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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Mehl/Biophile International Corporation
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(Name of Issuer)
Common Stock, $.01 Par Value
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(Title of Class of Securities)
81661300
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(CUSIP Number)
Todd J. Emmerman, Esq.,
c/o Rosenman & Colin LLP, 575 Madison Avenue, New York, NY 10022 (212) 940-8873
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(Name, Address and Telephone Number
of Person Authorized to Receive Notices and Communications)
February 28, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1 (b)(3) or (4), check the following
box / /.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 89
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SCHEDULE 13D
CUSIP No. 81661300
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Clearwater Fund IV Ltd. Employer I.D.# [ ]
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
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7 SOLE VOTING POWER
NUMBER OF 2,743,667 Shares
SHARES ------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
0
OWNED BY
------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,743,667 Shares
PERSON ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,743,667 Shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 89
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SCHEDULE 13D
CUSIP No. 81661300
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Clearwater Fund IV, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 4,857,267 Shares(1)
SHARES ------------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
0
OWNED BY
------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 4,857,267 Shares(1)
PERSON ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,857,267 Shares(1)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.1%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
--------
(1) Includes 2,743,667 Shares of Common Stock beneficially owned by
Clearwater Fund IV Ltd.
Page 3 of 89
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Item 1. Security and Issuer
This statement relates to the shares of Common Stock, .01 par
value per share (the "Common Stock"), of Mehl/Biophile
International Corporation (the "Company")*. The principal
executive offices of the Company are located at 4127 N.W.
27th Lane, Gainesville, Florida 32606.
Item 2. Identity and Background
(a)-(c)
Pursuant to Rule 13d-1(f)(1) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), this
Schedule 13D is being filed by Clearwater Fund IV Ltd.**
("Clearwater Ltd.") and Clearwater Fund IV, LLC ("Clearwater
LLC" and collectively with Clearwater Ltd., the "Reporting
Persons"). Clearwater Ltd. and Clearwater LLC may be deemed
to constitute a group for purposes of this Schedule 13D, due
to the fact that Clearwater Ltd. is wholly owned by
Clearwater LLC.
Clearwater Ltd.
Clearwater Ltd. is a corporation organized under the laws of
the British Virgin Islands whose investment strategy is to
make investments in equity private placements. The principal
business address of Clearwater Ltd. is CITCO Building,
Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin
Islands.
The Directors of Clearwater Ltd. are Tortola Corporation
Company Ltd. ("Tortola"), Hans Frederic Heye and Inter
Caribbean Services Ltd. ("Inter Caribbean"). The President of
Clearwater Ltd. is A.P. de Groot. The Vice President of
Clearwater Ltd. is J.M.S. Verhooren. The Treasurer of
Clearwater Ltd. is Trust Company of Willemstad N.V. ("Trust
Company"). The Secretary of Clearwater Ltd. is Inter
Caribbean. Clearwater Ltd. is wholly owned by Clearwater LLC.
The principal business address of Mr. de Groot, Mr.
Verhooren, Inter Carribean and Trust Company is c/o CITCO
Fund Services (Curacao) N.V., Kaya Flamboyan 9, P.O. Box
812, Curacao, Netherland Antilles. The principal business
address of Tortola is Wickhams Cay, P.O. Box 662, Road Town,
Tortola, British Virgin Islands. Mr. Heye's principal
business address is 611 Druid Road East, Suite 200,
Clearwater, Florida, 34616.
Tortola principally functions as a provider of administrative
services for offshore funds. Mr. Heye is principally employed
as President of the Clearwater Funds, a series of private
investment entities. Inter Caribben principally functions as a
provider of administrative services for offshore funds. Mr. de
Groot is principally employed as the Account Manager of CITCO
Fund Services (Curacao) N.V., a provider of administrative
services for offshore funds. Mr. Verhooren is principally
employed as the Managing Director of CITCO Fund Services
(Curacao) N.V. Trust Company principally functions as a
provider of administrative services for offshore funds.
Clearwater LLC
Clearwater LLC is a Delaware limited liability company
whose investment strategy is to make investments in equity
private placements. The principal business address of
Clearwater LLC is 611 Druid Road East, Suite 200, Clearwater,
Florida 34616. Mr. Heye is the Managing Member of Clearwater
LLC.
- --------
* In June 1996 the Company changed its name from "Selvac Corporation" to its
present name.
** In May 1997 Clearwater Fund IV Ltd. changed its name from GFL Perfomance Fund
Ltd. to its present name.
