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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF SECURITIES
Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934,
Section 17(a) of the Public Utility Holding Company Act of 1935 or
Section 30(f) of the Investment Company Act of 1940
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1. Name and Address of Reporting Person*
PI, Inc.
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(Last) (First) (Middle)
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(Street)
70 Airport Road
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(City) (State) (Zip)
Hyannis Mass. 02601
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2. Date of Event Requiring Statement (Month/Day/Year)
August 31, 1996
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3. IRS or Social Security Number of Reporting Person (Voluntary)
22-1509251
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4. Issuer Name and Ticker of Trading Symbol
Quality Products, Inc. PQP
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5. Relationship of Reporting Person to Issuer
(Check all applicable)
[ ] Director
[X] 10% Owner
[ ] Officer (give title below)
[ ] Other (specify below)
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6. If Amendment, Date of Original (Month/Day/Year)
n/a
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7. Individual or Joint/Group Filing
(Check all applicable)
[X] Form filed by One Reporting Person
[ ] Form filed by More than One Reporting Person
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FORM 3 (continued)
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TABLE I--Non-Derivative Securities Beneficially Owned
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1. Title of Security 2. Amount of Securities 3. Ownership 4. Nature of Indirect Beneficial Onwership
(Instr. 4) Beneficially Owned Form: Direct (Instr. 5)
(Instr. 4) (D) or Indirect
(I) (Instr. 5)
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<S> <C> <C> <C>
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* If the form is filed by more than one person, see Instruction 5(b)(v).
Reminder: Report on a separate line for each class of securities beneficially
owned directly or indirectly.
(Print or Type Responses)
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FORM 3 (continued)
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TABLE II--Derivative Securities Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
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1. Title of Derivative 2. Date Exer- 3. Title and Amount of Securities 4. Conver- 5. Owner- 6. Nature of
Security (Instr. 4) cisable and Underlying Derivative Security sion or ship Indirect
Expiration (Instr. 4) Exercise Form of Beneficial
Date ----------------------------------- Price of Deriv- Ownership
(Month/Day/Year) Deriv- ative (Instr. 5)
--------------------- Amount ative Security
of Security Direct
Date Expira- Title Number (D) or
Exer- tion of Indirect
cisable Date Shares (I)
(Instr. 5)
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<S> <C> <C> <C> <C> <C> <C> <C>
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Convertible 08/31/96 08/31/01 From 500,000 to $.75 to D
Promissory
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Note, Principal 666,666 Shares of Common $1.00 per
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Amount $500,000 Stock, $.00001 Share
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See Note A Par Value, see Note A See Note A
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Explanation of Responses:
SEE NOTE A ATTACHED
By: PI, Inc.
/s/ SCOTT C. SMITH July 17, 1997
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** Signature of Reporting Person Date
Scott C. Smith
Executive Vice President
** Intentional misstatements or omissions of facts constitute Federal Criminal
Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note: File three copies of this Form, one of which must be manually signed.
If space is insufficient, see Instruction 6 for procedure.
Page 3
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NOTE A:
The following is a copy of the provisions of the Convertible Note governing the
Redemption or Conversion of the Convertible Note:
REDEMPTION OR CONVERSION OF NOTE.
1.1 Mandatory Redemption of Note. This Note shall, without any action on the
part of the holder thereof, be redeemed by the Company and automatically
converted into fully paid and nonassessable shares of Common Stock at a
conversion rate of $1.00 per share, on the date set forth in the "Redemption
Notice" (as such term is defined below). The term "Redemption Notice" as used
herein means a notice signed by the principal executive or financial officer of
the Company, certifying that (a) the closing price per share of the Common
Stock, determined in accordance with Section 1.9(b) of this Note, for each of
the thirty (30) consecutive trading days ending not earlier that five days
prior to the date of such notice exceeds $2.00, subject to adjustment as
provided herein, and (b) that the Company has filed all periodic reports
required to be filed under the Securities Exchange Act of 1934, and further
providing that, unless converted earlier by the registered holder pursuant the
Section 1.3, the entire principal amount of the Note will be converted into
common stock at $1.00 per share on the date specified in the Redemption Notice
which is not less than 15 days after the date of the Redemption Notice. The
Note shall be deemed to have been redeemed, converted and satisfied on the date
set forth in such notice, regardless of whether the Note has been physically
surrendered for redemption. Notwithstanding anything to the contrary herein,
the Company shall not be obligated to deliver certificates represented such
shares of Common Stock until such Note has been physically surrendered to the
Company.
