SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): APRIL 4, 1996
PHARMACEUTICAL FORMULATIONS, INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-11274 22-2367644
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
460 PLAINFIELD AVENUE, EDISON, NEW JERSEY 08818
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: 908-985-71000
N.A.
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
(a) CREATION OF SERIES A PREFERRED STOCK.
Effective April 4, 1996, the Company filed a Certificate of
Designations, Preferences and Rights creating 3,000,000 shares of Series A
Cumulative Redeemable Convertible Preferred Stock, par value $1.00 per share
(the "Series A Preferred Stock"). The holders of Series A Preferred Stock are
entitled to a dividend at the lower of $.08 per share or $1.00 times the prime
rate of interest at the time of the sale of the Series A Preferred Stock,
payable semiannually. Dividends cumulate if not paid and the Company can not
declare or pay dividends on any other class of stock until dividends on the
Series A Preferred Stock is paid.
The holders of Series A Preferred Stock are entitled to a liquidation
preference of $1.00 per share. The Company may redeem shares of Series A
Preferred Stock at any time at a price equal to the liquidation preference plus
accrued and unpaid dividends. Shares of Series A Preferred Stock may be
converted at the option of the holder into shares of Common Stock, par value
$.08 per share, at any time after 36 months from issuance upon three months
prior notice at a rate such that each share of Series A Preferred Stock shall be
converted into such number of shares of Common Stock as equals the liquidation
preference divided by the lower of the current market price (as defined) at the
conversion date or $2.00 per share (subject to certain antidilution
adjustments).
The shares of Series A Preferred Stock are accorded only such voting
rights as required by applicable law. The Company, however, may not take certain
enumerated action prejudicial to the interest of the holders of Series A
Preferred Stock without the approval of the holders of a majority of the Series
A Preferred Stock.
(b) SALE OF SERIES A PREFERRED STOCK.
On April 8, 1996, the Company sold 2,500,000 shares of Series A Preferred
Stock to ICC Industries Inc. ("ICC") pursuant to a Stock Purchase Agreement
between the Company and ICC dated April 8, 1996 for a payment of $2,500,000.
Pursuant to the Stock Purchase Agreement, the Company agreed to (a) redeem some
or all of the Series A Preferred Stock owned by ICC if the Company has made a
registered public offering of its common stock and the proceeds thereof shall
have been sufficient to pay the redemption price and (b) allow ICC to surrender
shares of Series A Preferred Stock, valued at the liquidation preference
therefor plus accrued and unpaid dividends, in exercise of any warrants, options
or other rights to purchase Common Stock which ICC may have or in payment of any
shares of Common Stock purchased in any public offering. The foregoing covenants
are conditioned upon the redemption or surrender of shares not thereby
causing the Company to fail to meet all requirements for listing or continued
listing of the Company's Common Stock on the Nasdaq Stock Market or such other
exchange on which the Common Stock may be listed.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
a. Not applicable
b. Not applicable
c. Exhibits:
1. Certificate of Designations, Preferences
and Rights of Series A Cumulative
Redeemable Convertible Preferred Stock
of the Company, filed April 4, 1996
2. Stock Purchase Agreement between the
Company and ICC Industries Inc. dated
April 8, 1996 regarding the purchase of
2,500,000 shares of Series A Cumulative
Redeemable Convertible Preferred Stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHARMACEUTICAL FORMULATIONS, INC.
By: /S/ FRANK MARCHESE
Name: Frank Marchese
Title: Vice President -
Finance
Dated: April 25, 1996
EXHIBIT INDEX
ITEM
1. Certificate of Designations, Preferences
and Rights of Series A Cumulative
Redeemable Convertible Preferred Stock
of the Company, filed
April 4, 1996
2. Stock Purchase Agreement between the
the Company and ICC Industries Inc. dated
April 8, 1996 regarding the purchase of 2,500,000 shares of Series A
Cumulative Redeemable Convertible Preferred Stock
<PAGE>
Exhibit 1 to Form 8-K
dated April 4, 1996
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
PHARMACEUTICAL FORMULATIONS, INC.
Under Section 151 of the Delaware General Corporation Law
Pharmaceutical Formulations, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: That,
pursuant to authority conferred upon the Board of Directors by the Certificate
of Incorporation, as amended, of the Corporation and pursuant to the provisions
of Section 151 of the Delaware General Corporation Law, said Board of Directors,
at a meeting duly held and called on April 4, 1996, adopted a resolution
providing for the authorization of a series of Preferred Stock consisting of
3,000,000 shares designated "Series A Cumulative Redeemable Convertible
Preferred Stock", which resolution is as follows: RESOLVED that, pursuant to
Article Fourth of the Certificate of Incorporation of the Corporation, as
amended, there is hereby authorized and created a series of preferred stock to
consist of 3,000,000 shares, par value $1.00 per share, having the designations,
preferences, relative participating, optional and other special rights,
qualifications, limitations and restrictions as hereinafter set forth:
1. DESIGNATION.
The designation of the preferred stock shall be "Series A
Cumulative Redeemable Convertible Preferred Stock" and the number of shares
constituting such series is 3,000,000 (the
"Series A Preferred Stock").
2. CERTAIN DEFINITIONS.
2.1. "Additional Shares of Common Stock" shall
mean all shares of Common Stock of the Corporation issued by the Corporation
after April 4, 1996 (the "Effective Date") except Common Stock which may be
issued pursuant to (a) the conversion of Series A Preferred Stock, (b) the
exercise by employees of the Corporation or any of its subsidiaries of options
granted pursuant to any stock option plan presently in effect or which may
hereafter be adopted by the Corporation where the exercise price of such options
is not less than the fair market value of a share of Common Stock on the date of
grant thereof and (c) options, warrants, rights or Convertible Securities
outstanding on the Effective Date.
2.2. "Common Stock" shall mean the shares of the
Common Stock of the Corporation, par value $0.08 per share, and any stock into
which such Common Stock may hereinafter be changed.
2.3. "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 Additional Shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event.
2.4. "Current Market Price" per share of Common
Stock at any date herein specified shall mean the average of the daily market
prices for 30 consecutive trading days commencing 45 days before such date,
except that for purposes of Section 5.1.3 hereof, the "Current Market Price" per
share of Common Stock shall mean the market price on the trading day therein
specified. The market price for each such trading day shall be (a) the last
reported sales price on the principal exchange on which the Common Stock is
listed, or the Nasdaq Stock Market ("NASDAQ"), if the Common Stock is so listed
or quoted; (b) if the Common Stock is not reported by NASDAQ or listed or
admitted to trading on a national securities exchange, the last bid price as
furnished by a New York Stock Exchange member firm selected from time to time by
the Corporation in good faith for that purpose; (c) if the Common Stock is not
reported by NASDAQ or listed or admitted to trading on a national securities
exchange and no such New York Stock Exchange member firm is able to furnish such
a bid, the highest of (i) the average of the last five sales of Common Stock (if
any), (ii) the net per share book value of the Corporation or (iii) the value of
the Corporation as fixed by an appraiser selected by the Corporation's Board of
Directors in good faith.