Page 4 of 89
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(d) To the best knowledge of the Reporting Persons, during the
last five years, none of the persons named in this Item 2 has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) To the best knowledge of the Reporting Persons, during the
last five years, none of the persons named in this Item 2 was
a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction which as a result of such
proceeding was or is subject to any judgment, decree or final
order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or state securities
laws or finding any violation with respect to such laws.
(f) Mr. Heye is a United States citizen. A.P. de Groot and
J.M.S. Verhooren are both citizens of the Netherlands.
Item 3. Source and Amount of Funds or Other Consideration.
Clearwater Ltd.
Clearwater Ltd. purchased 10,000 shares of 5% Cumulative
Convertible Preferred Stock of the Company (the "Series C
Preferred Stock"), reported in Item 5, for a purchase price
of $10,000,000. The source of funds used by Clearwater Ltd. to
purchase the shares of Series C Preferred Stock was working
capital.
CLEARWATER LLC
Clearwater LLC acquired 8,000 shares of the Company's 5%
Cumulative Convertible Preferred Stock, Series D, $10 par
value per share (the "Series D Preferred Stock"), reported in
Item 5, for a purchase price of $8,000,000. The aggregate
amount of funds used by Clearwater LLC to purchase 113,600
shares of the Company's Common Stock in the open market was
$466,068.48. The source of Funds used by Clearwater LLC to
purchase all such securities was working capital.
Item 4. Purpose of Transaction.
The Reporting Persons acquired the securities reported herein
as being beneficially owned by the Reporting Persons for
investment purposes. Depending upon market conditions and
other factors that each of the Reporting Persons may deem
material to their respective investment decisions, the
Reporting Persons may purchase additional shares of securities
of the Company in the open market or in private transactions,
or may dispose of all or a portion of the securities of the
Company that each now owns or hereafter may acquire. In
addition, both Clearwater Ltd. and Clearwater LLC have agreed
not to sell or transfer the Common Stock received upon
conversion of the shares of Series C Preferred Stock or the
shares of Series D Preferred Stock, respectively, on or
before February 28, 1998. Except as otherwise set forth
herein, the Reporting Persons have no plans or proposals
which relate to, or could result in any of the matters
referred to in Paragraphs (b) through (j) of Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a)-(b)
According to the Company's Quarterly Report on Form 10- QSB
for the period ended February 28, 1997, there were, as of
February 28, 1997, 43,743,301 shares of Common
Page 5 of 89
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Stock of the Company outstanding.
CLEARWATER LTD.
For purposes of this Schedule 13D, Clearwater Ltd.
beneficially owns 2,743,667 shares of the Company's Common
Stock (comprising 6.3% of the outstanding Common Stock as of
February 28, 1997) by virtue of its ownership of 2,000,000
shares of Common Stock and 2,231 shares of Series C Preferred
Stock, which, if converted into Common Stock, would be
convertible into 743,667 shares (see Item 6).
Clearwater Ltd. has the sole power to vote and dispose of all
such shares.
CLEARWATER LLC
For purposes of this Schedule 13D, Clearwater LLC may be
deemed to beneficially own a total of 4,857,267 shares of the
Company's Common Stock (comprising 11.1% of the outstanding
Common Stock as of February 28, 1997) in the following manner:
(i) By virtue of the fact that Clearwater Ltd. is
wholly owned by Clearwater LLC, Clearwater LLC may be
deemed to be the beneficial owner of the 2,743,667
shares of Common Stock beneficially owned by
Clearwater Ltd.
(ii) Clearwater LLC owns 8,000 shares of Series D
Preferred Stock. The number of shares of the
Company's Common Stock receivable by Clearwater LLC
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 (see Item 6). However, if
the shares of Series D Preferred Stock owned by
Clearwater LLC were converted on the date hereof,
said shares would be convertible into 2,000,000
shares of Common Stock. In addition, it is the
position of Clearwater LLC that it did not acquire
beneficial ownership of the 2,000,000 shares of
Common Stock receivable by Clearwater LLC if the
Series D Preferred Shares were converted on the date
hereof, until May 1, 1997, because such conversion
cannot be effected until the earlier of (i) June 30,
1997 and (ii) the date on which the registration
statement referred to in the Series D Registration
Rights Agreement (as that term is defined below, in
Item 6) is declared effective by the Securities and
Exchange Commission (the "SEC").
Page 6 of 89
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Clearwater LLC has the sole power to vote and dispose of all
such shares.
(c) None.
(d) Each of the Reporting Persons affirms that no person other
than the Reporting Persons has the right to receive, or the
power to direct the receipt of dividends from, or the proceeds
from the sale of, the Common Stock owned by the Reporting
Persons.
