DEBENTURES. So long as Buyer beneficially owns any of the Preferred
Shares, the Company shall not issue any additional convertible preferred stock
or convertible debt securities, in each case, convertible into Common Stock at a
floating conversion price, without the prior written consent of Buyer.
M. CERTAIN RESTRICTION. So long as any Preferred Shares are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities (as defined in the
Certificate of Designation), nor shall any Junior Securities be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of shares of Common Stock made for purposes of or pursuant to the
provisions of an employee incentive or benefit plan (including a stock option
plan) of the Company or any Material Subsidiary, for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Company, directly or indirectly.
N. TRANSFER AGENT. If requested by Buyer, the Company shall
replace the then Transfer Agent for the Common Stock with a Transfer Agent
designated by Buyer.
O. AMENDMENT OF CERTIFICATE OF DESIGNATION. The Company
covenants and agrees that it take all corporate and other steps required to
amend and restate the Certificate of Designation to read in its entirety
substantially as set forth in Exhibit B-2 attached hereto and shall cause such
Amended and Restated Certificate of Designation of Series B 6% Convertible
Preferred Stock to be duly filed with the Secretary of State of the State of
Nevada no later than the third business days after the date hereof.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other
than the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Conversion Shares, the Dividend Shares
and the Warrants Shares otherwise shall be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's
<PAGE> 21
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transfer agent to issue one or more certificates for Common Stock without any
restrictive legends endorsed thereon.
B. Buyer shall have the right to convert the Preferred Shares
by telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to the Company. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date (as defined in the
Certificate of Designation). The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of any Preferred
Shares (together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five business days after receipt by the Company of the Notice of
Conversion (the "DELIVERY DATE"). Within 30 days after Buyer delivers the Notice
of Conversion to the Company, Buyer shall deliver to the Company the Preferred
Shares being converted.
C. Buyer shall have the right to purchase shares of Common
Stock pursuant to exercise of the Warrants in accordance with its applicable
terms of the Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is referred to herein as the
"WARRANT DELIVERY DATE."
D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the Preferred
Shares, upon the conversion of the Preferred Shares or exercise of the Warrants
beyond the applicable Dividend Payment Due Date (as defined in the Certificate
of Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "NO. BUSINESS DAYS" is defined as the number of business days beyond five
days from the Dividend Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
NO. BUSINESS DAYS COMPENSATION FOR EACH 10 SHARES OF
PREFERRED SHARES NOT CONVERTED
TIMELY OR 500 SHARES OF COMMON STOCK
ISSUABLE IN PAYMENT OF DIVIDENDS OR
UPON EXERCISE OF WARRANTS NOT ISSUED
TIMELY
------------------ -------------------------------------
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
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8 200
9 225
10 250
more than 10 $250 + $100 for each Business Day
Late beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. DELIVERY INSTRUCTIONS
The Securities shall be delivered by the Company to the Escrow Agent pursuant to
Section I.B. hereof on a "delivery-against-payment basis" at the Closing.
VII. CLOSING DATE
The date and time (the "CLOSING DATE") of the issuance and sale of the Preferred
Shares and the Warrants (the "CLOSING") shall be the date hereof or such other
as shall be mutually agreed upon in writing. The issuance and sale of the
Securities shall occur on the Closing Date at the offices of the Escrow Agent.