1.2 Optional Redemption of Note by Company. The Company shall have the right,
but not the obligation, to redeem the unpaid principal amount of this Note and
Convert it into fully paid and nonassessable shares of Common Stock of the
Company at a conversion rate of $.75 per share. This option may be exercised by
delivery of an "Optional Redemption Notice" which, as used herein, means a
notice signed by the principal executive or financial officer of the Company
certifying that (a) the closing price per share of Common Stock determined in
accordance with Section 1.9(b) of this note for each of the thirty (30)
consecutive trading days ending not earlier than five days prior to the date of
such notice, exceeds $1.50 per share, subject to adjustment as provided herein;
and (b)
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that the Company has filed all periodic reports required to be filed under the
Securities Exchange Act of 1934; and further providing that, unless converted
earlier by the registered holder pursuant to Section 1.3, the entire principal
amount of the Note will be converted into common stock at $.75 per share on the
date set forth in the Optional Redemption Notice which is not less that 15 days
after the date of the Optional Redemption Notice. The Note shall be deemed to
have been redeemed, converted and satisfied on the date set forth in such
notice, regardless of whether the Note has been surrendered for conversion.
However, the Company shall not be obligated to deliver certificates
representing such shares of Common Stock until such Note has been physically
surrendered to the Company.
1.3 Optional Conversion at Holder's Request. Subject to and upon compliance
with the provision of this Section 1.3, the registered holder of the Note shall
have the right, at its option, at any time prior to 5:00 P.M., New York City
time on August 31, 2001, to convert the unpaid principal amount of this Note
into fully paid and nonassessable shares of Common Stock of the Company.
(a) In order to exercise the conversion privilege, the Holder of this
Note to be converted in whole or in part shall surrender the Note at the
address of the Company, and together with the notice annexed hereto as
Exhibit A. The number of shares of Common Stock issuable upon conversion
shall be determined by dividing the amount of principal being converted by
the conversion price in effect at such time. Such Holder shall thereupon be
deemed the holder of the shares of Common Stock so issued and the principal
amount of the Note shall be deemed to have been paid in full.
(b) As promptly as practicable after the surrender of such Note and
the receipt of such notice, the Company shall issue and shall deliver at
such office to such holder, or on his written order, a certificate or
certificates for the number of full shares issuable upon the conversion of
such Note or portion thereof in accordance with the provisions of this
Section 1.3.
(c) Each conversion shall be deemed to have been effected on the date
on which such Note shall have been surrendered and such notice shall have
been received by the Company, as aforesaid, and the person in whose name
any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become on said date
the holder of record of the shares represented thereby; provided, however,
that any such surrendered on any date when the stock transfer books of the
Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but
such conversion shall be at the conversion price in effect on the date upon
which such Note shall have been surrendered.
(d) Conversion Price. The conversion price shall be the Current Market
Price as of the date the Note is surrendered for conversion, determined in
accordance with section 1.9 of this Agreement; provided, however, that the
conversion price may not be less than
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$.75 per share nor more than $1.00 per share, subject to adjustment as
provided herein. Notwithstanding the foregoing, the number of shares of
Common Stock issuable upon conversion will not be less than 12.5% of the
Company's Common Stock, on a fully diluted basis, and after giving effect
to such conversion. The term fully diluted basis as used in this Section
shall mean the number of shares of Common Stock which would be outstanding
after giving effect to the exercise and/or conversion of all rights,
warrants and options to acquire Company Common Stock (collectively, the
"Rights"), other than those Rights whose exercise price or conversion price
is equal to or greater than the conversion price then in effect.
1.4 No cash Payments in Lieu of Fractional Shares. No fractional shares of
stock or scrip representing fractional shares shall be issued upon conversion
of Notes.
1.5 Taxes on Shares Issued. The issue of stock certificates on conversion of
this Note shall be made without charge to the Holder for any issue, stamp or
other similar tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than
that of the holder of the Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the reasonable satisfaction of the
Company that such tax has been paid or that no such tax is payable.
1.6 Reservation of Shares; Shares to be Fully Paid, Compliance with
Governmental Requirements; Listing of Common Stock.