2.5. "Person" shall mean any individual,
corporation, association, company, business trust, partnership, joint venture,
joint-stock company, limited liability company, trust, unincorporated
organization or association or government or any agency or political subdivision
thereof.
3. DIVIDENDS.
3.1. The holders of outstanding shares of the
Series A Preferred Stock shall be entitled to receive preferential dividends in
cash, as and when declared by the Board of Directors of the Corporation out of
any earnings and profits or surplus funds of the Corporation legally available
at the time for declaration of dividends, at the rate per share of eight cents
or an amount equal to $1.00 times the prime rate of interest (as published in
the Wall Street Journal) at the time of purchase, whichever is lower (the
"Preferred Rate"), on the Liquidation Preference Per Share (as defined herein),
payable semi-annually on January 1 and July 1, in each year commencing on July
1, 1996, before any dividend or other distribution will be paid or declared and
set apart for payment on any shares of any Common Stock of the Corporation, or
any other stock of any class of the Corporation. The calculation of the amount
of each dividend due under the preceding sentence for any period of more than or
less than six calendar months shall be made on the basis of a year of 360 days
and the actual number of days elapsed since the preceding dividend payment or
the issuance of the shares, as the case may be. The determination at any time by
the Board of Directors of the Corporation of the amount of any earnings and
profits or surplus funds of the Corporation available for the payment of such
dividends will be binding and conclusive on the holders of Series A Preferred
Stock outstanding at the time. Holders of Series A Preferred Stock will not
receive any dividends other than the dividends provided in this Section and will
not participate with the holders of any Common Stock or any other class of stock
of the Corporation in the payment of dividends thereon.
3.2. Dividends on the Series A Preferred Stock
at the Preferred Rate calculated as provided in the preceding paragraph and
payable at the times provided therein shall be cumulative, whether or not
earned, so that if at any time full cumulative dividends on all shares of the
Series A Preferred Stock then outstanding as so calculated shall not have been
paid or declared and set apart for payment at the times provided in the
preceding paragraph, or if the full dividend on all such outstanding Series A
Preferred Stock for the then preceding semiannual dividend period shall not have
been paid or declared and set apart for payment, the amount of the deficiency
shall be paid or declared and set apart for payment, with interest thereon from
the date as of which such dividend should have been paid as provided in the
preceding paragraph at the Preferred Rate, before any sum shall be set apart for
or applied by the Corporation or a subsidiary of the Corporation to the
purchase, redemption or other acquisition of any shares of any other class of
stock of the Corporation and before any dividend or other distribution shall be
paid or declared and set apart for payment on any other class of stock of the
Corporation and until the full cumulative dividend for all past periods and the
immediately preceding period shall have been paid or distributed to, or at the
direction of, the holders of the Series A Preferred Stock.
4. LIQUIDATION RIGHTS.
4.1. Upon the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary, the holders of
the Series A Preferred Stock shall be entitled to receive, before any payment or
distribution shall be made to the holders of any other class of outstanding
stock of the Corporation, out of the assets of the Corporation available for
distribution to shareholders, an amount per share equal to (i) $1.00 per share
of Series A Preferred Stock (the "Liquidation Preference Per Share") and (ii)
all accrued and unpaid dividends to and including the date of payment thereof,
but shall have no other preference over the distribution of assets of the
Corporation.
4.2. Upon the payment in full of all amounts due
to holders of the Series A Preferred Stock, the holders of the Common Stock and
of any other class of stock of the Corporation shall receive all remaining
assets of the Corporation legally available for distribution. If the assets of
the Corporation available for distribution to the holders of the Series A
Preferred Stock shall be insufficient to permit payment in full of the amounts
payable as aforesaid to the holders of the Series A Preferred Stock upon such
liquidation, dissolution or winding-up, whether voluntary or involuntary, then
all such assets of the Corporation shall be distributed, to the exclusion of the
holders of shares of any other class of stock of the Corporation, ratably among
the holders of the Series A Preferred Stock.
4.3. Holders of the Series A Preferred Stock
shall not be entitled, upon the liquidation, dissolution or
winding-up of the Corporation, to receive any amounts with
respect to such stock other than the amounts referred to in this Section 4.
5. CONVERSION RIGHTS.
5.1. CONVERSION OF SERIES A PREFERRED STOCK.
5.1.1. The Series A Preferred Stock shall
be convertible at the option of the respective holders thereof at any time after
36 months after the date of issuance into fully paid and non-assessable Common
Stock, at the rate such that each share of Series A Preferred Stock shall be
converted into such number of shares of Common Stock as equals the Liquidation
Preference divided by the lower of (i) the Current Market Price at the
Conversion Date (as defined below) or (ii) $2.00 per share or at the rate which
results from the making of any adjustment specified in Section 5.2 hereof (the
number of shares of Common Stock issuable at any time, giving effect to the
latest prior adjustment pursuant to Section 5.2 hereof, if any, in exchange for
one share of Series A Preferred Stock being hereinafter called the "Conversion
Rate").
5.1.2. The holder of any shares of Series A
Preferred Stock may exercise the conversion right as to any part thereof by
delivering at least three months prior to the conversion date to the Corporation
during regular business hours, at the office of any transfer agent of the
Corporation for the Series A Preferred Stock or at such other place as may be
designated by the Corporation, the certificate or certificates for the shares to
be converted, duly endorsed or assigned in blank or to the Corporation (if
required by it), accompanied by written notice stating that the holder elects to
convert such shares and, subject to applicable securities laws, stating the name
or names (with address) in which the certificate or certificates for the shares
of Common Stock are to be issued. Conversion shall be deemed to have been
effected on the date in the third month following the date of such delivery
corresponding to the date of such delivery and such date is referred to herein
as the "Conversion Date". As promptly as practicable after the Conversion Date,
the Corporation shall issue and deliver to or upon the written order of such
holder, at such office or other place designated by the Corporation, a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled, with appropriate securities laws legends if
required, and a check or cash in respect to any fractional interest in a share
of Common Stock as provided in subsection 5.1.3 hereof. The person in whose name
the certificate or certificates for Common Stock are to be issued shall be
deemed to have become a stockholder of record on the applicable Conversion Date
unless the transfer books of the Corporation are closed on that date, in which
event he shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open, but the Conversion Rate
shall be that in effect on the Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate representing shares of
Series A Preferred Stock surrendered for conversion, the Corporation shall issue
and deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new certificate
covering the number of shares of Series A Preferred Stock representing the
unconverted portion of the certificate so surrendered, which new certificate
shall entitle in all respects the holder thereof to the rights of Series A
Preferred Stock represented thereby to the same extent as if the certificate
theretofore covering such unconverted shares had not been surrendered for
conversion.
