<PAGE>1
As filed with the Securities and Exchange Commission
on March 31, 1997
Registration No. __________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT
ON
FORM S-3
UNDER
THE SECURITIES ACT OF 1933
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(Exact name of issuer as specified in its charter)
Delaware 2844 22-2408186
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
Thomas L. Mehl, Sr.
MEHL/Biophile International Corporation
4127 N.W. 27th Lane
Gainesville, Florida 32606
(352) 373-2565
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Alan J. Bernstein
Marks & Murase L.L.P.
399 Park Avenue
New York, New York 10020
(212) 318-7700
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.[x]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter becomes effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration Statement shall
become effective on such date as the Commission acting pursuant to said
Section 8(a), may determine.
<PAGE>2
If the only securities being registered 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 registered 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. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Proposed
maximum Proposed
Title of each class of offering maximum Amount of
securities to Amount to price per aggregate registration
be registered be registered unit (1) offering price (1) fee
Common Stock, $.01 par 2,500,000(2) $4.25 $10,625,000 $3,220
value
______________________________________________________________________________
(1) Pursuant to Rule 457(c), the offering price and amount of registration
fee have been calculated based upon the last sale price of the Registrant's
Common Stock as reported on the Nasdaq SmallCap Market on March 25, 1997.
(2) There are being registered hereunder the number of shares of Common Stock
receivable upon conversion of the 5% Cumulative Convertible Preferred Stock,
Series D of the Registrant at the conversion price of $4.00, which represents
the lowest conversion price applicable to such securities, absent adjustments
for stock splits or dividends, extraordinary corporate transactions or sales
of Common Stock below the purchase price.
<PAGE>
MEHL BIOPHILE INTERNATIONAL CORPORATION
Cross-Reference Sheet Pursuant to Rule 404(a)
and Item 501(b) of Regulation S-K
Form S-3 Item Number and Caption Caption in Prospectus
1. Forepart of the Registration Statement Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages of Prospectus;
Available Information
3. Summary Information, Risk Factors The Company; Risk Factors
and Ratio of Earnings to Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Cover Page, Plan of
Distribution
9. Description of Securities to be Not Applicable
Registered
10. Interests of Named Experts and Legal Matters, Experts
Counsel
11. Material Changes Recent Developments
12. Incorporation of Certain Information Incorporation of Certain
by Reference Information by Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification
<PAGE>3
Subject to Completion, Dated March 31, 1997
PROSPECTUS
MEHL/BIOPHILE INTERNATIONAL CORPORATION
_______________
2,500,000 SHARES
COMMON STOCK (par value of $.01 per share)
_________
Issuable on Conversion of 5% Cumulative Convertible
Preferred Stock, Series D
The 2,500,000 shares (the "Shares") of Common Stock, par value $.01 per share
(the "Common Stock"), of MEHL/Biophile International Corporation (the
"Company"), offered by this Prospectus are issuable upon the conversion of
shares of the Company's 5% Cumulative Convertible Preferred Stock, Series D,
par value $10 per share ("Series D Preferred Stock") issued by the Company on
February 28, 1997 and may be sold from time to time by the persons named
herein as selling stockholders (the "Selling Stockholders"). The Company will
not receive any proceeds from the sale of the Common Stock offered hereby.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
Sales may be made from time to time in the over-the-counter market at prices
prevailing at the time of sale, or in private transactions at negotiated
prices, and any commissions paid or discounts given will be those customary in
the type of transaction involved. See "Plan of Distribution."
Any brokers and dealers through whom sales of the Common Stock are made may be
deemed "underwriters" within the meaning of the Securities Act of 1933 with
respect to the Common Stock, and any profits realized or commissions received
may be deemed underwriting compensation.
Expenses of this offering (other than brokerage commissions) are payable by
the Company and estimated not to exceed $16,000.00.
The closing bid price of the Common Stock quoted on the Nasdaq SmallCap Market
under the symbol MEHL on March 25, 1997 was $4.25.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY MISREPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ________, 1997.
<PAGE>4
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 3
THE COMPANY 4
RISK FACTORS 4
PLAN OF DISTRIBUTION 9
SELLING STOCKHOLDERS 10
LEGAL MATTERS 11
EXPERTS 11
____________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL OR AN OFFERING OF ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER AT ANY
TIME SHALL IMPLY THAT THE INFORMATION PROVIDED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
<PAGE>5
AVAILABLE INFORMATION
This Prospectus does not contain all of the information set forth in the
Registration Statement of which this Prospectus is a part and which is filed
with the Securities and Exchange Commission (the "Commission"). The Company
is subject to the informational requirements of the Securities Exchange Act of
1934 (the "Exchange Act") and, in accordance therewith, files reports, proxy
statements and other information with the Commission. For further information
with respect to the Company, reference is made to such Registration Statement
and the exhibits thereto, and to such reports, proxy statements and other
information filed with the Commission. Such Registration Statement, reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Room 1400, 75 Park Place, New York, New York 10007
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended May
31, 1996.
2. The Company's Quarterly Reports on Form 10-QSB for the three month periods
ended August 31, 1996 and November 30, 1996.
3. The Company's Current Report on Form 8-K filed on June 19, 1996.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Shares shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
Copies of any and all documents that have been incorporated by reference
herein, other than exhibits to such documents, may be obtained upon request
without charge from the Company's Corporate Secretary, MEHL/Biophile
International Corporation, 4127 N.W. 27th Lane, Gainesville, Florida 32606,
telephone number (352) 373-2565.
<PAGE>6
THE COMPANY
The Company was organized under the laws of Delaware on June 28, 1982. In
connection with the merger in June 1996 of its wholly-owned subsidiary with
Classy Lady by Mehl of Puerto Rico, Inc., the Company changed its name from
"Selvac Corporation" to "MEHL/Biophile International Corporation". The
Company has its principal executive office at 4127 N.W. 27th Lane,
Gainesville, Florida 32606. The telephone number is (352) 373-2565.
RISK FACTORS
IN EVALUATING AN INVESTMENT IN THE COMPANY, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING CONSIDERATIONS IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS.
Uncertain Impact of Merger and Results of New Business Operations. On June 4,
1996, the Company completed a merger transaction whereby Classy Lady by Mehl
of Puerto Rico, Inc. ("Classy Lady") has been merged with and into a wholly-
owned subsidiary of the Company in exchange for an aggregate of 25 million
shares of Common Stock. Pursuant to such merger, the Company obtained
exclusive patents rights to certain multiple hair removal and laser hair
removal technologies. The Company has only recently commenced marketing the
laser hair removal technology exclusively licensed by Classy Lady and there
can be no assurance that such hair removal technologies can be commercially
marketed and sold profitably.
Uncertain Impact of SLS Acquisition. On June 4, 1996, the Company completed
the acquisition of an 81% interest in SLS (Wales) Limited ("SLS"), a privately-
held company in Wales engaged in the development, manufacturing and
marketing of lasers. Although the Company believes that SLS has very valuable
patent and technology rights and has a number of projects under development
which can be commercially exploited, to date SLS has not generated substantial
income and has operated at a loss. There can be no assurance that SLS will be
able to develop, market and sell its products profitably.
Uncertain Impact of Dispute with Laser Industries Ltd. On December 5, 1996,
the Company's wholly-owned subsidiary, Selvac Acquisition Corp. ("SAC"),
commenced an arbitration with the American Arbitration Association ("AAA") in
New York, New York to terminate a joint venture with Laser Industries Limited
("Laser"). The joint venture was formed in December 1995 when Laser and
Classy Lady by Mehl of Puerto Rico, Inc. ("Classy Lady"), which merged with
and into SAC and is now 100% owned by the Company, entered into an agreement
to exploit patented laser hair removal technology exclusively licensed to
Classy Lady. The joint venture, Sharplan 2000, Inc. ("Sharplan 2000"), is 50%
owned by SAC and 50% by Laser and is managed exclusively by Laser. SAC
commenced the arbitration to terminate the license granted to Sharplan 2000
and unwind the joint venture. SAC is basing this action on a dispute
concerning the nature of technological and financial contributions to be made
to the joint venture by Laser and an additional dispute concerning whether
Laser utilized technology within the joint venture which was in fact developed
by SLS prior to the purchase by the Company of a controlling interest in SLS.
<PAGE>7
On December 23, 1996, Laser asserted two counterclaims in the arbitration
proceedings, claiming that the Company has breached an alleged fiduciary duty
owed to Laser and Sharplan 2000 and seeking a declaration that neither the
Company nor SAC may grant a sublicense of certain patent rights to SLS. The
Company has filed a response to these counterclaims requesting dismissal on
the grounds that neither claim is arbitrable.
In a separate action filed in England on October, 1996, SLS commenced an
action against Laser, a laser manufacturer, Spectron Laser Systems Ltd.
("Spectron") and related parties, for orders preventing Laser from using SLS's
technology and stopping Spectron from supplying SLS's technology to Laser.
Management believes that the actions commenced by its subsidiaries and
described above are well-founded, that the counterclaims filed by Laser
in the arbitration proceeding are without merit and that its subsidiaries will
prevail in both actions. However, there can be no assurance that the
Company's subsidiaries will be successful in these proceedings. In the event
that Laser prevails in the AAA arbitration described above, the Company and
SAC could potentially face monetary liabilities for damages and attorneys'
fees and be subject to certain restrictions on its ability to sublicense its
laser hair removal technology which could have a material adverse effect on
the business of the Company and its subsidiaries.
Future Need for Capital. Although the Company has recently completed a $10
million private placement offering (see "Recent Developments - Issuance of
Series D Preferred Stock"), management of the Company anticipates that
commercial exploitation of Classy Lady's and SLS' patent rights will require
substantial additional capital. There can be no assurance that additional
capital requirements will be available on acceptable terms or at all. Future
financings could have dilutive effect on the Company's shareholders.
Dependence on Key Personnel. The Company's success is dependent on certain
key management personnel. Competition for qualified employees is intense, and
the loss of such key personnel, or the inability to attract and retain the
additional highly skilled employees required for the Company's activities,
could adversely affect its business.