Notwithstanding anything to the contrary contained herein, the Escrow Agent
shall not be authorized to release to the Company the Purchase Price and to
Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the
Securities being purchased by Buyer unless the conditions set forth in Section
VIII.C. and IX.H. hereof have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the Securities on the
Closing Date to Buyer pursuant to this Agreement is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase
Price;
B. The accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case
<PAGE> 23
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such accuracy shall be measured as of such specified date) and the performance
by Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date; and
C. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase the Securities on
the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the
Certificate of Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
C. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date (except for representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
material respects on or before the Closing Date of all covenants and agreements
of the Company required to be performed by it pursuant to this Agreement on or
before the Closing Date, all of which shall be confirmed to Buyer by the chief
executive officer of the Company by delivery of the certificate to that effect;
D. Buyer having received an opinion of counsel for the
Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to Buyer as to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common Stock on the Amex,
(ii) the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States or any of its territories, protectorates or
possessions, or (iv) in the case of the foregoing existing at the date of this
Agreement, a material acceleration or worsening thereof;
F. There not having occurred any event or development, and
there being in existence no condition, having or which reasonably and
foreseeable could have a Material Adverse Effect;
<PAGE> 24
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G. The Company shall have delivered to Buyer (as provided in
the Escrow Instructions) reimbursement of Buyer's out-of-pocket costs and
expenses whether or not accounted for or incurred in connection with the
transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel) of $60,000;
H. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement;
I. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve 5,722,031 shares of Common Stock for
issuance of the Conversion Shares and the Warrant Shares;
J. The Company shall have obtained all consents, approvals or
waivers from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, all without material cost to the Company; and
K. Buyer shall have received such additional documents,
certificates, payment, assignments, transfers and other delivers, as it or its
legal counsel may reasonably request and as are customary to effect a closing of
the matters herein contemplated.
X. TERMINATION
A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on October 18, 1999 (the "LATEST CLOSING
DATE"); provided, however, that the right to terminate this Agreement pursuant
to this Section X.B. shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur at or before such time and date;
provided, further, however, that if the Closing shall not have occurred on or
prior to the Latest Closing Date, the Closing may only occur after the Latest
Closing Date with the written consent of Buyer.
C. TERMINATION BY BUYER. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by Buyer at any time prior
to the Closing Date, if (i) the Company shall have failed to comply in all
material respects with its covenants or agreements contained in this Agreement,
(ii) there shall have been a breach by the Company with respect to any
representation or warranty made by it in this Agreement, (iii) there shall have
occurred any event or
<PAGE> 25
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development, or there shall be in existence any condition, having or reasonably
likely to have a Material Adverse Effect or (iv) the Company shall have failed
to satisfy the conditions provided in Section IX hereof.
D. TERMINATION BY THE COMPANY. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by the
Company at any time prior to the Closing Date, if (i) Buyer shall have failed to
comply in all material respects with its covenants or agreements contained in
this Agreement or (ii) there shall have been a breach by Buyer with respect to
any representation or warranty made by it in this Agreement.
E. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to this Section X, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Article XI, this Section X.E and Section X.F shall survive any
such termination; provided, however, that no party shall be released from any
liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.
F. FEES AND EXPENSES OF TERMINATION. If this Agreement is
terminated for any reason, the Company shall promptly reimburse Buyer for all of
Buyer's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement and the other Documents (including,
without limitation, the fees and disbursements of Buyer's legal counsel).
XI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each
of the Company and Buyer in this Agreement, the annexes, schedules and exhibits
hereto and in each instrument, agreement and certificate entered into and
delivered by them pursuant to this Agreement, shall survive the Closing and the
consummation of the transactions contemplated hereby. In the event of a breach
or violation of any of such representations, warranties or covenants, the party
to whom such representations, warranties or covenants have been made shall have
all rights and remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless
Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "BUYER INDEMNITEES"), from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES"), and agrees to reimburse Buyer Indemnitees for all out
of- pocket expenses (including the fees and expenses of legal counsel), in each
case promptly as incurred by Buyer Indemnitees and to the extent arising out of
or in connection with:
<PAGE> 26
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1. any misrepresentation, omission of fact or breach
of any of the Company's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or exhibits
hereto or thereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement or the
other Documents;
2. the purchase of the Preferred Shares and the
Warrants, the conversion of the Preferred Shares and the exercise of
the Warrants and the consummation of the transactions contemplated by
this Agreement and the other Documents, the use of any of the proceeds
of the Purchase Price by the Company, the purchase or ownership of any
or all of the Securities, the performance by the parties hereto of
their respective obligations hereunder and under the Documents or any
claim, litigation, investigation, proceedings or governmental action
relating to any of the foregoing, whether or not Buyer is a party
thereto; and
3. resales of the Common Shares by Buyer in the
manner and as contemplated by this Agreement and the Registration
Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "COMPANY INDEMNITEES"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:
1. any misrepresentation, omission of fact, or breach
of any of Buyer's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or exhibits
hereto or thereto or any instrument, agreement or certificate entered
into or delivered by Buyer pursuant to this Agreement or the other
Documents; and
2. any failure by Buyer to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or the other Documents or any instrument,
certificate or agreement entered into or delivered by Buyer pursuant to
this Agreement or the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "INDEMNIFIED PARTY") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "INDEMNIFYING PARTY") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the
<PAGE> 27
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Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles of such state.
XIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement
<PAGE> 28
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and the other Documents. Each party hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may effectively do so, any
defense of an inconvenient forum or improper venue to the maintenance of such
action or proceeding in any such court and any right of jurisdiction on account
of its place of residence or domicile. Each party hereto irrevocably and
unconditionally consents to the service of any and all process in any such
action or proceeding in such courts by the mailing of copies of such process by
certified or registered airmail at its address specified in Section IXX. Each
party hereto agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
XIV. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES
HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XV. COUNTERPARTS; EXECUTION
This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.
XVI. HEADINGS
The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
XVII. SEVERABILITY
In the event any one or more of the provisions contained in
this Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
<PAGE> 29
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affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by all parties. No
waiver of any of the provisions of the Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
XIX. NOTICES
Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
A. if to the Company, to:
CVF Technologies Corporation
916 Center Street
Lewiston, NY 14092
Attention: Jeffrey I. Dreben
(716) 754-7883
(716) 754-7606 (Fax)
with a copy to:
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Attention: John J. Zak, Esq.
(716) 848-1253
(716) 849-0349 (Fax)
<PAGE> 30
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B. if to Buyer, to:
The Shaar Fund Ltd.
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane New
York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
C. if to the Escrow Agent, to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
XX. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
<PAGE> 31
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XXI. ASSIGNMENT
This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
---------------------------------
Name: Jeffrey I. Dreben
Title: President
THE SHAAR FUND LTD.
By: /s/ Samuel Levinson
---------------------------------
Name: Samuel Levinson
Title: Managing Director
<PAGE> 1
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of October 8,
1999 (this "AGREEMENT"), by and between CVF Technologies Corporation, a Nevada
corporation, with principal executive offices located at 916 Center Street,
Lewiston, New York 14092 (the "COMPANY"), and The Shaar Fund Ltd. (the "INITIAL
INVESTOR").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of October 8, 1999, by and between the
Initial Investor and the Company (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed to issue and sell to the Initial Investor (i) 350,000 shares
of Series B 6% Convertible Preferred Stock, par value $0.001 per share (the
"SERIES B PREFERRED SHARES") which, upon the terms of and subject to the
conditions of the Company's Certificate of Designation of Series B 6%
Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), are convertible
into shares of the Company's common stock, par value $0.001 per share (the
"COMMON STOCK") and (ii) Common Stock Purchase Warrants (the "WARRANTS") to
purchase shares of Common Stock; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide with
respect to the Common Stock issued or issuable in lieu of cash dividend payments
on the Series B Preferred Shares, upon conversion of the Preferred Shares and
exercise of the Warrants certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have
the meanings:
(i) "AFFILIATE," of any specified Person means any
other Person who directly, or indirectly through one or more
intermediaries, is in control of, is controlled by, or is under common
control with, such specified Person. For purposes of this definition,
control of a Person means the power, directly or indirectly, to direct
or cause the direction of the management and policies of such Person
whether by contract, securities, ownership or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have the respective meanings correlative
to the foregoing.
(ii) "CLOSING DATE" means the date and time of the
issuance and sale of the Series B Preferred Shares and the Warrants.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
(iv) "CURRENT MARKET PRICE" on any date of
determination means the closing sale price of a share of the Common
Stock on such day as reported on the Amex; provided, if such security
is not listed or admitted to trading on the Amex, the closing sale
<PAGE> 2
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price or closing bid price, as the case may be, as reported on the
principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted
or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by Bloomberg
LP, or a similar generally accepted reporting service, as the case may
be.
(v) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(vi) "INVESTOR" means each of the Initial Investor and any
transferee or assignee of Registrable Securities which agrees to become
bound by all of the terms and provisions of this Agreement in
accordance with Section 8 hereof.
