As filed with the Securities and Exchange Commission on February 12,
1999
Securities Act File No. 333-_____; Exchange Act File No. 0-13280
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PCC GROUP, INC.
(Exact name of registrant as specified in its charter)
California 95-3815164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
163 University Parkway
Pomona, California 91768
(909) 869-6133
(Address, including zip code, and telephone number, including area cod
e, of Registrant's principal executive offices)
Jack Wen
Chief Executive Officer
PCC Group, Inc.
163 University Parkway
Pomona, California 91768
(909) 869-6133
(Name, address, including zip code, and telephone number, including ar
ea code, of agent for service)
With copy to:
Istvan Benko, Esq.
Stuart Teng, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90024
(310) 553-4441
Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. X
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Class Amount To Maximum Maximum Amount of
of Securities To Be Be Offering Aggregate Registration
Registered Registered Price Per Offering Fee
Unit Price
Common Stock ($.01 10,000 $6.34375(3) $63,438
par value)
Common Stock ($.01 546,266(1) $6.34375(3) $3,465,375
par value)
Common Stock ($.01 25,000(2) $5.25(4) $131,250
par value)
Common Stock ($.01 50,000(2) $8.765625(4) $438,281
par value)
Common Stock ($.01 50,000(2) $10.51875(4) $525,938
par value)
Total 681,266 $4,624,282 $1,286.00
(1) Represents the maximum number of shares issuable upon the
conversion of outstanding 8% Convertible Preferred Stock.
Pursuant to Rule 416, there are also being registered such
indeterminate number of additional shares of common stock as may
become issuable pursuant to anti-dilution provisions of the 8%
Convertible Preferred Stock.
(2) Represents shares issuable upon the exercise of outstanding stock
purchase warrants. Pursuant to Rule 416, there are also being
registered such indeterminate number of additional shares of
common stock as may become issuable pursuant to anti-dilution
provisions of the warrants.
(3) Estimated solely for the purpose of calculating the fee, and
based, pursuant to Rule 457(c), on the average of the high and low
sale prices of Registrant's common stock as reported on the Nasdaq
SmallCap Market on February 10, 1999.
(4) The registration fee for shares of common stock issuable upon
exercise of outstanding warrants was calculated using the prices
at which such warrants may be exercised.
____________________
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
The information contained in this prospectus is not yet complete,
and it may be supplemented or amended in the final version. A
registration statement relating to the securities described in
this prospectus has been filed with the Securities and Exchange
Commission. The selling shareholders may not sell these
securities, or accept offers to buy them, until the registration
statement becomes effective. These securities will not be sold
in any state where their offer or sale, or solicitations of
offers to buy them, would be unlawful prior to their registration
or qualification under the securities laws of any such state.
PROSPECTUS
PCC GROUP, INC.
681,266 Shares of Common Stock
_______________
An investment The Company --
in common
stock involves PCC Group, Inc. is a manufacturer and
a high degree wholesale distributor of microprocessor-
of risk. based personal computer components and
Before systems.
investing in
the common The Offering --
stock, you
should These shares of common stock are being
consider offered by the selling shareholders. The
carefully the selling shareholders may acquire the
risks shares of common stock offered pursuant to
described this prospectus upon the conversion of
under "Risk shares of 8% Convertible Preferred Stock
Factors" and upon the exercise of warrants. The
beginning on selling shareholders may sell these shares
page three. from time to time on the over-the-counter
market in regular brokerage transactions,
Our common in transactions directly with market
stock is makers, or in certain privately negotiated
traded on the transactions. For additional information
Nasdaq on the methods of sale, you should refer
SmallCap to the section entitled "Plan of
Market under Distribution" on page 8. We will not
the symbol receive any portion of the proceeds from
"PCCG." On the sale of these shares.
February 10,
1999, the The selling shareholders may be deemed to
closing price be an "Underwriter," as such term is
of our common defined in the Securities Act of 1933, as
stock was amended.
$ 6.1875 per
share.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the common stock
or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is February --, 1999.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a
result, file reports, proxy statements, and other information with
the Securities and Exchange Commission (the "SEC"). You may read
and copy such reports, proxy statements, and other information
that we file at the public reference facilities maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, as well as at the following regional offices: 7 World
Trade Center, New York, New York 10048, and Northwestern Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC maintains a
web site at http://www.sec.gov which contains our reports, proxy
statements, and other information that we file electronically with
the SEC. You can also inspect our reports, proxy statements and
other information at the offices of the Nasdaq Stock Market.
The SEC allows us to "incorporate by reference" the
information we file with it, which means that we can disclose
important information to you by referring you to those documents.
The information that we incorporate by reference is considered to
be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
Annual report on Form 10-K for the fiscal year ended
September 30, 1998, as amended by Amendment No. 1 on
Form 10-K/A, filed pursuant to Section 13(a) of the
Securities Act of 1934.
Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1998.
The description of our common stock contained in the
Registration Statement on Form 8-A, dated March 12,
1985.
This prospectus is part of a registration statement we filed
with the SEC (Registration No. __________). You may request a
free copy of any of the above filings by writing or calling:
PCC Group, Inc.
Attn: Don Johnson, Chief Financial Officer
163 University Parkway
Pomona, California 91768
(909) 869-6133
You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement to this
prospectus. We have not authorized anyone else to provide you
with information. The selling shareholders should not make an
offer of these shares of common stock in any state where the offer
is not permitted. You should not assume that the information in
this prospectus or any supplement to this prospectus is accurate
as of any date other than the date on the cover page of this
prospectus or any supplement.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
Certain information in this prospectus, or incorporated
herein, may contain forward-looking statements which involve known
and unknown risks and uncertainties and other factors which may
cause the actual results, performance or achievements or our
company to be materially different from the future result,
performance or achievements stated or implied by the statements.
These statements discuss future revenue and expenditure
expectations in addition to anticipated strategies and events.
When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements contained
in this prospectus.
PROSPECTUS SUMMARY
The following summary is not complete and does not contain all
of the information that is important to you. To understand this
offering more fully, you should read the entire prospectus carefully,
including the risk factors, and review the documents incorporated by
reference.
The Company
During the past 16 years, PCC Group, Inc. has been
primarily engaged in the wholesale distribution of microcomputer
products and components. The computer hardware products and
components that we resell include add-on boards, CD-ROM drives, hard
disk drives, monitors, sound cards, and keyboards. We purchase these
products in large volume directly from the manufacturers and sell the
products to personal computer assemblers and other resellers. Until
recently, we have not marketed any products directly to end-user
customers. In December 1998, we launched a new Internet website
through which we are offering personal computer parts and products
directly to the public.
We are a California corporation, and were formed by a
merger in September 1989, of PC Craft, Inc., a Delaware corporation,
with and into WMD Micro Distributors, Inc., a California corporation
organized in 1983. Concurrently with the merger, WMD Micro
Distributors, Inc. changed its name to PCC Group, Inc. Our principal
executive offices are located at 163 University Parkway, Pomona,
California 91768, and our telephone number is (909) 869-6133. Unless
otherwise stated, the terms "we," "PCC Group," or "Company" as used
in this prospectus refers to PCC Group, Inc. and its subsidiaries.
The Offering
Common stock offered 681,266 shares(1)
Common stock to be outstanding 3,427,605 shares(1)(2)
after offering
Use of proceeds All of the proceeds from the sale
of the common stock offered
hereby will be received by the
selling shareholders. We will
not receive any of the proceeds
from this offering but will bear
estimated expenses of
approximately $25,286.
Nasdaq SmallCap Market Symbol PCCG
________________
(1) The number of shares the holders of our 8% Convertible
Preferred Stock can acquire upon the conversion of the preferred
stock will depend upon the purchase price of the common stock
prior to the conversion. The number of shares shown here as
being offered by this prospectus assumes that the maximum number
of shares possible are issued upon the conversion of the
preferred stock and also assumes that all of the warrants are
exercised.
(2) Based upon the total number of outstanding shares of common
stock on February 8, 1999, and assumes that the maximum number
of shares issuable under the 8% Convertible Preferred Stock and
warrants are issued.
RISK FACTORS
An investment in the common stock offered by this prospectus is a
speculative investment with a high degree of risk. Therefore, before
investing, you should carefully consider the following risk factors
along with other matters in this prospectus. The risk factors in our
Annual Report on Form 10-K for the year ended September 30, 1998, as
amended, and in our subsequent SEC filings are incorporated by
reference into this prospectus.
Industry Trends
We believe that the growth rate of worldwide personal computer
sales has declined and may remain below the growth rate from prior
years for the foreseeable future. As a result, we could experience
decreased demand for our products and increased competition. This
decline in the growth rate could adversely affect our business.
Rapid Technological Change; Inventory Risk
Due to the highly volatile nature of the personal computer
industry, we are frequently required to distribute new products and
product enhancements. The success of new product introductions is
dependent on a number of factors, including market acceptance,
management of inventory levels, availability of products in
appropriate quantities, and risk that new products may have defects.
Accordingly, we cannot determine the effect that new products will
have on our sales or results of operations.
We acquire inventory in advance of product shipments.
Accordingly, because the markets for our products are volatile and
subject to rapid technological and price changes, there is risk that
we will forecast incorrectly and stock excessive or insufficient
inventory of particular products. Price reductions by other
manufacturers or technological changes, could materially decrease the
value of our inventory. There can be no assurance that we will be
able to successfully manage our inventory.
In our financial statements, we provide reserves against any
inventories of products that have become obsolete or are in excess of
anticipated demand, accrue cancellation fees of orders for inventories
that have been canceled, and accrue estimated costs to correct any
product quality problems. Although we believe our inventory and
related reserves are adequate, no assurance can be given that we will
not incur additional inventory and related charges. Significant
declines in inventory value in excess of established inventory
reserves or dramatic changes in prevailing technology have had, and
may again in the future have a material adverse effect on our
business.
Substantial Competition
The wholesale microcomputer components distribution industry is
highly competitive and is characterized by aggressive pricing
practices, downward pressure on gross margins, frequent introduction
of new products, short product life cycles, continual improvement in
product price/performance characteristics, price sensitivity on the
part of consumers, and a large number of competitors. Competition is
based primarily on product availability, price, credit availability,
speed of delivery, and breadth and depth of product lines and
services. Our business has been, and in the future may continue to
be, adversely affected by industry-wide pricing pressures and downward
pressures on gross margins. Many of our competitors have greater
financial, marketing, manufacturing, and technological resources,
broader product lines and larger customer bases. If we fail to
compete effectively, our business will be adversely affected.
We will also experience substantial competition in our new
Internet retail operations. There already are a number of major
Internet-focused computer retailers on the Internet, including several
well-financed, prominent public companies. In addition, we will also
compete against various computer manufacturers who operate their own
retail websites. There is no assurance that we will be able to
compete with these other Internet companies.
Low Profit Margins
As a result of price competition, we have low gross profit and
operating margins. These low margins magnify the impact of variations
in net sales and operating costs on our operating results. Our goal
is to partially offset the effects of low margins by increasing our
net sales, trying to make large volume purchases at a discount, and
reducing expenses as a percentage of net sales. We cannot assure you
that we will be able to make purchases with large volume discounts or
otherwise increase our margins.
Dependence on Third-Party Suppliers
Although certain components essential to our business are
generally available from multiple sources, certain products are
currently obtained from single sources. If the supply of single-
source products were to be delayed or curtailed, our business could be
adversely affected.
Marketing and Distribution
A number of uncertainties may affect the marketing and
distribution of our products. Currently, our primary means of
distribution is through third-party computer resellers. Such
resellers include value added resellers, system integrators, and
dealers. Our business and financial results could be adversely
affected if the financial condition of these resellers weakened or if
resellers discontinued the distribution of our products.
Dependence on Key Personnel
Our success depends to a significant extent upon the continued
service of key marketing, sales, and executive personnel, and on our
ability to continue to attract, retain and motivate qualified
personnel. The competition for such employees is intense, and the
loss of the services of one or more of these key personnel could
adversely affect us. We do not maintain key man life insurance on any
of our key executives.
Possible Volatility of Stock Price
The market price of our common stock has been, and may continue
to be, highly volatile. Factors such as new product announcements by
us or competitors, quarterly fluctuations in our operating results,
and general conditions in the computer market may have a significant
impact on the market price of the common stock. In particular, if we
were to report operating results that did not meet the expectations of
research analysts, the market price of our common stock could be
materially adversely affected. In addition, the stock market has
often experienced extreme volatility, which has particularly affected
high technology companies and which has often been unrelated to the
business performance of specific companies.
Dividends Unlikely
We do not plan to pay dividends on our common stock for the
foreseeable future. All earnings, other than dividends paid on
preferred stock, will be retained for operations and for the
development of our business. Our ability to pay dividends in the
future is dependent on our financial condition and California law.
Year 2000 Issue
We use a number of computer software programs and operating
systems in our internal operations, including applications used in
order processing, inventory management, distribution, financial
business systems and various administrative functions. We have
conducted an independent audit of our internal software applications
to determine if it contains source code that is able to interpret
appropriately the upcoming calendar year 2000. Based on the
independent audit, we believe that our computers are able to handle
dates beyond the year 2000. Accordingly, we do not anticipate that we
will incur material expenses to make our computer software programs
and operating systems "Year 2000" compliant. However, there can be no
assurance that unanticipated costs necessary to update software, or
potential systems interruptions, will not exceed our present
expectations and have a material adverse effect on our business. In
addition, failure by our key suppliers, customers or service providers
to make their respective computer software programs and operating
systems "Year 2000" compliant could have a material adverse effect on
us. While we are not aware of any known third party problems that will
not be corrected, we only have limited knowledge of their Year 2000
state of readiness.
Effect of Conversion of 8% Convertible Preferred Stock
The 1,600 shares of 8% Convertible Preferred Stock outstanding as
of the date of this prospectus are convertible into shares of common
stock at a conversion price that is based on the trading price of the
common stock prior to the date of the conversion. As a result, the
exact number of shares that the preferred stock will be converted into
cannot be known until all of the shares are converted. The more
shares that are issued upon the conversion, the more the existing
shareholders of the Company are diluted. For example, if the shares
of 8% Convertible Preferred Stock are converted when the trading price
of the common stock on Nasdaq is about $7.00, the number of shares
issued upon such a conversion would be about 228,571. However, if the
8% Convertible Preferred Stock is converted when the trading price of
the common stock is about $3.00, a total of about 533,333 shares of
common stock would be issued to the holders of the common stock.
Since the shares of common stock into which the preferred stock is
convertible are registered for resale by this prospectus, the offer
and sale of these different amounts of shares could have a depressive
effect upon the price of the common stock.
Possible Issuance of Additional Shares of Preferred Stock
The Company's Articles of Incorporation permit our Board of
Directors to designate the terms of, and to issue, up to 5,000,000
shares of preferred stock without further shareholder approval. The
issuance of additional series of preferred stock by our Board of
Directors could aversely affect the rights of the holders of our
common stock by, among other things, establishing additional classes
of preferred stock that have preferential rights over the common
stock. Such preferences could include priority in the payment of
dividends, priority upon liquidation, and special voting rights. In
addition, the issuance of additional series of preferred stock in the
future could make it more difficult for a third party to attempt to
take over the company in a tender offer, or to remove existing
management, even if such action would be in the best interests of the
existing shareholders.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the
common stock offered pursuant to this prospectus, and all of the net
proceeds shall belong solely to selling shareholders. We will,
however, receive the exercise price of the warrants if the warrants
are exercised. We will bear the costs and expenses of registration
of the shares offered by the selling shareholders, which currently
estimate to be about $25,500.
RECENT DEVELOPMENTS
Sale of 8% Convertible Preferred Stock
Effective January 19, 1999, we sold 750 shares of the 8%
Convertible Preferred Stock for a total price of $750,000. In
addition, the buyers of the 750 shares have agreed to purchase an
additional 850 shares of the 8% Convertible Preferred Stock, for
$850,000 and on the same terms, immediately before the registration
statement of which this prospectus is a part is declared effective by
the SEC. The buyers of the foregoing 1,600 shares are JMG Capital
Partners, L.P. and Triton Capital Investments, Ltd.--each buyer will
have purchased 800 shares. Pursuant to a registration rights
agreement, we are registering 546,266 shares of common stock for
possible issuance upon the conversion of the 8% Convertible Preferred
Stock. The actual number of shares that will be issued will depend
upon the price of the common stock prior to the conversion date and
may, therefore, be less than the 546,266 shares.
Terms of New Preferred Stock
The Company's articles of incorporation authorize the issuance of
5,000,000 shares of preferred stock. These shares of preferred stock
may be issued from time to time in one or more series. The Board may
determine or alter the rights, preferences, privileges, and
restrictions on any wholly unissued series of preferred stock.
Furthermore, the Board may fix the number of shares constituting a
series of preferred stock and determine its designation.
Pursuant to its authority, on January 14, 1999, the Board of
Directors established and designated 1,600 shares as a new series of
preferred stock as "8% Convertible Preferred Stock." The stated value
of this stock is $1,000 per share. The following is a summary of the
significant terms of the 8% Convertible Preferred Stock. This summary
is not complete. You may request a copy of the Certificate of
Determination of the 8% Convertible Preferred Stock from us. In
addition, a copy of the Certificate of Determination of the 8%
Convertible Preferred Stock has been filed with the SEC and is
available for your review on the SEC's website.
Rank. The 8% Convertible Preferred Stock ranks prior to the
common stock; any other currently outstanding shares of preferred
stock; and any class or series of stock created in the future, except
for stock that is deemed of equal rank.
Dividends. The holders of 8% Convertible Preferred Stock are
entitled to receive preferential cash dividends of 8% per annum,
compounded annually on the stated value per share. This dividend is
payable semi-annually on January 1 and July 1, commencing July 1,
1999. Furthermore, this dividend must be paid in full before any
dividend or other distribution is made on the common stock or other
class of stock that is junior to the 8% Convertible Preferred Stock.
Liquidation Preference. The holders of 8% Convertible Preferred
Stock have a liquidation preference. Upon a liquidation of the
Company, each share of 8% Convertible Preferred Stock must first
receive an amount equal to the stated value and all accrued and unpaid
dividends, before other shareholders can receive any distribution.