Dependence on FDA Pre-Market Clearance. The Company's laser hair removal
technologies to which Classy Lady holds an exclusive license and which are
held by SLS will require 510(k) pre-market clearance from the U.S. Food and
Drug Administration ("FDA") prior to the manufacture or sale in the United
States. In May 1996, Classy Lady filed a 510(k) request for clearance for the
Chromos 694 laser for hair removal, and such clearance was received in March
1997. If the Company desires to modify such technologies or to attempt to
market other technologies requiring 510(k) pre-market clearance, there can be
no assurance that the Company would receive FDA clearance on a timely basis or
at all. Failure to obtain such clearance may adversely affect the Company's
business and its financial prospects.
Uncertain Market Acceptance of Laser Hair Removal. Historically, hair
removal technologies have utilized electric current, radio frequency,
depilatory cremes and other methods. There can be no assurance that consumers
of hair removal products will accept the use of lasers for hair removal.
Risk of Competition with Competitors Having Substantially Greater Resources.
There are several companies that offer the hair removal products sold and
anticipated to be sold by the Company and its subsidiaries which compete with
the Company. Many of such other companies have established markets, product
history, and substantially larger sales and service organizations and
financial strength than the Company. There can be no assurance that the
Company will be able to compete successfully with such other companies.
Risk of Product Liability. The Company may be subject to claims for personal
injuries or other damages resulting from its products or services. There can
be no assurance that the Company's product liability insurance will be
sufficient to protect the Company against liability that could have a material
adverse effect on the Company.
Uncertainty of Protection of Patents and Proprietary Information. There can
be no assurance that the patents and patents pending relating to depilation
and other technologies owned or licensed by the Company and its subsidiaries
will not be challenged. The issuance of a patent to the Company or a licensor
is not conclusive as to validity or as to the enforceable scope of claims
therein. The validity and enforceability of a patent can be challenged by
litigation after its issuance; and, if the outcome of such litigation is
adverse to the owner of the patent, the owner's rights could be diminished or
withdrawn. In March 1997, Palomar Medical Technologies Inc. ("Palomar")
served the Company with a lawsuit seeking to declare the patent embodying the
laser hair removal technology exclusively licensed by SAC to be declared
invalid. Although management of the Company is confident that the validity of
its patent will be upheld, there can be no assurance that the outcome of this
litigation would not be adverse to the Company and its subsidiaries. The
patent laws of other countries may differ from those of the United States.
There can be no assurances that any patents will provide substantial
protection or be of commercial benefit to the Company. The absence of patents
and patent applications for the Company's hair removal technology may
adversely affect the Company's prospects. In addition, the technologies used
by the Company could be subject to claims of infringement of patents or
proprietary technology of others.
In March 1997, SAC filed suit against Palomar and its subsidiaries, Spectrum
Medical Technologies, Inc., Spectrum Financial Services LLC, and a New Jersey
dermatologist for patent infringement and unfair competition. The suit was
filed in the United States District Court for the District of New Jersey and
alleges that the defendants infringe on the patented method of laser hair
removal owned by Dr. Nardo Zaias and exclusively licensed to SAC and that the
defendants have improperly marketed laser hair removal products before
receiving FDA approval. The plaintiff is seeking monetary damages and
injunctive relief to restrain Palomar from marketing its laser hair removal
products in the United States. While management is confident that the actions
brought against the above defendants are well-founded, there can be no
assurance that SAC will prevail in this proceeding. The cost of enforcing the
patent rights in lawsuits that the Company and its subsidiaries have brought
and may bring against infringers or defending itself against infringement
charges by other patent holders may be high and could interfere with the
Company's operations.
Trade secrets and confidential know-how may be important to the Company's
scientific and commercial success. Although the Company seeks to protect its
proprietary information through confidentiality agreements and appropriate
contractual provisions, there can be no assurance that others will not develop
independently the same or similar information or gain access to proprietary
information of the Company.
<PAGE>8
Control by Principal Shareholders; No Cumulative Voting. There is no
cumulative voting for the election of directors of the Company. Accordingly,
the beneficial owners of a majority of the Company's outstanding Common Stock
voting in an election of directors, may elect all directors nominated for
election, if they choose to do so, and the owners of the remaining shares will
not be able to elect any directors. Thomas L. Mehl, Sr., Nardo Zaias and
Pichit Suvanprakorn beneficially own a majority of the voting rights of the
Company and accordingly have effective voting control of any matter voted on
by the Company's shareholders.
Prior Dependence on Single Product; Declining Sales. Virtually all of the
Company's revenues in prior periods have been derived from the sale of its
Finally Free hair removal product. For each of the three most recent fiscal
years, sales of Finally Free represented more the 97% of the Company's net
sales. Sales of Finally Free products for each year declined from those for
the preceding year. Although the Company has commenced marketing and selling
its laser hair removal products, there can be no assurance that its products
will be successfully developed and sold and contribute to the Company's
revenues and profits or that sales of the Finally Free product will not
continue to decline.
Dependence on Principal Customers. For the years ending May 31, 1996, 1995
and 1994, sales to the Company's principal customer, Ikeda Corporation
("Ikeda") represented 89%, 76% and 68% of the Company's total sales,
respectively. The Company has already commenced receiving revenues from the
sale of the Classy Lady laser hair removal technologies and expects to
continue to develop a substantial customer base for the Classy Lady and SLS
hair removal technologies; however, until such revenues increase, the loss or
reduction of sales to Ikeda, would have a material adverse effect on the
financial condition of the Company.
No Dividends on Common Stock. The Company anticipates that for the
foreseeable future, all earnings, if any, will be retained for the operation
and expansion of the Company's business, and it will not pay cash dividends.
<PAGE>9
RECENT DEVELOPMENTS
Issuance of Series D Preferred Stock
On February 28, 1997, the Company completed a private placement offering
exempt under Regulation D promulgated under the Securities Act of 1933 of
10,000 shares of 5% Cumulative Convertible Preferred Stock, Series D, par
value $10 per share (the "Series D Preferred Stock"), for an aggregate
purchase price of $10,000,000. Holders of the Series D Preferred Stock are
entitled to receive dividends payable at the annual rate of 5% per annum.
The Series D Preferred Stock is convertible into Common Stock of the Company
at 80% of the average market price on the five trading days prior to
conversion but in no event shall the conversion price be below $4.00 (other
than pursuant to adjustment as noted below) or greater than the average market
price on the five trading days prior to February 28, 1997. The Company agreed
to file a registration statement covering the public sale of the shares of
Common Stock receivable upon conversion of the Series D Preferred Stock on or
before March 31, 1997. The Series D Preferred Stock may not be converted
until the earlier of (i) the 120th day following issuance and (ii) the date on
which the aforementioned registration statement is declared effective by the
Securities and Exchange Commission. The purchasers of the Series D Preferred
Stock agreed not to sell or transfer the Common Stock received upon conversion
on or before February 28, 1998.
The conversion price of the Series C Preferred Stock into Common Stock is
subject to adjustment if the registration statement described above is not
filed by March 31, 1997 or is not declared effective by the SEC within 120
days after issuance, or if a stop order has been issued regarding such
registration statement has been issued or if the Company's Common Stock is not
listed for quotation on the Nasdaq SmallCap Market. In connection with the
sale and issuance of the Series D Preferred Stock, the Company and the holders
thereof agreed to certain reciprocal indemnification against certain
liabilities, including liabilities under the Securities Act of 1933.
The Company has been advised that the investors who purchased the Series D
Preferred Stock, Clearwater Fund IV, LLC and Clearwater Offshore Fund Ltd.,
are commonly controlled with GFL Performance Fund Ltd. ("GFL"), the holder of
all outstanding shares of the Company's 5% Cumulative Convertible Preferred
Stock, Series C (the "Series C Preferred Stock"). In connection with the sale
of the Series D Preferred Stock, the Company entered into an agreement with
GFL whereby (i) GFL agreed not to sell or transfer the Common Stock issuable
upon conversion of the Series C Preferred Stock on or before February 28,
1998, and (ii) the Company, acting upon unanimous approval of the Board of
Directors and by the written consent of the holders of a majority of the
Company's Common Stock, agreed to fix the conversion price of the Series C
Preferred Stock at $3.00, and to adjust the conversion price of the Series C
Preferred Stock in the event that the Company issues Common Stock in the
future at a price of less than $3.00. In addition, the Company agreed to
remove a restriction in the Company's Certificate of Incorporation which
prohibited conversion of the Series C Preferred Stock, if after such
conversion the number of shares of Common Stock beneficially owned by such
holder would exceed 4.9% of the issues and outstanding Common Stock of the
Company. The Company has been advised that GFL currently owns 2,000,000
shares of Common Stock received upon conversion of the Series C Preferred
Stock, and GFL would not be able to convert a substantial number of additional
remaining 2,231 shares of Series C Preferred Stock into Common Stock without
the removal of this restriction.
<PAGE>10
PLAN OF DISTRIBUTION
This Prospectus relates to the sale by the Selling Stockholders of the Shares.
The Shares may be sold from time to time, in whole or in part, by the Selling
Stockholders, or their pledges, donees, transferees, or other successors in
interest, in the over-the-counter market at then prevailing market prices or
in privately negotiated transactions. Although the Company ultimately expects
that all Shares may be sold, the actual number of Shares that will be sold
cannot be determined.
In offering the Shares, the Selling Stockholders and any selling broker or
dealer may be deemed to be statutory "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with such sales. The
Company has advised the Selling Stockholders that they, because they may be
deemed to be statutory underwriters, will be subject to the Prospectus
delivery requirements under the Securities Act.
The Company will pay all the expenses, estimated to be $16,000 in connection
with this offering, other than underwriting commissions and discounts, if any.
<PAGE>11
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned by the Selling Stockholders on March 25, 1997,
(which number represents the number of shares of Common Stock issuable upon
the Conversion of Preferred Stock as of such date), the number of Shares
covered by this Prospectus and the amount retained by the Selling Stockholders
after the offering. All shares set forth as owned on the date hereof are
beneficially owned and the sole voting and investment power is held by the
person named.
Number of
Number of Shares Shares
Beneficially Covered by Number of
Name Owned on this Shares to be
March 25, 1997(1),(2) Prospectus(1) Retained
Clearwater Fund IV, LLC 2,000,000 2,000,000 0
Clearwater Offshore Fund 500,000 500,000 0
Ltd.
(1) As described above under "Recent Developments - Issuance of Series D
Preferred Stock," the number of shares receivable upon conversion of the
10,000 shares of the Series D Preferred Stock held by the Selling Stockholders
cannot be fixed until actual conversion, since the conversion rate fluctuates
based on the average market price of the Common Stock on the five trading days
prior to conversion. If converted on March 25, 1997, the total number of
shares of Common Stock receivable would be 2,500,000.