(e) It is inapplicable for the purposes herein to state the
date on which the Reporting Persons ceased to be the owners of
more than five percent of the Company's Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer.
Pursuant to that certain Securities Purchase Agreement, dated
as of February 28, 1997, by and between the Company, and
Clearwater LLC and Clearwater Offshore Fund, Ltd. (the "Series
D Agreement"), Clearwater LLC purchased 8,000 shares of Series
D Preferred Stock and Clearwater Offshore Fund, Ltd.
("Clearwater Offshore") purchased 2,000 shares of Series D
Preferred Stock for an aggregate price of $10,000,000. The
Series D Agreement is attached hereto as Exhibit 2.
Pursuant to the Certificate of Designations, Preferences and
Rights of the Series D Preferred Shares (the "Series D
Certificate of Designation"), holders of the Series D
Preferred Stock, described above, are entitled to receive
dividends payable at an 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
certain adjustments noted in the Series D Certificate of
Designation, attached hereto as Exhibit 3), or greater than
the average market price on the five trading days prior to
February 28, 1997. The Series D Preferred Stock may not be
converted until the earlier of (i) June 30, 1997 and (ii) the
date on which the registration statement referred to in the
Series D Registration Rights Agreement (as defined below) is
declared effective by the SEC.
Page 7 of 89
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Pursuant to that certain Registration Rights Agreement, dated
as of February 28, 1997, by and between the Company and
Clearwater LLC and Clearwater Offshore (the "Series D
Registration Rights Agreement") the Company agreed to file a
registration statement covering the public sale of the shares
of Common Stock receivable by Clearwater LLC and Clearwater
Offshore upon conversion of the Series D Preferred Stock on or
before March 31, 1997. The Series D Registration Rights
Agreement is attached hereto as Exhibit 4.
Pursuant to that certain Securities Purchase Agreement, dated
May 15, 1996, by and between the Company and Clearwater Ltd.
(the "Series C Agreement"), Clearwater Ltd. purchased 10,000
shares of Series C Preferred Stock for an aggregate purchase
price of $10,000,000. The Series C Agreement is attached
hereto as Exhibit 5.
Pursuant to the Side Letter Agreement, dated as of February
28, 1997, by and between the Company and Clearwater Ltd. (the
"Side Letter Agreement"), (i) Clearwater Ltd. 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 agreed to amend its Articles of
Incorporation to change the Certificate of Designations,
Preferences and Rights of 5% Cumulative Convertible Preferred
Stock, Series C (attached hereto as Exhibit 6) 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 issued and outstanding Common Stock of the
Company. The Side Letter Agreement is attached hereto as
Exhibit 7.
Pursuant to that certain Registration Rights Agreement, dated
as of May 15, 1996, by and among the Company and Clearwater
Ltd. (the "Series C Registration Rights Agreement"), the
Company agreed to file a registration statement covering the
public sale of the shares of Common Stock receivable by
Clearwater Ltd. upon conversion of the Series C Preferred
Stock on or before June 30, 1996. The Series C Registration
Rights Agreement is attached hereto as Exhibit 8.
Page 8 of 89
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Item 7. Material to be Filed as Exhibits
1. Agreement, dated May 29, 1997, among the Reporting Persons
relating to filing of a joint acquisition statement pursuant
to Rule 13d-1(f)(1).
2. Securities Purchase Agreement, dated as of February 28,
1997, by and between the Company and Clearwater LLC and
Clearwater Offshore.
3. Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series D, of the
Company.
4. Registration Rights Agreement, dated as of February 28,
1997 by and between the Company and Clearwater LLC and
Clearwater Offshore.
5. Securities Purchase Agreement, dated as of May 15, 1996, by
and among the Company and Clearwater Ltd.
6. Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series C.
7. Side Letter Agreement, dated as of February 28, 1997, by
and between the Company and Clearwater Ltd.
8. Registration Rights Agreement, dated as of May 15, 1996, by
and among the Company and Clearwater Ltd.
Page 9 of 89
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SIGNATURE
After reasonable inquiry, and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: May , 1997
CLEARWATER FUND IV LTD.
/s/ A. P. de Groot
--------------------------
By: A. P. de Groot
Title: President
CLEARWATER FUND IV, LLC
/s/ Hans Frederic Heye
--------------------------
By: Hans Frederic Heye
Title: Managing Member
Page 10 of 89
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Exhibit Index
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
1. Agreement, dated May 29, 1997 among the Reporting
Persons relating to filing of a joint acquisition
statement pursuant to Rule 13d-1(f)(1).