5.1.3. No fractional shares of Common Stock
or scrip shall be issued upon conversion of shares of Series A Preferred Stock.
The number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock which
would otherwise be issuable upon conversion of any shares of Series A Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount determined on the basis of the Current Market Price per
share of Common Stock on the Conversion Date. Fractional interests shall not be
entitled to dividends, and the holders thereof shall not be entitled to any
rights as stockholders of the Corporation in respect of such fractional
interests.
5.1.4. All dividends accrued and unpaid on
Series A Preferred Stock to and including the date of conversion, whether or not
declared by the Board of Directors, shall constitute a debt of the Corporation
payable without interest to the converting holders and shall be paid by the
Corporation on the Conversion Date, in its option, either in cash or by the
issuance of Common Stock at the then Current Market Price per share. In case any
shares of Series A Preferred Stock are redeemed, such right of conversion shall
cease and terminate, as to the shares to be redeemed, as of the close of
business on the business day preceding the Redemption Date (as defined herein)
unless default shall be made in the payment of the redemption price for the
shares to be so redeemed.
5.2. ADJUSTMENTS. The Conversion Rate shall be
subject to adjustment from time to time as set forth in this
Section 5.2.
5.2.1. STOCK DIVIDENDS, SUBDIVISIONS AND
COMBINATIONS. In case at any time, or from time to time, the
Corporation 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, Common Stock;
b. subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock;
c. combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock; or
d. issue by reclassification or
recapitalization of its Common Stock any other class or series of shares of
the Corporation;
then the Conversion Rate in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder of any
Series A Preferred Stock surrendered for conversion after such time shall be
entitled to receive the number and kind of shares which he would have owned or
have been entitled to receive had such Series A Preferred Stock been converted
immediately prior to such time. Such adjustment shall be made whenever any event
listed above shall occur.
5.2.2. ISSUANCE OF ADDITIONAL SHARES OF
COMMON STOCK. In case at any time, or from time to time, the Corporation shall
(except as hereinafter provided) issue or sell any Additional Shares of Common
Stock for a consideration per share less than the Current Market Price per share
of Common Stock, then the Conversion Rate shall, on the date specified below for
determining the Current Market Price, subject to the provisions of subsection
5.2.5 hereof, be adjusted to that number determined by multiplying the
Conversion Rate immediately prior to such adjustment by a fraction (a) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock plus
the number of such Additional Shares of Common Stock so issued (including shares
deemed to have been issued pursuant to subsections 5.2.3 or 5.2.4 hereof), and
(b) the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Additional Shares of
Common Stock (including shares deemed to have been issued pursuant to
subsections 5.2.3 or 5.2.4 hereof) plus the number of shares of Common Stock
which the aggregate consideration for the total number of such Additional Shares
of Common Stock so issued would purchase at the Current Market Price. For the
purposes of this subsection 5.2.2, the date as of which the Current Market Price
per share of Common Stock shall be computed shall be the earlier of (i) the date
on which the Corporation shall enter into a firm contract for the issuance or
sale of such Additional Shares of Common Stock or (ii) the date of actual
issuance of such Additional Shares of Common Stock. The provisions of this
subsection 5.2.2 shall not apply to any issuance of Additional Shares of Common
Stock for which an adjustment is provided under subsection 5.2.1 hereof. No
adjustment of the Conversion Rate shall be made under this subsection 5.2.2 upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to subsections 5.2.3 or 5.2.4 hereof.
5.2.3. ISSUANCE OF WARRANTS OR OTHER
Rights. In case at any time, or from time to time, the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a distribution of, or shall otherwise issue, any warrants or other
rights to subscribe for or purchase either any Additional Shares of Common Stock
or any Convertible Securities and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to such warrants or other rights or pursuant to the terms of such
Convertible Securities shall be less than the Current Market Price per share of
Common Stock, then the Conversion Rate immediately thereafter shall, subject to
the provisions of subsection 5.2.5 hereof, be adjusted as provided in subsection
5.2.2 hereof on the basis that (a) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued as of the date for the determination of the Current
Market Price per share of Common Stock as hereinafter provided, and (b) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received and receivable by
the Corporation for the issuance of such Additional Shares of Common Stock
pursuant to such warrants or other rights or pursuant to the terms of such
Convertible Securities. For the purposes of this subsection 5.2.3, the date as
of which the Current Market Price per share of Common Stock shall be computed
shall be the earliest of (i) the date on which the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any such warrants or other rights, (ii) the date on which the
Corporation shall enter into a firm contract for the issuance of such warrants
or other rights or (iii) the date of actual issuance of such warrants or other
rights.
5.2.4. ISSUANCE OF CONVERTIBLE SECURITIES.
In case at any time, or from time to time, the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a distribution of, or shall otherwise issue, any Convertible Securities and the
consideration per share for which Additional Shares of Common Stock may at any
time thereafter be issuable pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price per share of Common Stock, then the
Conversion Rate shall, subject to the provisions of subsection 5.2.5 hereof, be
adjusted as provided in subsection 5.2.2 hereof on the basis that (a) the
maximum number of Additional Shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued as of the date for the determination of the Current Market
Price per share of Common Stock as hereinafter provided, and (b) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received and receivable by the
Corporation for the issuance of such Additional Shares of Common Stock pursuant
to the terms of such Convertible Securities. For the purposes of this subsection
5.2.4, the date as of which the Current Market Price per share of Common Stock
shall be computed shall be the earliest of (i) the date on which the Corporation
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any such Convertible Securities, (ii) the date on
which the Corporation shall enter into a firm contract for the issuance of such
Convertible Securities or (iii) the date of actual issuance of such Convertible
Securities. No adjustment of the Conversion Rate shall be made under this
subsection 5.2.4 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to subsection 5.2.3
hereof.