(2) Does not include 2,000,000 shares of Common Stock held by GFL Performance
Fund Ltd. ("GFL") or 2,231 shares of Series C Preferred Stock held by GFL,
which, if converted would be convertible into 743,667 shares of Common Stock.
The Company has been advised that GFL is under common control with the Selling
Stockholders.
<PAGE>12
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Marks & Murase L.L.P., 399 Park Avenue, New York, New York 10022.
EXPERTS
The financial statements of the Company for the years ending May 31, 1996 and
1995 appearing in this Prospectus and Registration Statement have been audited
by Bond, Andiola & Company, as set forth in their respective reports thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
<PAGE>13
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration Fee $ 3,220
Legal Fees and Expenses* $10,000
Accountants' Fees* $ 2,000
Miscellaneous $ 780
Total Expenses $16,000.00
* Estimated.
______________
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation may indemnify any director made a party to any proceeding
by reason of service in that capacity if the director acted in good faith, and
if the director reasonably believed, in the case of conduct in the director's
official capacity with the Corporation, that the conduct was in the best
interests of the Corporation; in all other cases, that the conduct was at
least not opposed to the best interests of the Corporation; that the conduct
was in the best interests of the interests of the Corporation; and in any
criminal proceeding, had no reason to believe the conduct was unlawful.
The Company's Certificate of Incorporation provides that:
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to
the Corporation or its Stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law; (iii) for the payment of unlawful dividends or unlawful stock repurchases
or redemptions under Section 174 of the Delaware General Corporation Law; or
(iv) for any transactions from which the Director derived an improper/personal
benefit.
Section VI of the By-laws of the Company contain the following provisions:
SECTION 1. General. The Corporation shall indemnify any person who is or was
a party to or is threatened to be made a party to any threatened, pending, or
<PAGE>14
contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including reasonable attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the extent, and subject to
the conditions prescribed by statute and by such rules and regulations, not
inconsistent with statute, as the Board of Directors may in its discretion
impose in general or particular cases or classes of cases.
SECTION 2. Rights Not Exclusive. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 3. Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted by him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
Item 16. Exhibits.
3(a) Amended and Restated Certificate of Incorporation of the Corporation
(incorporated by reference to Annual Report on Form 10-K for year ended May
31, 1996).
3(b) Certificate of Designation of 5% Cumulative Convertible Preferred Stock,
Series D.
3(c) By-laws of the Corporation (incorporated by reference to Annual Report
on Form 10-K for year ended May 31, 1996).
<PAGE>15
5 Opinion of Marks & Murase L.L.P.
10.1 Securities Purchase Agreement dated as of February 28, 1996 by and
between the Registrant and Clearwater Fund IV, LLC and Clearwater Offshore
Fund Ltd.
10.2 Registration Rights Agreement dated as of May 15, 1996 by and between
the Registrant and Clearwater Fund IV, LLC and Clearwater Offshore Fund Ltd.
24(a) Consent of Bond, Andiola & Company
24(b) Consent of Marks & Murase L.L.P. (the consent of counsel is contained
in their opinion)
Item 17. Undertakings.
(a) 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:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>16
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the 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, the 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 Act
will be governed by the final adjudication of such issue.
<PAGE>17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the 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 or amendments thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York on March 28, 1997.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(Registrant)
By: Thomas L. Mehl, Sr.
Thomas L. Mehl, Sr., Chairman of
the Board, President
and Chief Executive Officer
The undersigned hereby appoint Thomas L. Mehl, Sr. as the proxy, agent and
attorney-in-fact to execute and sign any and all amendments to this
registration statement in the capacities set forth after their respective
names below.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature and Title Date
Thomas L. Mehl, Sr. March 28, 1997
Thomas L. Mehl, Sr.
Chairman of the Board,
President and Chief Executive
Officer
AnnMarie Mehl March 28, 1997
AnnMarie Mehl
Director
Nardo Zaias March 28, 1997
Nardo Zaias
Director
<PAGE>18
Pichit Suvanprakorn March 26, 1997
Pichit Suvanprakorn
Director
Mark Clement March 27, 1997
Mark Clement
Director
Antonius Clemens March 26, 1997
Antonius Clemens
Director
Paul W. Hartloff, Jr. March 28, 1997
Paul W. Hartloff, Jr.
Director
Raymond Wilson March 28, 1997
Raymond Wilson
Vice President - Finance
and Chief Financial Officer
<PAGE>19
Exhibit 3(b)
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES D
OF
MEHL/BIOPHILE INTERNATIONAL CORPORATION
MEHL/Biophile International Corporation (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Corporation by the Certificate of Incorporation, as
amended, of the Corporation, and pursuant to Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by written consent dated February 26, 1997, adopted resolutions
providing for the designations, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, of ten thousand (10,000) shares of 5% Cumulative Convertible
Preferred Stock, Series D, of the Corporation, as follows:
RESOLVED, that the Corporation is authorized to issue 10,000 shares of 5%
Cumulative Convertible Preferred Stock, Series D, $10 par value (the
"Preferred Shares"), which shall have the following powers, designations,
preferences and other special rights:
1. Dividends. The holders of the Preferred Shares shall be entitled to a
dividend of five percent (5%) per annum of the Stated Value (as defined
below), payable in cash, on a cumulative basis with quarterly compounding
(prorated for any portion of the applicable period during which the Preferred
Shares are outstanding). Dividends shall accrue from the date of issuance of
the Preferred Shares and shall be payable quarterly commencing May 31, 1997,
through and including the date on which the Preferred Shares are no longer
outstanding.
<PAGE>20
2. Conversion of Preferred Shares. The holders of the Preferred Shares shall
have the right, at their option, to convert the Preferred Shares into shares
of Common Stock on the following terms and conditions:
a. Conversion Right. Each Preferred Share shall be convertible, at any time
after the earlier of (i) the date the Registration Statement (the
"Registration Statement"), which the Corporation is required to file pursuant
to Section 2 or 3 of the Registration Rights Agreement by and among the
Corporation and the Investors named therein (the "Registration Rights
Agreement"), is declared effective (the "Effective Date") by the U.S.
Securities and Exchange Commission (the "SEC"), and (ii) June 30, 1997, into
fully paid and nonassessable shares (calculated to the nearest whole share) of
Common Stock, at the conversion price per share (the "Conversion Price"), as
defined in Section 2(b), below, in effect at the time of conversion determined
as hereinafter provided. Each Preferred Share shall have a value of One
Thousand Dollars ($1,000) (the "Stated Value") for the purpose of such
conversion and the number of shares of Common Stock issuable upon conversion
of each of the Preferred Shares shall be determined by dividing the Stated
Value thereof by the Conversion Price then in effect. Every reference herein
to the Common Stock of the Corporation (unless a different intention is
expressed) shall be to the shares of Common Stock of the Corporation, $.01 par
value, as such stock exists immediately after the issuance of the Preferred
Shares provided for hereunder, or to stock into which such Common Stock may be
changed from time to time thereafter.
b. Conversion Price. Subject to adjustment pursuant to Sections 2(c) and
2(e), below, and subject to the "Ceiling Price," as defined below, and the
"Floor Price," as defined below, the Conversion Price shall be eighty percent
(80%) (the "Conversion Percentage") of the Average Market Price (as defined
below) for the Common Stock for the five (5) consecutive trading days ending
one trading day prior to the date of the Conversion Notice (as defined below);
provided, however that subject to adjustment pursuant to Sections 2(c) and
2(e), below: (i) in no event shall the Conversion Price be greater than the
Average Market Price (as defined below) for the Common Stock for the five (5)
consecutive trading days ending one trading day prior to the Closing Date (the
"Ceiling Price") , and (ii) in no event shall the Conversion Price be less
than $4.00 (the "Floor Price").
c. Adjustment to Conversion Percentage. (i) If either (A) the Registration
Statement which the Corporation is required to file pursuant to Section 2 of
the Registration Rights Agreement has not been filed in accordance the
Registration Rights Agreement on or before March 31, 1997; or (B) the
Effective Date has not occurred on or before June 30, 1997, or if, after the
Registration Statement has been declared effective by the SEC, sales cannot be
<PAGE>21
made pursuant to the Registration Statement by reason of stop order, the
Corporation's failure to update the Registration Statement in accordance with
the rules and regulations of the SEC or otherwise, or if the Common Stock is
not listed or included for quotation on the National Market of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ-NM"),
the New York Stock Exchange (the "NYSE"), the American Stock Exchange (the
"AMEX"), or the NASDAQ SmallCap Market ("NASDAQ SmallCap") then, (ii) as
partial relief for the damages to the holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity): the Conversion Percentage and the Floor Price shall each be reduced
by a number of basis points equal to two hundred (200) basis points multiplied
by the sum of(A) the number of months (prorated for partial months) after
March 31, 1997 prior to the date the Registration Statement is so filed by the
Company; (B) the number of months (prorated for partial months) after June 30,
1997 and prior to the date the Registration Statement is declared effective by
the SEC; (C) the number of months (prorated for partial months) that sales
cannot be made pursuant to the Registration Statement (by reason of stop
order, the Corporation's failure to update the Registration Statement or
otherwise) after the Registration Statement has been declared effective; and
(D) the number of months (prorated for partial months) that the Common Stock
is not listed or included for quotation on the NASDAQ-NM, NYSE, AMEX, or
NASDAQ SmallCap after the Registration Statement has been declared effective.
If the holder converts Preferred Shares into Common Stock and an adjustment to
the Conversion Percentage and the Floor Price is required subsequent to such
conversion, but prior to the sale of such Common Stock by such holder, the
Corporation shall pay to such holder, within five (5) days after receipt of a
notice of the sale of such Common Stock from such holder, an amount equal to
the Average Market Price of the Common Stock obtained upon conversion of such
Preferred Shares for the five (5) trading days ending one (1) trading day
prior to the date of conversion multiplied by a fraction, the numerator of
which shall two (2) and the denominator of which shall be one hundred (100),
multiplied by the number of months (prorated for partial months) for which an
adjustment was required. Such amount shall be paid, at the option of the
holder, in cash or in Common Stock ("Damage Shares"), whose value shall be the
Conversion Price, as adjusted pursuant to this subsection 2(c).