2. Securities Purchase Agreement, dated as of February
28, 1997, by and between the Company and Clearwater LLC
and Clearwater Offshore.
3. Certificate of Designations, Preferences and Rights of
5% Cumulative Convertible Preferred Stock, Series D,
of the Company.
4. Registration Rights Agreement, dated as of February
28, 1997 by and between the Company and Clearwater LLC
and Clearwater Offshore.
5. Securities Purchase Agreement, dated as of May 15,
1996 by and among the Company and Clearwater Ltd.
6. Certificate of Designations, Preferences and Rights of
5% Cumulative Convertible Preferred Stock, Series C.
7. Side Letter Agreement, dated as of February 28, 1997,
by and between the Company and Clearwater Ltd.
8. Registration Rights Agreement, dated as of May 15,
1996, by and among the Company and Clearwater Ltd.
Page 11 of 89
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Exhibit 1
The undersigned hereby agree, pursuant to Rule 13d- 1(f)(1) to file a
joint statement on Schedule 13D and amendments thereto pertaining to their
beneficial ownership of shares of Common Stock of Mehl/Biophile International
Corporation.
This agreement may be terminated for any reason by any party hereto
immediately upon the personal delivery or facsimile transmission of notice to
that effect to the other parties hereto.
This agreement may be executed in counterparts and all so executed
shall constitute one agreement.
Date: May 29, 1997
CLEARWATER FUND IV LTD.
/s/ A.P. de Groot
------------------------------------
Name: A.P. de Groot
Title: President
CLEARWATER FUND IV, LLC
/s/ Hans Frederic Heye
------------------------------------
Name: Hans Frederic Heye
Title: Managing Member
Page 12 of 89
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Exhibit 2
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 13 of 89
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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
Page 14 of 89
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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.
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 STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
Page 15 of 89
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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:
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<PAGE>
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
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
Page 17 of 89
<PAGE>
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 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
Page 18 of 89
<PAGE>
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, in the case of
unaudited statements, to normal year-end audit adjustments). 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
Page 19 of 89
<PAGE>
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.
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
Page 20 of 89
<PAGE>
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 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
Page 21 of 89
<PAGE>
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:
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
Page 22 of 89
<PAGE>
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
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
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<PAGE>
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.
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.
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(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.
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
Page 25 of 89
<PAGE>
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.
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.
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<PAGE>
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).
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.
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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: /s/ Thomas L. Mehl Sr.
-----------------------
Name: Thomas L. Mehl Sr.
Its: President and CEO
CLEARWATER FUND IV, LLC
By: /s/ Hans Frederic Heye
-----------------------
Name: Hans Frederic Heye
Its: Managing Member
Address: 611 Druid Road East - Suite 200
Clearwater, FL 34616
Telephone: (813) 442-0825
Telecopier: (813) 443-0143
CLEARWATER OFFSHORE FUND, LTD.
By: /s/ Darnell Osbourne
-----------------------
Name: Darnell Osbourne
Its: Director
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 28 of 89
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Exhibit 3
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 29 of 89
<PAGE>
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 the 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 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
Page 30 of 89
<PAGE>
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).
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
Page 31 of 89
<PAGE>
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 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:
Page 32 of 89
<PAGE>
(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:
CP(1) = (CP(0)*CS) + C
--------------
CS + AS
where:
CP(1) = the Conversion Price as adjusted pursuant to this
Section 2(e)(iii);
CP(0) = 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:
Page 33 of 89
<PAGE>
(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 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
Page 34 of 89
<PAGE>
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.
(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.
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<PAGE>
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.
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
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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.
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
Page 37 of 89
<PAGE>
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.
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IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by _________________________ its President and
_____________________________ its Secretary, this _____ day of February 1997.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By: /s/
------------------------------------
President
Attest:/s/
--------------------------------
Secretary
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Exhibit 4
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:
1. 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.
Page 40 of 89
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(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").
(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.
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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:
(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.
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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 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).
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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 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
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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.
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
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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
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.
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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.
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
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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 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.
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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 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:
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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.
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
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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 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.
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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.
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.
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<PAGE>
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.
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<PAGE>
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: /s/
-----------------------
Name:
Its:
CLEARWATER FUND IV, LLC
By: /s/
-----------------------
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: /s/
--------------------
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
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<PAGE>
Exhibit 5
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 15,
1996 by and among Selvac Corporation, a Delaware corporation, with headquarters
located at 221 Boston Post Road, Marlboro, MA 01752 (the "Company"), and the
undersigned (the "Buyer").