5.2.5. REDUCTION IN AMOUNT OF ADJUSTMENT.
If, at the time an adjustment is required by subsections 5.2.2, 5.2.3 or 5.2.4
hereof (hereinafter in this subsection 5.2.5 called an "Adjustment"), there has
been any previous adjustment or adjustments of the Conversion Rate under
subsections 5.2.3 or 5.2.4 hereof on the basis of the issuance of warrants or
other rights or the issuance of Convertible Securities, and
a. a portion of such warrants or rights, or the
right of conversion or exchange in respect of a portion of
such other Convertible Securities, as the case may be,
shall have expired without having been exercised; and/or
b. the consideration per share, for which shares of
Common Stock are issuable pursuant to such warrants or rights or the
terms of such other Convertible Securities, shall have been increased
solely by virtue of provisions therein contained for an automatic
increase in such consideration upon the arrival of a specified date or
the happening of a specified event;
then the Conversion Rate after such Adjustment shall be reduced by the sum (to
the extent not used pursuant to this subsection 5.2.5 to reduce previous
Adjustments) of the amounts of excess, in respect of each such previous
adjustment, of (i) the Conversion Rate immediately after such previous
adjustment over (ii) the Conversion Rate which would have been applicable after
such adjustment on the basis of
(1) treating the Additional Shares of Common Stock,
if any, theretofore actually issued or issuable pursuant to the
previous exercise of such warrants or rights or such right of
conversion or exchange as having been issued prior to the event
requiring such adjustment and for the consideration actually received
and receivable therefor, and
(2) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as having
been granted or issued with such grant or issuance being the event
requiring such adjustment and with the consideration per share for
which shares of Common Stock are issuable pursuant thereto being the
consideration then in effect.
If the reduction as provided above exceeds the amount of such Adjustment, the
excess shall be carried over and used to reduce the amount of any subsequent
Adjustment.
5.2.6. OTHER PROVISIONS APPLICABLE TO
ADJUSTMENTS UNDER THIS SECTION. The following provisions shall be applicable to
the making of adjustments of the Conversion Rate hereinbefore provided for in
this Section 5.2:
a. TREASURY STOCK. The sale or other disposition of
any issued shares of Common Stock owned or held by or for the account
of the Corporation shall be deemed an issuance thereof for purposes of
this Section 5.2, but until so issued such shares shall not be deemed
to be outstanding.
b. COMPUTATION OF CONSIDERATION. To the extent
that any Additional Shares of Common Stock or any
Convertible Securities or any warrants or other rights to
subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for a
cash consideration, the consideration received by the
Corporation therefor shall be deemed to be the amount of the cash
received by the Corporation therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Corporation
for subscription, the subscription price, or, if such Additional Shares
of Common Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the
initial public offering price, in any such case excluding any amounts
paid or receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses paid or
incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issue thereof. To the extent that
such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined by the
independent public accountants then regularly auditing the accounts of
the Corporation. The consideration for any Additional Shares of Common
Stock issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received by the
Corporation for issuing such warrants or other rights, plus the
additional consideration payable to the Corporation upon the exercise
of such warrants or other rights. The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received by the
Corporation for issuing any warrants or other rights to subscribe for
or purchase such Convertible Securities, plus the consideration paid or
payable to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the exercise of
the right of conversion or exchange in such Convertible Securities. In
case of the issuance at any time of any Additional Shares of Common
Stock or Convertible Securities in payment or satisfaction of any
dividend upon any class of stock other than Common Stock or in payment
of any debt, the Corporation shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend or debt so paid or
satisfied.
c. WHEN ADJUSTMENTS TO BE MADE. The adjustments
required by the preceding subsections shall be made whenever and as
often as any specified event requiring an adjustment shall occur,
except that no adjustment of the Conversion Rate that would otherwise
be required shall be made (except in the case of a subdivision or
combination of shares of the Common Stock, as provided for in
subsection 5.2.1 hereof) unless and until such adjustment either by
itself or with other adjustments not previously made and after giving
effect to any reduction provided for in subsection 5.2.5 hereof adds at
least 1/100th of a share to the Conversion Rate immediately prior to
the making of such adjustment. Any adjustment representing a change of
less than such minimum amount (except as aforesaid) shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by this Section 5.2 and not previously made, would
result in a minimum adjustment. 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.
d. FRACTIONAL INTERESTS. In computing
adjustments under this Section 5.2, fractional interests in
Common Stock shall be taken into account to the nearest one-
thousandth of a share.
e. ANTIDILUTION PROVISIONS. No adjustment shall be
made as a result of any increase in the number of Additional Shares of
Common Stock issuable or any decrease in the consideration payable upon
any issuance of Additional Shares of Common Stock, pursuant to any
provisions intended solely to avoid dilution contained in any warrants,
rights or Convertible Securities.
f. WHEN ADJUSTMENT NOT REQUIRED. (i) If the
Corporation 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.
(ii) If the Corporation declares or makes any
dividend or distribution with respect to Common Stock, other than
regular cash dividends (as defined in Section 2.2 hereof) or dividends
payable solely in shares of Common Stock, and each holder of Series A
Preferred Stock concurrently receives dividends or distributions equal
in amount and in the same kind of property (whether cash, securities or
other property) as such holder would be entitled to receive if all of
the outstanding Series A Preferred Stock were converted into Common
Stock as of the record date of such dividend or distribution with
respect to Common Stock, then thereafter no adjustment shall be
required with respect to such dividend or distribution.
5.2.7. MERGER, CONSOLIDATION OR DISPOSITION
OF ASSETS. In case the Corporation shall merge with or consolidate into another
Person, or shall sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another Person and, pursuant to the terms of
such merger, consolidation or disposition of assets, shares of common stock or
other securities, property or assets of the successor or acquiring corporation
or an affiliate thereof or cash are to be received by or distributed to the
holders of Common Stock of the Corporation, then each holder of Series A
Preferred Stock shall have the right thereafter to receive, upon conversion of
such Series A Preferred Stock, the number of shares of common stock or other
securities, property or assets of the successor or acquiring corporation or
affiliate thereof or cash receivable upon or as a result of such merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock equal to the Conversion Rate immediately prior to such event
multiplied by the number of shares of Series A Preferred Stock as may be
converted. The foregoing provisions of this subsection 5.2.7 shall similarly
apply to successive mergers, consolidations or dispositions of assets.
If a purchase, tender or exchange offer is made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock, the Corporation shall not effect any consolidation, merger or sale with
the Person having made such offer or with any affiliate of such Person, unless
prior to the consummation thereof each holder of shares of Series A Preferred
Stock shall have been given a reasonable opportunity to then elect to receive,
upon conversion of the shares of Series A Preferred Stock then held by such
holder, either the stock, securities, cash or assets then issuable with respect
to the Common Stock or the stock, securities, cash or assets, or the equivalent,
issued to previous holders of the Common Stock in accordance with such offer.
5.2.8. OTHER ACTION AFFECTING COMMON STOCK.
If a state of facts shall occur which, without being specifically controlled by
the provisions of the foregoing Subsections 5.2.1 to 5.2.7, inclusive, would not
fairly protect the conversion rights of the Series A Preferred Stock in
accordance with the essential intent and principles of such provisions, then the
Board of Directors of the Corporation shall in good faith make an adjustment in
the application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
5.2.9. NECESSARY CORPORATE ACTION. Before
taking any action which would result in an adjustment in the Conversion Rate,
the Corporation 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.