"Average Market Price" of any security for any period shall be computed as the
arithmetic average of the closing bid prices for such security for each
trading day in such period on the NASDAQ SmallCap, or, if the NASDAQ SmallCap
is not the principal trading market for such security, on the principal
trading market for such security, or, if market value cannot be calculated for
such period on any of the foregoing bases, the average fair market value
during such period as reasonably determined in good faith by the Board of
Directors of the Corporation (all as appropriately adjusted for any stock
dividend, stock split, or other similar transaction during such period or
between the end of such period or between the end of such period and the date
of conversion or dividend payment, as applicable).
<PAGE>22
d. Conversion Notice. On presentation and surrender to the Corporation (or
at any office or agency maintained for the transfer of the Preferred Shares)
of the certificates of Preferred Shares so to be converted, duly endorsed in
blank for transfer or accompanied by proper instruments of assignment or
transfer in blank (a "Conversion Notice"), the holder of such Preferred Shares
shall be entitled, subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for fully paid and
nonassessable shares, which certificates shall be delivered by the second
trading day after the date of delivery of the Conversion Notice, and cash for
fractional shares, of Common Stock on the foregoing basis. The Preferred
Shares shall be deemed to have been converted, and the person converting the
same to have become the holder of record of Common Stock, for all purposes as
of the date of delivery of the Conversion Notice.
e. (i) Adjustments for Dividends, Subdivisions or Combinations. If the
Corporation shall at any time subdivide the outstanding shares of Common Stock
or shall issue a stock dividend on its outstanding shares of Common Stock, the
Conversion Price and the Floor Price shall be appropriately decreased so that
the number of shares of Common Stock issuable upon conversion of the Preferred
Shares shall be increased by the same percentage as the percentage increase in
the number of outstanding shares of Common Stock as a result of the
subdivision or stock dividend, effective at the close of business on the date
of such subdivision or stock dividend. If the Corporation shall at any time
combine the shares of outstanding Common Stock, the Conversion Price and the
Floor Price shall be appropriately increased so that the number of shares of
Common Stock issuable upon conversion of the Preferred Shares shall be
decreased by the same percentage as the percentage decrease in the number of
shares of outstanding Common Stock as a result of the combination, effective
at the close of business on the date of such combination.
(ii) Adjustments for Reorganizations and Reclassifications. In case, at any
time after the date hereof, of any capital reorganization (other than a merger
or other reorganization in which the Corporation is the continuing entity and
that does not result in any change in the Common Stock) or any
reclassification of the Common Stock of the Corporation (other than as a
result of a stock dividend or subdivision, split or combination of shares),
the Preferred Shares shall thereafter be convertible into the number of shares
of stock or other securities or property to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion of the
<PAGE>23
Preferred Shares immediately prior to such reorganization or recapitalization
would have been entitled upon such reorganization or reclassification; and, in
any such case, appropriate adjustment (including, without limitation,
adjustment to the Conversion Price and the Floor Price) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of Preferred Shares, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any share of stock or other property
thereafter deliverable upon the conversion.
(iii) Adjustments of Conversion Price for Dilutive Issuances. Upon the
issuance by the Corporation of Common Stock, or any right or option to
purchase Common Stock, or any obligation or any shares of stock convertible
into or exchangeable for Common Stock for a consideration per share less than
the Conversion Price in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale, the Conversion Price and the
Floor Price shall be reduced to a price calculated (to the nearest cent) by
dividing:
(A) an amount equal to the sum of (1) the number of shares of Common Stock
outstanding prior to such issuance or sale plus shares of Common Stock
issuable upon conversion or exercise of any evidence of indebtedness, shares,
options, warrants or other securities or obligations of the Corporation
outstanding immediately prior to such issuance or sale multiplied by the then
existing Conversion Price, and (2) the aggregate amount of consideration
received by the Corporation upon such issuance or sale, by
(B) the sum of (1) the number of shares of Common Stock outstanding prior to
such issuance or sale plus shares of Common Stock issuable upon conversion or
exercise of any evidence of indebtedness, shares, options, warrants or other
securities or obligations of the Corporation outstanding immediately prior to
such issuance or sale and (2) the number of shares of Common Stock issued or
deemed to be issued pursuant to Section 2(e)(iv), below, in such issuance or
sale.
Expressed as an arithmetic formula, the new Conversion Price would be
calculated as follows:
<PAGE>24
CP(l) = (CP(O)*CS) + C
CS + AS
where:
CP(l) = the Conversion Price as adjusted pursuant to this Section 2(e)(iii);
CP(O) = the Conversion Price in effect immediately prior to such issue or
sale;
CS = the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus shares of Common Stock issuable upon conversion or
exercise of any evidences of indebtedness, shares, options, warrants or other
securities or obligations of the Corporation outstanding immediately prior to
such issue or sale;
C = the aggregate amount of consideration received by the Corporation upon
such issue or sale;
AS = the number of shares of Common Stock issued or deemed to be issued
pursuant to Section 2(e)(iv), below in such issue or sale.
* = the arithmetic function of multiplication.
(iv) Calculation of Issuance Price. For purposes of Section 2(e)(iii) hereof
the following provisions shall be applicable:
(A) In the case of an issue or sale for cash of shares of Common Stock, the
consideration received by the Corporation therefor shall be deemed to be the
amount of cash received, before deducting therefrom any commissions or
expenses paid or incurred by the Corporation.
(B) In case of the issuance (otherwise than upon conversion or exchange of
obligations or shares of stock of the Corporation) of additional shares of
Common Stock for a consideration other than cash or a consideration partly
other than cash, the amount of the consideration other than cash received by
the Corporation for such shares shall be deemed to be the value of such
consideration as reasonably determined by the Board of Directors.
(C) In case of the issuance by the Corporation in any manner of any rights to
subscribe for or options to purchase shares of Common Stock, at a
consideration per share (as computed below) less than the Conversion Price for
<PAGE>25
in effect immediately prior to the date of the offering of such rights or the
granting of such options, as the case may be, the maximum number of shares of
Common Stock to which the holders of such rights or options shall be entitled
to subscribe for or purchase pursuant to such rights or options shall be
deemed to be issued or sold as of the date of the offering of such rights or
the granting of such options, as the case may be, and the minimum aggregate
consideration named in such rights or options for the shares of Common Stock
covered thereby, plus the consideration, if any, received by the Corporation
for such rights or options, shall be deemed to be the consideration actually
received by the Corporation (as of the date of the offering of such rights or
the granting of such options, as the case may be) for the issuance of such
shares.
(D) In case of the issuance or issuances by the Corporation in any manner of
any obligations or of any shares of stock of the Corporation that shall be
convertible into or exchangeable for Common Stock, at a consideration per
share (as computed below) less than the Conversion Price in effect immediately
prior to the date such obligation or shares are issued, the maximum number of
shares of Common Stock issuable upon the conversion or exchange of such
obligations or shares shall be deemed issued as of the date such obligations
or shares are issued, and the amount of the consideration received by the
Corporation for such additional shares of Common Stock shall be deemed to be
the total of (i) the amount of consideration received by the Corporation upon
the issuance of such obligations or shares, as the case may be, plus (ii) the
minimum aggregate consideration, if any, other than such obligations or
shares, receivable by the Corporation upon such conversion or exchange, except
in adjustment of dividends.
(E) The amount of the consideration received by the Corporation upon the
issuance of any rights or options referred to in Section 2(e)(iv)(C) hereof or
upon the issuance of any obligations or shares which are convertible or
exchangeable as described in Section 2(e)(iv)(D) hereof, and the amount of the
consideration, if any, other than such obligations or shares so convertible or
exchangeable, receivable by the Corporation upon the exercise, conversion or
exchange thereof shall be determined in the same manner provided in Section
2(e)(iv)(A) and 2(e)(iv)(B) hereof with respect to the consideration received
by the Corporation in case of the issuance of additional shares of Common
Stock. On the expiration of any rights or options referred to in Section
2(e)(iv)(C) hereof, or the termination of any right of conversion or exchange
referred to in Section 2(e)(iv)(D) hereof, the Conversion Price then in effect
shall forthwith be readjusted to such Conversion Price as would have obtained
had the adjustments made upon the issuance of such option, right or
convertible or exchangeable securities been made upon the basis of the
delivery of only the number of shares of Common Stock actually delivered upon
the exercise of such rights or options or upon the conversion or exchange of
such securities.
<PAGE>26
(F) The foregoing notwithstanding, no adjustment of the Conversion Price of a
series of Preferred Shares shall be made pursuant to Section 2(e)(iii) or
Section 2(e)(iv) as a result of the issuance after the date hereof of (1) up
to an aggregate of 517,000 shares of Common Stock issued or issuable with the
approval of the Board of Directors pursuant to options granted by the Company
prior to February 26, 1997; and (2) up to an aggregate of 2,305,000 shares of
Common Stock (or any options, warrants or rights to purchase such shares of
Common Stock issued or issuable under grants by the Board of Directors of the
Corporation pursuant to the Company's employee stock option plan in the form
approved by the Board of Directors of the Corporation prior to the date of
this Agreement.
f. Fractional Shares. The Corporation shall not issue any fraction of a
share of Common Stock upon any conversion, but shall pay in cash therefor at
the Conversion Price then in effect multiplied by such fraction.
g. Reservation of Shares. The Corporation shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding.
h. Taxes. The Corporation shall pay any and all taxes which may be imposed
upon it with respect to the issuance and delivery of Common Stock upon the
conversion of the Preferred Shares as herein provided. The Corporation shall
not be required in any event to pay any transfer or other taxes by reason of
the issuance of such Common Stock in names other than those in which the
Preferred Shares surrendered for conversion are registered on the
Corporation's records, and no such conversion or issuance of Common Stock
shall be made unless and until the person requesting such issuance has paid to
the Corporation the amount of any such tax, or has established to the
satisfaction of the Corporation and its transfer agent, if any, that such tax
has been paid.
3. Voting Rights. Holders of Preferred Shares shall have no voting rights,
except as required by law and by Section 7 hereof.
<PAGE>27
4. Redemption. Subject to the following terms and conditions, the
Corporation, at any time after the Effective Date, at its option, may redeem
from time to time all or any portion of the then outstanding Preferred Shares:
a. The Corporation may, at any time or times after the Effective Date, redeem
such Preferred Shares at the Redemption Price, as defined in Section 4(b)
below, payable in cash; provided, however, that at the option of the Investor,
the Investor shall have the right to convert all or any portion of such
Preferred Shares to Common Stock pursuant to Section 2 at any time prior to
the Redemption Date, as defined below. With respect to any redemption of such
shares, the Corporation must give written notice (the "Redemption Notice") by
certified mail (postage prepaid, return receipt requested) or by overnight
courier to the holders of the Preferred Shares to be redeemed at least thirty
(30) days prior to the scheduled date of redemption (the "Redemption Date").