(a) The Company shall provided, free from preemptive rights, out of
its authorized but unissued shares, or out of shares held in its treasury,
sufficient shares to provide for the conversion of this Note.
(b) Before taking any action which would cause an adjustment reducing
the conversion price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of this Note, the Company will take
all corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted conversion price.
(c) The Company covenants that all shares of Common Stock which may be
issued upon conversion of this Note will upon issue by fully paid and
nonassessable by the Company and free from all taxes, liens and charges
with respect to the issue thereof.
(d) The Company further covenants that in the event that the Common
Stock shall be listed on any registered stock exchange or any other
national securities exchange (which term shall include the Nasdaq and the
Nasdaq National Market) the Company will, if permitted by the rules of such
exchange, list and keep listed and for sale so long as the
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Common Stock shall be so listed on such exchange, upon official notice of
issuance, all Common Stock issuable upon conversion of this Note.
1.7 Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of
the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock or the class issuable upon conversion of
this Note) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a
condition precedent to such transaction, cause effective provision to be made
so that the holder of this Note shall have the right thereafter by converting
this Note, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by
the Holder of the number of shares of Common Stock which might have been
acquired upon conversion of this Note immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustment provided for in this Note.
The foregoing provisions of this Section 1.7 shall similarly apply to
successive reclassification, capital reorganization and changes of shares of
Common Stock and to successive consolidations, merger, sales or conveyances.
1.8 Payment of Interest on Conversion. The Company shall not, upon conversion
of this Note, be required to pay any interest accrued thereon from the day
immediately following the immediately preceding interest payment date through
the date of conversion; provided, however, that the Company shall pay all
unpaid interest accrued through and including the immediately preceding
interest payment date.
1.9 Current Market Price.
(a) For the purpose of any computation under this Article 1, the
current market price (the "Current Market Price") per share of Common Stock
at any date shall be deemed to be the average of the daily closing prices
for the thirty (30) consecutive trading days commencing forty-five (45)
trading days before the day in question.
(b) The closing price for each day shall be (A) the average of the
closing bid and asked quotations of the Common Stock on NASDAQ (which term
shall include the Nasdaq Bulletin Board) or any other automated quotation
system or (B) if the Common Stock shall be listed or admitted for trading
on the New York or American Stock Exchange or any successor exchange, the
last sale price, or if no sale occurred on such date, the average of the
closing bid and asked prices of the Common Stock on such exchange, or (C)
if the Common Stock shall not be included in any automated quotation system
or listed on any such exchange, the average of the closing bid and asked
quotation for Common Stock as reported by The Wall Street Journal, or if
not reported therein, by the National Quotation Bureau Incorporated (or
other recognized quotation service) if at least two (2) securities dealers
have
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inserted both bid and asked quotations for Common Stock on at least
five (5) of the ten (10) preceding trading days. If none of the conditions
set forth above is met, the closing price of Common Stock on any day or the
average of such closing prices for any period shall be the fair market
value of Common Stock as determined by appraisal by an NASD member
broker-dealer firm selected by the Board of Directors of the Company.
1.10 Adjustment of Conversion Price. In case the Company shall on any one or
more occasions after the date hereof (1) pay a dividend or make a distribution
in shares of its capital stock (whether shares of Common Stock or of capital
stock of any other class) to all holders of its Common Stock, (2) subdivide its
outstanding Common Stock, or (3) combine its outstanding Common Stock into
smaller number of shares, the conversion price in effect immediately prior
thereto shall be adjusted so that the Holder of the Note thereafter surrendered
for conversion shall be entitled to receive the numbers of shares of capital
stock of the Company which he would have owned or have been entitled to receive
after the happening of any of the events described above had such Note been
converted immediately prior to the happening of such event. Any adjustment made
pursuant to this Section 1.10 shall become effective immediately after the
record date in the case of a dividend or distribution or the effective date in
the case of a subdivision or combination. If, as a result of an adjustment made
pursuant to this Section 1.10, the Holder of the Note thereafter surrendered
for conversion shall become entitled to receive shares of two (2) or more
classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written statement
delivered to the Holder of the Note at his Payment Address) shall determine
the allocation of the adjusted conversion price between or among shares of such
classes of capital stock.