5.2.10. TAXES UPON CONVERSION. The
Corporation shall pay all documentary, stamp or other transaction taxes
attributable to the issuance or delivery of shares of Common Stock upon
conversion of any shares of Series A Preferred Stock.
5.3. RESERVATION OF COMMON STOCK.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion or exchange of shares of Series A Preferred Stock, the
full number of whole shares of Common Stock then deliverable upon the conversion
or exchange of all shares of Series A Preferred Stock at the time outstanding.
All shares of Common Stock which shall be so issuable shall, when issued upon
conversion of all or any portion of the Series A Preferred Stock, be duly and
validly issued and fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issuance thereof. Upon conversion of Series A
Preferred Stock, the shares of Series A Preferred Stock so converted shall have
the status of authorized and unissued Preferred Stock.
5.4. NOTICE PROVISIONS.
5.4.1 NOTICE OF ADJUSTMENTS. Whenever the
Conversion Rate shall be adjusted pursuant to Section 5.2 hereof, the
Corporation shall forthwith obtain a certificate signed by a firm of independent
accountants of recognized national standing selected by the Corporation, 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 Corporation's independent public accountants determined the fair value
of any evidences of indebtedness, shares of stock, other securities or property
or assets or warrants or other subscription or purchase rights referred to in
Sections 5.2.2 or 5.2.7 hereof) and specifying the Conversion Rate and (if such
adjustment was made pursuant to subsections 5.2.7 or 5.2.8 hereof) describing
the amount and kind of common stock, securities, property or assets or cash
which may be received upon conversion of the Series A Preferred Stock, after
giving effect to such adjustment. The Corporation shall promptly cause a signed
copy of such certificate to be delivered to each holder of Series A Preferred
Stock.
5.4.2. NOTICE OF CERTAIN CORPORATE ACTION.
In case the Corporation shall propose (a) to pay any dividend payable in stock
of any class to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock, (b) to offer to the holders of
its Common Stock rights to subscribe for or to purchase any Convertible
Securities or Additional Shares of Common Stock or shares of stock of any class
or any other securities, rights or options, (c) to effect any reclassification
of its Common Stock (other than a reclassification involving only the
subdivision or combination of outstanding shares of Common Stock), (d) to effect
any capital reorganization, (e) to effect any consolidation, merger or sale,
transfer or other distribution of all or substantially all its property, assets
or business, or (f) to effect the liquidation, dissolution or winding-up of the
Corporation, then in each such case, the Corporation shall give to each holder
of Series A Preferred Stock a notice of such proposed action, which shall
specify the date on which a record is to be taken for the purposes of such stock
dividend, distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution or winding-up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock and the Conversion Rate
after giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by (a)
or (b) above at least 20 days prior to the record date for determining holders
of the Common Stock for purposes of such action and, in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of Common Stock,
whichever shall be the earlier.
6. REDEMPTION.
6.1. On and after the date hereof the Series A
Preferred Stock may be redeemed, in whole or from time to time in part, at the
election of the Corporation, expressed by resolution of the Board of Directors
of the Corporation, at any time or from time to time at a redemption price per
share equal to (i) the Liquidation Preference Per Share, and (ii) all accrued
and unpaid dividends on such shares of the Series A Preferred Stock to and
including the date of redemption.
6.2. Notice of every redemption of the Series A
Preferred Stock shall be given by mail or in such other manner as may be
prescribed by resolution of the Board of Directors of the Corporation not less
than 30 days nor more than 60 days prior to the applicable date of redemption
("Redemption Date"). The notice shall specify the number of shares of Series A
Preferred Stock to be redeemed, the date fixed for redemption, the redemption
price per share and the address where payment of the redemption price per share
is to be paid. The giving of such notice shall obligate the Corporation to
redeem the shares to which the notice relates on the date specified therein for
redemption. If less than all the outstanding Series A Preferred Stock is to be
redeemed, the selection of shares for redemption may be made either by lot or
pro rata in such manner as may be prescribed by resolution of the Board of
Directors of the Corporation.
6.3. On and after the applicable Redemption Date
(unless default shall be made by the Corporation in paying the redemption price
per share), all dividends on the Series A Preferred Stock called for redemption
shall cease to accrue and, notwithstanding that any certificate for shares of
the Series A Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the shares represented thereby shall no longer be
deemed outstanding and all rights of the holders thereof as shareholders of the
Corporation shall cease and terminate, except the right to receive the
redemption price per share as herein provided.
6.4. At any time on or after the applicable
Redemption Date, the holders of record of the Series A Preferred Stock to be
redeemed shall be entitled to receive the redemption price per share upon actual
delivery of the certificates for the shares to be redeemed to the place so
specified in the redemption notice, such certificates, if required, to be duly
endorsed in blank or accompanied by proper instruments of assignment and
transfer. If less than all of the shares represented by any such certificate are
redeemed, a new certificate representing the unredeemed shares shall be issued.
In case any shares of the Series A Preferred Stock shall be redeemed pursuant to
this section, or shall be otherwise purchased or reacquired by the Corporation,
the shares so redeemed, purchased or reacquired shall resume the status of
authorized but unissued shares of the Corporation's preferred stock, but shall
not be reissued by the Corporation except in accordance with the section
entitled "Voting Rights" below.
7. VOTING RIGHTS.
7.1. Except in statutory proceedings in which,
and then only to the extent to which, their vote is at the time required by law,
the holders of shares of the Series A Preferred Stock shall have no right to
vote at, to participate in or to receive any notice of any meeting of the
stockholders of the Corporation. On any matter on which the holders of the
Series A Preferred Stock shall be entitled to vote, they shall be entitled to
one vote per share of Series A Preferred Stock held.