(vii) "PERSON" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(viii) "PROSPECTUS" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(ix) "PUBLIC OFFERING" means an offer registered with the
Commission and the appropriate state securities commissions by the
Company of its Common Stock and made pursuant to the Securities Act.
(x) "REGISTRABLE SECURITIES" means the Common Stock issued or
issuable (i) in lieu of cash dividend payments on the Series B
Preferred Shares, (ii) upon conversion or redemption of the Preferred
Shares or (iii) upon exercise of the Warrants; provided, however, a
share of Common Stock shall cease to be a Registrable Security for
purposes of this Agreement when it no longer is a Restricted Security.
(xi) "REGISTRATION STATEMENT" means a registration statement
of the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act, including the Prospectus
contained
<PAGE> 3
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therein and forming a part thereof, any amendments to such registration
statement and supplements to such Prospectus, and all exhibits to and
other material incorporated by reference in such registration statement
and Prospectus.
(xii) "RESTRICTED SECURITY" means any share of Common Stock
issued or issuable in lieu of cash dividend payments on the Series B
Preferred Shares, upon conversion or redemption of the Preferred Shares
or exercise of the Warrants except any such share that (i) has been
registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus
included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred and a new
share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(xiii) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. REGISTRATION
(a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than 90 days after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but in no event later than 180 days after the Closing
Date, assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.50 per share. The Company shall promptly (and, in any event,
no more than 24 hours after it receives comments from the Commission), notify
the Buyer when and if it receives any comments from the Commission on the
Registration Statement and promptly forward a copy of such comments, if they are
in writing, to the Buyer. At such time after the filing of the Registration
Statement pursuant to this Section 2(a) as the Commission indicates, either
orally or in writing, that it has no further comments with respect to such
Registration Statement or that it is willing to entertain appropriate requests
for acceleration of effectiveness of such Registration Statement, the Company
shall promptly, and in no event later than two business days after receipt of
such indication from the Commission, request that the effectiveness of such
Registration Statement be accelerated within 48 hours of the Commission's
receipt of such request. The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of the Registrable
Securities. The Company shall notify the Initial Investor by written notice that
such Registration Statement has been declared effective by the Commission within
24 hours of such declaration by the Commission.
<PAGE> 4
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(b) REGISTRATION DEFAULT. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a), is not (i) filed with the Commission within 90 days after the Closing Date
or (ii) declared effective by the Commission within 180 days after the Closing
Date (either of which, without duplication, an "INITIAL DATE"), then the Company
shall make the payments to the Initial Investor as provided in the next sentence
as liquidated damages and not as a penalty. The amount to be paid by the Company
to the Initial Investor shall be determined as of each Computation Date (as
defined below), and such amount shall be equal to 2% (the "LIQUIDATED DAMAGE
RATE") of the Purchase Price (as defined in the Securities Purchase Agreement)
from the Initial Date to the first Computation Date and for each Computation
Date thereafter, calculated on a pro rata basis to the date on which the
Registration Statement is filed with (in the event of an Initial Date pursuant
to clause (i) above) or declared effective by (in the event of an Initial Date
pursuant to clause (ii) above) the Commission (the "PERIODIC AMOUNT") provided,
however, that in no event shall the liquidated damages be less than $25,000;
provided, further, however, that if the Registration Statement is not declared
effective by the Commission within 210 days after the Initial Date set forth in
clause (ii) above, then the Liquidated Damage Rate shall increase to 4%;
provided, further, however, that the Liquidated Damage Rate shall increase by 1%
for each 30 day period after the 210th day after the Initial Date set forth in
clause (ii) above that the Registration Statement is not declared effective by
the Commission. The full Periodic Amount shall be paid by the Company to the
Initial Investor by wire transfer of immediately available funds within three
days after each Computation Date.