The Redemption Notice shall be addressed to each such shareholder at the
address of such holder appearing on the books of the Corporation or given by
such holder to the Corporation for the purpose of notice. The Redemption
Notice shall state the Redemption Date, the Redemption Price (as hereinafter
defined), and the number of Preferred Shares of such holders to be redeemed
and shall call upon such holder to surrender to the Corporation on the
Redemption Date at the place designated in the Redemption Notice such holder's
certificate or certificates representing the shares to be redeemed. On or
after the Redemption Date, each holder of Preferred Shares called for
redemption shall surrender the certificate evidencing such Preferred Shares to
the Corporation (except that, if fewer Preferred Shares are outstanding on the
Redemption Date than were called for redemption due to the Holder's conversion
of some or all of its outstanding Preferred Shares into Common Stock between
the date of the Redemption Notice and the Redemption Date, then such number of
Preferred Shares shall be reduced to the number of such Preferred Shares which
are still outstanding) at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less
than all of the outstanding Preferred Shares are to be redeemed for any
reason, then the Corporation shall redeem a pro rata portion from each holder
of Preferred Shares according to the respective number of Preferred Shares
held by such holder.
b. The Preferred Shares shall be redeemed at a cash price (the "Redemption
Price") equal to sum of (i) the Conversion Price in effect on the Redemption
Date multiplied by the number of Preferred Shares actually redeemed, and (ii)
all accrued but unpaid dividends on the Preferred Shares being redeemed
through the Redemption Date. In the event fails to pay the Redemption Price
in full on the Redemption Date, interest shall accrue on the unpaid portion at
the rate of ten percent (10%) per annum, compounded daily.
<PAGE>28
c. From and after the Redemption Date (unless default shall be made by the
Corporation in duly paying the Redemption Price, in which case all the rights
of the holders of such shares shall continue) the holders of the shares of the
Preferred Shares called for redemption shall cease to have any rights as
shareholders of the Corporation relating to such shares, except (i) the right
to receive, without interest other than as payable under Section 4(b), above,
the Redemption Price and (ii) if less than all of the Preferred Shares
represented by the certificate(s) surrendered by the holder for redemption are
actually redeemed, the right to receive forthwith from the Corporation a new
certificate for the unredeemed shares, and the redeemed shares shall not
thereafter be transferred (except with the written consent of the Corporation)
on the books of the Corporation and shall not be deemed outstanding for any
purpose whatsoever. The Preferred Shares not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein.
d. There shall be no redemption of any Preferred Shares of the Corporation
where such action would be in violation of applicable law.
e. Upon any redemption of Preferred Shares pursuant to this Section 4, the
Preferred Shares which are so redeemed shall not be reissued and, upon such
redemption, the number of authorized shares of the series to which the shares
of such Preferred Shares belonged shall be reduced by the number of shares so
redeemed.
5. Liquidation, Dissolution, Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Corporation, whether from capital or from earnings available
for distribution to its stockholders (the "Preferred Funds"), before any
amount shall be paid to the holders of the Common Stock, an amount equal to
the Stated Value per Preferred Share plus any accrued and unpaid dividends,
provided that, if the Preferred Funds are insufficient to pay the full amount
due to the holders of Preferred Shares and holders of shares of other classes
or series of preferred stock of the Corporation that are of equal rank with
the Preferred Shares as to payments of Preferred Funds (the "Pari Passu
Shares"), then each holder of Preferred Shares and Pari Passu Shares shall
receive a percentage of the Preferred Funds equal to the full amount of
Preferred Funds payable to such holder as a percentage of the full amount of
Preferred Funds payable to all holders of Preferred Shares and Pari Passu
Shares. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Corporation.
Neither the consolidation nor merger of the Corporation with or into any other
corporation or corporations, nor the sale or transfer by the Corporation of
less than substantially all of its assets, shall, for the purposes hereof, be
deemed to be a liquidation, dissolution or winding up of the Corporation. No
holder of Preferred Shares shall be entitled to receive any amounts with
respect thereto upon any liquidation, dissolution or winding up of the
Corporation other than the amounts provided for herein.
<PAGE>29
6. Preferred Rank. All shares of Common Stock and any series of Serial
Preferred Shares as may be issued after the original date of issuance of any
Preferred Shares by the Corporation shall be of junior rank to all Preferred
Shares in respect to the preferences as to payments of dividends and/or other
distributions, including, without limitation, distributions and payments upon
the liquidation, dissolution or winding up of the Corporation. The rights of
the shares of Common Stock shall be subject to the preferences and relative
rights of the Preferred Shares.
7. Vote to Change the Terms of Preferred Shares. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting
of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares shall be required to:
a. amend, alter, change or repeal any of the powers, preferences, privileges
or rights of the Preferred Shares; or
b. create any new class or series of shares having preferences prior to the
Preferred Shares as to dividends or assets; or
c. amend the provisions of this Section 7; or
d. alter or change any of the powers, preferences, privileges or rights of
the Common Stock.
<PAGE>30
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Thomas L. Mehl, Sr. its President and AnnMarie Mehl its Secretary, this 27th
day of February 1997.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By:/s/ Thomas L. Mehl, Sr.
President
Attest:/s/ AnnMarie Mehl
Secretary
<PAGE>31
March 31, 1997
MEHL/Biophile International Corporation
4127 N.W. 27th Lane
Gainesville, Florida 32606
Dear Sirs:
We have acted as counsel to MEHL/Biophile International Corporation (the
"Company") in connection with the Registration Statement of Form S-3 (the
"Registration Statement") being filed with the Securities and Exchange
Commission on March 31, 1997 covering up to 2,500,000 shares of the Company's
Common Stock (the "Shares") issuable upon the conversion of 10,000 shares of 5%
Cumulative Convertible Preferred Stock, Series D (the "Preferred Shares").
We are of the opinion that upon the issuance of the Shares in accordance with
the terms of conversion of the Preferred shares, the Shares will when sold be
legally issued, fully paid and non-assessable.
We hereby consent to the inclusion of our name under the caption "Legal
Matters" in the Prospectus which is included in the Registration Statement.
Very truly yours,
Marks & Murase L.L.P.
<PAGE>32
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, together with the Exhibits A, B, C(1), C(2) and
D and Schedules 3(a), 3(d) and 3(j), attached hereto and hereby incorporated
by reference (collectively, this "Agreement"), dated as of February 28, 1997
by and between MEHL/Biophile International Corporation, a Delaware
corporation, with headquarters located at 4217 N.W. 27th Lane, Gainesville,
Florida 32606 (the "Company"), and Clearwater Fund IV, LLC, a Delaware limited
liability company ("Clearwater IV") and Clearwater Offshore Fund Ltd., a
corporation organized under the International Business Companies Act of the
Commonwealth of the Bahamas ("Clearwater Offshore") (Clearwater IV and
Clearwater Offshore are hereinafter sometimes collectively referred to as the
"Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 Act");
B. The Buyers wish to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares of the Company's 5% Cumulative
Convertible Preferred Stock, Series D, $10 par value per share (the "Preferred
Shares"), which shall be convertible into shares of the Company's Common Stock
(the "Common Stock"), $.01 par value, (as converted, the "Conversion Shares"),
and pursuant to which certain shares of Common Stock may be issued to the
Buyers in accordance with Section 2(c) of the Certificate of Designation
therefor (the "Damage Shares); and
C. Contemporaneously with the execution and delivery of this Agreement, (i)
the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit A (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws, and (ii) the
Company and GFL and Performance Fund Ltd. ("GFL") are executing and
delivering a side letter agreement in the form attached hereto as Exhibit B
(the "Side Letter Agreement").
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
<PAGE>33
a. Purchase of Preferred Shares. Subject to Sections 6 and 7, below, the
Company shall issue and sell to the Buyers and the Buyers shall purchase an
aggregate of 10,000 Preferred Shares which shall be convertible into
Conversion Shares in accordance with the terms of the Certificate of
Designations, Preferences and Rights of 5% Cumulative Convertible Preferred
Stock, Series D in the form attached hereto as Exhibit C (the "Certificate of
Designation"). The per share purchase price of the Preferred Shares shall be
One Thousand Dollars ($1,000). Subject to Sections 6 and 7, below, Clearwater
IV shall purchase 8,000 of such Preferred Shares and Clearwater Offshore shall
purchase 2,000 of such Preferred Shares.
b. Closing Date. The date and time of the issuance and sale of the Preferred
Shares shall be 5:00 p.m. Eastern Standard Time on February 28, 1997 (the
"Closing Date").
c. Closing. Subject to Section 6 and 7, below, the Buyers shall, at the
closing of the transactions contemplated by this Agreement (the "Closing"),
pay the purchase price for the Preferred Shares (the "Purchase Price") by wire
transfer of immediately available United States Dollars to the Company on the
Closing Date, and the Company shall promptly deliver a stock certificate, duly
executed on behalf of the Company, representing the Preferred Shares (the
"Stock Certificate") to the Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyers represent and warrant to the Company that:
a. Investment Purpose. The Buyers are purchasing the Preferred Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, any "distribution" thereof within the meaning of the 1933
Act.
b. Accredited Investor Status. The Buyers are "accredited investors" as that
term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. The Buyers understand that the Preferred Shares
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the
Buyers' compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyers set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Buyers to acquire the Preferred Shares.
d. Information. The Buyers and their advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Shares
which have been requested by the Buyers. The Buyers and their advisors, if
any, have been afforded the opportunity to ask questions of the Company and
have received answers that to their knowledge are complete and satisfactory.
The Buyers understand that their investment in the Preferred Shares involves a
high degree of risk. The Buyers have sought such accounting, legal and tax
advice as they have considered necessary to an informed investment decision
with respect to their acquisition of the Preferred Shares.