Furthermore, the merger of the Company, the sale of our assets and
certain changes in control, are deemed to be liquidations at which the
holders will be entitled to receive 120% of the liquidation
preference.
Conversion Rights. Beginning on May 19, 1999, each holder of
the 8% Convertible Preferred Stock may convert up to 20% of the 8%
Convertible Preferred Stock into shares of common stock. After each
additional 30 days, the holder will be entitled to convert another 20%
of the 8% Convertible Preferred Stock, until all of it is convertible.
The number of shares of common stock due upon conversion shall be
equal to (I) the number of shares of 8% Convertible Preferred Stock
to be converted multiplied by $1,000, (ii) divided by the conversion
price. The conversion price is the lower of the (a) average of the
three lowest closing sales prices as reported by Nasdaq for the 22
consecutive trading days immediately preceding the conversion date;
and (b) 125% of the lowest closing sales price of a share of common
stock reported on Nasdaq on the date that this registration statement
is declared effective.
Limitation of Conversion Rights. We will not have the obligation
to convert the 8% Convertible Preferred Stock if the issuance of
shares of common stock to the holder would result in the holder
becoming a "beneficial owner" of more than 5% of the outstanding
shares of common stock within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended. Furthermore, unless we
obtain the approval of our voting shareholders in accordance with
Nasdaq rules, upon conversion of the 8% Convertible Preferred Stock,
we will not issue more than the 546,266 shares of common stock that
are included for such purposes in this prospectus. If, but for this
limitation, we would have had to issue more than a cumulative total
of 546,266 shares upon conversion, we will be required to redeem the
number of shares above 546,266 shares that we would have had to issue,
which redemption will be at a price of 125% of the stated value of the
shares of the 8% Convertible Preferred Stock that cannot be converted.
Redemption. At any time, upon 20 days notice, we may redeem all
or a portion of the 8% Convertible Preferred Stock. The redemption
price shall be 120% of the stated value of the shares to be redeemed
plus any accrued and unpaid dividends. If we redeem less than all of
the 8% Convertible Preferred Stock, we will redeem each holder's
shares an a pro rata manner. The holders, however, may choose to
convert the 8% Convertible Preferred Stock into shares of common stock
prior to the redemption date.
Voting Rights. The holders of the 8% Convertible Preferred Stock
have no voting power unless required by law. The Company may not,
however, change the terms of the 8% Convertible Preferred Stock,
increase the authorized number of such shares, or make certain other
changes to the holders' rights without the consent of a majority of
the holders.
SELLING SHAREHOLDERS
All of the shares offered under this prospectus will be offered
by the following selling shareholders. Except as indicated below,
none of the selling shareholders has held any position or office
(other than a non-officer employment relationship) or had any other
material relationship with us (or any of our affiliates) within the
past three years other than as a result of the ownership of the our
stock. The following table sets forth under "Shares of Common Stock
Beneficially Owned Prior to the Offering" certain information known to
us with respect to beneficial ownership of our common stock as of
February 8, 1999 by each selling shareholder. The following table
assumes that the selling shareholders sell all of the shares and that
the selling shareholders will make no other purchases or sales of our
common stock. However, the selling shareholders are not obligated to
sell their shares at any time or at any price. Therefore, no estimate
can be given as to the number of shares of common stock that will be
owned by each of the selling shareholders upon the termination of this
offering. The number of shares of common stock that each holder may
own may also change due to adjustments made by reason of any stock
splits or other anti-dilution adjustments.
Shares of Common Stock Number of Shares of Common Stock
Beneficially Owned Shares of Beneficially Owned
Prior to the Offering Common After the Offering
Stock
Selling Shareholder Number Percentage Offered Number Percentage
Summit Marketing 35,000 1.27% 35,000 0 0%
JMG Capital
Partners, L.P. 273,133(3) 9.02% 273,133 0 0&
Triton Capital
Investments, Ltd. 273,133(3) 9.02% 273,133 0 0%
Pacific
Continental
Securities Corp. 100,000(4) 3.50% 100,000 0 0%
____________________
(1) The number of outstanding shares used to calculate the percentage
is based on 2,746,339 shares of common stock outstanding on February
8, 1999,plus 10,000 shares of common stock to be issued to Summit Marketing.
(2) As payment for services performed, we intend to issue 10,000 shares of
common stock to Summit Marketing before this registration statement goes
effective. In addition, we granted warrants to purchase 25,000 shares of
common stock to Summit Marketing on 2/08/ 1998. These warrants have an
exercise price of $5.25 per share and expire on 12/31/99.
(3) These shares are issuable to each selling shareholder upon the
conversion of our 8% Convertible Preferred Stock. Because the number
of shares of common stock issuable upon the conversion of the 8%
Convertible Preferred Stock is based on the future trading price of
the common stock, we cannot currently determine how many shares of
common stock will be issuable upon conversion. Therefore, the number
of shares owned by the selling shareholder noted in the table, assumes
a conversion resulting in the maximum dilutive effect to existing
shareholders permissible without obtaining shareholder approval.
(4) These 100,000 shares of common stock are issuable to this selling
shareholder upon exercise of warrants: 50,000 shares of common stock
at $8.765625 per share and 50,000 shares of common stock at $10.51875
per share. These warrants expire on January 19, 2002.
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of
the selling shareholders (the term "selling shareholders" includes
donees and pledgees selling shares received from a named selling
shareholder after the date of this prospectus). We will pay all
costs, expenses, and fees in connection with the registration of the
shares. The selling shareholders will pay all brokerage commissions
and similar selling expenses.
The shares may be sold from time to time be the selling shareholders,
or subject to applicable law,by pledges,donees, distributees, transferees
or other successors in interest. Such sales may be made on the NASDAQ
Small Cap Stock Market, in another over-the-counter market, on a
national securities exchange (any of which may involve crosses and block
transactions at prices and at terms then prevailing or at prices related
to the then current market price, or at privately negotiated prices. In
addition anyShares covered by this Prospectus which qualify for sale
pursuant to Section 4(1) of the securities Act or Rule 144 promulgated
thereunder may be sold under such provisions rather than pursuant to this
Prospectus. Without limiting the generality of the foregoing the shares
may be sold in one or more of the following types of transactions: (a)
a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion as
principal to facilitate the transaction; (b) purchases by a broker or
dealer as principle and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; (d) ordenary brokerag transactions and
transactions in which the broker solicits purchasers, and (e) face-to
face transactions between sellers and purchasers without a broker-dealer.
In effecting sales,brokers or dealersw engaged by the selling shareholders
may arrange for othr brokers or dealers to participate in the resales.
In connection with distributions of the shares or otherwise, the
selling shareholders may entered into hedging transactions with broker-
dealers. In connection with such transactions, broker-dealers may
engage in short sales of the shares of the shares registered hereunder
in the course of hedging the positions they assume with selling share-
holders. The selling shaeholders may also enter into options or other
transactions with broker-deales which require the delivery to the broker-
dealer of the shares registered hereunder, whcih the brokedealer may resell
pursuant to this Prospectus.
The selling shareholders may also pledge the shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer
effect sales of the pledged shares pursuant to this Prospectus.
Brokers, Dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling shareholders in amounts
to be negotiated in connection with the sale. Such brokers or dealers and
any other participating brokers or dealers may be deemed to be
"underwriters within the meaning of the Securities Act in connection
with such sales and any such commission, discount or concession may be
deemed to be underwriting discounts or commissions under the
Securities Act. We have agreed to indemnify each selling shareholder
against certain liabilities, including liabilities arising under the
Securities Act. The selling shareholders may agree to indemnify any
agent, dealer, or broker-dealer against certain liabilities, including
liabilities arising under the Securities Act.
Because selling shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the selling
shareholders will be subject to the prospectus delivery requirements
of the Securities Act. We has informed the selling shareholders that
the anti-manipulative provisions of Regulation M promulgated under the
Exchange Act may apply to their sales in the market.
If we are notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution
or secondary distribution, or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to
Rule 424(b) under the Securities Act, disclosing (I) the name of each
such selling shareholder and of the participating broker-dealer(s),
(ii) the number of shares involved, (iii) the price at which such
shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer, (v) that such broker-dealer
did not conduct any investigation to verify the information set out or
incorporated by reference in this prospectus and (vi) other facts
material to the transaction. In addition, if we are notified by a
selling shareholder that a donee or pledgee intends to sell more than
500 shares, a supplement to this prospectus will be filed.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California,
has rendered an opinion to the effect that the shares of common stock
hereby will be duly and validly issued, fully paid and nonassessable.
EXPERTS
Our consolidated financial statements, which were included in our
Annual Report (Form 10-K as amended) for the year ended September 30, 1998, have
been audited by BDO Seidman, LLP, independent certified public
accountants. The accountant's report is included in the Form 10-K and
is incorporated by reference into this prospectus. These consolidated
financial statements have been incorporated by reference into this
prospectus in reliance upon the accountant's report, given upon the
authority of such firm as experts in accounting and auditing.
PCC Group has not authorized
anyone to give any
information or make any
representations, other than
those contained in this
prospectus, in connection
with this offering of common
stock. You must not rely on
any such unauthorized
information or 681,266 Shares
representations. This
prospectus is an offer to PCC GROUP, INC.
sell only the shares offered
hereby, but only under Common Stock
circumstances and in
jurisdictions where it is
lawful to do so. The
information contained in this ____________
prospectus is current only as
of its date. PROSPECTUS
____________
TABLE OF CONTENTS
Where You Can Find More February ---, 1999
Information 1
Caution Regarding Forward- 1
Looking Information 1
Prospectus Summary 2
The Company 2
The Offering 2
Risk Factors 3
Use of Proceeds 5
Recent Developments 6
Selling Shareholders 7
Plan of Distribution 8
Legal Matters 10
Experts 10
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF REGISTRATION AND DISTRIBUTION
The following table sets forth the estimated expenses of the
Registrant in connection with the offering described in this
Registration Statement.
Securities and Exchange Commission registration fee $1,286.00
Nasdaq listing fees $ 7,500.00
Accountants' fees and expenses $ 500.00
Legal fees and expenses $15,000.00
Miscellaneous $ 1,214.00
Total $25,500.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code ("Section 317")
provides that a California corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than action by or in
the right of the corporation) by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise, against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding,
had no cause to believe his conduct was unlawful.
Section 317 also provides that a California corporation may
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set
forth above, against expenses actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if
he acted under similar standards, except that no indemnification may
be made in respect to any claim, issue or matter as to which such
persons shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or
suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 317 provides further that to the extent a director or
officer of a California corporation has been successful in the defense
of any action, suit or proceeding referred to in the previous
paragraphs or in the defense of any claim, issue or matter therein, he
shall be indemnified against expenses actually and reasonably incurred
by him in connection therewith; that indemnification authorized by
Section 317 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; and that the corporation may
purchase and maintain insurance on behalf of a director or officer of
the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him
against such liabilities under Section 317.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by
reference as a part of this Registration Statement:
4.1 Form of Certificate of Determination of Rights, Preferences,
Privileges and Restriction of 8% Convertible Preferred Stock.(1)
4.2 Securities Purchase Agreement, dated January 19, 1999, between
the Company and the purchasers of the 8% Convertible Preferred Stock.
4.3 Registration Rights Agreement, dated January 19, 1999, between
the Company and the purchasers of the 8% Convertible Preferred Stock.
4.4 Form of Warrant issued to Pacific Continental Securities Corp.
4.5 Form of Common Stock Purchase Warrant issued to Summit Marketing
5.1 Opinion of Troy & Gould Professional Corporation, to be included with
the pre-effective amendment.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Troy & Gould Professional Corporation (contained in
Exhibit 5.1 hereof).
24 Power of Attorney (contained on page 16 hereof).
__________________________________
(1) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the period ended December 31, 1998 and hereby
incorporated herein by this reference.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference into the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that such a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pomona, State
of California, on the 12th day of February 1999.
PCC GROUP, INC.
BY /s/ JACK WEN
Jack Wen, Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints each of Jack Wen and
Gary L. Blum, his true and lawful attorney-in-fact and agent, with
full power of each to act alone, with full powers of substitution, for
him in any and all capacities, to sign this Registration Statement and
any and all amendments hereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, with full power of each to act alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as he might do or could
do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ JACK WEN Chairman of the February 12,
Jack Wen Board and Chief 1999
Executive Officer
(Principal Executive
Officer)
/s/ DONALD JOHNSON Vice President and February 12,
Donald Johnson Chief Financial 1999
Officer
(Principal Financial
and
Principal Accounting
Officer)
/s/ GARY L. BLUM Director February 12,
Gary L. Blum 1999
/s/ GEORGE RODDA, JR. Director February 12,
George Rodda, Jr. 1999
INDEX TO EXHIBITS
4.1 Form of Certificate of Determination of Rights, Preferences,
Privileges and Restrictions of 8% Convertible Preferred Stock.(1)
4.2 Securities Purchase Agreement, dated January 19, 1999, between
the Company and the purchasers of the 8% Convertible Preferred Stock.
4.3 Registration Rights Agreement, dated January 19, 1999, between
the Company and the purchasers of the 8% Convertible Preferred Stock.
4.4 Form of Warrant issued to Pacific Continental Securities Corp.
4.5 Form of Common Stock Purchase Warrant issued to Summit Marketing
5.1 Opinion of Troy & Gould Professional Corporation, to be included with
the pre-effective amendment.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Troy & Gould Professional Corporation (contained in
Exhibit 5.1 hereof).
24 Power of Attorney (contained on page 16 hereof).
_______________________
(1) Previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the period ended December 31, 1998 and hereby
incorporated herein by this reference.
EXHIBIT 4.1
Los Angeles, California
February 12, 1999
CERTIFICATE OF DETERMINATION
OF RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF 8% CONVERTIBLE PREFERRED STOCK OF
PCC GROUP, INC.
________________________________________________________
PCC Group, Inc., a California corporation (the
"Corporation"), in accordance with the provisions of the
General Corporation Law of the State of California, DOES
HEREBY CERTIFY that, at a meeting of the Board of Directors
of the Corporation held on January, 14,1999:
The undersigned, Don Johnson and Gary Blum hereby
certify that:
FIRST. They are the duly elected and acting Vice
President and Secretary, respectively of the Corporation;
SECOND. Pursuant to authority given by the
Corporation's Articles of Incorporation, as amended, the
Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
WHEREAS, the Articles of Incorporation, as
amended, of the Corporation provide for a class of
shares known as Preferred Stock, issuable from
time to time in one or more series; and
WHEREAS, the Board of directors of the
Corporation is authorized to determine or alter
the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock, to fix the
number of shares constituting any such series and
to determine the designation thereof, or any of
them; and
WHEREAS, the Corporation desires, pursuant to
its authority as aforesaid, to determine and fix
the rights, preferences, privileges and
restrictions relating to a new series of said
Preferred Stock and the number of shares
constituting and the designation of said series;
NOW, THEREFORE, BE IT RESOLVED, that the
Board of Directors hereby establishes and
designates 1,600 shares as a new series of
Preferred Stock, designated as the "8% Convertible
Preferred Stock" (the "8% Preferred Stock"),
having a stated value of $1,000 per share (the
"Stated Value"), and having the following rights,
preferences and privileges:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. The terms defined in this
Article whenever used in this Certificate of Determinations
have the following respective meanings:
(a) "Affiliate" has the meaning ascribed to such
term in Rule 12b-2 under the Securities Exchange Act of
1934, as amended.
(b) "Average Price" per share of Common Stock
means the average of the three (3) lowest closing sales
prices as reported by Nasdaq for the twenty-two (22)
consecutive Trading Days immediately preceding the
Conversion Date; provided, however, that if no sales of the
Common Stock were reported for three (3) Trading Days within
the twenty-two (22) consecutive Trading Days immediately
preceding the Conversion Date, the Average Price shall be
determined on the latest three (3) lowest closing sales
prices for any Trading Day preceding the Conversion Date.
(c) "Business Day" means a day other than
Saturday, Sunday or any day on which banks located in the
State of California are authorized or obligated to close.
(d) "Capital Shares" means the Common Stock and
any other shares of any other class or series of common
stock, whether now or hereafter authorized and however
designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution,
liquidation or winding-up) of the Corporation.
(e) "Closing Date" means the Tranche I Closing
Date as defined in the Securities Purchase Agreement.
(f) "Common Shares" or "Common Stock" means
shares of common stock, par value $0.01 per share, of the
Corporation.
(g) "Common Stock Issued at Conversion" when used
with reference to the securities issuable upon conversion of
the 8% Preferred Stock, means all Common Stock now or
hereafter Outstanding and securities of any other class or
series into which the 8% Preferred Stock hereafter shall
have been changed or substituted, whether now or hereafter
created and however designated.
(h) "Conversion Date" means any day on which all
or any portion of shares of the 8% Preferred Stock is
converted in accordance with the provisions hereof.
(i) "Conversion Notice" has the meaning set forth
in Section 5.2.
(j) "Conversion Price" means on any date of
determination the applicable price for the conversion of
shares of 8% Preferred Stock into Common Stock on such day
as set forth in Section 5.1.
(k) "Corporation" means PCC Group Inc., a
California corporation, and any successor or resulting
corporation by way of merger, consolidation, sale or
exchange of all or substantially all of the Corporation's
assets, or otherwise.
(l) "Current Market Price" on any date of
determination means the closing sales price of a Common
Share on such day as reported on Nasdaq.
(m) "Fixed Strike Price" shall be equal to 125%
of the lowest closing sales price of a share of Common Stock
as reported on Nasdaq on the date that the Registration
Statement is declared effective.
(n) "Holders" means JMG Capital Partners, L.P.
and Triton Capital Investments, Ltd., any successor thereto,
or any Person to whom the 8% Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(o) "Market Disruption Event" means any event
that results in a material suspension or limitation of
trading of Common Stock on Nasdaq.
(p) "Market Price" per Common Share means the
average of the lowest sales prices of the Common Stock as
reported on Nasdaq for the five (5) Trading Days immediately
preceding a Conversion Date.