As used in this Section 2(b), "COMPUTATION DATE" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
(c) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) ADDITIONAL REGISTRATION STATEMENT. In the event the Current Market
Price declines to $2.00 per share or less and each time thereafter that the
Current Market Price declines by 25% (each such date, a "DECLINE DATE"), the
Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Preferred
Shares and exercise of the Warrants (the "ADDITIONAL REGISTRABLE SECURITIES") in
addition to those previously registered, assuming (x) with respect to the first
Additional Registration Statement, a Conversion Price of $0.75 per share and (y)
with respect to each succeeding Additional Registration Statement, a Conversion
Price of 25% less than the Conversion Price assumed with respect to the
immediately preceding Additional
<PAGE> 5
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Registration Statement. The Company shall, to the extent required by the
Securities Act, as reasonably determined by the Initial Investor, prepare and
file with the Commission not later than the 30th day thereafter, a Registration
Statement relating to the offer and sale of such Additional Registrable
Securities and shall use its best efforts to cause the Commission to declare
such Registration Statement effective under the Securities Act as promptly as
practicable but not later than 60 days thereafter. The Company shall not include
any other securities in the Registration Statement relating to the offer and
sale of such Additional Registrable Securities.
If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "ADDITIONAL REGISTRATION DATE"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "ADDITIONAL PERIODIC AMOUNT")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "ADDITIONAL COMPUTATION DATE" means the
date which is 30 days after the Additional Registration Date and, if the
Additional Registration Statement required to be filed by the Company pursuant
to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.
(e) (i) If the Company proposes to register any of its warrants, Common
Stock or any other shares of common stock of the Company under the Securities
Act (other than a registration (A) on Form S-8 or S-4 or any successor or
similar forms, (B) relating to Common Stock or any other shares of common stock
of the Company issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in connection
with a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision) under
the Securities Act applies), whether or not for sale for its own account, it
will each such time, give prompt written notice at least 20 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such Investor's
rights under this Section 3(e) and shall offer such Investor the opportunity to
include in such registration statement such number of
<PAGE> 6
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Registrable Securities as such Investor may request. Upon the written request of
any Investor made within 10 days after the receipt of notice from the Company
(which request shall specify the number of Registrable Securities intended to be
disposed of by such Investor), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities that the
Company has been so requested to register by each Investor, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered; provided, however, that (A) if such registration involves a Public
Offering, each Investor must sell its Registrable Securities to any underwriters
selected by the Company with the consent of such Investor on the same terms and
conditions as apply to the Company and must enter into any underwriting
agreement, custody agreement or power of attorney requested by any such
underwriter and (B) if, at any time after giving written notice of its intention
to register any Registrable Securities pursuant to this Section 3 and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to each Investor
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(e) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission.
(ii) If a registration pursuant to this Section 2(e) involves a Public
Offering and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock, Warrants or other shares of Common
Stock that the Company and the Investors intend to include in such registration
exceeds the largest number of shares of Common Stock or Warrants (including any
other shares of Common Stock or Warrants of the Company) that can be sold
without having an adverse effect on such Public Offering (the "MAXIMUM OFFERING
SIZE"), the Company will include in such registration only such number of shares
of Common Stock or Warrants, as applicable, as does not exceed the Maximum
Offering Size, and the number of shares in the Maximum Offering Size shall be
allocated among the Company, the Investors and any other sellers of Common Stock
or Warrants in such Public Offering ("THIRD-PARTY SELLERS"), first, pro rata
among the Investors until all the shares of Common Stock or Warrants originally
proposed to be offered for sale by the Investors have been allocated, and
second, pro rata among the Company and any Third-Party Sellers, in each case on
the basis of the relative number of shares of Common Stock or Warrants
originally proposed to be offered for sale under such registration by each of
the Investors, the Company and the Third-Party Sellers, as the case may be. If
as a result of the proration provisions of this Section 2(e)(ii), any Investor
is not entitled to include all such Registrable Securities in such registration,
such Investor may elect to withdraw its request to include any Registrable
Securities in such registration. With respect to registrations pursuant to this
Section 2(e), the number of securities required to satisfy any underwriters'
over-allotment option shall be allocated among the Company, the Investors and
any Third Party Seller pro rata on the basis of the relative number of
securities offered for sale under such registration by each of the Investors,
the Company and any such Third Party Sellers before the exercise of such
over-allotment option.