<PAGE>33
e. Governmental Review. The Buyers understand that no United States federal
or state agency or any other government or governmental agency has passed on
or made any recommendation or endorsement of the Preferred Shares or the
fairness or suitability of the investment in the Preferred Shares, nor have
such authorities passed upon or endorsed the merits of the offering of the
Preferred Shares.
f. Transfer or Resale. The Buyers understand that (i) except as provided in
the Registration Rights Agreement, the Preferred Shares, the Conversion
Shares, and the Damage Shares have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be transferred unless
(a) subsequently registered thereunder, or (b) the Buyers shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope
and substance to the Company, to the effect that the securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms
of said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to register such
securities (other than pursuant to the Registration Rights Agreement) under
the 1933 Act or any state securities laws.
g. Legends. The Buyers understand that the Preferred Shares and, until such
time as the Conversion Shares and the Damage Shares (collectively, the
"Registrable Securities") have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Registrable Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE
<PAGE>35
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY
WITH ANY APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or any
Registrable Securities upon which it is stamped, if, unless otherwise required
by state securities laws, (a) the sale of such Preferred Shares or Registrable
Securities is registered under the 1933 Act, or (b) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in
form, substance and scope reasonably acceptable to the Company, to the effect
that a public sale or transfer of the Preferred Shares or such Registrable
Securities may be made without registration under the 1933 Act, or (c) such
holder provides the Company with reasonable assurances that the Preferred
Shares or such Registrable Securities can be sold pursuant to Rule 144 under
the 1933 Act (or a successor rule thereto) without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. Holdback Agreement. Buyers agree not to effect any sale or transfer of
any of (i) the Registrable Securities and/or (2) any Common Stock issued upon
conversion of the Company's 5% Cumulative Convertible Preferred Stock Series
C, $10 par value per share (the "Series C Common Shares"), for a one year
period commencing on the Closing Date, other than sales or transfers to
"affiliates," as that term is defined under the 1934 Act, who agree in writing
to be bound by the foregoing; provided, however, that notwithstanding the
foregoing, Buyers shall have the right to pledge any or all of the Registrable
Securities and the Series C Common Shares in connection with margin
transactions, provided such Registrable Securities are not used to satisfy
margin calls. In consideration of this Agreement, the Company agrees to
provide in the Amended and Restated Certificate of Incorporation, a form of
which is attached hereto as Exhibit C(2), that the Conversion Price for the
Company's 5% Cumulative Convertible Preferred Stock Series C, $10 par value
per share, shall be $3.00.
i. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyers and is a valid and
binding agreement of the Buyers enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyers that:
a. Organization and Qualification. The Company is a corporation organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of the subsidiaries of the Company (the "Subsidiaries") is a corporation
duly organized, validly existing in good and in good standing under the laws
of the jurisdictions in which it is incorporated. The Company and its
Subsidiaries each have the requisite corporate power to own their properties
and to carry on their business as now being conducted. The Company and each
of the Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the name of the
business conducted by it makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the operations, properties or
financial condition of the Company and the Subsidiaries taken as a whole.
b. Each of the Subsidiaries of the Company is listed on Schedule 3(a),
attached hereto and hereby incorporated by reference. Other than the
Subsidiaries, the Company does not as of the date of this Agreement, and on
the Closing Date will not, own or control, directly or indirectly, any
interest in any other corporation, association, limited partnership, limited
liability company or other business entity of any kind whatsoever. The
Company is not as of the date of this Agreement, and on the Closing Date will
not be, a participant in any joint venture, partnership or similar
arrangement.
c. Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue the Preferred Shares and the
Registrable Securities in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Registration Rights
Agreement and the Side Letter Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement, the Registration Rights Agreement and the Side
Letter Agreement have been duly executed and delivered by the Company, and
(iv) this Agreement, the Registration Rights Agreement and the Side Letter
Agreement constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
d. Capitalization. The authorized capital stock of the Company consists of
(i) 60,000,000 shares of Common Stock of which 43,743,301 shares are issued
and outstanding, and (ii) 200,000 shares of serial preferred stock, $10 par
<PAGE>36
value per share ("Preferred Stock") of which 2231 shares are issued and
outstanding as 5% Cumulative Convertible Preferred Stock, Series C. Ten
Thousand Preferred Shares will be issued at the Closing. No other shares of
Common Stock or of serial preferred stock will be issued and outstanding on
the Closing Date. All of such outstanding shares have been validly issued,
are fully paid and nonassessable and have been issued in compliance with
applicable federal and state securities laws. No shares of Common Stock or
Preferred Stock are subject to preemptive rights or any other similar rights
of the stockholders of the Company. Except as disclosed in Schedule 3(d) as
of the effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no outstanding debt securities, and (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of its or their securities under the
1933 Act (except the Registration Rights Agreement). The Company has
furnished to the Buyers true and correct copies of the Company's Articles of
Incorporation, as amended, as in effect on the date hereof ("Articles of
Incorporation") and the Company's Bylaws, as in effect on the date hereof (the
"Bylaws").
e. Issuance of Securities. The Registrable Securities and Preferred Shares
are duly authorized and, upon issuance in accordance with the terms hereof and
thereof, shall be validly issued, fully paid and non-assessable, free from all
liens and encumbrances, including, without limitation, liens and charges with
respect to the issuance thereof, not subject to any preemptive rights, and
issued in compliance with applicable federal and state securities laws and the
rules and regulations of each national securities exchange or automated
quotation system, if any, on which shares of Common Stock are listed as of the
date of issuance.
f. No Conflicts. The execution, delivery and performance of this Agreement,
the Registration Rights Agreement and the Side Letter Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
and thereby will not (i) result in a violation of the Articles of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
or any of the Subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including, without limitation,
federal and state securities laws and regulations and rules and regulations of
national securities exchanges and automated quotation systems, if any, on
which the Common Stock is listed as of the Closing Date) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). The business of the Company and the Subsidiaries is not
<PAGE>37
being conducted, and shall not be conducted through the Registration Period
(as defined herein), in violation of any law, ordinance, regulation of any
governmental entity, except for possible violations which either singly or in
the aggregate do not have a Material Adverse Effect. Except as required under
the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement in
accordance with the terms hereof.
g. SEC Documents, Financial Statements. Since May 31, 1992, the Company has
filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents (as amended) contained 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. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject,
The Company is current in all of its required filings, and otherwise in
compliance with its obligations, under the Exchange Act.
h. Representations Complete. None of the representations, warranties or
covenants made by Company in this Agreement, nor any statement made in any
Schedule, Exhibit or certificate furnished to Buyers pursuant to this
Agreement, when all such documents are read together in their entirety,
contains or will at the Closing contain any untrue statement of a material
fact, or omits or will omit at Closing to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
i. Absence of Certain Changes. Since November 30, 1996 there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or
prospects of the Company.
j. Absence of Litigation. Except as set forth in Schedule 3(j), there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect
the validity or enforceability of, or the authority or ability of the Company
to perform its obligations under, this Agreement or any of the documents
contemplated herein. To the Company's knowledge, there are no actions, suits,
proceedings or investigations pending against the employees of the Company
before any court or governmental agency (nor, to the Company's knowledge, is
there any threat or basis therefor) involving the prior employment of any of
such employees, their obligations under any agreements with prior employers or
their use of information or techniques allegedly proprietary to any of their
former employers. The Company is not a party to any order, writ, injunction,
judgment, or decree of any court or governmental agency or instrumentality.
There is no action, suit, proceeding, or investigation by the Company
currently pending or that the Company presently intends to initiate.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the Preferred
Shares as required under Regulation D and to provide a copy thereof to the
Buyers promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of which the
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which (A) the Investors have sold all the Registrable Securities and (B)
none of the Preferred Shares is outstanding (the "Registration Period"), the
Company shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of the
Preferred Shares for the Company's internal working capital purposes and shall
not, directly or indirectly, use such proceeds for any loan to or investment
in any other corporation, partnership, enterprise or other person except as
the Company's board of directors deems necessary in order to develop and
commercialize the Company's technology.
<PAGE>38
e. Financial Information. The Company agrees to send the following reports
to the Buyers during the Registration Period: (i) within five (5) days after
the filing thereof with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii)
within one day after release thereof, copies of all press releases issued by
the Company or any of its subsidiaries. In addition, the Company will furnish
to the Buyers any financial information, reports or analyses provided to any
institution or other party lending funds to the Company as soon as practicable
after release of such documents to such party.
f. Access to Information. The Buyers shall have the right to visit and
inspect any of the books and records and properties of the Company and its
subsidiaries, if any, and to discuss their affairs, finances and accounts with
their officers, all at such reasonable times and as often as may be reasonably
requested in writing and on reasonable notice.
g. Rule 144A(d)(4). The Company will comply with the requirements of Rule
144A(d)(4).
h. Reservation of Shares. The Company shall at all times have authorized,
and reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of the Conversion Shares and the
Damage Shares.
i. Listing. The Company shall promptly secure the listing of the Registrable
Securities upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Registrable
Securities from time to time issuable under the terms of this Agreement and the
Registration Rights Agreement.
j. Expenses. Each shall bear all of their own costs and expenses, including
legal and accounting fees, incurred in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyers or their nominee, for the Conversion
Shares and Damage Shares in such amounts as specified from time to time by the
Buyers to the Company. Prior to registration of the Registrable Securities
pursuant to an effective registration statement, all such certificates shall
<PAGE>39
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company shall provide instructions and opinions of counsel to its transfer
agent in accordance with Section 3(p) of the Registration Rights Agreement.
The Company warrants that no instruction other than such instructions referred
to in this Section 5, and stop transfer instructions to give effect to Section
2(f) hereof, in the case of the Registrable Securities, prior to registration
of the Registrable Securities under the 1933 Act, will be given by the Company
to its transfer agent and that the Preferred Shares and the Registrable
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any
way the Buyers' obligations and agreement to comply with all applicable
securities laws upon resale of the Registrable Securities. If the Buyers
provide the Company with an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, that registration of a resale by the
Buyers of any of the Preferred Shares or the Registrable Securities is not
required under the 1933 Act, the Company shall permit the transfer, and
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Buyers.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell the Preferred Shares is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to each other.
b. The Buyers shall have delivered the Purchase Price to the Company by wire
transfer of immediately available funds pursuant to the wiring instructions
provided by the Company.
c. The Company and GFL shall have executed the Side Letter Agreement and
delivered the same to each other.