(q) "Original Issuance Date" has the meaning set
forth in Section 5.1
(r) "Outstanding" when used with reference to
Common Stock or Capital Shares (collectively, "Shares"),
means, on any date of determination, all issued and
outstanding Shares, and includes all such Shares issuable in
respect of outstanding warrants, options, scrip or any
certificates representing fractional interests in such
Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the
Corporation or any Subsidiary of the Corporation shall not
be deemed "Outstanding" for purposes hereof.
(s) "Person" means an individual, a corporation,
a partnership, an association, a limited liability company,
a unincorporated business organization, a trust or other
entity or organization, and any government or political
subdivision or any agency or instrumentality thereof.
(t) "Registration Rights Agreement" means that
certain Registration Rights Agreement, dated the Original
Issuance Date, between the Corporation and the Holders.
(u) "SEC" means the United States Securities and
Exchange Commission.
(v) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations of the SEC
thereunder, all as in effect at the time.
(w) "Securities Purchase Agreement" means that
certain Securities Purchase Agreement dated the Original
Issuance Date between the Corporation and the Holders.
(x) "Subsidiary" means any entity of which
securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors
or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(y) "Trading Day" means any day on which
purchases and sales of securities authorized for quotation
on the Nasdaq are reported thereon and on which no Market
Disruption Event has occurred.
(z) "8% Preferred Stock" means the 8% Convertible
Preferred Stock of the Corporation or such other convertible
preferred stock exchanged therefor as provided in Section
3.1.
(aa) All references to "cash" or "$" herein means
currency of the United States of America.
ARTICLE 2
RANK
SECTION 2.1 Rank. The 8% Preferred Stock shall rank
(i) prior to the Common Stock; (ii) prior to any class or
series of Preferred Stock of the Corporation outstanding,
including the New Series A Preferred Stock; (iii) prior to
any class or series of capital stock of the Corporation
hereafter created (collectively, with the Common Stock and
the outstanding Preferred Stock, "Junior Securities"), other
than "Pari Passu Securities" (as hereinafter defined); and
(iv) pari passu with any class or series of capital stock of
the Corporation hereafter created specifically ranking on
parity with the 8% Preferred Stock (the "Pari Passu
Securities").
ARTICLE 3
DIVIDENDS
SECTION 3.1 Dividends. (a) The holders of
outstanding shares of 8% Preferred Stock shall be entitled
to receive preferential dividends in cash, out of any funds
of the Corporation legally available at the time for
declaration of dividends, before any dividend or other
distribution will be paid or declared and set apart for
payment on any shares of any Common Stock or other class of
stock junior to the 8% Preferred Stock (the Common Stock and
such junior stock being hereinafter collectively the "Junior
Stock") at the rate of 8% per annum , compounded annually on
the Stated Value per share, payable semi-annually on the
first day of July and January of each year, commencing July
1, 1999.
(b) The dividends on the 8% Preferred Stock at
the rates provided above shall be cumulative whether or not
earned, so that if at any time full cumulative dividends at
the rate aforesaid on all shares of the 8% Preferred Stock
then outstanding from the date from and after which
dividends thereon are cumulative to the end of the semi-
annual dividend period next preceding such time shall not
have been paid or declared and set apart for payment, or if
the full dividend on all such outstanding 8% Preferred Stock
for the then current dividend period shall not have been
paid or declared and set apart for payment, the amount of
the deficiency shall be paid or declared and set apart for
payment before any sum shall be set apart for or applied by
the Corporation or a subsidiary of the Corporation to the
purchase, redemption or other acquisition of the 8%
Preferred Stock or any shares of any other class of stock
ranking on a parity with the 8% Preferred Stock ("Parity
Stock") and before any dividend or other distribution shall
be paid or declared and set apart for payment on any Junior
Stock and before any sum shall be set aside for or applied
to the purchase, redemption or other acquisition of Junior
Stock.
ARTICLE 4
LIQUIDATION PREFERENCE
SECTION 4.1 (a) If the Corporation shall commence a
voluntary case under the Federal bankruptcy laws or any
other applicable Federal or State bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief
in an involuntary case under any law or to the appointment
of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an
assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under
the Federal bankruptcy laws or any other applicable Federal
or state bankruptcy, insolvency or similar law resulting in
the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official)
of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall be unstayed and
in effect for a period of thirty (30) consecutive days and,
on account of any such event, the Corporation shall
liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event
being considered a "Liquidation Event"), no distribution
shall be made to the holders of any shares of capital stock
of the Corporation upon liquidation, dissolution or winding
up unless prior thereto, the holders of shares of 8%
Preferred Stock and the holders of Pari Passu Securities,
subject to Article 4, shall have received the Liquidation
Preference (as defined in Section 4.1(c)) with respect to
each share. If upon the occurrence of a Liquidation Event,
the assets and funds available for distribution among the
holders of the 8% Preferred Stock and holders of Pari Passu
Securities shall be insufficient to permit the payment to
such holders of the preferential amounts payable thereon,
then the entire assets and funds of the Corporation legally
available for distribution to the 8% Preferred Stock and the
Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation
Preference payable on each such share bears to the aggregate
liquidation preference payable on all such shares.
(b) At the option of each Holder, the sale,
conveyance of disposition of all or substantially all of the
assets of the Corporation, the effectuation by the
Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of
the Corporation is disposed of, or the consolidation, merger
or other business combination of the Corporation with or
into any other Person (as defined below) or Persons when the
Corporation is not the survivor shall be deemed to be a
liquidation, dissolution or winding up of the Corporation
pursuant to which the Corporation shall be required to
distribute, upon consummation of and as a condition to, such
transaction an amount equal to 120% of the Liquidation
Preference with respect to each outstanding share of 8%
Preferred Stock in accordance with and subject to the terms
of this Article 4; provided, that all holders of 8%
Preferred Stock shall be deemed to elect the option set
forth above if at least a majority in interest of such
holders elect such option. "Person" shall mean any
individual, corporation, limited liability company,
partnership, association, trust or other entity or
organization.
(c) For purposes hereof, the "Liquidation
Preference" with respect to a share of the 8% Preferred
Stock shall mean an amount equal to the sum of (i) the
Stated Value thereof, together with(ii) all accrued and
unpaid dividends therein.
ARTICLE 5
CONVERSION OF 8% PREFERRED STOCK
SECTION 5.1 Conversion; Conversion Price. Subject to
the terms, conditions and restrictions of this Section 5, at
the option of any Holder, the shares of 8% Preferred Stock
may be converted into Common Stock (calculated as to each
such conversion to the nearest 1/100th of a share), at any
time, from time to time after a date 120 days from the date
the first share of 8% Preferred Stock is originally issued
(the "Original Issuance Date") at a conversion price equal
to the Stated Value of the shares being converted multiplied
by the lower of (a) the Average Price or (b) the Fixed
Strike Price (the "Conversion Price").
The Holder of any shares of 8% Preferred Stock may
convert such shares as follows: 120 days after the Original
Issuance Date, 20% of the cumulative amount of shares of 8%
Preferred Stock issued to such Holder; 150 days after the
Original Issuance Date, 40% of the cumulative amount of
shares of 8% Preferred Stock issued to such Holder; 180 days
after the Original Issuance Date, 60% of the cumulative
amount of shares of 8% Preferred Stock issued to such
Holder; 210 days after the Original Issuance Date, 80% of
the cumulative amount of shares of 8% Preferred Stock issued
to such Holder; 270 days after the Original Issuance Date
100% of the cumulative amount of shares of 8% Preferred
Stock issued to such Holder.
The number of shares of Common Stock due upon
conversion of 8% Preferred Stock shall be (i) the number of
shares of 8% Preferred Stock to be converted, multiplied by
(ii) the Stated Value and divided by (iii) the applicable
Conversion Price.
SECTION 5.2 Exercise of Conversion Privilege. (a)
Conversion of the 8% Preferred Stock may be exercised, in
whole or in part, by any Holder by telecopying an executed
and completed notice of conversion in the form annexed to
the Securities Purchase Agreement as Annex I (the
"Conversion Notice") to the Corporation or to any agent
designated in writing by the Corporation. Each date on
which a Conversion Notice is telecopied to and received by
the Corporation in accordance with the provisions of this
Section 5.2 shall constitute a Conversion Date. The
Corporation shall convert the 8% Preferred Stock and issue
the Common Stock Issued at Conversion effective as of the
Conversion Date. The Conversion Notice also shall state the
name or names (with addresses) of the persons who are to
become the holders of the Common Stock Issued at Conversion
in connection with such conversion. The Holder shall
deliver the shares of 8% Preferred Stock to the Corporation
by express courier within two (2) days following the date on
which the Holder received the shares of Common Stock. Upon
surrender for conversion, the 8% Preferred Stock shall be
accompanied by a proper assignment hereof to the Corporation
or be endorsed in blank. As promptly as practicable after
the receipt of the Conversion Notice as
aforesaid, but in any event not more than three (3)
Business Days after the Corporation's receipt of such
Conversion Notice, the Corporation shall (i) issue the
Common Stock issued at Conversion in accordance with the
provisions of this Article 5, and (ii) cause to be mailed
for delivery by overnight courier to the Holder (X) a
certificate or certificate(s) representing the number of
Common Shares to which the Holder is entitled by virtue of
such conversion and (Y) cash, as provided in Section 5.3, in
respect of any fraction of a Share issuable upon such
conversion. Holder shall indemnify the Corporation for any
damages to third parties as a result of a claim by such
third party to ownership of the 8% Preferred Stock converted
prior to the receipt of the 8% Preferred Stock by the
Corporation. Such conversion shall be deemed to have been
effected at the time at which the Conversion Notice
indicates (but not before the date such Conversion Notice is
received by the Corporation or its agent) so long as the 8%
Preferred Stock shall have been surrendered as aforesaid at
such time, and at such time the rights of the Holder of the
8% Preferred Stock, as such, shall cease and the Person and
Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become
the holder or holders of record of the Common Stock
represented thereby. The Conversion Notice shall constitute
a contract between the Holder and the Corporation, whereby
the Holder shall be deemed to subscribe for the number of
Common Stock which it will be entitled to receive upon such
conversion and, in payment and satisfaction of such
subscription (and for any cash adjustment to which it is
entitled pursuant to Section 5.4), to surrender the 8%
Preferred Stock and to release the Corporation from all
liability thereon.
(b) If, at any time (i) the Corporation
challenges, disputes or denies the right of a Holder hereof
to effect the conversion of the 8% Preferred Stock into
Common Stock or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section
5.2 or (ii) any third party who is not and has never been an
Affiliate of a Holder commences any lawsuit or proceeding or
otherwise asserts any claim before any court or public or
governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of a
Holder hereof to effect the conversion of the 8% Preferred
Stock into Common Stock, then such Holder shall have the
right, by written notice to the Corporation, to require the
Corporation to promptly redeem the 8% Preferred Stock for
cash at a redemption price equal to, in the case of (i), one
hundred and thirty-five percent (135%) of the Stated Value
thereof together with all accrued and unpaid dividends
thereon and, in the case of (ii), one hundred and twenty-
five percent (125%) of the Stated Value thereof together
with all accrued and unpaid dividends thereon (each, the
"Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall be
responsible for the payment of all costs and expenses of
such Holder, including reasonable legal fees and expenses,
as and when incurred in disputing any such action or
pursuing its rights hereunder (in addition to any other
rights of such Holder).
(c) The Holders shall be entitled to exercise
their conversion privilege notwithstanding the commencement
of any case under 11 U.S.C. 101 et seq. (the "Bankruptcy
Code"). In the event the Corporation is a debtor under the
Bankruptcy Code, the Corporation hereby waives to the
fullest extent permitted any rights to relief it may have
under 11 U.S.C. 362 in respect of the holder's conversion
privilege. The Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11
U.S.C. 362 in respect of the conversion of the 8%
Preferred Stock. The Corporation agrees, without cost or
expense the Holders, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. 362.
SECTION 5.3 Fractional Shares. No fractional Common
Stock or scrip representing fractional Common Stock shall be
issued upon conversion of the 8% Preferred Stock. Instead of
any fractional Common Stock which otherwise would be
issuable upon conversion of the 8% Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction.
SECTION 5.4 Reclassification, Consolidation, Merger or
Mandatory Share Exchange. At any time while any shares of
the 8% Preferred Stock remain outstanding and any shares
thereof have not been converted, in case of any
reclassification or change of Outstanding Common Stock
issuable upon conversion of the 8% Preferred Stock (other
than a change in par value, or from par value to no par
value per share, or from no par value per share to par value
or as a result of a subdivision or combination of
outstanding securities issuable upon conversion of the 8%
Preferred Stock) or in case of any consolidation, merger or
mandatory share exchange of the Corporation with or into
another corporation (other than a merger or mandatory share
exchange with another corporation in which the Corporation
is a continuing corporation and which does not result in any
reclassification or change, other than a change in par
value, or from par value to no par value per share, or from
no par value per share to par value, or as a result of a
subdivision or combination of Outstanding Common Stock upon
conversion of the 8% Preferred Stock), or in the case of any
sale or transfer to another corporation of the property of
the Corporation as an entirety or substantially as an
entirety, the Corporation, or such successor, resulting or
purchasing corporation, as the case may be, shall, without
payment of any additional consideration therefor, execute a
new 8% Preferred Stock providing that the Holders shall have
the right to convert such new 8% Preferred Stock (upon terms
and conditions not less favorable to the Holders than those
in effect pursuant to the 8% Preferred Stock) and to receive
upon such exercise, in lieu of each Common Share theretofore
issuable upon conversion of the 8% Preferred Stock, the kind
and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change,
consolidation, merger, mandatory share exchange, sale or
transfer by the holder of one Common Share issuable upon
conversion of the 8% Preferred Stock had the 8% Preferred
Stock been converted immediately prior to such
reclassification, change, consolidation, merger, mandatory
share exchange or sale or transfer. The provisions of this
Section 5.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers,
mandatory share exchanges and sales and transfers.
SECTION 5.5 Optional Redemption. At anytime after the
date of issuance of the 8% Preferred Stock, the Corporation,
upon notice delivered to the Holders as provided in Section
5.7, may redeem (an "Optional Redemption") all or a portion
of the 8% Preferred Stock (but only with respect to such
shares as to which the Holders have not theretofore
furnished a Conversion Notice in compliance with Section
5.2) at a redemption price per share equal to 120% of the
Stated Value thereof together with all accrued and unpaid
dividends thereon (the "Optional Redemption Price"). In the
event that the Corporation redeems less than all of the 8%
Preferred Stock, the shares shall be redeemed pro rata. If
the Corporation elects to exercise its right of Optional
Redemption under this Section 5.6, the Holders shall have
the right to either (i) exercise their right of conversion
under Section 5.2 with respect to that portion of the 8%
Preferred Stock that the Corporation has indicated it would
redeem at any time prior to the Redemption Date, or (ii)
accept the redemption. Any Holder's failure to notify the
Corporation of its intent to exercise its right of
conversion pursuant to the foregoing sentence shall be
construed as such Holder's acceptance of redemption.
SECTION 5.6 Notice of Redemption. Notice of
redemption pursuant to Section 5.5 shall be provided by the
Corporation to the Holders in writing (by registered mail or
overnight courier at the Holders' last address appearing in
the Corporation's security registry) not less than twenty
(20) prior to the date of redemption (the "Redemption
Date"), which notice shall specify the Redemption Date and
refer to Section 5.5 and this Section 5.6.
SECTION 5.7 Surrender of 8% Preferred Stock. Upon any
redemption of the 8% Preferred Stock pursuant to Sections
5.5 or 5.6, the Holders shall either deliver the 8%
Preferred Stock by hand to the Corporation at its principal
executive offices or surrender the same to the Corporation
at such address by express courier. Payment of the Optional
Redemption Price specified in Section 5.5 shall be made by
the Corporation to the Holders against receipt of the 8%
Preferred Stock (as provided in this Section 5.7) by wire
transfer of immediately available funds to such account(s)
as the Holders shall specify to the Corporation. If payment
of such redemption price is not made in full by the
Redemption Date, the Holders shall again have the right to
convert the 8% Preferred Stock as provided in Article 5
hereof.
SECTION 5.9 Compliance with Section 13(d).
Notwithstanding anything herein to the contrary, the Holders
shall not have the right, and the Company shall not have the
obligation, to convert all or any portion of the 8%
Preferred Stock if and to the extent that the issuance to
the Holders of shares of Common Stock upon such conversion
would result in any of the Holders being deemed the
"beneficial owner" of more than 5% of the then outstanding
shares of Common Stock within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the
rules promulgated thereunder. If any court of competent
jurisdiction shall determine that the foregoing limitation
is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then outstanding
shares of Common Stock, then the Corporation shall redeem so
many of such Holder's shares (the "Redemption Shares") of 8%
Preferred Stock as are necessary to cause such Holder to be
deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock. Upon such determination
by a court of competent jurisdiction, the Redemption Shares
shall immediately and without further action be deemed
returned to the status of authorized but unissued shares of
8% Preferred Stock and the Holder shall have no interest in
or rights under such Redemption Shares. Any and all
dividends paid on or prior to the date of such determination
shall be deemed dividends paid on the remaining shares of 8%
Preferred Stock held by such Holder. Such redemption shall
be for cash at a redemption price equal to the Stated Value
of the Redemption Shares.
SECTION 5.10 Shareholder Approval. Unless the
Corporation shall have obtained the approval of its voting
stockholders to such issuance in accordance with the rules
of Nasdaq or such other stock market as the Corporation
shall be required to comply with, the Corporation shall not
issue shares of Common Stock upon conversion of any shares
of 8% Preferred Stock, if such issuance of Common Stock,
when added to the number of shares of Common Stock
previously issued by the Corporation upon conversion of
shares of the 8% Preferred Stock would equal or exceed
twenty percent (20%) of the number of shares of the
Corporation's Common Stock which were issued and outstanding
on the Closing Date (the "Maximum Issuance Amount"). In the
event that a properly executed Conversion Notice is received
by the Corporation which would require the Corporation to
issue shares of Common Stock equal to or in excess of the
Maximum Issuance Amount, the Corporation shall honor such
conversion request by (i) converting the number of shares of
8% Preferred Stock stated in the Conversion Notice not in
excess of the Maximum Issuance Amount and (ii) redeeming the
number of shares of 8% Preferred Stock stated in the
Conversion Notice equal to or in excess of the Maximum
Issuance Amount in cash at a price equal to one hundred and
twenty-five percent (125%) of the Stated Value of the shares
of 8% Preferred Stock to be so redeemed, together with all
accrued and unpaid dividends thereon.