WHEREAS:
A. The Company and the Buyer 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 Buyer wishes 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 C, $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 Buyer
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 (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 parties hereto and certain persons named therein are
executing and delivering a side letter agreement (the "Side Letter Agreement")
pursuant to which the Company and the certain persons named therein have agreed
to cause the Company's Certificate of Incorporation to be amended;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall issue and sell to
the Buyer and the Buyer shall purchase 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 C in the form attached hereto as Exhibit A (the
"Certificate of Designation"). The per share purchase price of the Preferred
Shares shall be One Thousand Dollars ($1,000).
c. Form of Payment. The Buyer shall pay the purchase price for the
Preferred Shares (the "Purchase Price") by wire transfer of immediately
available United States Dollars to the
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<PAGE>
Company on the Closing Date (as defied below). 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.
d. 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 May 15, 1996 (the
"Closing Date").
2. BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Company that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof except pursuant to
sales registered under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. The Buyer understands 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 Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Shares.
d. Information. The Buyer and its 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 Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer understands
that its investment in the Preferred Shares involves a high degree of risk. The
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to an informed investment decision with respect to its acquisition of
the Preferred Shares.
e. Governmental Review. The Buyer understands 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 Buyer understands 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 Buyer
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
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<PAGE>
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 or to comply with the terms and conditions of any exemption thereunder.
g. Legends. The Buyer understands 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 STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO
THE BORROWER 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 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 Debenture 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
Page 57 of 89
<PAGE>
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. Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer 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.
i. Residency. The Buyer is a resident of that country specified in its
address on the signature page hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and existing in good standing under the laws of the
jurisdiction in which they are incorporated, except, in the case of any such
subsidiaries, as would not have a Material Adverse Effect (as defined below),
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its 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 its subsidiaries taken as a whole.
b. 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 by the Company and the consummation by
it of the transactions contemplated hereby 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 and the Registration Rights Agreement have been duly executed and
delivered by the Company, and (iv) this Agreement and the Registration Rights
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.
c. Capitalization. As of April 17, 1996, the authorized capital stock
of the Company consists of (i) 20,000,000 shares of Common Stock of which
14,497,423 shares were issued and outstanding, and (ii) 200,000 shares of serial
preferred stock, $10 par value per share ("Preferred Stock") of which 16,000
shares were issued and outstanding as 12% Cumulative Convertible Preferred
Stock, Series A, and 10,500 shares were issued and outstanding as 12%
Page 58 of 89
<PAGE>
Cumulative Convertible Preferred Stock, Series 1985. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. 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(c), 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 Buyer 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"). The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive or Chief
Financial Officer on behalf of the Company as of the Closing Date.
d. 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, and
free from all taxes, liens and charges with respect to the issue thereof
e. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby 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 its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) 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 its
subsidiaries is not 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.
f. 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
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<PAGE>
(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, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer and referred to in Section 2(d) of this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
g. Absence of Certain Changes. Since February 29, 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.
h. Absence of Litigation. Except as set forth in its Form 10-Q for the
quarter ended February 29, 1996, 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.
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 Buyer 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
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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.
e. Financial Information. The Company agrees to send the following
reports to the Buyer 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.
f. Reservation of Shares. The Company shall at 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.
g. 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.
h. Expenses. The Company shall pay all of Buyer's expenses incurred in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement (including,
without limitation, attorneys' fees) up to an aggregate amount of Ten Thousand
Dollars ($10,000).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares
and Damage Shares in such amounts as specified from time to time by the Buyer to
the Company. Prior to registration of the Registrable Securities pursuant to an
effective registration statement, all such certificates shall 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
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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 Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If the Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by the Buyer 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 Buyer.
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 Certificate of Designation shall have been accepted for filing
with the Secretary of State of Delaware.
c. The Buyer 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.
d. The representations and warranties of each Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations. and warranties
that speak as of a specific date), and the Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer 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 Buyer's sole benefit and
may be waived by the Buyer 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.
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<PAGE>
b. The Certificate of Designation shall have been accepted for filing
with the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. Until the Closing Date, 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.
d. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied m all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by the Buyer.
e. The Buyer 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 Buyer and in substantially the same form as Exhibit B.
f. The Buyer shall have received the officer's certificate described in
Section 3(c) above, dated as of the Closing Date.
g. The Company shall have executed and delivered the Stock Certificate
to the Buyer.
h. The Company shall have caused the Side Letter Agreement to be
executed and delivered to the Buyer.
8. 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.
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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.
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 any Buyer 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:
1 Horizon Road
Fort Lee, NJ 07024
Telephone: (201) 886-1667
Telecopy: (201) 886-8821
Attention: Allan Borkowski
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 the Buyer, at the addresses on the signature page.