7.2. Except as otherwise provided in this
section, the Corporation shall not without the prior written consent of the
holders of a majority of outstanding shares of the Series A Preferred Stock:
(i) increase the authorized number of
shares of Series A Preferred Stock of the Corporation or reissue any
previously redeemed shares of Series A Preferred Stock as Series A
Preferred Stock;
(ii) amend, alter or repeal any provision of
the Corporation's Certificate of Incorporation or By-Laws if such
amendment, alteration or repeal adversely affects the rights,
preferences or privileges of the holders of the Series A Preferred
Stock;
(iii) authorize, create or issue shares of
any series or class of stock or any other securities convertible into
equity securities of the Corporation having a preference over, or being
on a parity with, the Series A Preferred Stock with respect to
dividends or redemptions or upon liquidation or dissolution of the
Corporation;
(iv) reclassify any shares of any class of
stock of the Corporation into shares (A) ranking as to payment of
dividends, distributions of assets or redemptions prior to or on a
parity with the Series A Preferred Stock or (B) which in any manner
adversely affects the holders of the Series A Preferred Stock;
(v) enter into any agreement or instrument,
or create any obligation, restricting or limiting, directly or
indirectly, the redemption of the Series A Preferred Stock or the
payment of any liquidation preference on the Series A Preferred Stock
without the prior written consent of the holders of a majority of the
outstanding Series A Preferred Stock;
(vi) (A) pay, or declare and set aside for
payment, any dividend on any shares of Common Stock or any other class
of stock of the Corporation; (B) purchase, redeem or otherwise acquire
any shares of any class of stock of the Corporation or otherwise pay,
or set apart for payment, any monies for a purchase fund or sinking
fund for the purchase thereof;or (C) pay, or set aside for payment, any
loans by any Affiliate of the Corporation; unless, in each case, all
dividends payable in respect of the Series A Preferred Stock have been
paid; or
(vii) consolidate or merge the Corporation
with or into any other corporation or corporations, or sell, convey or
dispose of all or substantially all of the assets of the Corporation,
or effect any transaction or series of related transactions by the
Corporation in which (x) more than 50% of the voting power of the
Corporation is disposed of and as a result thereof such disposed-of
securities are held beneficially by any person other than its the
Corporation's Parent or its Affiliates (as defined in Rule 405 of the
Securities Act of 1933, as amended) and (y) holders of the Series A
Preferred Stock or their Affiliates are not, directly or indirectly,
the surviving or acquiring entity.
IN WITNESS WHEREOF, said corporation has caused this
Certificate to be signed by Charles LaRosa, its President, this 4th day of
April, 1996.
PHARMACEUTICAL FORMULATIONS, INC.
By: /s/Charles LaRosa
Name: Charles LaRosa
Title: President
<PAGE>
Exhibit 2 to Form 8-K
dated April 4, 1996
STOCK PURCHASE AGREEMENT
THE SECURITIES PURCHASED PURSUANT TO THIS STOCK PURCHASE AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT), OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF REGISTRATION UNDER THE ACT AND SUCH STATE LAWS OR AN OPINION
OF COUNSEL TO THE CORPORATION TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED.
STOCK PURCHASE AGREEMENT made by and between PHARMACEUTICAL
FORMULATIONS, INC., a Delaware corporation (the "Corporation"), and ICC
INDUSTRIES INC., a New York corporation (the "Purchaser") as of the 5th day of
April, 1996.
1. STOCK PURCHASE.
The Purchaser hereby purchases and the Corporation hereby
sells 2,500,000 shares (the "Purchased Shares") of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $1.00 per share, of the
Corporation ("Series A Preferred Stock") on the terms set forth herein at a
purchase price of $1.00 per share, paid by wire transfer or check (subject to
collection) for an aggregate consideration of $2,500,000, receipt of which is
hereby acknowledged by the Corporation. Concurrently with the execution of this
Agreement, the Corporation is delivering to the Purchaser a stock certificate
representing the Purchased Shares.
2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to the Purchaser as
follows:
(a) AUTHORITY; BINDING NATURE. The Corporation has full right
and legal capacity or power and authority to execute and deliver this Agreement
and to perform each of its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by or on behalf of the Corporation and
constitutes the legal, valid and binding obnligation of the Corporation
enforceable in accordance with its terms. The Corporation is not subject to any
restriction or agreement that prohibits or would be violated by the execution
and delivery of this Agreement or the issuance of the Series A Preferred Stock
to the Purchaser or pursuant to which the consent of any other person is
required in order to give effect to the transactions contemplated herein. There
are no actions, suits, claims or proceedings pending or, to the knowledge of the
Corporation, threatened before any court, arbitration panel or administrative
agency to restrain or prohibit the consummation by the Corporation of any of the
transactions contemplated by this Agreement or which might adversely affect the
ability of the Corporation to perform any of its obligations under this
Agreement.
(b) ORGANIZATION AND QUALIFICATION. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its businesses as it is now being conducted.
(c) CAPITAL STOCK. The Corporation has 40,000,000 authorized
shares of Common Stock, par value $.08 per share, and 10,000,000 authorized
shares of Preferred Stock, of which 3,000,000 have been designated Series A
Preferred Stock. Upon the issuance thereof pursuant to this Agreement, the
Purchased Shares shall be validly issued, fully paid and nonassessable. The
Corporation has reserved a sufficient number of shares of its Common Stock for
issuance upon any conversion of the Purchased Shares into Common Stock.
(d) REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1995,
the Corporation has filed all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by it under each of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder (the "Corporation's SEC Reports"), all of which complied
in all material respects with all applicable requirements of the appropriate act
and the rules and regulations thereunder. As of their respective dates, the
Corporation's SEC Reports did not contain any 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. The audited consolidated financial statements and
unaudited interim financial statements of the Corporation included in the
Corporation's SEC Reports fairly present the financial position of the
Corporation and its subsidiaries as of the dates thereof and the results of
their operations and cash flows for the periods then ended in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto), subject, in the case of
the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Corporation as follows:
(a) DOCUMENTS PROVIDED. All documents, records and books
pertaining to the investment by the Purchaser in the Purchased Shares as
requested by the Purchaser have been made available for inspection to the
Purchaser and its attorneys, accountants or other advisors. The Purchaser
acknowledges receipt of a copy of the Certificate of Designations, Preferences
and Rights of Series A Preferred Stock as filed with the Secretary of the State
of Delaware (the "Certificate of Designations").
(b) INDEPENDENT DECISION; ACCESS. In making its decision to
invest in the Purchased Shares, the Purchaser has relied upon independent
investigations made by it and by its own professional advisors. The Purchaser
and its advisors have been given full access to information concerning the
Corporation's business and future prospects, the opportunity to obtain
information and to examine documents relating to the Corporation and to ask
questions of, and to receive answers from, directors and officers of the
Corporation concerning the Corporation and the terms and conditions of the
investment in the Purchased Shares, and to obtain any additional information, to
the extent the Corporation possesses such information or could acquire it
without unreasonable effort or expense, to verify the accuracy of any
information previously furnished. All such questions have been answered to the
Purchaser's full satisfaction, and all information pertaining to such investment
which the Purchaser has requested has been made available to the Purchaser.
(c) NO REPRESENTATIONS. Neither the Corporation nor any of its
officers, directors, affiliates or agents has made any representations or
warranties to the Purchaser concerning its investment in the Purchased Shares
including, without limitation, any representations or warranties concerning the
anticipated financial results of the operations of the Corporation, except as
set forth in this Agreement.