ARTICLE 6
VOTING RIGHTS
The Holders of the 8% Preferred Stock have no voting
power, except as otherwise provided by the General
Corporations Law of the State of California ("CGCL"), in
this Article 6, and in Article 7 below.
Notwithstanding the above, the Corporation shall
provide each Holder of 8% Preferred Stock with prior
notification of any meeting of the shareholders (and copies
of proxy materials and other information sent to
shareholders). In the event of any taking by the
Corporation of a record of its shareholders for the purpose
of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by
way of merger, consolidation or recapitalization) any share
of any class or any other securities or property, or to
receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection with any
proposed liquidation, dissolution or winding up of the
Corporation, the Corporation shall mail a notice to each
Holder, at least thirty (30) days prior to the consummation
of the transaction or event, whichever is earlier), of the
date on which any such action is to be taken for the purpose
of such dividend, distribution, right or other event, and a
brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent
known at such time.
To the extent that under the CGCL the vote of the
holders of the 8% Preferred Stock, voting separately as a
class or series as applicable, is required to authorize a
given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares
of the 8% Preferred Stock represented at a duly held meeting
at which a quorum is present or by written consent of a
majority of the shares of 8% Preferred Stock (except as
otherwise may be required under the CGCL) shall constitute
the approval of such action by the class. To the extent
that under the CGCL holders of the 8% Preferred Stock are
entitled to vote on a matter with holders of Common Stock,
voting together as one class, each share of 8% Preferred
Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then
convertible using the record date for the taking of such
vote of shareholders as the date as of which the Conversion
Price is calculated. The Holders shall be entitled to
notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to
shareholders) with respect to which they would be entitled
to vote, which notice would be provided pursuant to the
Corporation's bylaws and the CGCL.
ARTICLE 7
PROTECTIVE PROVISIONS
So long as shares of 8% Preferred Stock are
outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as
provided by the CGCL) of the holders of at least a majority
of the then outstanding shares of 8% Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the 8% Preferred Stock;
(b) create any new class or series of capital
stock having a preference over the 8% Preferred Stock as to
distribution of assets upon liquidation, dissolution or
winding up of the Corporation ("Senior Securities") or alter
or change the rights, preferences or privileges of any
Senior Securities so as to affect adversely the 8% Preferred
Stock;
(c) increase the authorized number of shares of
8% Preferred Stock;
(d) do any act or thing not authorized or
contemplated by this Certificate of Determination which
would result in taxation of the holders of shares of the 8%
Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time
amended); or
(e) issue any additional shares of Preferred
Stock (including shares of the Corporation's Series A
Preferred Stock) or securities convertible into Preferred
Stock.
In the event holders of at least a majority of the then
outstanding shares of 8% Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or
privileges of the shares of 8% Preferred Stock, pursuant to
subsection (a) above, so as to affect the 8% Preferred
Stock, then the Corporation will deliver notice of such
approved change to the holders of the 8% Preferred Stock
that did not agree to such alteration or change (the
"Dissenting Holders") and Dissenting Holders shall have the
right for a period of thirty (30) days to convert pursuant
to the terms of this Certificate of Determination as they
exist prior to such alteration or change or continue to hold
their shares of 8% Preferred Stock.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Loss, Theft, Destruction of Preferred
Stock. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of
shares of 8% Preferred Stock and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in
the case of any such mutilation, upon surrender and
cancellation of the 8% Preferred Stock, the Corporation
shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of 8% Preferred Stock, new
shares of 8% Preferred Stock of like tenor. The 8%
Preferred Stock shall be held and owned upon the express
condition that the provisions of this Section 8.1 are
exclusive with respect to the replacement of mutilated,
destroyed, lost or stolen shares of 8% Preferred Stock and
shall preclude any and all other rights and remedies
notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without the
surrender thereof.
SECTION 8.2 Who Deemed Absolute Owner. The
Corporation may deem the Person in whose name the 8%
Preferred Stock shall be registered upon the registry books
of the Corporation to be, and may treat it as, the absolute
owner of the 8% Preferred Stock for the purpose of receiving
payment of dividends on the 8% Preferred Stock, for the
conversion of the 8% Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any
notice to the contrary. All such payments and such
conversion shall be valid and effectual to satisfy and
discharge the liability upon the 8% Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
SECTION 8.3 Notice of Certain Events. In the case of
the occurrence of any event described in Article 5 of this
Certificate of Determination, the Corporation shall cause to
be mailed to each Holder of the 8% Preferred Stock at its
last address as it appears in the Corporation's security
registry, at least twenty (20) days prior to the applicable
record, effective or expiration date hereinafter specified
(or, if such twenty (20) days notice is not practicable, at
the earliest practicable date prior to any such record,
effective or expiration date), a notice stating (x) the date
on which a record is to be taken for the purpose of such
dividend, distribution, issuance or granting of rights,
options or warrants, or if a record is not to be taken, the
date as of which the holders of record of 8% Preferred Stock
to be entitled to such dividend, distribution, issuance or
granting of rights, options or warrants are to be determined
or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective,
and the date as of which it is expected that holders of
record of 8% Preferred Stock will be entitled to exchange
their shares for securities, cash or other property
deliverable upon such reclassification, consolidation,
merger, sale transfer, dissolution, liquidation or winding-
up.
SECTION 8.4 Register. The Corporation shall keep at
its principal office a register in which the Corporation
shall provide for the registration of the 8% Preferred
Stock. Upon any transfer of the 8% Preferred Stock in
accordance with the provisions hereof, the Corporation shall
register such transfer on the 8% Preferred Stock register.
The Corporation may deem the person in whose name the
8% Preferred Stock shall be registered upon the registry
books of the Corporation to be, and may treat it as, the
absolute owner of the 8% Preferred Stock for the purpose of
receiving payment of dividends on the 8% Preferred Stock,
for the conversion of the 8% Preferred Stock and for all
other purposes, and the Corporation shall not be affected by
any notice to the contrary. All such payments and such
conversions shall be valid and effective to satisfy and
discharge the liability upon the 8% Preferred Stock to the
extent of the sum or sums so paid or the conversion or
conversions so made.
SECTION 8.5 Reservation of Stock. The Corporation,
upon the effective date of this Certificate of Designation,
has a sufficient number of shares of Common Stock available
to reserve for issuance upon the conversion of all
outstanding shares of 8% Preferred Stock. The Corporation
will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance
upon the conversion of 8% Preferred Stock as herein
provided, such number of shares of Common Stock as shall
then be issuable upon the conversion of all outstanding
shares of 8% Preferred Stock. The Corporation covenants
that all shares of Common Stock which shall be so issued
shall be duly and validly issued, fully paid and non-
assessable. The Corporation will take all such action as
may be so taken without violation of any applicable law or
regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed to have a
sufficient number of authorized but unissued shares of
Common Stock to issue upon conversion of the 8% Preferred
Stock. The Corporation will not take any action which
results in any adjustment of the conversion rights if the
total number of shares of Common Stock issued and issuable
after such action upon conversion of the 8% Preferred Stock
would exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of
Incorporation, as amended.
SECTION 8.6 Withholding. To the extent required by
applicable law, the Corporation may withhold amounts for or
on account of any taxes imposed or levied by or on behalf of
any taxing authority in the United States having
jurisdiction over the Corporation from any payments made
pursuant to the 8% Preferred Stock.
SECTION 8.7 Headings. The headings of the Articles
and Sections of this Certificate of Determination are
inserted for convenience only and do not constitute a part
of this Certificate of Determination.
THIRD. The authorized number of shares of 8%
Convertible Preferred Stock is 1,600, of which none have
been issued.
We further declare under penalty of perjury under the
laws of the State of California that the matters set forth
in this certificate are true and correct of our own
knowledge.
Date: January 19, 1999.
PCC GROUP, INC.
By:
Don Johnson, VicePresident
By:
Gary Blum, Secretary
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
Attest:
exhibit 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of 14,
January 1999, between PCC Group Inc., a California
corporation with principal executive offices located at 163
University Parkway, Pomona, California, 91768 (the
"Company"), and JMG Capital Partners, L.P. ("JMG") and
Triton Capital Investments, Ltd. ("Triton," and together
with JMG, the "Buyers").
W I T N E S S E T H:
WHEREAS, Buyers desire to purchase from the
Company, and the Company desires to issue and sell to
Buyers, upon the terms and subject to the conditions of this
Agreement, (i) 1,600 shares of 8% Convertible Preferred
Stock, $.01 par value (the "Preferred Stock"), having the
rights, preferences and privileges set forth in the
Certificate of Determination of Rights, Preferences,
Privileges and Restrictions of 8% Preferred Stock of PCC
Group Inc. attached hereto as Annex I (the "8% Certificate
of Determination");
WHEREAS, upon the terms and subject to the
conditions set forth in the 8% Certificate of Determination,
the Preferred Stock is convertible into shares of the
Company's Common Stock, $.01 par value ("Common Stock");
NOW THEREFORE, in consideration of the premises
and the mutual covenants contained herein, the parties
hereto, intending to be legally bound, hereby agree as
follows:
I. PURCHASE AND SALE OF PREFERRED STOCK
A. Transaction. Buyers hereby severally and jointly
agree to purchase from the Company, and the Company has
offered and hereby agrees to issue and sell to Buyers in a
transaction exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Preferred Stock.
B. Purchase Price; Form of Payment. The purchase
price for the Preferred Stock to be purchased by Buyers
hereunder shall be equal to $1,600,000 (the "Purchase
Price"). Buyers shall pay the Purchase Price in the manner
set forth below:
1. Tranche I. On the date hereof, each of the
Buyers shall pay Three Hundred Seventy-five Thousand Dollars
($375,000) by wire transfer of immediately available funds
("Tranche I") to the Company. Simultaneously against receipt
by the Company of Tranche I of the Purchase Price, the
Company shall deliver to each of the Buyers one or more duly
authorized, issued and executed certificates (I/N/O each
Buyer or, if the Company otherwise has been notified, I/N/O
such Buyer's nominee) evidencing 375 shares of the Preferred
Stock (the "Tranche I Preferred Stock").
2. Tranche II. On the date that the Securities
and Exchange Commission (the "Commission") declares
effective the registration statement filed by the Company to
register an adequate number of shares of Common Stock upon
conversion of the Preferred Stock (the "Registration
Statement"), each Buyer shall pay Four Hundred Twenty-Five
Thousand Dollars ($425,000) by wire transfer of immediately
available funds to the Company. Simultaneously against
receipt by the Company of Tranche II of the Purchase Price,
the Company shall deliver to each of the Buyers one or more
duly authorized, issued and executed certificates (I/N/O
each Buyer or, if the Company otherwise has been notified,
I/N/O such Buyer's nominee) evidencing 425 shares of the
Preferred Stock (the "Tranche II Preferred Stock").
C. Method of Payment. Payment of the Purchase Price
shall be made by wire transfer of immediately available
funds to:
Imperial Bank
201 N. Figueroa Street
Los Angeles, CA 90012
ABA #: E 122201444
For the Account of: PCC Group, Inc.
Account #: 0009-088-938
Reference: JMG/Triton
Simultaneously with the execution of this Agreement, the
Buyers shall pay to the Company Tranche I of the Purchase
Price and the Company shall deliver to the Buyers the
Tranche I Preferred Stock.
II. BUYERS' REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Each Buyer severally and jointly represents and
warrants to, and covenants and agrees with, the Company as
follows:
A. Each Buyer is purchasing the Preferred Stock for
its own account, for investment purposes only and not with a
view towards or in connection with the public sale or
distribution thereof in violation of the Securities Act.
B. Each Buyer is (i) an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities
Act, (ii) experienced in making investments of the kind
contemplated by this Agreement, (iii) capable, by reason of
its business and financial experience, of evaluating the
relative merits and risks of an investment in the Securities
(as defined below), and (iv) able to afford the loss of its
investment in the Preferred Stock.
C. Each Buyer understands that the Preferred Stock is
being offered and sold by the Company in reliance on an
exemption from the registration requirements of the
Securities Act and equivalent state securities and "blue
sky" laws, and that the Company is relying upon the accuracy
of, and Buyers' compliance with, Buyers' representations,
warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the
eligibility of Buyers to purchase the Preferred Stock.
D. Each Buyer has been furnished with or provided
access to all materials relating to the business, financial
position and results of operations of the Company, and all
other materials requested by Buyer to enable it to make an
informed investment decision with respect to the Preferred
Stock.
E. Each Buyer acknowledges that it has been furnished
with copies of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998 and all other
reports and documents heretofore filed by the Company with
the Commission pursuant to the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since December 31, 1998 (collectively the "Commission
Filings").
F. Each Buyer acknowledges that in making its
decision to purchase the Preferred Stock it has been given
an opportunity to ask questions of and to receive answers
from the Company's executive officers, directors and
management personnel concerning the terms and conditions of
the private placement of the Preferred Stock by the Company.
G. Each Buyer understands that the Preferred Stock
has not been approved or disapproved by the Commission or
any state securities commission and that the foregoing
authorities have not reviewed any documents or instruments
in connection with the offer and sale to it of the Preferred
Stock and have not confirmed or determined the adequacy or
accuracy of any such documents or instruments.
H. This Agreement has been duly and validly
authorized, executed and delivered by each Buyer and is a
valid and binding agreement of such Buyer enforceable
against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyers that:
A. Capitalization.
1. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, of which
2,705,330 shares are outstanding as of December 31, 1998;
5,000,000 shares of Preferred Stock, of which 250,000 shares
are designated as Series A Preferred Stock, none of which
are outstanding as of the date hereof, and 250,000 shares
are designated as New Series A Preferred Stock, all of which
shares are outstanding as of the date hereof. All of the
issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-
assessable. As of December 31, 1998, the Company has
outstanding stock options and warrants, and convertible
preferred stock to purchase 965,000 shares of Common Stock.
The shares of Common Stock issued upon conversion of the
Preferred Stock (the "Conversion Shares," and together with
the shares of Preferred Stock, the "Securities") have been
duly and validly authorized and reserved for issuance by the
Company, and when issued by the Company upon conversion of
the Preferred Stock will be duly and validly issued, fully
paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such
holder. There are no preemptive, subscription, "call" or
other similar rights to acquire the Common Stock (including
the Conversion Shares) that have been issued or granted to
any person.
2. Except as set forth on Schedule III.A.2.
hereto, the Company does not own or control, directly or
indirectly, any interest in any other corporation,
partnership, limited liability company, unincorporated
business organization, association, trust or other business
entity.
B. Organization; Reporting Company Status.
1. The Company and each of its subsidiaries
listed on Schedule III.B.1 (the "Subsidiaries") are
corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of
organization and are duly qualified as a foreign corporation
in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business,
properties, condition (financial or otherwise) or results of
operations of the Company or on the consummation of any of
the transactions contemplated by this Agreement (a "Material
Adverse Effect"). The Subsidiaries are the only
subsidiaries of the Company.
2. The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and, except as
described on Schedule III.B.2 has timely filed with the
Commission all reports and information required to be filed
by it pursuant to all reporting obligations under Section
13(a) or 15(d), as applicable, of the Exchange Act for the
12-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the Nasdaq SmallCap
Market and the Company has not received any notice
regarding, and to its knowledge there is no threat, of the
termination or discontinuance of the eligibility of the
Common Stock for such listing.
C. Authorized Shares. The Company has duly and
validly authorized and reserved for issuance a sufficient
number of Conversion Shares of the Preferred Stock. The
Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the
Preferred Stock and the Conversion Shares upon conversion of
the Preferred Stock. The Company further acknowledges that
its obligation to issue the Preferred Stock and the
Conversion Shares upon conversion of the Preferred Stock in
accordance with this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case
under 11 U.S.C. 101 et seq. (the "Bankruptcy Code"). In
the event the Company is a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. 362 in
respect of the conversion of the Preferred Stock. The
Company agrees, without cost or expense to Buyers, to take
or consent to any and all action necessary to effectuate
relief under 11 U.S.C. 362.
D. Authority; Validity and Enforceability. The
Company has the requisite corporate power and authority to
enter into this Agreement, the 8% Certificate of
Determination, the Registration Rights Agreement of even
date herewith between the Company and Buyers, a copy of
which is annexed hereto as Annex II (the "Registration
Rights Agreement") and to perform all of its obligations
hereunder and thereunder (including the issuance, sale and
delivery to Buyers of the Securities). The execution,
delivery and performance by the Company of this Agreement,
the 8% Certificate of Determination and the Registration
Rights Agreement, and the consummation by the Company of the
transactions contemplated hereby and thereby (the issuance
of the Preferred Stock, and the issuance and reservation for
issuance of the Conversion Shares), has been duly authorized
by all necessary corporate action on the part of the
Company. Each of this Agreement, the 8% Certificate of
Determination and the Registration Rights Agreement has been
duly validly executed and delivered by the Company and each
instrument constitutes a valid and binding obligation of the
Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally. The
Preferred Stock have been duly and validly authorized for
issuance by the Company and, when executed and delivered by
the Company, will be valid and binding obligations of the
Company enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies
generally.