7. CONDITIONS TO THE BUYERS' OBLIGATION TO PURCHASE.
The obligation of the Buyers to purchase the Preferred Shares is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Buyers' sole benefit
and may be waived by the Buyers at any time in their sole discretion:
<PAGE>40
a. The parties shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to each other.
b. The Company and GFL shall have executed the Side Letter Agreement and
delivered the same to each other.
c. (i) The Board of Directors of the Company shall have caused the Company
to file with the Secretary of State of Delaware the Certificate of Designation
in the form attached hereto as Exhibit C(1); (ii) the Controlling Shareholders
shall have executed and delivered to the Buyers a Written Consent of
Shareholders approving the filing by the Company with the Secretary of State
of Delaware of the Amended and Restated Certificate of Incorporation in the
form attached hereto as Exhibit C(2); and (iii) the Board of Directors of the
Company shall have taken all other necessary or appropriate actions in order
to effectuate the filing by the Company, as promptly as possible after the
Closing Date, with the Secretary of State of Delaware of the Amended and
Restated Certificate of Incorporation in the form attached hereto as Exhibit
C(2).
d. Until the Effective Date, as defined in the Registration Rights Agreement,
the Common Stock shall be authorized for quotation on the Small Cap Market of
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System ("NASDAQ SmallCap") and trading in the Common Stock on NASDAQ SmallCap
shall not have been suspended by the SEC or NASDAQ.
e. The Buyers shall have received the opinion of the Company's counsel dated
as of the Closing Date, in form, scope and substance reasonably satisfactory
to the Buyers and in substantially the same form as Exhibit D.
f. The Company shall have executed and delivered the Stock Certificate to the
Buyers.
8. INDEMNIFICATION.
a. Subject to Section 8(d), below, to the extent permitted by law, the
Company will indemnify, hold harmless and defend (i) the Buyers, and (ii) the
directors, officers and each person who controls either or both Buyers within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), if any (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) (collectively,
"Claims") to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any breach by the Company of any of the
representations, warranties, covenants and/or agreements of the Company in
this Agreement. The Company shall reimburse the Indemnified Persons promptly
as such expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
<PAGE>41
herein, the indemnification agreement contained in this Section 8(a) shall not
apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person.
b. Subject to Section 8(d), below, the Buyers agree jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth
in Section 8(a), the Company, and each of its directors and officers (each an
"Indemnified Party" and collectively, an "Indemnified Parties"), against any
Claim to which any of them may become subject, insofar as such Claim arises
out of or is based upon any breach by the Buyers of any of the
representations, warranties, covenants and/or agreements of the Buyers in this
Agreement, and the Buyers will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 8(b) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Buyers,
which consent shall not be unreasonably withheld.
c. Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 8 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 8, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company or the Buyers, as the case may be,
shall pay reasonable fees for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as the case may be. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 8, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action. The indemnification
required by this Section 8 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
<PAGE>42
d. Limitations on Indemnification Obligations. Notwithstanding anything to
the contrary in this Agreement:
(i) Neither the Company nor the Buyers shall be obligated to indemnify any
Indemnified Person or Indemnified Party, as the case may be, pursuant to this
Section 8, until the aggregate amount of all Claims for which such Indemnified
Person or Indemnified Party, as the case may be, seeks to be so indemnified
exceeds One Hundred Thousand Dollars ($100,000), whereupon such Indemnified
Person or Indemnified Party shall be entitled to be so indemnified for the
full amount of all such Losses in excess of the foregoing threshold amount;
(ii) The maximum aggregate liability of the Company to the Indemnified
Persons for any reason whatsoever arising out of or related to this Agreement,
including, without limitation, for indemnification with respect to Claims,
shall not exceed Ten Million Dollars ($10,000,000) Dollars.
(iii) The maximum aggregate liability of the Buyers to the Indemnified
Parties for any reason whatsoever arising out of or related to this Agreement,
including, without limitation, for indemnification with respect to Claims,
shall not exceed Ten Million Dollars ($10,000,000) Dollars.
9. GOVERNING LAW: MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause
four (4) additional original executed signature pages to be physically
delivered to the other party within five (5) days of the execution and
delivery hereof.
c. Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement
or the validity or enforceability of this Agreement in any other jurisdiction.
<PAGE>43
e. Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor either of the Buyers makes
any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than
by an instrument in writing signed by the party to be charged with
enforcement.
f. Notices. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by mail or delivered personally or by courier and
shall be effective five days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by telefacsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
4127 N.W. 27th Lane
Gainesville, FL 32606
Attention: Thomas L. Mehl, Sr.
With copy to:
Marks & Murase, L.L.P.
399 Park Avenue
New York, NY 10022
Telephone: (212) 318-7721
Telecopy: (212) 752-5378
Attention: Alan J. Bernstein, Esq.
If to Clearwater IV, at the address on the signature page.
With copy to:
Rosenman & Colin, LLP
575 Madison Avenue
New York, NY 10022
Telephone: (212) 940-7003
Telecopy: (212) 940-8545
Attention: Richard H. Fortmann, Esq.
<PAGE>44
If to Clearwater Offshore, at the address on the signature page.
With copy to:
Rosenman & Colin, LLP
575 Madison Avenue
New York, NY 10022
Telephone: (212) 940-7003
Telecopy: (212) 940-8545
Attention: Richard H. Fortmann, Esq.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. Neither the
Company nor the Buyers shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent may be withheld for any reason in the sole discretion of the party
from whom consent is sought). Notwithstanding the foregoing, either or both
of the Buyers may assign their respective rights hereunder to any of their
"affiliates," as that term is defined under the 1934 Act, without the consent
of the Company, provided, however, that any such assignment shall not release
such Buyer of its obligations hereunder unless such obligations are assumed by
such affiliate and the Company has consented to such assignment and
assumption, such consent not to be unreasonably withheld.
h. Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival. The representations and warranties of the Company and the
Buyers contained in Sections 2 and 3 shall survive for a period of two (2)
years subsequent to the Closing, and the agreements and covenants set forth in
Sections 4, 5, 8(a), 8(b), 8(c), 8(d) and this Article 9 shall survive the
Closing. Each party which constitutes the Buyers shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
k. Publicity. The Company and the Buyers shall have the right to approve
before issuance any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Buyers, to make any press
release with respect to such transactions as is required by applicable law and
regulations (although the Buyers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
<PAGE>45
l. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. Termination. In the event that the Closing shall not have occurred on or
before five (5) days from the date hereof, this Agreement shall terminate at
the close of business on such date.
<PAGE>46
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By:______________________
Name:____________________
Its:_____________________
CLEARWATER FUND IV, LLC
By:______________________
Name:____________________
Its:_____________________
Address: 611 Druid Road East - Suite 200
Clearwater, FL 34616
Telephone: (813) 442-0825
Telecopier: (813) 443-0143
CLEARWATER OFFSHORE FUND, LTD.
By:______________________
Name:____________________
Its:_____________________
Address: c/o New World Trust (Bahamas) Limited
Euro-Canadian Centre, 1st Floor
Marlborough Street
P.O. Box N 4465
Nassau, Bahamas
Telephone: (809) 322-7461
Telecopier: (809) 326-6177
<PAGE>47
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February 28,
1997 by and between MEHL/Biophile International Corporation, a Delaware
corporation, with headquarters located at 4217 N.W. 27th Lane, Gainesville,
Florida 32606 (the "Company"), and Clearwater Fund IV, LLC, a Delaware limited
liability company ("Clearwater IV") and Clearwater Offshore Fund Ltd., a
corporation organized under the International Business Companies Act of the
Commonwealth of the Bahamas ("Clearwater Offshore") (Clearwater IV and
Clearwater Offshore are hereinafter sometimes collectively referred to as the
"Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers shares of the
Company's 5% Cumulative Convertible Preferred Stock, Series D, $10 par value
per share (the "Preferred Shares"), which will be convertible into shares of
the Company's common stock (the "Common Stock"), par value $.01 per share, (as
converted, the "Conversion Shares"), and pursuant to which certain shares of
Common Stock may be issued to the Buyers in accordance with the Certificate of
Designation therefor (the "Damage Shares"); and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Buyers hereby
agree as follows:
I. DEFINITIONS.
a.As used in this Agreement, the following terms shall have the following
meanings:
(i) "Investor" or collectively "Investors" means the Buyers and any
transferees or assignees thereof who agree to become bound by the provisions
of this Agreement in accordance with Section 10 hereof.
(ii) "register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
<PAGE>48
(iii) "Registrable Securities" means (i) the Conversion Shares and the Damage
Shares, (ii) shares of stock issued with respect to or in any exchange for or
in replacement of the Conversion Shares or the Damage Shares, which have not
been resold to the public in a registered public offering, and/or (iii) shares
of stock issued in respect of the stock referred to in (i) or (ii) as a result
of a stock split, stock dividend or the like, which have not been resold to
the public in a registered public offering. .
(iv) "Registration Statement" means a registration statement of the Company
under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. MANDATORY REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or before
March 31, 1997, file with the SEC a Registration Statement on Form S-3 (or, if
such form is unavailable for such a registration, on such other form as is
available for such a registration) covering the resale of the Registrable
Securities, which Registration Statement shall state that, in accordance with
Rule 416 promulgated under the 1933 Act, such Registration Statement also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Preferred Shares to prevent dilution
resulting from stock splits, stock dividends or similar transactions. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to and
approved by the Buyers and its counsel prior to its filing or other
submission, such approval not to be unreasonably withheld.
b. Eligibility for Form S-3. The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the sale by
the Buyers and any other Investors of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the
SEC in a timely manner so as to maintain such eligibility for the use of Form
S-3. In the event that Form S-3 is not available for sale by the Investors of
the Registrable Securities, the Company shall register the sale on another
appropriate form.