With copy to:
Genesee Advisers
11921 Freedom Drive, Suite 550
Reston, VA 22090
Telephone: (703) 904-4349
Telecopy: (703) 834-6627
Attention: Neil T. Chau
Page 64 of 89
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And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-6060
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, 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 Buyer 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, a Buyer may assign its
rights hereunder to any of its "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.
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
Buyer contained in Sections 2 and 3 and the agreements and covenants set forth
in Sections 4, 5, 8(g), 8(h), 8(k) and 8(l), and this subsection shall survive
the closing. Each party which constitutes the Buyer shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
k. Publicity. The Company and the Buyer 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 Buyer, to make any press
release with respect to such transactions as is required by applicable law and
regulations (although the Buyer 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).
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.
Page 65 of 89
<PAGE>
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.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
SELVAC CORPORATION
By: /s/ Allan Borkowski
---------------------
Name: Allan Borkowski
Its: Chairman
GFL PERFORMANCE FUND LTD.
By: /s/ A.P. de Groot
---------------------
Name: A. P. de Groot
Its: President
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
Page 66 of 89
<PAGE>
Exhibit 6
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES C
OF
SELVAC CORPORATION
Selvac Corporation (the "Company"), 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
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held on May 13, 1996,
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 C, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 10,000 shares of 5%
Cumulative Convertible Preferred Stock, Series C, $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 cash dividend of five percent (5%) per annum of the
Stated Value (as defined below), 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 August 31, 1996, through and including the date on
which the Preferred Shares are no longer outstanding.
Page 67 of 89
<PAGE>
(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 ninetieth (90th)
day following the date of issuance or (ii) the date the Registration
Statement (the "Registration Statement"), which the Company is required
to file pursuant to Section 2(a) of the Registration Rights Agreement
of even date herewith by and among the Company and the investor named
therein (the "Registration Rights Agreement"), is declared effective
(the "Effective Date") by the U.S. Securities and Exchange Commission
(the "SEC"), into fully paid and nonassessable shares (calculated to
the nearest whole share) of Common Stock, at the conversion price (the
"Conversion Price") in effect at the time of conversion determined as
hereinafter provided; provided, however, that in no event shall any
holder be entitled to convert Preferred Shares if, after giving effect
to such conversion, the number of shares of Common Stock beneficially
owned by such holder and all other holders whose holdings would be
aggregated with such holder for purposes of calculating beneficial
ownership in accordance with Sections 13(d) and 16 of the Securities
Exchange Act of 1934, as amended, and the regulations thereunder
("Sections 13(d) and 16"), including, without limitation, any person
serving as an adviser to any holder (collectively, the "Related
Persons"), would exceed four and nine-tenths percent (4.9%) of the
outstanding shares of Common Stock (calculated in accordance with
Sections 13(d) and 16). 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 Company
(unless a different intention is expressed) shall be to the shares of
the Common Stock of the Company, $.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. The Conversion Price shall be
the lesser of (i) 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), subject to
adjustment as provided herein, or (ii) $7.50 (the "Fixed Conversion
Price"); provided, however, that in no event shall the Conversion Price
be less am $3.00 (the "Floor Price").
(c) Adjustment to Conversion Percentage. If the
Effective Date has not occurred within ninety (90) days after the date
of issuance of the Preferred Shares, or if, after the Registration
Statement has been declared effective by the SEC, sales cannot be made
pursuant to the Registration Statement by reason of stop order, the
Company'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
Page 68 of 89
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System ("NASDAQ-NM"), the New York Stock Exchange (the "NYSE"), the
American Stock Exchange (the "AMEX"), or the NASDAQ SmallCap Market
("NASDAQ SmallCap") then, 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 shall be reduced by a number of percentage points
equal to the Discount Amount (as hereinafter defined) multiplied by the
sum of (i) the number of months (prorated for partial months) after the
end of such 90 day period and prior to the date the Registration
Statement is declared effective by the SEC; (ii) the number of months
(prorated for partial months) that sales cannot be made pursuant to the
Registration Statement (by reason of stop order, the Company's failure
to update the Registration or otherwise) after the Registration
Statement has been declared effective; and (iii) 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. The
"Discount Amount" for the first month during which adjustment is
required pursuant to this Section shaft be one and one-half (1 1/2);
for the second month, two (2); and for the third month and each month
thereafter, three (3). (For example, if the Registration Statement
becomes effective one and one-half (1 1/2) months after the end of such
90 day period, the Conversion Percentage would be 77.5% until any
subsequent adjustment; if thereafter sales could not be made pursuant