E. Non-contravention. The execution and delivery by
the Company of this Agreement, the 8% Certificate of
Determination and the Registration Rights Agreement, the
issuance of the Securities, and the consummation by the
Company of the other transactions contemplated hereby and
thereby, do not and will not conflict with or result in a
breach by the Company or the Subsidiaries of any of the
terms or provisions of, or constitute a default (or an event
which, with notice, lapse of time or both, would constitute
a default) under (i) the articles of incorporation or by-
laws of the Company or the Subsidiaries or (ii) except for
such conflict, breach or default which would not have a
Material Adverse Effect, any indenture, mortgage, deed of
trust or other material agreement or instrument to which the
Company or the Subsidiaries is a party or by which their
respective properties or assets are bound, or any law, rule,
regulation, decree, judgment or order of any court or public
or governmental authority having jurisdiction over the
Company or the Subsidiaries or any of the Company's or the
Subsidiaries' respective properties or assets.
F. Approvals. No authorization, approval or consent
of any court or public or governmental authority is required
to be obtained by the Company for the issuance and sale of
the Preferred Stock (and the Conversion Shares) to Buyers as
contemplated by this Agreement, except such authorizations,
approvals and consents that have been obtained by the
Company prior to the date hereof.
G. Commission Filings. None of the Commission
Filings contained at the time they were filed any untrue
statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements made therein, in light of the
circumstances under which they were made, not misleading.
H. Absence of Certain Changes. Except as disclosed in
the Financial Statements (as defined in Section III.L.
hereto), since the Balance Sheet Date (as defined in Section
III.L.), there has not occurred any change, event or
development in the business, financial condition, prospects
or results of operations of the Company or the Subsidiaries,
and there has not existed any condition having or reasonably
likely to have, a Material Adverse Effect.
I. Full Disclosure. There is no fact known to the
Company (other than general economic or industry conditions
known to the public generally) that has not been fully
disclosed in writing to the Buyers that (i) reasonably would
be expected to have a Material Adverse Effect or (ii)
reasonably would be expected to materially and adversely
affect the ability of the Company to perform its obligations
pursuant to this Agreement, the 8% Certificate of
Determination or the Registration Rights Agreement.
J. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation pending or, to
the Company's knowledge, threatened, by or before any court
or public or governmental authority which, if determined
adversely to the Company, would have a Material Adverse
Effect.
K. Absence of Events of Default. No "Event of
Default" (as defined in any agreement or instrument to which
the Company is a party) and no event which, with notice,
lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing, which could
have a Material Adverse Effect.
L. Financial Statements; No Undisclosed Liabilities.
The Company has delivered to Buyers true and complete copies
of its audited balance sheet as at September 30, 1998 and
the related audited statements of operations and cash flows
for the fiscal year ended September 30, 1998 including the
related notes and schedules thereto (collectively, the
"Financial Statements"), and all management letters, if any,
from the Company's independent auditors relating to the
dates and periods covered by the Financial Statements. Each
of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with
United States General Accepted Accounting Principles
("GAAP") (subject, in the case of the interim Financial
Statements, to normal year end adjustments and the absence
of footnotes) and in conformity with the practices
consistently applied by the Company without modification of
the accounting principles used in the preparation thereof,
and fairly presents the financial position, results of
operations and cash flows of the Company as at the dates and
for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at September 30, 1998 is
hereinafter referred to as the "Balance Sheet" and September
30, 1998 is hereinafter referred to as the "Balance Sheet
Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due)
that would have been required to be reflected in, reserved
against or otherwise described in the Balance Sheet or in
the notes thereto in accordance with GAAP, which was not
fully reflected in, reserved against or otherwise described
in the Balance Sheet or the notes thereto or was not
incurred in the ordinary course of business consistent with
the Company's past practices since the Balance Sheet Date.
M. Compliance with Laws; Permits. The Company and
the Subsidiaries are in compliance with all laws, rules,
regulations, codes, ordinances and statutes (collectively
"Laws") applicable to them or to the conduct of their
respective businesses, except for such non-compliance which
would not have a Material Adverse Effect. The Company and
the Subsidiaries possess all permits, approvals,
authorizations, licenses, certificates and consents from all
public and governmental authorities which are necessary to
conduct their respective businesses, except for those the
absence of which would not have a Material Adverse Effect.
N. Related Party Transactions. Neither the Company
nor any of its officers, directors or "Affiliates" (as such
term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness
or other similar obligations to the Company. Neither the
Company nor any of its officers, directors or Affiliates (i)
owns any direct or indirect interest constituting more than
a one percent equity (or similar profit participation)
interest in, or controls or is a director, officer, partner,
member or employee of, or consultant to or lender to or
borrower from, or has the right to participate in the
profits of, any person or entity which is (x) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of
the Company, (y) engaged in a business related to the
business of the Company , or (z) a participant in any
transaction to which the Company is a party (other than in
the ordinary course of the Company's business) or (ii) is a
party to any contract, agreement, commitment or other
arrangement with the Company.
O. Insurance. The Company maintains property and
casualty, general liability, workers' compensation,
environmental hazard, personal injury and other similar
types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry
standards and the Company's historical claims experience.
The Company has not received notice from, and has no
knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends
to deny coverage under or cancel, discontinue or not renew
any insurance policy presently in force.
P. Securities Law Matters. Based, in part, upon the
representations and warranties of Buyer set forth in Section
II hereof, the offer and sale by the Company of the
Securities is exempt from (i) the registration and
prospectus delivery requirements of the Securities Act and
the rules and regulations of the Commission thereunder and
(ii) the registration and/or qualification provisions of all
applicable state securities and "blue sky" laws. Other than
pursuant to an effective registration statement under the
Securities Act, the Company has not issued, offered or sold
Preferred Stock or any shares of Common Stock (including for
this purpose any securities of the same or a similar class
as the Preferred Stock or Common Stock, or any securities
convertible into or exchangeable or exercisable for
Preferred Stock or Common Stock or any such other
securities) within the 6-month period next preceding the
date hereof, except as previously disclosed in writing to
Buyers, and the Company shall not directly or indirectly
take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any
person or entity of Preferred Stock or shares of Common
Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company
for the offer and sale to Buyers of the Securities as
contemplated by this Agreement. No form of general
solicitation or advertising has been used or authorized by
the Company or any of its officers, directors or Affiliates
in connection with the offer or sale of the Securities as
contemplated by this Agreement or any other agreement to
which the Company is a party.
Q. Environmental Matters.
1. The operations of the Company and the
Subsidiaries are in material compliance with all applicable
Environmental Laws and all permits issued pursuant to
Environmental Laws or otherwise.
2. To its knowledge, the Company and the
Subsidiaries have obtained or applied for all material
permits required under all applicable Environmental Laws
necessary to operate their respective businesses.
3. Neither the Company nor the Subsidiaries is
the subject of any outstanding written order of or agreement
with any governmental authority or person respecting (i)
Environmental Laws, (ii) Remedial Action or (iii) any
Release or threatened Release of Hazardous Materials.
4. Neither the Company nor the Subsidiaries has
received, since the Balance Sheet Date, any written
communication alleging that it may be in violation of any
Environmental Law or any permit issued pursuant to any
Environmental Law, or may have any liability under any
Environmental Law.
5. Neither the Company nor the Subsidiaries has
any current contingent liability in connection with any
Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site).
6. To the Company's knowledge, there are no
investigations of the business, operations, or currently or
previously owned, operated or leased property of the Company
or the Subsidiaries pending or threatened which could lead
to the imposition of any liability pursuant to any
Environmental Law.
7. Neither the Company nor the Subsidiaries have
any of their properties located (A) underground storage
tanks, (B) asbestos-containing material or (C) equipment
containing polychlorinated biphenyls.
8. The Company has provided to Buyers all
environmentally related audits, studies, reports, analyses,
and results of investigations that have been performed with
respect to the currently or previously owned, leased or
operated properties of the Company and the Subsidiaries.
9. For purposes of this Section III.Q.:
"Environmental Law" means any foreign,
federal, state or local statute, regulation, ordinance, or
rule of common law as now or hereafter in effect in any way
relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42
U.S.C. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. 6901 et
seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. 136 et seq.), and the Occupational Safety and
Health Act (29 U.S.C. 651 et seq.), and the regulations
promulgated pursuant thereto.
"Hazardous Material" means any substance,
material or waste which is regulated by the United States,
Canada or any of its provinces, or any state or local
governmental authority including, without limitation,
petroleum and its by-products, asbestos, and any material or
substance which is defined as a "hazardous waste,"
"hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste,"
"contaminant," "pollutant," "toxic waste" or toxic
substance" under any provision of any Environmental Law;
"Release" means any release, spill,
filtration, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, or leaching into the indoor
or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x)
clean up, remove, treat or in any other way address any
Hazardous Material; (y) prevent the Release of any Hazardous
Material so it does not endanger or threaten to endanger
public health or welfare or the indoor or outdoor
environment; or (z) perform pre-remedial studies and
investigations or post-remedial monitoring and care.
R. Labor Matters. Neither the Company nor the
Subsidiaries is party to any labor or collective bargaining
agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company or the
Subsidiaries. No employees of the Company or the
Subsidiaries are represented by any labor organization and
none of such employees has made a pending demand for
recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently
pending or, to the Company's knowledge, threatened to be
brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing
activity involving the Company or the Subsidiaries pending
or to the Company's knowledge, threatened by any labor
organization or group of employees of the Company or the
Subsidiaries. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material
grievances or other labor disputes pending or, to the
knowledge of the Company, threatened against or involving
the Company or the Subsidiaries. There are no unfair labor
practice charges, grievances or complaints pending or, to
the knowledge of the Company, threatened by or on behalf of
any employee or group of employees of the Company or the
Subsidiaries.
S. ERISA Matters. The Company and its ERISA
Affiliates are in compliance in all material respects with
all provisions of ERISA applicable to it. Neither the
Company nor any ERISA Affiliate maintains, contributes,
maintained or contributed to a plan subject to the
provisions of Title IV of ERISA or Section 412 of the
Internal Revenue Code.
For purposes of this Section III.S.:
"ERISA" means the Employee Retirement Income
Security Act of 1974, or any successor statute, together
with the final regulations promulgated thereunder, as the
same may be amended from time to time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated) that is a member of a group of
which the Company is a member and which is treated as a
single employer under 414 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code").
T. Tax Matters.
1. The Company and the Subsidiaries have filed
all Tax Returns which they are required to file under
applicable Laws, except for such Tax Returns in respect of
which the failure to so file does not and could not have a
Material Adverse Effect; all such Tax Returns are true and
accurate in all material respects and have been prepared in
compliance with all applicable Laws; the Company and the
Subsidiaries have paid all Taxes due and owing by them
(whether or not such Taxes are required to be shown on a Tax
Return) and have withheld and paid over to the appropriate
taxing authorities all Taxes which they are required to
withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for
Taxes with respect to the Company and the Subsidiaries
(including any provisions for deferred income taxes)
reflected on the books of the Company and the Subsidiaries
are adequate to cover any Tax liabilities of the Company and
the Subsidiaries if its current tax year were treated as
ending on the date hereof.
2. No claim has been made by a taxing authority
in a jurisdiction where the Company and the Subsidiaries do
not file tax returns that such corporation is or may be
subject to taxation by that jurisdiction. There are no
foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being
conducted with respect to the Company; no information
related to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except as
disclosed above, no written notice indicating an intent to
open an audit or other review has been received by the
Company or the Subsidiaries from any foreign, federal, state
or local taxing authority. There are no material unresolved
questions or claims concerning the Company's or the
Subsidiaries' Tax liability. The Company (A) has not
executed or entered into a closing agreement pursuant to
7121 of the Internal Revenue Code or any predecessor
provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to
make any adjustments pursuant to 481 (a) of the Internal
Revenue Code or any similar provision of state, local or
foreign law by reason of a change in accounting method
initiated by the Company or has any knowledge that the IRS
has proposed any such adjustment or change in accounting
method, or has any application pending with any taxing
authority requesting permission for any changes in
accounting methods that relate to the business or operations
of the Company. The Company has not been a United States
real property holding corporation within the meaning of
897(c)(2) of the Internal Revenue Code during the
applicable period specified in 897(c)(1)(A)(ii) of the
Internal Revenue Code.
3. The Company has not made an election under
341(f) of the Internal Revenue Code. The Company is not
liable for the Taxes of another person that is not a
subsidiary of the Company under (A) Treas. Reg. 1.1502-6
(or comparable provisions of state, local or foreign law),
(B) as a transferee or successor, (C) by contract or
indemnity or (D) otherwise. The Company is not a party to
any tax sharing agreement. The Company has not made any
payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that
would not be deductible under 280G of the Internal Revenue
Code.
4. For purposes of this Section III.T.:
"IRS" means the United States Internal
Revenue Service.
"Tax" or "Taxes" means federal, state,
county, local, foreign, or other income, gross receipts, ad
valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental,
communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative
or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information
report or filing with respect to Taxes, including any
schedules attached thereto and including any amendment
thereof.
U. Property. The Company does not own any real
property. Each of the Company and the Subsidiaries has good
and marketable title to all personal property owned by it,
free and clear of all liens, encumbrances and defects except
such as do not materially affect the value of such property
and do not materially interfere with the use made and
proposed to be made of such property by the Company or the
Subsidiaries; and any real property and buildings held under
lease by the Company or the Subsidiaries are held by such
person under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property
and buildings by the Company or the Subsidiaries.
V. Intellectual Property. The Company owns or
possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) and
other similar rights and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the best of the
Company's knowledge, the Company is not infringing upon or
in conflict with any right of any other person with respect
to any Intangibles. No claims have been asserted by any
person to the ownership or use of any Intangibles and the
Company has no knowledge of any basis for such claim.
W. Internal Controls and Procedures. The Company
maintains accurate books and records and internal accounting
controls which provide reasonable assurance that (i) all
transactions to which the Company is a party or by which its
properties are bound are executed with management's
authorization; (ii) the reported accountability of the
Company's assets is compared with existing assets at regular
intervals; (iii) access to the Company's assets is permitted
only in accordance with management's authorization; and (iv)
all transactions to which the Company is a party or by which
its properties are bound are recorded as necessary to permit
preparation of the financial statements of the Company in
accordance with GAAP.
X. Payments and Contributions. Neither the Company
nor any of its directors, officers or, to its knowledge,
other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company
funds to any foreign or domestic government official or
employee; (iii) violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any bribe, rebate, payoff, influence payment,
kickback or other similar payment to any person with respect
to Company matters.
Y. No Misrepresentation. No representation or
warranty of the Company contained in this Agreement, any
schedule, annex or exhibit hereto or any agreement,
instrument or certificate furnished by the Company to Buyers
pursuant to this Agreement, contains any untrue statement of
a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements
therein, not misleading.
Z. Right of First Refusal. The Company has not
granted any right of first refusal to any person with
respect to the issuance of Common Stock or securities
convertible into Common Stock.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. Restrictive Legend. Buyers acknowledge and agree
that, upon issuance pursuant to this Agreement, the
Securities (and any shares of Common Stock issued in
conversion of the Preferred Stock) shall have endorsed
thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
Preferred Stock and the Conversion Shares:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND ARE
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
B. Agreement to Register. The Company shall promptly
prepare and file with the Commission the Registration
Statement and shall use its best efforts to cause the
Commission to declare the Registration Statement effective
under the Securities Act as promptly as practicable, but in
no event later than 120 days after the Tranche I Closing
Date (as hereinafter defined).
C. Filings. The Company shall make all necessary SEC
and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to Buyers as
required by all applicable Laws, and shall provide a copy
thereof to Buyers promptly after such filing.
D. Reporting Status. So long as Buyers beneficially
own any of the Securities, the Company shall use its best
efforts to file all reports required to be filed by it with
the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
E. Listing. Except to the extent the Company lists
its Common Stock on The New York Stock Exchange or the
Nasdaq National Market, the Company shall use its best
efforts to maintain its listing of the Common Stock on the
Nasdaq SmallCap Market.
F. Reserved Conversion Shares. Subject to Article 5
of the 8% Certificate of Determination, the Company at all
times from and after the date hereof shall have a sufficient
number of shares of Common Stock duly and validly authorized
and reserved for issuance to satisfy the conversion, in
full, of the Preferred Stock.
G. Convertible Funding Exclusive. Except for
Preferred Stock issued to the Buyers, the Company shall not
issue additional convertible securities unless (i) such
securities are being purchased by the Buyers, (ii) the
Buyers have fully converted all of its Preferred Stock in
conjunction with this Agreement (and any additional
financing), or (iii) the Company has redeemed all
outstanding shares of Preferred Stock issued to the Buyers
in conjunction with this Agreement (and any additional
purchase of additional convertible securities by the
Buyers).
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no
instruction other than the instructions referred to in this
Section V and customary stop transfer instructions prior to
the registration and sale of the Common Stock pursuant to an
effective Securities Act registration statement will be
given to its transfer agent for the Common Stock and that
the Conversion Shares shall be freely transferable on the
books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights
Agreement and applicable law. Nothing contained in this
Section V.A. shall affect in any way Buyers' obligations and
agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, any of the
Buyers provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of
the resale by such Buyer of such Common Stock is not
required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the
Company shall permit the transfer of such Common Stock and,
promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without any
restrictive legends endorsed thereon.
B. The Company shall permit Buyers to exercise their
right to convert the Preferred Stock by telecopying an
executed and completed Notice of Conversion to the Company.
Each date on which a Notice of Conversion is telecopied to
and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date. The
Company shall transmit the certificates evidencing the
shares of Common Stock issuable upon conversion of any
Preferred Stock (together with certificates evidencing any
Preferred Stock not being so converted) to the applicable
Buyer via express courier, by electronic transfer or
otherwise, within five (5) business days after receipt by
the Company of the Notice of Conversion (the "Delivery
Date"). Within two (2) business days after such Buyer
receives the foregoing shares of Common Stock from the
Company, Buyer shall deliver to the Company the Preferred
Stock being converted. Buyers shall indemnify the Company
for any damages to third parties as a result of a claim by
such third party to ownership of the Preferred Stock
converted prior to receipt of the Preferred Stock by the
Company.