<PAGE> 7
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3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable
Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the date on which the Registration
Statement is first declared effective by the Commission (the "EFFECTIVE TIME")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "REGISTRATION PERIOD") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) During the Registration Period, comply with the provisions
of the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide (A)
draft copies thereof to the Investors and reflect in such documents all such
comments as the Investors (and their counsel) reasonably may propose and (B) to
the Investors a copy of the accountant's consent letter to be included in the
filing and (ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (A) promptly after the same is prepared and publicly distributed, filed
with the Commission, or received by the Company, one copy of the Registration
Statement, each Prospectus, and each amendment or supplement thereto, and (B)
such number of copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
<PAGE> 8
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(d) (i) Register or qualify the Registrable Securities covered
by the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
registration statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Investors reasonably may request and registered in such names as the Investor
may request; and, within three business days after a registration statement
which includes Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to the
transfer
<PAGE> 9
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agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such registration statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon
as practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
<PAGE> 10
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(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managers) addressed to
the underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such
<PAGE> 11
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Registrable Securities, (B) indemnifying such qualified independent underwriter
to the extent of the indemnification of underwriters provided in Section 5
hereof, and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the requirements of the
NASD Rules.
4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. As least seven
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "REQUESTED INFORMATION") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from an Investor (a "NON-RESPONSIVE
INVESTOR"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 3(e)
or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting
<PAGE> 12
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fees, and the fees and disbursements of counsel for the Company, and the
reasonable fees of one firm of counsel to the holders of a majority in interest
of the Registrable Securities shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each
Investor and each underwriter, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Investor or underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "INDEMNIFIED PERSON") from
and against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
an omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign any Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or
<PAGE> 13
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liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement or Prospectus or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in light of the
circumstances under which they were made, in the case of the Prospectus), not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter expressly for use therein; provided,
however, that no Investor or underwriter shall be liable under this Section 6(b)
for any amount in excess of the net proceeds paid to such Investor or
underwriter in respect of shares sold by it, and (ii) reimburse the Company for
any legal or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
<PAGE> 14
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liabilities with respect to such Claim or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section 6, in
no event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an
<PAGE> 15
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indemnified party at law or in equity.
7. RULE 144
With a view to making available to the Investors the benefits
of Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Investors to sell securities of
the Company to the public without registration ("RULE 144"), the Company agrees
to use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule
144; and
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company pursuant to Section 13
or 15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such Registrable Securities
(or all or any portion of any Preferred Shares or Warrant of the Company which
is convertible into such securities) only if: (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment, the securities so transferred or assigned to the
transferee or assignee constitute Restricted Securities, and (d) at or before
the time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investors who hold a majority-in-interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon each Investor and the Company.
<PAGE> 16
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10. CHANGES IN COMMON STOCK
If, and as often as, there are any changes in the Common Stock
by way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed.
11. MISCELLANEOUS
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then the
Company forthwith shall grant (by means of an amendment to this Agreement or
otherwise) identical registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
CVF Technologies Corporation
916 Center Street
Lewiston, NY 14092
Attention: Jeffrey I. Dreben
(716) 754-7883
(716) 754-7606 (Fax)
<PAGE> 17
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with a copy to:
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
Attention: John J. Zak, Esq.
(716) 848-1253
(716) 849-0349 (Fax)
(ii) if to the Initial Investor, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
(iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 11(c).
(d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
<PAGE> 18
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(f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, dated as of a date even herewith (the "ESCROW
INSTRUCTIONS"), between the Company, the Initial Investor and Cadwalader,
Wickersham & Taft, the Preferred Shares and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement, the Securities Purchase
Agreement, the Escrow Instructions, the Certificate of Designation and the
Warrants supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
<PAGE> 19
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(l) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(m) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.
[SIGNATURE PAGE FOLLOWS.]
<PAGE> 20
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In Witness Whereof, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
CVF TECHNOLOGIES CORPORATION
By: /s/ Jeffrey I. Dreben
------------------------------
Name: Jeffrey I. Dreben
Title: President
The Shaar Fund Ltd.
By: /s/ Samuel Levinson
------------------------------
Name: Samuel Levinson
Title: Managing Director