(d) PURCHASER'S KNOWLEDGE AND EXPERIENCE. The Purchaser has
such knowledge and experience in financial and business matters that the
Purchaser is and will be capable of evaluating the merits and risks of the
prospective investment.
(e) CORPORATION'S BUSINESS. The Purchaser understands
the business in which the Corporation is engaged. The Purchaser has
obtained sufficient information to evaluate the merits and risks of
its investment in the Corporation and to make an informed investment
decision with respect thereto.
(f) NO NEED FOR LIQUIDITY. The Purchaser has no need for
liquidity of its investment in the Purchased Shares. The Purchaser is able to
bear the economic risk of its investment in the Purchased Shares and to hold the
Purchased Shares for an indefinite period of time, and presently is and, based
on existing conditions, will hereafter be able to afford a complete loss of such
investment.
(g) HIGH RISK. The Purchaser is aware that: (1) investment in
the Purchased Shares involves a possible high degree of risk, lack of liquidity
and substantial restrictions on transferability, (2) there is no market for the
Purchased Shares and there is no assurance that a market will develop, and (3)
no federal or state agency (including without limitation the Securities and
Exchange Commission ("SEC") or any state securities commission) or agency of any
other jurisdiction has passed upon, approved, made any recommendation or
endorsement of, or made any finding or determination as to the merits or
fairness of, an investment in the Purchased Shares.
(h) INVESTMENT INTENT. The Purchased Shares are being acquired
by the Purchaser solely for its own account, as principal, for investment and
not for the interest of any other Person (as defined below) and not with a view
to, with the present intention of, or in connection with, any resale or
distribution of the Purchased Shares or any interest therein. The Purchaser does
not anticipate any particular event the occurrence or non-occurrence of which
would change its intention as stated herein. The Purchaser has no agreement or
other arrangement with any individual, partnership, corporation, association,
joint stock company, trust, estate, unincorporated association or government or
governmental authority (any of the foregoing, a "Person") to sell, assign,
pledge or otherwise transfer any of the Purchased Shares or which would
guarantee the Purchaser any profit or indemnify the Purchaser against any loss
with respect to the Purchased Shares, and the Purchaser has no plans to enter
into any such agreement or arrangement. The Purchaser was not organized or
created for the specific purpose of acquiring the Purchased Shares and has other
investments or business activities or will make other investments or engage in
other business activities.
(i) NO REGISTRATION. The Purchaser understands and
acknowledges that the Purchased Shares have not been registered under the
Securities Act of 1933, as amended (the "Act") or under the laws of any
jurisdiction, the Purchased Shares are being offered and sold under one or more
exemptions provided by the Act, and the Corporation does not contemplate
registering, and is under no obligation to so register, the Purchased Shares
under the Act or under the laws of any jurisdiction and that the certificates
for the Purchased Shares, and for any shares of Common Stock into which the
Purchased Shares may be converted, shall have noted thereon a legend
substantially as set forth at the beginning of this Agreement. The Purchaser
also understands that it must hold the Purchased Shares indefinitely unless they
are subsequently registered under the Act or an exemption from such registration
is then available and, therefore, the Purchaser may be required to bear the
economic risk of this investment for an indefinite period of time. The Purchaser
further understands that Rule 144 ("Rule 144") under the Act is not immediately
applicable for any sales of the Purchased Shares, that any routine sales of the
Purchased Shares made in reliance on Rule 144 (if it becomes applicable) can be
made only in limited amounts in accordance with the terms and conditions of that
Rule including holding period and volume limitations, and that, in the event
Rule 144 is not applicable, compliance with the registration requirements or
Regulation A under the Act would be required or facts must exist which otherwise
provide the basis for an exemption from the registration requirements of the
Act.
(j) ACTION TO PRESERVE PRIVATE PLACEMENT. The Purchaser
understands and agrees that the Corporation may take any action to preserve its
ability to rely on one or more exemptions from the registration requirements of
the Act in respect of the offer and sale of the Purchased Shares by it. The
Purchaser agrees specifically that the Corporation may take any action necessary
to give effect to the restrictions on transfer of the Purchased Shares described
in this Agreement including, without limitation, requiring (1) a written
representation and warranty from the Purchaser, upon the Purchaser's application
to register a sale, assignment, pledge or other transfer of the Purchased
Shares, that the sale, assignment, pledge or other transfer complies with the
restrictions specified in this Agreement, and (2) a written agreement from the
Person to whom the Purchaser desires to sell, assign, pledge or otherwise
transfer the Purchased Shares that any sale, assignment, pledge or other
transfer undertaken by such transferee will comply with the restrictions
specified in this Agreement and that such transferee will take all actions
necessary to ensure that any subsequent sales, assignments, pledges or other
transfers of Purchased Shares by it or its transferees will be undertaken in
compliance with the restrictions specified in this Agreement.
(k) AUTHORITY; BINDING OBLIGATION. The Purchaser has full
right and legal capacity or power and authority to execute and deliver this
Agreement and to perform each of its obligations hereunder. This Agreement has
been duly authorized, if required, executed and delivered by or on behalf of the
Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable in accordance with its terms. The Purchaser is not subject
to any restriction or agreement that prohibits or would be violated by the
execution and delivery hereof or the consummation of the transactions
contemplated herein or pursuant to which the consent of any Person other than
the Corporation is required in order to give effect to the transactions
contemplated herein. There are no actions, suits, claims or proceedings pending
or, to the knowledge of the Purchaser, threatened before any court, arbitration
panel or administrative agency to restrain or prohibit the consummation by the
Purchaser of any of the transactions contemplated by this Agreement or which
might adversely affect the ability of the Purchaser to perform any of its
obligations under this Agreement.
(l) CORPORATE ORGANIZATION. The Purchaser was organized or
created under the laws of, and has its principal place of business in, the state
set forth on the signature page of this Agreement. The Purchaser's address and
federal tax identification number are correctly set forth on the signature page
of this Agreement.
(m) ACCREDITED INVESTOR STATUS. The Purchaser is an
"accredited investor" within the meaning of Regulation D promulgated
under the Act (a copy of which will be provided upon request).
4. COVENANTS OF THE PURCHASER.
The Purchaser hereby agrees and covenants with the Corporation
as follows:
(a) NO ASSIGNMENT. The Purchaser shall not offer, sell,
assign, pledge or otherwise transfer its rights under this
Agreement.
(b) NO TRANSFER. The Purchaser shall make no offer, sale,
assignment, pledge or other transfer of any of the Purchased Shares, or any
interest therein, and the Corporation shall not be required to transfer, or
register a transfer of, any of the Purchased Shares, in the absence of an
effective registration statement under the Act and applicable state securities
laws covering the Purchased Shares or an opinion of counsel to the Corporation
(obtained at the expense of the Purchaser) to the effect that such offer, sale,
assignment, pledge or other transfer may be made without registration under the
Act and such state laws pursuant to an exemption from the registration
requirements thereunder. Any certificates representing any of the Purchased
Shares may bear a legend to that effect and the Corporation may give
stop-transfer instructions to its transfer agent, if any, for the Purchased
Shares.