C. The Company understands that a delay in the
issuance of the shares of Common Stock issuable upon the
conversion of the Preferred Stock beyond the applicable
Delivery Date could result in economic loss to Buyers. As
compensation to Buyers for such loss (and not as a penalty),
the Company agrees to pay to Buyers for late issuance of
Common Stock upon conversion of the Preferred Stock in
accordance with the following schedule (where "No. of
Business Days" is defined as the number of business days
beyond three (3) days from the Delivery Date):
Compensation For Each 10
Shares of
No. of Business Days Preferred Stock
Not Issued Timely
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each
Business Day Late
beyond 10 days
The Company shall pay to Buyers the compensation described
above by the transfer of immediately available funds upon
Buyers' demand. Nothing herein shall limit Buyers' right to
pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyers (which actual damages shall
be reduced by the amount of any compensation paid by the
Company as described above in this Section V.C.), and in
addition to any other remedies which may be available to
Buyers, in the event the Company fails for any reason to
effect delivery of such shares of Common Stock within five
(5) business days after the relevant Delivery Date, Buyers
shall be entitled to rescind the relevant Notice of
Conversion by delivering a notice to such effect to the
Company whereupon the Company and Buyers shall each be
restored to their respective original positions immediately
prior to delivery of such Notice of Conversion on delivery.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company on a
"delivery-against-payment basis" at the Closing.
VII. CLOSING DATE.
The date (the "Closing Date") of the issuance and
sale of the Preferred Shares (the "Closing") shall be (i)
for Tranche I, the date hereof or such other date as shall
be mutually agreed upon in writing (the "Tranche I Closing
Date") and (ii) for Tranche II, the date on which the
Commission declares effective the Registration Statement or
such other date as shall be mutually agreed upon in writing
(the "Tranche II Closing Date"). The issuance and sale of
the Securities shall occur on each of the Closing Dates at a
time mutually agreed upon by the parties at the offices of
Troy & Gould located at 1801 Century Park East, 16th Floor,
Los Angeles, CA 90067 or such other location as shall be
mutually agreed upon by the parties.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
Each Buyer understands that the Company's obligation to
sell the Securities on each Closing Date to Buyers pursuant
to this Agreement is conditioned upon the following:
A. The accuracy in all material respects on the
Closing Date of the representations and warranties of Buyer
contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their
express terms, are as of and relate to a specified date, in
which case such accuracy shall be measured as of such
specified date) and the performance by Buyer in all material
respects on or before each Closing Date of all covenants and
agreements of Buyer required to be performed by it pursuant
to this Agreement on or before each Closing Date;
B. There shall not be in effect any Law or order,
ruling, judgment or writ of any court or public or
governmental authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this
Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
A. The Company understands that Buyers' obligation to
purchase the Preferred Stock on each Closing Date pursuant
to this Agreement is conditioned upon the following:
1. Delivery by the Company of one or more
certificates (I/N/O Buyers) evidencing the Securities to be
purchased by Buyers pursuant to this Agreement;
2. The accuracy in all material respects on each
Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on each
Closing Date (except for representations and warranties
which, by their express terms, speak as of and relate to a
specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by
the Company in all material respects on or before each
Closing Date of all covenants and agreements of the Company
required to be performed by it pursuant to this Agreement on
or before each Closing Date;
3. Buyers having received an opinion of counsel
for the Company, dated each Closing Date, in form, scope and
substance reasonably satisfactory to Buyers.
4. There not having occurred (i) any general
suspension of trading in, or limitation on prices listed
for, the Common Stock on the Nasdaq SmallCap Market, (ii)
the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) the
commencement of a war, armed hostilities or other
international or national calamity directly or indirectly
involving the United States or any of its territories,
protectorates or possessions, or (iv) in the case of the
foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
5. There not having occurred any event or
development, and there being in existence no condition,
having or which reasonably and foreseeably would have a
Material Adverse Effect.
6. There shall not be in effect any Law or
order, ruling, judgment or writ of any court or public or
governmental authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this
Agreement.
7. The Company shall have delivered to Buyers
reimbursement of Buyers' out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by
this Agreement, including the fees and disbursements of
Buyer's legal counsel, Piper & Marbury L.L.P., of Ten
Thousand Dollars ($10,000) by wire transfer of immediately
available funds to:
First National Bank of Maryland
25 South Charles Street
Baltimore, MD 21201
ABA #: 052000113
For the Account of: Piper & Marbury LLP
Operating Account
Account #: 074-8148-5
Reference: 27468-12; Pacific Continental
Securities, Corp.
8. The Company shall have delivered to Pacific
Continental Securities, Corp. a placement fee of Sixty
Thousand Dollars ($60,000) on the Tranche I Closing Date
and, if the Registration Statement becomes effective no
later than 120 days after the Tranche I Closing Date, the
Company shall deliver to Pacific Continental Securities,
Corp a placement fee of Sixty-Eight Thousand Dollars
($68,000) on the Tranche II Closing Date by wire transfer of
immediately available funds to:
Bank of America
8381 Wilshire Blvd.
Beverly Hills, CA 90211
ABA #: 121 000 358
SWIFT #: BOFAUS6S
For the Account of: Pacific Continental
Securities Corp.
Account #: 03809 06218
Reference: PCC Group, Inc.
B. The Company understands that Buyers' obligation to
purchase the Tranche II Preferred Stock on the Tranche II
Closing Date pursuant to this Agreement is conditioned upon
the effectiveness of the Registration Statement by no later
than 120 days after the Tranche I Closing Date.
X. TERMINATION.
A. Termination by Mutual Written Consent. This
Agreement may be terminated and the transactions
contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written
consent of the Company and Buyers.
B. Termination by the Company or Buyers. This
Agreement may be terminated and the transactions
contemplated hereby may be abandoned by action of the
Company or Buyers if (i) the Closing shall not have occurred
at or prior to 5:00 p.m., Los Angeles, California time, on
February 1, 1999; provided, however, that the right to
terminate this Agreement pursuant to this Article X.B(i)
shall not be available to any party whose failure to fulfill
any of its obligations under this Agreement has been the
cause of or resulted in the failure of the Closing to occur
at or before such time and date or (ii) any court or public
or governmental authority shall have issued an order,
ruling, judgment or writ, or there shall be in effect any
Law, restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by this
Agreement.
C. Termination by Buyers. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by Buyers at any time prior to the Closing Date,
if (i) the Company shall have failed to comply in any
material respect with any of its covenants or agreements
contained in this Agreement, (ii) the Commission does not
declare the Registration Statement effective within 120 days
after the Tranche I Closing Date, (iii) there shall have
been a breach by the Company with respect to any
representation or warranty made by it in this Agreement, or
(iv) there shall have occurred any event or development, or
there shall be in existence any condition, having or
reasonably and foreseeably likely to have a Material Adverse
Effect.
D. Termination by the Company. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by the Company at any time prior to the Closing
Date, if (i) any Buyer shall have failed to comply in any
material respect with any of its covenants or agreements
contained in this Agreement or (ii) there shall have been a
breach by any Buyer with respect to any representation or
warranty made by it in this Agreement.
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made
by each of the Company and Buyers in this Agreement, the
annexes, schedules and exhibits hereto and in each
instrument, agreement and certificate entered into and
delivered by them pursuant to this Agreement, shall survive
the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants
have been made shall have all rights and remedies for such
breach or violation available to it under the provisions of
this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold
harmless Buyers, their Affiliates and their respective
officers, directors, partners and members (collectively, the
"Buyer Indemnitees"), from and against any and all losses,
claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses"), and agrees to
reimburse the Buyer Indemnitees for all out-of-pocket
expenses (including the reasonable fees and expenses of
legal counsel), in each case promptly as incurred by the
Buyer Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact or
breach of any of the Company's representations or
warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by
the Company pursuant to this Agreement; or
2. any failure by the Company to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this
Agreement, the annexes, schedules or exhibits hereto or
any instrument, agreement or certificate entered into
or delivered by the Company pursuant to this Agreement.
C. Buyers hereby severally and not jointly agree to
indemnify and hold harmless the Company, its Affiliates and
their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against
any and all Losses, and agree to reimburse the Company
Indemnitees for all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the
extent arising out of or in connection with:
1. any misrepresentation, omission of fact, or
breach of any of Buyers' representations or warranties
contained in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyers
pursuant to this Agreement; or
2. any failure by Buyers to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement
or any instrument, certificate or agreement entered
into or delivered by Buyers pursuant to this Agreement.
D. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section XI (an
"Indemnified Party") of written notice of any investigation,
claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against
whom indemnification pursuant to this Section XI is being
sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying
Party shall not relieve it from any liability that it
otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of
such failure. In connection with any Claim as to which both
the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate
legal counsel (together with appropriate local counsel) and
to participate in the defense of such Claim, and the
Indemnifying Party shall bear the reasonable fees, out-of-
pocket costs and expenses of such separate legal counsel to
the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, out-of-pocket
costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that
representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due
to actual or, as reasonably determined by legal counsel to
the Indemnified Party, (i) potentially differing interests
between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to
the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party and which can
not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal
counsel reasonably satisfactory to the Indemnified Party
within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than
as described in clauses (x), (y) or (z) above, the fees,
costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with
any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel).
The Indemnifying Party shall not, without the prior written
consent of the Indemnified Party (which consent shall not
unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include
an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
E. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or
demand being asserted by a third party, the Indemnified
Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of
the Indemnified Party and the Indemnifying Party or by
binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration
Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, without
regard to the conflicts of law principles of such state.
Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the
City of Los Angeles or the state courts of the State of
California sitting in the City of Los Angeles in connection
with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto.
This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of
this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this
Agreement. 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. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to
the subject matter hereof.
XIII. NOTICES. Except as may be otherwise provided
herein, any notice or other communication or delivery
required or permitted hereunder shall be in writing and
shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight
courier service, and shall be deemed given when so delivered
personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the U.S. mails,
as follows:
(1) if to the Company, to:
PCC Group Inc.
163 University Parkway
Pomona, CA 91768
Attention: Mr. Don Johnson
(2) if to Buyer, to
JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 2530
Los Angeles, CA 90067
Attention: Mr. Jonathan Glacer
and
Triton Capital Investments, Ltd.
1999 Avenue of the Stars, Suite 2530
Los Angeles, CA 90067
Attention: Mr. Jonathan Glacer
The Company or Buyers may change the foregoing address by
notice given pursuant to this Section XVIII.
XIV. CONFIDENTIALITY. Each of the Company and Buyers agrees
to keep confidential and not to disclose to or use for the
benefit of any third party the terms of this Agreement or
any other information which at any time is communicated by
the other party as being confidential without the prior
written approval of the other party; provided, however, that
this provision shall not apply to information which, at the
time of disclosure, is already part of the public domain
(except by breach of this Agreement) and information which
is required to be disclosed by law (including, without
limitation, pursuant to Item 10 of Rule 601 of Regulation S-
K under the Securities Act and the Exchange Act).
XV. ASSIGNMENT. This Agreement shall not be assignable by
either of the parties hereto prior to the Closing without
the prior written consent of the other party, and any
attempted assignment contrary to the provisions hereby shall
be null and void; provided, however, that Buyers may assign
their rights and obligations hereunder, in whole or in part,
to each other or any affiliate of either of the Buyers who
furnishes to the Company the representations and warranties
set forth in Section II hereof and otherwise agrees to be
bound by the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement on the date first
above written.
PCC GROUP INC.
By:
Name:
Title:
JMG CAPITAL PARTNERS, L.P.
By:_________________________________
Name:
Title:
TRITON CAPITAL INVESTMENTS,LTD.
By:_________________________________
Name:
Title:
ANNEX I
to Securities Purchase Agreement
[FORM OF CONVERSION NOTICE]
TO: _________________________________
_________________________________
_________________________________
The undersigned owner of this 8% Convertible Preferred
Stock (the "8% Preferred Stock") issued by PCC Group Inc. (the
"Corporation") hereby irrevocably exercises its option to convert
______________ shares of the 8% Preferred Stock into shares of
the Common Stock, $0.1 par value, of the Corporation ("Common
Stock"), in accordance with the terms of the Certificate of
Determination. The undersigned hereby instructs the Corporation
to convert the number of shares of the 8% Preferred Stock
specified above into Shares of Common Stock Issued at Conversion
in accordance with the provisions of Article 5 of the Certificate
of Determination. The undersigned directs that the Common Stock
issuable and certificates therefor deliverable upon conversion,
the 8% Preferred Stock recertificated, if any, not being
surrendered for conversion hereby, together with any check in
payment for fractional Common Stock, be issued in the name of and
delivered to the undersigned unless a different name has been
indicated below. All capitalized terms used and not defined
herein have the respective meanings assigned to them in the
Certificate of Determination.
Dated: __________________________
Signature
Fill in for registration of 8% Preferred Stock:
Please print name and address (including zip code number) :
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated this 19th day of January, 1999
(this "Agreement"), between PCC Group, Inc., a California Corporation,
with principal executive offices located at 163 University Parkway,
Pomona, California 91768 (the "Company"), and the undersigned (the
"Initial Investors").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of a date even herewith, between
the Initial Investors and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Initial
Investors (i) 1,600 shares of 8% Convertible Preferred Stock, $0.01 par
value ("Preferred Stock") which, upon the terms and subject to the
conditions of the Certificate of Determination of Rights, Preferences and
Privileges and Restrictions of 8% Convertible Preferred Stock (the
"Certificate of Determination") are convertible into shares of common
stock, $0.01 par value, of the Company ("Common Stock"); and
WHEREAS, to induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with
respect to the Common Stock issued or issuable upon conversion of the
Preferred Stock certain registration rights under the Securities Act;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate" of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such
specified Person. For purposes of this definition, control of a Person
means the power, directly or indirectly, to direct or cause the direction
of the management and policies of such Person whether by contract,
securities, ownership or otherwise; and the terms "controlling" and
"controlled" have the respective meanings correlative to the foregoing.
(ii) "Commission" means the Securities and Exchange Commission.
(iii) "Current Market Price" on any date of determination
means the closing price of a share of Common Stock on such day as
reported on the Nasdaq Small Cap Market ("NASDAQ"), or, if such security
is not listed or admitted to trading on the NASDAQ, on the principal
national security exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the closing price of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if
not so available, in such manner as furnished by any NASDAQ member firm
of the National Association of Securities Dealers, Inc. selected from
time to time by the Board of Directors of the Company for that purpose,
or a price determined in good faith by the Board of Directors of the
Company as being equal to the fair market value thereof, as the case may
be.
(iv) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder,
or any similar successor statute.
(v) "Investors" means the Initial Investors and any transferee
or assignee of Registrable Securities who agrees to become bound by all
of the terms and provisions of this Agreement in accordance with Section
8 hereof.
(vi) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government or agency or political
subdivision thereof.
(vii) "Prospectus" means the prospectus (including, without
limitation, any preliminary prospectus and any final prospectus filed
pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the Exchange
Act and incorporated by reference therein.
(viii) "Registrable Securities" means the Common Stock
issued or issuable upon conversion of the Preferred Stock; provided,
however, a share of Common Stock shall cease to be a Registrable Security
for purposes of this Agreement when it no longer is a Restricted
Security.
(ix) "Registration Statement" means a registration statement of
the Company filed on an appropriate form under the Securities Act
providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act, including the Prospectus
contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all
exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(x) "Restricted Security" means any share of Common Stock
issued or issuable upon conversion of the Preferred Stock except any such
share that (i) has been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by
the Prospectus included in the Registration Statement, (ii) has been
transferred in compliance with the resale provisions of Rule 144 under
the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities
Act (or any successor provision thereto), or (iii) otherwise has been
transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf
of the Company.
(xi) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration.
(a) Filing and Effectiveness of Registration Statement. The
Company shall promptly prepare and file with the Commission (as defined
in the Securities Purchase Agreement), a Registration Statement relating
to the offer and sale of the Registrable Securities and shall use its
best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable,
but in no event later than 120 days after the Tranche I Closing Date.
The Company shall notify the Initial Investors by written notice that
such Registration Statement has been declared effective by the Commission
within 48 hours of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering
the Registrable Securities or the Additional Registrable Securities (as
defined in Section 2(d) hereof) required to be filed by the Company
pursuant to Section 2(a) or (2d) hereof, as the case may be, is not
effective within one hundred twenty (120) days after the Tranche I
Closing Date ("Initial Date"), then the Company shall make the cash
payments to the Initial Investors as provided in the next sentence as
liquidated damages and not as a penalty. The amount to be paid by the
Company to the Initial Investors shall be determined as of each
Computation Date, and such amount shall be equal to 2% (the "Liquidated
Damage Rate") of the liquidation preference per share of Preferred Stock
from the Initial Date to the first Computation Date and for each
Computation Date thereafter, calculated on a pro rata basis to the date
on which the Registration Statement is filed with (in the event of an
Initial Date pursuant to (c)(i) above) or declared effective by (in the
event of an Initial Date pursuant to (c)(ii) above) the Commission (the
"Periodic Amount"). The full Periodic Amount shall be paid by the
Company to the Initial Investors by wire transfer of immediately
available funds within three (3) days after each Computation Date.
As used in this Section 2(b), "Computation Date" means the date
which is thirty (30) days after the Initial Date and, if the Registration
Statement required to be filed by the Company pursuant to Section 2(a)
has not theretofore been declared effective by the Commission, each date
which is 30 days after the previous Computation Date until such
Registration Statement is so declared effective.
Notwithstanding the above, if the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) is not declared effective by the Commission within one
hundred twenty (120) days after the Tranche I Closing Date the Company
shall be in default of this Registration Rights Agreement.
(c) Eligibility for Use of Form S-3. The Company agrees that at
such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 it shall file all reports and
information required to be filed by it with the Commission in a timely
manner and take all such other action so as to maintain such eligibility
for the use of such form.