to the Registration Statement for a period of two (2) additional
months, the Conversion Percentage would then be 72%.) If the holder
converts Preferred Shares into Common Stock and an adjustment to the
Conversion Percentage is required subsequent to such conversion, but
prior to the sale of such Common Stock by such holder, the Company
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 be the applicable Discount
Amount 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 may be paid at the
Company's option in cash or Common Stock ("Damage Shares") whose value
is based on the Average Market Price of the Common Stock for the period
of five (5) consecutive trading days ending on the date of the sale of
such Common Stock; provided, however, that any amounts due as to that
period during which the shares are not traded or included for quotation
on the NASDAQ-NM, NYSE, AMEX or NASDAQ SmallCap shall be paid in cash
only; provided, further, however, that in no event shall shares be
issued hereunder if, after giving effect to such issuance, the number
of shares of Common Stock beneficially owned by such holder and all
Related Persons would exceed four and nine tenths percent (4.9%) of the
outstanding shares of Common Stock (calculated in accordance with
Sections 13(d) and 16); cash shall be paid in lieu of any shares which
cannot be issued pursuant to this second proviso. (For example, if the
Conversion Percentage was 77.5% at the time of conversion of $1,000,000
in Stated Value of Preferred Shares (such that the Preferred Shares
were converted into Common Stock having an Average Market Price for the
applicable period in aggregate
Page 69 of 89
<PAGE>
of $1,290,322.50) and subsequent to conversion there was a further two
(2) month delay in the Registration Statement's being declared
effective, and such Common Stock was sold at the end of such two (2)
month period, the Company would pay to the holder $70,967.74 in cash or
Damage Shares.)
"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
Company (all as appropriately adjusted for any stock dividend, stock
split, or other similar transaction during such period or between the
end of such period and the date of conversion or dividend payment, as
applicable).
(d) Conversion Notice. On presentation and surrender
to the Company (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) Major Transactions. If the Company shall
consolidate with or merge into any corporation or reclassify its
outstanding shares of Common Stock (other than by way of subdivision or
reduction of such shares) (each a "Major Transaction"), then each
Preferred Share shall thereafter be convertible into the number of
shares of stock or securities (the "Resulting Securities") or property
of the Company, or of the entity resulting from such consolidation or
merger, to which a holder of the number of shares of Common Stock
delivered upon conversion of such Preferred Share would have been
entitled upon such Major Transaction had the holder of such Preferred
Share exercised its right of conversion and had such Common Stock been
issued and outstanding and had such holder been the holder of record of
such Common Stock at the time of such Major Transaction, and the
Company shall make lawful provision therefor as a part of such
consolidation, merger or reclassification; provided, however, that the
Company shall give the holders of the Preferred Shares written notice
of any Major Transaction promptly upon the execution of any agreement
whether or not binding in connection therewith (including without
limitation a letter of intent or agreement in principle) and in no
event shall a Major Transaction be consummated prior to forty-five (45)
days after such notice.
Page 70 of 89
<PAGE>
(f) Fractional Shares, The Company 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 Company 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 Company 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 Company 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 Company'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 Company the amount
of any such tax, or has established to the satisfaction of the Company
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 6 hereof.
(4) Redemption. The Company waives all redemption rights with
respect to the Preferred Shares.
(5) Preferred Rank. All shares of Common Stock shall be of
junior rank to all Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution or winding
up of the Company. The rights of the shares of Common Stock shall be
subject to the preferences and relative rights of the Preferred Shares.
(6) 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 amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Preferred Shares.
Page 71 of 89
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by James Leonard, its President this 15th day of May 1996.
SELVAC CORPORATION
By: /s/ James Leonard
------------------
President
Page 72 of 89
<PAGE>
Exhibit 7
SIDE LETTER 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 GFL Performance Fund Ltd., a corporation
organized under the laws of the British Virgin Islands ("GFL").
WHEREAS, pursuant to that certain Securities Purchase Agreement among
the Company, Clearwater Fund IV, LLC and Clearwater Offshore Fund Ltd. (the
"Securities Purchase Agreement"), the Company has agreed to amend its Articles
of Incorporation to change the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred Stock, Series C, as further
described in the Securities Purchase Agreement; and
WHEREAS, the execution by GFL of this Agreement is a material
inducement to the Company to such agreement.
NOW, THEREFORE, the Company and GFL hereby agree as follows:
1. Holdback Agreement. GFL agrees not to effect any sale or transfer of
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, GFL and such affiliates shall have the right to
pledge any or all of the Series C Common Shares in connection with margin
transactions, provided such Series C Common Shares 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, that the Conversion
Price for the Company's 5% Cumulative Convertible Preferred Stock Series C, $10
par value per share, shall be $3.00.