(c) INDEMNIFICATION. The Purchaser shall indemnify, hold
harmless and, upon request, defend the Corporation and all officers, directors,
shareholders, agents and representatives of the Corporation against any and all
loss, liability, claim, action, damage and expense whatsoever (including, but
not limited to, expenses incurred in investigating, preparing or defending
against any litigation, whether commenced or threatened, or any claim
whatsoever) arising out of, or based upon, the actual or alleged breach or
untruth of any representation or warranty made by the Purchaser in this
Agreement or any actual or alleged breach of or default under any of the
obligations of the Purchaser under this Agreement. Notwithstanding the
foregoing, however, no representation, warranty, acknowledgment, covenant or
agreement made herein by the Purchaser shall in any manner be deemed to
constitute a waiver of any rights granted to it under Federal or state
securities laws. All representations, warranties and covenants of the
Purchaser, including without limitation the foregoing indemnity, shall survive
the purchase of the Purchased Shares.
(e) NONDISCLOSURE. The Purchaser shall not transmit or
distribute any information provided to the Purchaser in connection with its
investment in the Purchased Shares to anyone other than its attorneys,
accountants, or other advisors acting for or assisting it in connection with its
prospective investment in the Purchased Shares, unless such information is or
becomes generally available to the public other than as a result of a disclosure
by the Purchaser.
(f) RULE 144 SALE. In the event of any sale by the Purchaser
of any of the Purchased Shares pursuant to Rule 144, the Purchaser shall furnish
to the Corporation a copy of Form 144 filed by the Purchaser with the SEC at the
time such Form is filed.
(g) LEGAL AND TAX ADVICE. With respect to the tax and
other legal consequences of an investment in the Purchased Shares,
the Purchaser is relying solely upon advice of its own tax and legal
advisors.
5. COVENANTS OF THE CORPORATION.
(a) REDEMPTION AND SURRENDER OF PURCHASED SHARES.
To the extent permitted under applicable law and subject to the conditions
set forth herein, (a) the Corporation shall redeem some or all of the Series A
Preferred Stock held by Purchaser pursuant to the Certificate of Designations if
the Corporation shall have made a registered public offering of any shares of
Common Stock (other than offerings registered on a Form S-8 or S-4 or comparable
forms or in connection with any rights offering, exchange offering, or stock
option plan) and the proceeds thereof shall have been sufficient to pay the
redemption price for such shares and (b) the Purchaser shall have the right, at
its sole option and election, to surrender shares of Series A Preferred Stock in
payment of the exercise price under any warrants, options or other rights
("Rights") held by Purchaser to purchase shares of Common Stock of the
Corporation or in payment of the purchase price for any shares of Common Stock
subscribed for by such holder in any public offering of Common Stock of the
Corporation, in which case the surrendered shares of Series A Preferred Stock
shall be deemed to have a value per share equal to (i) the Liquidation
Preference Per Share (as defined in the Certificate of Designations), and (ii)
all accrued and unpaid dividends on such shares of the Series A Preferred Stock
to and including the date of such surrender. In no event, however, shall any
such redemption or surrender of Series A Preferred Stock in payment pursuant to
exercise of Rights or to purchase Common Stock of the Corporation be required to
the extent that such redemption or surrender would thereby cause the Corporation
to fail to meet all requirements for listing or continued listing, as
applicable, of its Common Stock on the Nasdaq Stock Exchange or such stock
exchange on which the Common Stock of the Corporation may be listed at that
time.
(b) INDEMNIFICATION. The Corporation shall indemnify, hold
harmless and, upon request, defend the Purchaser and all officers, directors,
shareholders, agents and representatives of the Purchaser against any and all
loss, liability, claim, action, damage and expense whatsoever (including, but
not limited to, expenses incurred in investigating, preparing or defending
against any litigation, whether commenced or threatened, or any claim
whatsoever) arising out of, or based upon, the actual or alleged breach or
untruth of any representation or warranty made by the Corporation in this
Agreement or any actual or alleged breach of or default under any of the
obligations of the Corporation under this Agreement. All representations,
warranties and covenants of the Corporation, including without limitation the
foregoing indemnity, shall survive the purchase of the Purchased Shares.
6. MISCELLANEOUS.
(a) LANGUAGE. In this Agreement, unless the context otherwise
requires, the use of any personal pronoun, whether in the masculine, feminine or
neuter gender, includes all other genders. The headings contained in this
*Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
(b) WAIVER. Any failure of a party to exercise any right or
remedy under this Agreement or otherwise, or any delay by a party in exercising
the same, will not operate as a waiver thereof. No waiver by a party will be
effective unless it is in writing and signed by such party.
(c) APPLICABLE LAW. This Agreement shall be enforced,
governed and construed in all respects in accordance with the laws
of the State of Delaware applicable to contracts made and to be
performed therein.
(d) MODIFICATION. This Agreement and the rights, powers and
duties set forth herein may not be canceled, terminated or revoked by a party
without the prior written consent of the other party and shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and, subject to the provisions of this Agreement, assigns.
(e) ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the Purchaser and the Corporation with
respect to the subject matter hereof and may be amended only by a
writing executed by the party to be charged.
(f) INVALIDITY. In the event that any provision of this
Agreement is held to be invalid or unenforceable, then such provision shall be
deemed inoperative to the extent that it is invalid or unenforceable and shall
be deemed modified to the extent necessary so that it shall be valid and
enforceable. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(g) ARM'S LENGTH ARRANGEMENT. The Purchaser acknowledges
that this Agreement represents an arm's-length arrangement between
the Corporation and the Purchaser.
(h) ACCURACY OF INFORMATION. The Purchaser certifies that the
information provided by it in this Agreement is true, complete and accurate as
of the date of this Agreement and may be relied upon by the Corporation. The
representations, warranties and agreements of the parties contained in this
Agreement shall survive the delivery of, and payment for, the Purchased Shares.
(i) COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the Purchaser and the Corporation have
executed this Agreement as of the date set forth above.
ICC INDUSTRIES INC.
By /S/ JOHN ORAM
Name: John Oram
Title: President
Taxpayer Identification
Number:
Present Address:
460 Park Avenue
New York, NY 10022
State of Organization: New York
State of Principal Place of Business: New York
PHARMACEUTICAL FORMULATIONS, INC.
By: /S/ CHARLES LAROSA
Name: Charles LaRosa
Title: President