(d) Piggy-back Registrations. (i) If the Company proposes to
register any of its warrants, Common Stock or any other shares of common
stock of the Company under the Securities Act (other than a registration
(A) on Form S-8 or S-4 or any successor or similar forms, (B) relating to
Common Stock or any other shares of common stock of the Company issuable
upon exercise of employee share options or in connection with any
employee benefit or similar plan of the Company or (C) in connection with
a direct or indirect acquisition by the Company of another Person or any
transaction with respect to which Rule 145 (or any successor provision)
under the Securities Act applies), whether or not for sale for its own
account, it will at each such time, give prompt written notice at least
twenty (20) days prior to the anticipated filing date of the registration
statement relating to such registration to the Initial Investors, which
notice shall set forth such Initial Investors' rights under this Section
2(d) and shall offer the Initial Investors the opportunity to include in
such registration statement such number of Registrable Shares as the
Initial Investors may request. Upon the written request of an Initial
Investor made within ten (10) days after the receipt of notice from the
Company (which request shall specify the number of Registrable Shares
intended to be disposed of by such Initial Investor), the Company will
use its best efforts to effect the registration under the Securities Laws
of all Registrable Shares that the Company has been so requested to
register by the Initial Investors, to the extent requisite to permit the
disposition of the Registrable Shares so to be registered; provided,
however, that (A) if such registration involves a Public Offering, the
Initial Investors must sell their Registrable Shares to the underwriters
selected as provided in Section 2(f) hereof on the same terms and
conditions as apply to the Company and (B) if, at any time after giving
written notice of its intention to register any Registrable Shares
pursuant to this Section 2, and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Shares, the Company shall give written notice to the Initial Investors
and, thereupon, shall be relieved of its obligation to register any
Registrable Shares in connection with such registration. The Company's
obligations under this Section 2(d) shall terminate on the date that the
registration statement to be filed in accordance with Section 2(a) is
declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(d) involves a
Public Offering and the managing underwriter thereof advises the Company
that, in its view, the number of shares of Common Stock that the Company
and the Initial Investors intend to include in such registration exceeds
the largest number of shares of Common Stock that can be sold without
having an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration, only that number
of shares of Common Stock such that the number of Registrable Shares
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number
of shares to be issued by the Company to be allocated (after including
all shares to be issued and sold by the Company) among the Initial
Investors pro rata on the basis of the relative number of Registrable
Shares offered for sale under such registration by each of the Initial
Investors.
If as a result of the proration provisions of this Section
2(d)(ii), any Initial Investor is not entitled to include all such
Registrable Shares in such registration, such Initial Investor may elect
to withdraw its request to include any Registrable Shares in such
registration. With respect to registrations pursuant to this Section
2(d), the number of securities required to satisfy any underwriters' over-
allotment option shall be allocated pro rata among the Company and the
Initial Investors on the basis of the relative number of securities
otherwise to be included by each of them in the registration with respect
to which such over-allotment option relates.
(e) Underwritten Offering. If the offering pursuant to a
Registration Statement contemplated by Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority-in-interest of
the Registrable Securities subject to such underwritten offering shall
have the right to select one legal counsel to represent their interests
subject to the consent of the Company (which consent shall not be
unreasonably withheld). The Investors who hold the Registrable
Securities to be included in such underwriting shall pay all underwriting
discounts and commissions of such investment banker (or bankers) and
manager (or managers) so selected in accordance with this Section 2(e)
with respect to their Registrable Securities.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall:
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration
Statement and supplements to the Prospectus as may be necessary to keep
the Registration Statement continuously effective and in compliance with
the provisions of the Securities Act applicable thereto so as to permit
the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two
(2) years from the date on which the Registration Statement is first
declared effective by the Commission (the "Effective Time") or such
shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus,
transferred pursuant to Rule 144 under the Securities Act or otherwise
transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the
"Registration Period") and (ii) take all lawful action such that each of
(A) the Registration Statement and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, not misleading and (B) the Prospectus
forming part of the Registration Statement, and any amendment or
supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing provisions of this
Section 3(a), the Company may, during the Registration Period, suspend
the use of the Prospectus for a period not to exceed 60 days (whether or
not consecutive) in any 12-month period if the Board of Directors of the
Company determines in good faith that because of pending mergers or other
business combination transactions, the planned acquisition or divestiture
of assets, pending material corporate developments and similar events, it
is in the best interests of the Company to suspend such use, and prior to
or contemporaneously with suspending such use, the Company provides the
Investors with written notice of such suspension, which notice need not
specify the nature of the event giving rise to such suspension. At the
end of any such suspension period, the Company shall provide the
Investors with written notice of the termination of such suspension.
(b) During the Registration Period, comply with the provisions of
the Securities Act with respect to the Registrable Securities of the
Company covered by the Registration Statement until such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the Investors as set forth in the
Prospectus forming part of the Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any supplements
thereto), provide draft copies thereof to the Investors and reflect in
such documents all such comments as the Investors (and their counsel)
reasonably may propose with regard to the Investors' ownership and the
Plan of Distribution included therein and (ii) furnish to each Investor
whose Registrable Securities are included in the Registration Statement
and its legal counsel identified to the Company, (A) promptly after the
same is prepared and publicly distributed, filed with the Commission, or
received by the Company, one copy of the Registration Statement, each
Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto
and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned
by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky" laws of
such jurisdictions as the Investors who hold a majority-in-interest of
the Registrable Securities being offered reasonably request, (ii) prepare
and file in such jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as
may be necessary to maintain the effectiveness thereof at all times
during the Registration Period, (iii) take all such other lawful actions
as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all
such other lawful actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith
or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in any
such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare an amendment to the
Registration Statement and supplement to the Prospectus to correct such
untrue statement or omission, and deliver a number of copies of such
supplement and amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time
and take all lawful action to effect the withdrawal, recession or removal
of such stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a
registered national securities association, on or in which securities of
the same class or series issued by the Company are then listed or
included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as
the Investors reasonably may request and registered in such names as the
Investor may request; and, within three business days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by
the Company to deliver to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and,
to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their
Registrable Securities in accordance with the intended methods therefor
provided in the Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than eighteen (18) months after
(i) the effective date (as defined in Rule 158(c) under the Securities
Act) of the Registration Statement, and (ii) the effective date of each
post-effective amendment to the Registration Statement, as the case may
be, an earnings statement of the Company and its subsidiaries complying
with Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder (including, at the option of the Company, Rule
158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree
should be included therein and to which the Company does not reasonably
object and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of
the matters to be included or incorporated in such Prospectus supplement
or post-effective amendment;
(m) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and
take such other lawful and reasonable action to expedite and facilitate
the registration and disposition of the Registrable Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures
substantially identical to those set forth in this Agreement;
(n) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company and
its subsidiaries, and (ii) cause the Company's officers, directors and
employees to supply all information reasonably requested by such
Investors or any such underwriter, attorney, accountant or agent in
connection with the Registration Statement, in each case, as is customary
for similar due diligence examinations; provided, however, that all
records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any
material non-public information shall be kept confidential by such
Investors and any such underwriter, attorney, accountant or agent
(pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to
judicial process in a court proceeding (after first giving the Company an
opportunity promptly to seek a protective order or otherwise limit the
scope of the information sought to be disclosed) or is required by law,
or such records, information or documents become available to the public
generally or through a third party not in violation of an accompanying
obligation of confidentiality; and provided further that, if the
foregoing inspection and information gathering would otherwise disrupt
the Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated on behalf
of the Investors and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(o) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope
as are customarily made by the Company to underwriters in secondary
underwritten offerings;
(p) In connection with any underwritten offering, obtain opinions
of counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to
the underwriters, covering such matters as are customarily covered in
opinions requested in secondary underwritten offerings (it being agreed
that the matters to be covered by such opinions shall include, without
limitation, as of the date of the opinion and as of the Effective Time of
the Registration Statement or most recent post-effective amendment
thereto, as the case may be, the absence from the Registration Statement
and the Prospectus, including any documents incorporated by reference
therein, of an untrue statement of a material fact or the omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to
customary limitations);
(q) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public
accountants of the Company (and, if necessary, from the independent
public accountants of any subsidiary of the Company or of any business
acquired by the Company, in each case for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort
letter to be so addressed), in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(r) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers,
if any; and
(s) In the event that any broker-dealer registered under the
Exchange Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of
the rules and regulations of the National Association of Securities
Dealers, Inc. (the "NASD Rules") (or any successor provision thereto)) of
the Company or has a "conflict of interest" (as defined in Rule
2720(b)(7) of the NASD Rules (or any successor provision thereto)) and
such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of
any Registrable Securities covered by the Registration Statement, whether
as a holder of such Registrable Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such broker-dealer in complying with
the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule
2720(b)(15) of the NASD Rules (or any successor provision thereto)) to
participate in the preparation of the Registration Statement relating to
such Registrable Securities, to exercise usual standards of due diligence
in respect thereof and to recommend the public offering price of such
Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 5 hereof, and (C) providing such information to such broker-
dealer as may be required in order for such broker-dealer to comply with
the requirements of the NASD Rules.
4. Obligations of the Investors. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. As least seven days
prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company
requires from each such Investor (the "Requested Information") if such
Investor elects to have any of its Registrable Securities included in the
Registration Statement. If at least two business days prior to the
anticipated filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor and have no further
obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation
and filing of the Registration Statement hereunder, unless such Investor
has notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section
3(e) or 3(f), it shall immediately discontinue its disposition of
Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(e)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations,
filings or qualifications pursuant to Section 3, but including, without
limitation, all registration, listing, and qualifications fees, printing
and engraving fees, accounting fees, and the fees and disbursements of
counsel for the Company and, in the case of an underwritten offering, the
reasonable fees and disbursements of one firm of counsel to the holders
of a majority in interest of the Registrable Securities shall be borne by
the Company.
6. Indemnification and Contribution.
(a) Indemnification by the Company. The Company shall indemnify
and hold harmless each Investor and each underwriter, if any, which
facilitates the disposition of Registrable Securities, and each of their
respective officers and directors and each person who controls such
Investor or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and
against any losses, claims, damages or liabilities, joint or several, to
which such Indemnified Person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, not misleading, or arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Prospectus or an omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending
any such action or claim as and when such expenses are incurred;
provided, however, that the Company shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an untrue
statement or alleged untrue statement made in, or an omission or alleged
omission from, such Registration Statement or Prospectus in reliance upon
and in conformity with written information furnished to the Company by
such Indemnified Person expressly for use therein or (ii) in the case of
the occurrence of an event of the type specified in Section 3(e), the use
by the Indemnified Person of an outdated or defective Prospectus after
the Company has provided to such Indemnified Person an updated Prospectus
correcting the untrue statement or alleged untrue statement or omission
or alleged omission giving rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each
Investor agrees, as a consequence of the inclusion of any of its
Registrable Securities in a Registration Statement, and each underwriter,
if any, which facilitates the disposition of Registrable Securities shall
agree, as a consequence of facilitating such disposition of Registrable
Securities, severally and not jointly, to (i) indemnify and hold harmless
the Company, its directors (including any person who, with his or her
consent, is named in the Registration Statement as a director nominee of
the Company), its officers who sign any Registration Statement and each
person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities to which the Company
or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in
such Registration Statement or Prospectus or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
(in light of the circumstances under which they were made, in the case of
the Prospectus), not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such holder or
underwriter expressly for use therein, and (ii) reimburse the Company for
any legal or other expenses incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or
other action in respect of which indemnification is being sought (each, a
"Claim"), the Indemnified Party promptly shall notify the party against
whom indemnification pursuant to this Section 6 is being sought (the
"Indemnifying Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any liability
that it otherwise may have to the Indemnified Party, except to the extent
that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection
with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled
to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate
in the defense of such Claim, and the Indemnifying Party shall bear the
reasonable fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, costs and expenses, (y) the
Indemnified Party and the Indemnifying Party shall reasonably have
concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due
to actual or, as reasonably determined by legal counsel to the
Indemnified Party, (i) potentially differing interests between such
parties in the conduct of the defense of such Claim, or (ii) if there may
be legal defenses available to the Indemnified Party that are in addition
to or disparate from those available to the Indemnifying Party and which
can not be presented by counsel to the Indemnifying Party, or (z) the
Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time
after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described
in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in connection
with any Claim in the same jurisdiction, be liable for the fees and
expenses of more than one firm of counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnifying Party (which
consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnifying Party from all liabilities with
respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an
Indemnified Person under subsection (a) or (b) above in respect of any
losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
relates to information supplied by such Indemnified Party or by such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined
by pro rata allocation (even if the Investors or any underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in this Section 6(d). The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred
by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The obligations of the Investors
and any underwriters in this Section 6(d) to contribute shall be several
in proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no
event shall any (i) Investor be required to undertake liability to any
person under this Section 6 for any amounts in excess of the dollar
amount of the proceeds to be received by such Investor from the sale of
such Investor's Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) pursuant to any
Registration Statement under which such Registrable Securities are to be
registered under the Securities Act and (ii) underwriter be required to
undertake liability to any Person hereunder for any amounts in excess of
the aggregate discount, commission or other compensation payable to such
underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement; provided,
however, in the event of fraud by the Investor (in the case of (i) above)
or underwriter (in the case of (ii) above), there shall be no such dollar
amount limitation.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under
this Section 6 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies
provided in this Section 6 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to an indemnified
party at law or in equity.
7. Rule 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other similar rule
or regulation of the Commission that may at any time permit the Investors
to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its best efforts to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section
13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did
file such reports, it will, upon the request of any Investor, make
available other information as required by, and so long as necessary to
permit sales of, its Registrable Securities pursuant to Rule 144.
8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by
the Investors to any permitted transferee of all or any portion of such
securities (or all or any portion of any Preferred Stock which is
convertible into such securities) of Registrable Securities only if: (a)
the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished
with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment, the securities so transferred or assigned to the
transferee or assignee constitute Restricted Securities, and (d) at or
before the time the Company received the written notice contemplated by
clause (b) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Investors who hold a majority-
in-interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 9 shall be binding upon each
Investor and the Company.
10. Miscellaneous.
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities
with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a) effective
under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement,
then the Company forthwith shall grant (by means of an amendment to this
Agreement or otherwise) identical registration rights to all Investors
hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service,
and shall be deemed given when so delivered personally or by overnight
courier service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
PCC Group Inc.
163 University Parkway
Pomona, California 91768
Attention: Mr. Don Johnson
(2) if to the Initial Investors, to
JMG Capital Partners, L.P.
1999 Avenue of the Stars, Suite 2530
Los Angeles, CA 90067
Attention: Mr. Jonathan Glacer
and
Triton Capital Investments, Ltd.
1999 Avenue of the Stars, Suite 2530
Los Angeles, CA 90067
Attention: Mr. Jonathan Glacer
(3) if to any other Investor, at such address as such Investor
shall have provided
in writing to the Company.
The Company, the Initial Investors or any Investor may change the
foregoing address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of Los Angeles or the state courts of the
State of California sitting in the City of Los Angeles in connection with
any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection including any objection
based on forum non conveniens, to the bringing of any such proceeding in
such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provision, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The Company is not currently a
party to any agreement granting any registration rights with respect to
any of its securities to any person which conflicts with the Company's
obligations hereunder or gives any other party the right to include any
securities in any Registration Statement filed pursuant hereto. Without
limiting the generality of the foregoing, without the written consent of
the holders of a majority in interest of the Registrable Securities, the
Company shall not hereafter grant to any person the right to request it
to register any of its securities under the Securities Act unless the
rights so granted are subject in all respect to the prior rights of the
holders of Registrable Securities set forth herein, and are not otherwise
in conflict or inconsistent with the provisions of this Agreement. The
restrictions on the Company's rights to grant registration rights under
this paragraph shall terminate on the date the Registration Statement to
be filed pursuant to Section 2(a) is declared effective by the
Commission.
(h) This Agreement, the Securities Purchase Agreement and the
Certificate of Determination constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement, the Securities Purchase
Agreement and the Certificate of Determination supersede all prior
agreements and undertakings among the parties hereto with respect to the
subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance
could result in direct damages to the Investors and the Company agrees
that, in addition to any other liability the Company may have by reason
of any such failure or delay, the Company shall be liable for all direct
damages caused by such failure or delay.
(m) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall
constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
PCC GROUP INC.
By:
Name:
Title:
JMG CAPITAL PARTNERS, L.P.
By: _________________________________
Name:
Title:
TRITON CAPITAL INVESTMENTS, LTD.
By: _________________________________
Name:
Title:
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant dated as of _______________________________ to
purchase _____________ shares of the Common Stock, $0.01 par value, of
PCC Group, Inc., and tenders herewith payment in accordance with Section
2 of said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
______________________________________
______________________________________
______________________________________
Dated:
By:
Exhibit 4.4
CASH: $
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 100,000
Warrant No. 1
WARRANT
To Purchase Common Stock of
PCC GROUP, INC.
THIS IS TO CERTIFY THAT Pacific Continental Securities, Corp.,
or its registered assigns, is entitled, at any time from the Closing Date
(as hereinafter defined) to the Expiration Date (as hereinafter defined),
to purchase from PCC Group, Inc., a California corporation (the
"Company"), 100,000 shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, at the
Exercise Price (as hereinafter defined), all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than
Warrant Stock.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in
the State of California.
"Closing Date" shall mean the date hereof.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $0.01 par value, of the Company as
constituted on the Closing Date, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include
(i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
assets over any other class of stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation received by or distributed to the holders of Common
Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash
or property, for shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of
Common Stock may be purchased pursuant to this Warrant on such date.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Exercise Price" shall mean, with respect to 50,000 shares of
Common Stock purchasable under this Warrant, $8.765625 per share, and
with respect to the remaining 50,000 shares of Common Stock purchasable
under this Warrant, $10.51875 per share, all subject to adjustment as
provided herein.
"Expiration Date" shall mean a date three (3) years from the
Closing Date.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"Market Price" per Common Share means the average of the
closing prices of the Common Stock as reported on the Nasdaq SmallCap
Market ("Nasdaq"), or, if such security is not listed or admitted to
trading on Nasdaq, on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted
to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any Nasdaq member firm of the National Association
of Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose, or a price determined in good
faith by the Board of Directors of the Company as being equal to the fair
market value thereof, as the case may be, for the five (5) Trading Days
immediately preceding the Closing Date.
"Other Property" shall have the meaning set forth in Section
4.4.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned
or held by or for the account of the Company or any subsidiary thereof,
and shall include all shares issuable in respect of outstanding scrip or
any certificates representing fractional interests in shares of Common
Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, entity
or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant
would be, evidenced by a certificate bearing the restrictive legend set
forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time.
"Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section
9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any
thereof. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of shares of Common Stock
for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price as
of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased
by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. From and after the Closing Date and
until 5:00 P.M., California time, on the Expiration Date, Holder may
exercise this Warrant, on any Business Day, for all or any part of the
number of shares of Common Stock purchasable hereunder. In order to
exercise this Warrant, in whole or in part, Holder shall deliver to the
Company at its principal office at 163 University Parkway, Pomona,
California, 91768 or at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (ii) payment of the Warrant Price in cash,
by wire transfer or cashier's check drawn on a United States bank and
(iii) this Warrant.
Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt of the items
referred to in clauses (i), (ii) and (iii) above, the Company shall, as
promptly as practicable, and in any event within five (5) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations
as Holder shall request in the notice and shall be registered in the name
of Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other Person so designated to be named
therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the notice, together with the cash or
check or checks and this Warrant, is received by the Company as described
above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this
Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant
Stock, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be
made on this Warrant and the same returned to Holder. Notwithstanding
any provision herein to the contrary, the Company shall not be required
to register shares in the name of any Person who acquired this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance with
this Warrant.
The Holder shall be entitled to exercise the Warrant
notwithstanding the commencement of any case under 11 U.S.C. 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under
the Bankruptcy Code, the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. 362 in
respect of the Holder's exercise right. The Company hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C.
362 in respect of the exercise of the Warrant. The Company agrees,
without cost or expense to the Buyer, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. 362.
2.2 Payment of Taxes and Charges. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof
shall be validly issued, fully paid and nonassessable, freely tradeable
(except as restricted pursuant to Section 9 below) and without any
preemptive rights. The Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed
with respect to, the issue or delivery thereof, unless such tax or charge
is imposed by law upon Holder, in which case such taxes or charges shall
be paid by Holder. The Company shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for shares of Common Stock issuable upon
exercise of this Warrant in any name other than that of Holder, and in
such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other
charge is due.
2.3 Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant.
As to any fraction of a share which Holder would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of
the Market Price per share of Common Stock as of the Closing Date.
2.4 Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than
a holder who acquires such shares after the same have been publicly sold
pursuant to a Registration Statement under the Securities Act or sold
pursuant to Rule 144 thereunder), shall continue to be entitled with
respect to such shares to all rights to which it would have been entitled
as Holder under Sections 9, 10 and 14 of this Warrant. The Company will,
at the time of exercise of this Warrant, in whole or in part, upon the
request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all
such rights; provided, however, that if Holder shall fail to make any
such request, such failure shall not affect the continuing obligation of
the Company to afford to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Sections 9, transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the
Company pursuant to Section 12, together with a written assignment of
this Warrant substantially in the form of Exhibit B hereto duly executed
by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to
Section 9, execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation
hereof at the aforesaid office or agency of the Company, together with a
written notice specifying the names and denominations in which new
Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange
for the Warrant or Warrants to be divided or combined in accordance with
such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the
registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to
time as set forth in this Section 4. The Company shall give Holder
notice of any event described below which requires an adjustment pursuant
to this Section 4 at the time of such event.
4.1 Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event
would own or be entitled to receive after the happening of such event,
and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares for which this Warrant is exercisable
immediately after such adjustment.
4.2 Certain Other Distributions. (a) If at any time the
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution
of:
(i) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other
than cash, Convertible Securities or Additional Shares of Common
Stock), or
(ii) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any
other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock),
then Holder shall be entitled to receive such dividend or distribution as
if Holder had exercised the Warrant. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and
shares of any other class of stock shall be deemed a distribution by the
Company to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common
Stock within the meaning of Section 4.1.
(b) In case the Company shall issue any Common Stock or any rights,
options or warrants to all holders of record of its Common Stock
entitling all holders to subscribe for or purchase shares of Common Stock
at a price per share less than the Market Price per share of the Common
Stock on the date fixed for such issue, the Current Warrant Price in
effect immediately prior to the close of business on the date fixed for
such determination shall be reduced to the amount determined by
multiplying such Current Warrant Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such
Market Price and the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to the close of business on
the date fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase, such reduced amount to
become effective immediately after the close of business on the date
fixed for such determination. For the purposes of this clause (b), (i)
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company and (ii) in the case
of any rights, options or warrants which expire by their terms not more
than 60 days after the date of issue, sale, grant or assumption thereof,
no adjustment of the Current Warrant Price shall be made until the
expiration or exercise of all rights, options or warrants, whereupon such
adjustment shall be made in the manner provided in this clause (b), but
only with respect to the shares of Common Stock actually issued pursuant
thereto. Such adjustment shall be made successively whenever any event
specified above shall occur. In the event that any or all rights,
options or warrants covered by this clause (b) are not so issued or
expire or terminate before being exercised, the Current Warrant Price
then in effect shall be appropriately readjusted.
4.3 Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Current Warrant Price provided for in this
Section 4:
(a) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item under this
Section 4, such determination may be challenged in good faith by the
Holder, and any dispute shall be resolved by an investment banking
firm of recognized national standing selected by the Company and
acceptable to the Holder.
4.4 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of
the Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of
the successor or acquiring corporation, or any cash, shares of stock or
other securities or property of any nature whatsoever (including warrants
or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common
Stock of the Company, then Holder shall have the right thereafter to
receive, upon exercise of the Warrant, the number of shares of common
stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to such event.
In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution
of the Board of Directors of the Company) in order to provide for
adjustments of shares of Common Stock for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section
4.4, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as
to dividends or assets over any other class of stock of such corporation
and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately
or upon the arrival of a specified date or the happening of a specified
event and any warrants or other rights to subscribe for or purchase any
such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations or dispositions of assets.
4.5 Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, which
would have a materially adverse effect upon the rights of the Holder, the
number of shares of Common Stock and/or the purchase price thereof shall
be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
4.6 Certain Limitations. Notwithstanding anything herein to
the contrary, the Company agrees not to enter into any transaction which,
by reason of any adjustment hereunder, would cause the Current Warrant
Price to be less than the par value per share of Common Stock.
4.7 No Voting Rights. This Warrant shall not entitle its
Holder to any voting rights or other rights as a shareholder of the
Company.
5. NOTICES TO HOLDER
5.1 Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price
at which a share of such Common Stock may be purchased upon exercise of
the Warrants, shall be adjusted pursuant to Section 4, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants
or other subscription or purchase rights referred to in Section 4.2),
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.4 or
4.5) describing the number and kind of any other shares of stock or Other
Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment
or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section
14.2. The Company shall keep at its office or agency designated pursuant
to Section 12 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by
the Holder or any prospective purchaser of a Warrant designated by the
Holder.
5.2 Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
or other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation,
or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder
(i) at least 30 days' prior written notice of the date on which a record
date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days'
prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and
the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of
Common Stock shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall
be sufficiently given if addressed to Holder at the last address of
Holder appearing on the books of the Company and delivered in accordance
with Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant,
and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment therefor in accordance with the terms
of such Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of
the shares of Common Stock issuable upon exercise of the Warrants, the
Company shall take any corporate action which may be necessary in order
that the Company may validly and legally issue fully paid and non-
assessable shares of such Common Stock at such adjusted Current Warrant
Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is
exercisable or in the Current Warrant Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will
not at any time, except upon dissolution, liquidation or winding up of
the Company, close its stock transfer books or Warrant transfer books so
as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified
in this Section 9, which conditions are intended to ensure compliance
with the provisions of the Securities Act with respect to the Transfer of
any Warrant or any Warrant Stock. Holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Section 9.
9.1 Restrictive Legend. (a) The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the Warrant
Stock issuable upon exercise hereof may not be assigned or otherwise
transferred unless and until (i) the Company has received an opinion of
counsel for the Holder that such securities may be sold pursuant to an
exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act") or (ii) a registration statement relating to such
securities has been filed by the Company and declared effective by the
Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows unless such securities have been sold pursuant
to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act").
The securities may not be offered for sale, sold or otherwise
transferred except (i) pursuant to an effective registration
statement under the Act or (ii) pursuant to an exemption from
registration under the Act in respect of which the Company has
received an opinion of counsel satisfactory to the Company to such
effect.
(b) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended, and
may not be transferred in violation of such Act, the rules and
regulations thereunder or the provisions of this Warrant."
9.2 Notice of Proposed Transfers. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted Common
Stock, the Holder shall give ten days' prior written notice (a "Transfer
Notice") to the Company of Holder's intention to effect such Transfer,
describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the
Company shall, within five days thereof, notify the Holder as to whether
such opinion is reasonably satisfactory and, if so, such holder shall
thereupon be entitled to Transfer such Warrants or such Restricted Common
Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and the Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the opinion of
such counsel such legend is not required in order to ensure compliance
with the Securities Act. The Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice
from the Company under this Section 9.2(a) that such opinion is
reasonably satisfactory.
9.3 Registration. The Company shall include the Warrant Stock
in the registration statement contemplated in Section IV.B. of that
certain Securities Purchase Agreement dated as of the date hereof by and
among the Company, JMG Capital Partners, L.P. and Triton Capital
Investments, Ltd. and shall keep the registration effective until all of
the Warrant Stock has been sold or otherwise can be sold under Rule
144(k).
9.5 Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this
Section upon the transferability of the Warrants, the Warrant Stock and
the Restricted Common Stock (or Common Stock issuable upon the exercise
of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or
Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been
effectively registered under the Securities Act and disposed of pursuant
thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act. Whenever the
restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from
the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WARRANT CONTAINED
IN SECTION 9 HEREOF TERMINATED ON ____________, ______, AND ARE
OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled
to bear such legend shall have a similar legend endorsed thereon.
Whenever the restrictions imposed by this Section shall terminate as to
any share of Restricted Common Stock, as hereinabove provided, the holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 9.1(a).
9.6 Listing on Securities Exchange. If the Company shall list
any shares of Common Stock on any securities exchange, it will, at its
expense, list thereon, maintain and, when necessary, increase such
listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange rules, issuable upon
the exercise of this Warrant so long as any shares of Common Stock shall
be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and
file any information reporting forms presently or hereafter required by
the Commission as a condition to the availability of an exemption from
the Securities Act for the sale of any Warrant or Restricted Common
Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction
or mutilation of this Warrant and indemnity reasonably satisfactory to it
(it being understood that the written agreement of the Holder shall be
sufficient indemnity), and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof
a new Warrant of like tenor to Holder; provided, in the case of
mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this
Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of
the rights or privileges of Holder hereof, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
14. MISCELLANEOUS
14.1 Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice Holder's
rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other
provision of this Warrant, the Company shall pay to Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2 Notice Generally. Except as may be otherwise provided
herein, any notice or other communication or delivery required or
permitted hereunder shall be in writing and shall be delivered personally
or sent by certified mail, postage prepaid, or by a nationally recognized
overnight courier service, and shall be deemed given when so delivered
personally or by overnight courier service, or, if mailed, three (3) days
after the date of deposit in the United States mails, as follows:
(1) if to the Company, to:
PCC Group, Inc.
163 University Parkway
Pomona, CA 91768
Attention: Mr. Don Johnson
(2) if to the Holder, to:
Pacific Continental Securities Corp.
8484 Wilshire Blvd.
Beverly Hills, CA 90210
Attention: Mr. Matthew N. Littauer
with a copy to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, NY 10020
Attention: Paul J. Pollock, Esq.
The Company or the Holder may change the foregoing address by notice
given pursuant to this Section 14.2.
14.3 Costs. In any judicial proceeding pursuant to this
Warrant, the court shall require the losing party to reimburse the
prevailing party for its costs, including without limitation all
reasonable attorneys' fees, incurred from the inception of the dispute
until the actual recovery of a money aware or other relief (including
settlement negotiations), and all costs of preparing for and pursuing the
claim or defending the same or both, as the case may be, including all
costs of discovery of evidence, witness fees, stenographic record of the
proceedings and reproduction of documents. If the court shall determine
that a party prevailed only partially, then such partially prevailing
party may be awarded a pro rata portion of its costs.
14.4 Remedies. Holder in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under Section 9 of this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of Section 9 of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would
be adequate.
14.5 Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company
and the successors and assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of
this Warrant and, with respect to Section 9 hereof, holders of Warrant
Stock, and shall be enforceable by any such Holder or holder of Warrant
Stock.
14.6 Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written
consent of the Company and the Holder.
14.7 Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Warrant.
14.8 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
14.9 Governing Law. This Warrant shall be governed by the
laws of the State of California, without regard to the provisions thereof
relating to conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested
by its Secretary or an Assistant Secretary.
Dated: January 19, 1999
PCC GROUP, INC.
By:________________________________
Name:
Title:
Attest:
By:_______________________________
Name:
Title:
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ shares of Common
Stock of PCC Group Inc. and herewith makes payment therefor, all at
the price and on the terms and conditions specified in this Warrant
and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _____________
whose address is _________________ and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named
below all of the rights of the undersigned under this Warrant, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint _______
________________ attorney-in-fact to register such transfer on the
books of ___________________ maintained for the purpose, with full
power of substitution in the premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
Exhibit 4.5
PCC GROUP, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. For value received, the receipt of which is
hereby acknowledged by PCC Group, Inc., a California corporation (the
"Company"), Summit Marketing, or registered assigns (the "Holder"), is
hereby granted the right to purchase, at any time until December 31,
1999 (the "Expiration Date"), 25,000 fully paid and nonassessable
shares of the Company's Common Stock, $0.01 par value (the "Common
Stock") at the exercise price of $5.25 per share (the "Exercise
Price"), subject to further adjustments as set forth in Section 6
hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole
or in part at the Exercise Price per share of Common Stock payable
hereunder, payable in cash or by certified or official bank check.
Upon surrender of this Warrant with the annexed Notice of Exercise
Form duly executed, together with payment of the Exercise Price for
the shares of Common Stock purchased, the Holder shall be entitled to
receive a certificate or certificates for the shares of Common Stock
so purchased.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for
issuance upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance upon exercise of this
Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or
destruction) receipt of reasonably satisfactory indemnification, and
(in the case of mutilation) upon surrender and cancellation of this
Warrant, the Company will execute and deliver a new Warrant of like
tenor and date and any such lost, stolen, destroyed or mutilated
Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder of the Company,
either at law or in equity, and the rights of the Holder are limited
to those expressed in this Warrant and are not enforceable against the
Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustments for Stock Splits, Stock Dividends Etc. If
the number of outstanding shares of Common Stock of the Company are
increased or decreased by a stock split, reverse stock split, stock
dividend, stock combination, recapitalization or the like, the
Exercise Price and the number of shares purchasable pursuant to this
Warrant shall be adjusted proportionately so that the ratio of (i) the
aggregate number of shares purchasable by exercise of this Warrant to
(ii) the total number of shares outstanding immediately following such
stock split, reverse stock split, stock dividend, stock combination,
recapitalization or the like shall remain unchanged, and the aggregate
purchase price of shares issuable pursuant to this Warrant shall
remain unchanged.
6.2 Adjustments for Reorganization, Mergers,
Consolidations or Sales of Assets. If at any time there is
a capital reorganization of the Common Stock (other than a
recapitalization, combination, or the like provided for
elsewhere in this Section 6) or merger or consolidation of
the Company with or into another corporation, or the sale of
all or substantially all of the Company's properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision
shall be made so that the Holder shall thereafter be
entitled to receive upon exercise of this Warrant (and only
to the extent this Warrant is exercised), the number of
shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such
merger or consolidation or sale, to which a holder of Common
Stock, or other securities, deliverable upon the exercise of
this Warrant would otherwise have been entitled on such
capital reorganization, merger, consolidation or sale. In
any such case, appropriate adjustments shall be made in the
application of the provisions of this Section 6 (including
adjustment of the Exercise Price then in effect and number
of Warrant Shares purchasable upon exercise of this Warrant)
which shall be applicable after such events.
7. Transfer to Comply with the Securities Act. This
Warrant has not been registered under the Securities Act of
1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Shares.
Neither this Warrant nor any of the Warrant Shares or any
other security issued or upon exercise of this Warrant may
be sold, transferred, pledged or hypothecated in the absence
of an effective registration statement under the Act
relating to such security or an opinion of counsel
satisfactory to the Company that registration is not
required under the Act. Each certificate for the Warrant,
the Warrant Shares and any other security issued or issuable
upon exercise of this Warrant shall contain a legend in form
and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this
Section.
8. Registration. The Company hereby agrees to
prepare and file on or before February 28, 1999, a
Registration Statement (on Form S-3 or such other form as
the Company shall determine) with the Securities and
Exchange Commission ("SEC") to register, under Act, the
resale of the Warrant Shares, and the Company shall use its
best efforts to cause such Registration Statement to become
effective. The Company shall maintain the effectiveness
thereof until all shares registered thereunder have been
disposed of or are freely tradeable under Rule 144(k) under
the Act.
9. Notices. Any notice or other communication
required or permitted hereunder shall be in writing and
shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be
deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission, or, if mailed,
two days after the date of deposit in the United States
mails, as follows:
(i) if to the Company, to:
PCC Group, Inc.
163 University Parkway,
Pomona, CA 91768
Attention: President Jack Wen
(ii) if to the Holder, to:
Summit Marketing
_______________________
_______________________
Attention:_______________
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this
Section.
10. Supplements and Amendments; Whole Agreement. This Warrant may
be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant contains the full understanding of the
parties hereto with respect to the subject matter hereof, and there are
no representations, warranties, agreements or understandings other than
expressly contained herein.
11. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of California and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such
State.
12. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as
of ________________________.
PCC Group, Inc.
By:
Its
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
PCC Group, Inc.
Pomona, California
We hereby consent to the incorporation by reference in the prospectus
constituting a part of this Registration Statement on Form S-3 of our
report dated December 8, 1998, relating to the audit of the
consolidated financial statements of PCC Group, Inc., appearing in the
Company's Annual Report on Form 10-K for the year ended September 30,
1998.
/s/ BDO Seidman,LLP