2. 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.
3. 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.
4. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
Page 73 of 89
<PAGE>
5. 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.
6. 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 GFL 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.
7. 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 GFL:
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherlands Antilles
Page 74 of 89
<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.
8. 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 GFL 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, GFL may assign its rights hereunder to
any of its "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 GFL 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.
9. 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, other than Clearwater IV and/or Clearwater Offshore, as
defined in the Securities Purchase Agreement.
10. 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.
Page 75 of 89
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IN WITNESS WHEREOF, GFL and the Company have caused this Side Letter
Agreement to be duly executed as of the date first written above.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By: /s/
-----------------------
Name:
Its:
GFL PERFORMANCE FUND LTD.
By: /s/
-----------------------
Name:
Its:
Page 76 of 89
<PAGE>
Exhibit 8
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 15,
1996 by and among Selvac Corporation, a Delaware corporation, with headquarters
located at 220 Boston Post Road, Marlboro, MA 01752 (the "Company"), and the
undersigned (the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties 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 Buyer shares of the
Company's 5% Cumulative Convertible Preferred Stock, Series C, $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 Buyer in accordance with the Certificate of
Designation therefor (the "Damage Shares"); and
B. To induce the Buyer 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
Buyer hereby agree as follows:
1. DEFINITIONS
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investor" means the Buyer and any offeree or
assignee thereof who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 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 77 of 89
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(iii) "Registrable Securities" means the Conversion
Shares and the Damage Shares.
(iii) "Registrable Securities" means the Conversion
Shares and the Damage Shares.
(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. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or before June 30, 1996, 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 Buyer 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 Buyer and any other Investor 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. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than June 30, 1996, a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter to 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 restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date
Page 78 of 89
<PAGE>
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 3(e), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such
Page 79 of 89
<PAGE>
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 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 or 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 80 of 89
<PAGE>
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, (h) 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 fmal,
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 arid, 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. 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.
4. OBLIGATIONS OF THE INVESTORS.
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<PAGE>
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. 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 3(f)
or 3(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 3(f) or 3(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.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, and fees and disbursements of counsel for the Company and fees
and disbursements of counsel for the Investors shall be borne by the Company,
subject, with respect to expenses incurred by the Investors, to the limit stated
in Section 4(h) of the Securities Purchase Agreement.
6. 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
Page 82 of 89
<PAGE>
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 preliminary 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 violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) 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 6(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 by the Company pursuant to Section
3(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 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 offer of the Registrable Securities
by the Investors pursuant to Section 9.
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 6(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
Page 83 of 89
<PAGE>
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 any Violation, 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 or to the extent such Claim is based
upon any violation or alleged violation by the Investor of the 1933 Act, 1934
Act or any other law; 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 6(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 6(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 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(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 pre
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 6 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 6, 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. The Company shall payable 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 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 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.
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<PAGE>
7. 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 6 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 6, (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.
8. 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 tune 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.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Buyer to any
transferee which is an "affiliate" of the Buyer, as that term is defined under
the 1934 Act, of all or any portion of Registrable Securities if (i) the Buyer
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (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
Page 85 of 89
<PAGE>
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.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority in interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. 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 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. ne addresses for such communications shall be:
If to the Company:
1 Horizon Road
Fort Lee, NJ 07024
Telephone: (201) 886-1667
Telecopy: (201) 886-8821
Attention: Allan Borkowski
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<PAGE>
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 the Buyer, at the addresses on the signature page.
With copy to:
Genesee Advisers
11921 Freedom Drive, Suite 550
Reston, VA 22090
Telephone: (703) 904-4349
Telecopy: (703) 834-6627
Attention: Neil T. Chau
And:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-6060
Telecopy: (215) 568-6603
Attention: Stephen T. Burdumy, Esq.
Each party shall provide notice to the other party of any change in address.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. 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.
e. This Agreement and the Securities Purchase Agreement
constitute the entire
Page 87 of 89
<PAGE>
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.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. 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.
i. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
SELVAC CORPORATION
By: /s/ Allan Borkowski
--------------------
Name: Allan Borkowski
Its: Chairman
GLF PERFORMANCE FUND LTD.
By: /s/ A.P. de Groot
--------------------
Name: A.P. de Groot
Its: President
Address: Genesee Fund Limited
CITCO Building
Wickhams Cay
P.O. Box 662
Road Town, Tortola
British Virgin Islands
Administrator
Curacao: International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curaco, Netherland Antilles
Page 89 of 89