3. PIGGYBACK REGISTRATION.
a. Notice to Buyers. If at any time or from time to time, prior to the
filing by the Company of the Registration Statement pursuant to Section 2,
above, the Company proposes to register any of its securities, for its own
account or the account of any of its shareholders other than the Investors
(other than a registration relating solely to employee stock option or
purchase plans, or a registration on Form S-4 relating solely to an SEC Rule
145 transaction, or any successor to such form), the Company will:
<PAGE>49
(i) promptly give to the Investors written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify any securities under applicable blue sky or other state securities
laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance requirement), and in any underwriting involved
therein, all the Registrable Securities of the Investors and specified in a
written request or requests by the Investors, made within thirty (30) days
after receipt of such written notice from the Company, to be included in any
such registration, except as set forth in subsection 3(b), below.
b. Underwriting. If the registration of which the Company gives notice
pursuant to Section 3(a) is for a registered public offering involving an
underwriting, the Company shall so advise the Buyers as a part of the written
notice given pursuant to subsection 3(a)(i). In such event, the right of each
Investor to registration pursuant to Section 3 shall be conditioned upon the
Investor's participation in such underwriting and the inclusion of the
Investor's Registrable Securities acquired pursuant to this Agreement in the
underwriting to the extent provided herein. If the Investor proposes to
distribute its Registrable Securities through such underwriting it shall
(together with the Company and the other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company (which shall be qualified nationally recognized
underwriter(s)). Notwithstanding any other provision of this Section 3, if
the underwriter(s) shall notify the Company in writing that in their good
faith opinion, marketing factors require a limitation of the number of
Registrable Securities to be underwritten, the number of Registrable
Securities that may be included in the underwriting shall be allocated, first,
to the Company for its own account; second, to any shareholders (other than
the Buyers) invoking contractual rights to have their securities registered on
the registration statement pursuant to which Investors are invoking their
rights under this Section 3, if any, on a pro rata basis, and third, to the
Investors. In the event of such a limitation by the underwriters of the
number of Registrable Securities of the Investors to be included in the
registration and underwriting, the Company shall so advise the Investors. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
4. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities pursuant to
Sections 2 or 3, the Company shall have the following obligations:
a. In connection with registration of the Registrable Securities pursuant to
Section 2, the Company shall prepare promptly, and file with the SEC not later
than thirty (30) days after the Closing Date, a Registration Statement with
respect to the number of Registrable Securities provided in Section 2(a). In
connection with any registration of the Registrable Securities pursuant to
Sections 2 or 3, the Company shall subsequent to the filing of the
Registration Statement use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective as soon
as possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities without
<PAGE>50
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors have sold all
the Registrable Securities and (B) none of the Preferred Shares is outstanding
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
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 in which they were made, not
misleading. The Investors shall give notice to the Company when they have
sold all of the Registrable Securities.
b. The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of
the 1933 Act with respect to the disposition of all 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 seller or sellers thereof as set forth
in the Registration Statement.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and (ii) such number of copies of a
prospectus, including a preliminary 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.
d. The Company shall furnish to the counsel of each Investor each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to the Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment).
e. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as
the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications
in effect at all times during the Registration Period, and (iv) take all other
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 4(e), (b) subject itself to general
<PAGE>51
taxation in any such jurisdiction, (c) file a general consent to service of
process in any such jurisdiction, (d) provide any undertakings that cause more
than nominal expense or burden to the Company, or (e) make any change in its
charter or bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
stockholders.
f. As promptly as practicable after becoming aware of such event, the Company
shall notify each Investor of the happening of any event, of which the Company
has knowledge, 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 omission 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 use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
g. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Registration Statement, and,
if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution
thereof.
h. The Company shall make available for inspection by (i) any Investor and
(ii) one firm of attorneys and one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector
shall hold in confidence and shall not make any disclosure (except to an
Investor) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other final, non-
appealable order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company shall not be required to disclose any confidential information in
such Records to any Inspector until and unless such Inspector shall have
entered into confidentiality agreements (in form and substance satisfactory to
the Company) with the Company with respect thereto, substantially in the form
of this Section. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
<PAGE>52
i. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
j. The Company shall use its best efforts to (i) secure the inclusion for
quotation on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") SmallCap Market of all Registrable Securities
covered by the Registration Statement and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities, or (ii) cause all such Registrable Securities
to be listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (iii) secure
designation and quotation of such Registrable Securities on the National
Market of NASDAQ.
k. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities, and shall provide CUSIP numbers
for the Registrable Securities, not later than the effective date of the
Registration Statement.
l. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificates to be in such denominations or amounts as the Investors may
reasonably request and registered in such names as the Investors may request.
Not later than the date on which any Registration Statement registering the
resale of Registrable Securities is declared effective, the Company shall
deliver to its transfer agent instructions, accompanied by any reasonably
required opinion of counsel, that permit sales of unlegended securities in a
timely fashion that complies with then mandated securities settlement
procedures for regular way market transactions.
m. At the request of the Investors, furnish on the effective date of the
Registration Statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement,
(i) an opinion, dated each such date, of the counsel representing the Company
for the purposes of such registration, addressed to the underwriters, if any,
and to the Investors, covering such matters with respect to the Registration
Statement, the prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws, other matters relating to
the Company, the securities being registered and the offer and sale of such
<PAGE>53
securities as are customarily the subject of opinions of issuer's counsel
provided to underwriters in underwritten public offerings, and (ii) a letter
dated each such date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the Investors, stating
that they are independent certified public accountants within the meaning of
the Securities Act and that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
Registration Statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
financial matters, including information as to the period ending not more than
five (5) business days prior to the date of such letter with respect to the
Registration Statement and prospectus, as the underwriters or the Investors
may reasonably request.
n. The Company shall take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of Registrable Securities pursuant
to the Registration Statement.
5. 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 it, 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. At least five (5) 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 if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement.
b. Each Investor by such Investor's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder.
c. Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4(f) or 4(g), such
Investor will immediately discontinue 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 4(f) or 4(g) 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.
<PAGE>54
6. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company shall be borne by the Company.
7. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold harmless
and defend (i) each Investor who holds such Registrable Securities, and (ii)
the directors, officers and each person who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), if any (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) (collectively,
"Claims") to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or the omission or
alleged omission to state a material fact therein required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any breach by the Company of any of its representations, warranties,
covenants or agreements in this Agreement (the matters in the foregoing
clauses (i) and (ii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such controlling
person, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 7(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly for
use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely
made available to such Indemnified Person by the Company pursuant to Section
4(c) hereof; (ii) with respect to any preliminary prospectus, shall not inure
to the benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (iii) shall not be available to the extent such Claim is based on a
<PAGE>55
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company; and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 10.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 7(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (collectively, an
"Indemnified Party"), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for
use in connection with such Registration Statement; and such Investor will
reimburse any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 7(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 7(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to
Section 10. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 7(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 7 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 7, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
<PAGE>56
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates; provided,
that legal fees of such firm shall be reasonable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this
Section 7, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Section 7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
8. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under
Section 7 to the fullest extent permitted by law; provided, however, that (i)
no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 7, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation, and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount
of proceeds received by such seller from the sale of such Registrable
Securities.
9. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC 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:
a. make and keep public information available, as those terms are understood
and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
investors to sell such securities pursuant to Rule 144 without registration.
<PAGE>57
10. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the either or both Buyers
to any transferee which is an "affiliate" of the either or both Buyers, as
that term is defined under the 1934 Act, of all or any portion of Registrable
Securities if: (i) the assigning Buyer(s) agree(s) 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, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such registration
rights are being transferred or assigned, (iii) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein, (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement, (vi) such
transferee shall be an "accredited investor" as that term defined in Rule 501
of Regulation D promulgated under the 1933 Act; and (vi) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee agrees
to pay its all reasonable expenses of amending or supplementing such
Registration Statement to reflect such assignment.
11. AMENDMENT OF REGISTRATION RIGHTS; WAIVER.
This Agreement may be amended only by a written agreement duly executed by the
Company and Investors who hold a majority in interest of the Registrable
Securities. No term or condition of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) without the prior written consent of the Company and Investors
who hold a majority in interest of the Registrable Securities, which written
consent sets forth in detail the subject matter of the waiver. No failure to
enforce any term or condition of this Agreement or right or remedy hereunder,
or delay by a party in exercising such right or remedy, shall operate as or be
deemed a waiver thereof, and no waiver of any breach of any term or condition
herein shall be construed as a waiver of any other breach of the same or other
term or condition of this Agreement. Any amendment or waiver effected in
accordance with this Section 11 shall be binding upon each Investor and the
Company.
12. MISCELLANEOUS.
a. A person or entity is 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
<PAGE>58
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. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or telefacsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
4127 N.W. 27th Lane
Gainesville, FL 32606
Attention: Thomas L. Mehl, Sr.
With copy to:
Marks & Murase, L.L.P.
399 Park Avenue
New York, NY 10022
Telephone: (212) 318-7721
Telecopy: (212) 752-5378
Attention: Alan J. Bernstein, Esq.
If to Clearwater IV, at the address on the signature page.
With copy to:
Rosenman & Colin, LLP
575 Madison Avenue
New York, NY 10022
Telephone: (212) 940-7003
Telecopy: (212) 940-8545
Attention: Richard H. Fortmann, Esq.
If to Clearwater Offshore, at the address on the signature page.
With copy to:
Rosenman & Colin, LLP
575 Madison Avenue
New York, NY 10022
Telephone: (212) 940-7003
Telecopy: (212) 940-8545
Attention: Richard H. Fortmann, Esq.
<PAGE>59
Each party shall provide notice to the other party of any change in address.
c. This Agreement shall be enforced, governed by and construed in accordance
with the laws of the State of Delaware applicable to agreements made and to be
performed entirely within such State. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
d. This Agreement and the Securities Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This Agreement
and the Securities Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
e. Subject to the requirements of Section 10 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in two or more identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
h. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
<PAGE>60
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the date first written above.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By:______________________
Name:____________________
Its:_____________________
CLEARWATER FUND IV, LLC
By:______________________
Name:____________________
Its:_____________________
Address: 611 Druid Road East - Suite 200
Clearwater, FL 34616
Telephone: (813) 442-0825
Telecopier: (813) 443-0143
CLEARWATER OFFSHORE FUND, LTD.
By:______________________
Name:____________________
Its:_____________________
Address: c/o New World Trust (Bahamas) Limited
Euro-Canadian Centre, 1st Floor
Marlborough Street
P.O. Box N 4465
Nassau, Bahamas
Telephone: (809) 322-7461
Telecopier: (809) 326-6177
<PAGE>61
Exhibit 24(a)
We consent to the incorporation in this Registration Statement of Form S-3,
filed under the Securities Act of 1933, and Prospectus of Mehl/Biophile
International Corporation relating to the registration of 2,500,000 shares of
common stock, of our report dated July 11, 1996 on the financial statements of
Selvac Corporation, by reference to the Annual Report of Form 10-KSB for the
years ended May 31, 1996 and 1995, and to the use of our name, and the
statements with respect to us, under the heading "Experts" in the Prospectus.
BOND, ANDIOLA & COMPANY
Raritan, NJ
March 27, 1997
