Item 1. Security and Issuer.
- -----------------------------
The securities to which this statement (the "Schedule 13D")
relates are the shares of Common Stock (the "Stock") of Quality Products, Inc.
(the "Company"). The Company's principal executive office is located at 560
Dublin Avenue, c/o Multipress, Inc., Columbus, Ohio 43215.
Item 2. Identity and Background.
- ---------------------------------
This Schedule 13D is filed by Mr. Murray Koppelman (the
"Reporting Person"). The Reporting Person's business address is 575 Lexington
Avenue, New York, New York 10022. The Reporting Person is a citizen of the
United States. The Reporting Person is president and sole shareholder of
Eastlake Securities, Inc., a registered broker-dealer ("Eastlake"). During the
last five years, neither Koppelman nor Eastlake has been (a) convicted in any
criminal proceeding (excluding traffic violations or similar misdemeanors), nor
been (b) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- -----------------------------------------------------------
The source of funds used to effect the August 7, 1997 purchase
of the Company's "6% Convertible Note due August 31, 2001" (the "Note") was the
personal funds of the Reporting Person. The Reporting Person also advanced funds
on behalf of Richard W. Cohen, the Company's legal counsel and secretary
("Cohen"), to assist Cohen in effecting his purchase of a 50% proportionate
interest in the Note. The Reporting Person does not have any contracts,
arrangements or understandings with any other person with respect to the
securities of the Company, other than the Agreement of Intent (as defined)dated
August 8, 1997 and the Agreement (as defined) dated August 7, 1997. The
Agreement provided that (i) Cohen has a 50% interest in the Note, including all
proceeds deriving therefrom and (ii) that Cohen shall pay to the Reporting
Person $162,500 within 30 days of written request. As of August 29, 1997, the
Reporting Person and Cohen converted $100,000 principal amount of the Note into
133,333 shares of Common Stock (the "Conversion") of which 66,667 shares were
issued to the Reporting Person and 66,666 shares were issued to Cohen, and the
Company agreed to issue new $200,000 notes (the "New Notes") to each of the
Reporting Person and Cohen, each convertible into Common Stock at the rate of
$.75 per share, or up to 266,666 shares for each $200,000 principal amount.
Item 4. Purpose of Transaction.
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The Stock acquired by Koppelman was acquired and is being held
as an investment. Except as set forth below, neither Eastlake nor Koppelman has
any present plans or proposals which relate to or would result in: (a) the
acquisition or disposition by any person of additional securities of the Company
(other than the Note); (b) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation of the Company or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries; (d) any change in the present board of directors or management
of the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (e) any material
change in the present capitalization or dividend policy of the issuer; (f) any
other material change in the Company's business or corporate structure; (g)
changes in the Company's charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Company by any
person; (h) causing a class of securities of the Company to be delisted from a
national securities exchange or cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (j) any action similar to any of those enumerated
above.
In August 1997 and September 1997, the Company and Eastlake
conducted negotiations pursuant to which it was agreed between them that
Eastlake would act as placement agent for the Company in selling securities of
the Company in a "best efforts" private placement solely to a limited number of
accredited investors (the "Agreement of Intent"). Pursuant thereto, in
September 1997, the Company commenced an offering of an aggregate of $1,500,000
to $1,800,000 of secured debt and 750,000 - 900,000 warrants to purchase Stock.
In connection therewith,Eastlake would receive (i) cash fees equal to 5%
of the debt sold by the Company, and (ii) warrants to purchase shares of Stock
in an amount equal to 10% of the warrants sold in the private placement. The
Company would also grant a security interest in all of its assets to the
Reporting Person and Cohen to secure the obligations evidenced by the Note,
which would be subordinate to the private placement debt and any other debt to
which the private placement debt is subordinated.
Upon closing of the private placement, Eastlake would receive a 3
year right of first refusal to act as underwriter or placement agent for future
public offerings by the Company and certain private offerings by the Company,its
officers, directors and principal stockholders. The Company and Eastlake are
currently offering these securities to a limited number of accredited investors.
Item 5. Interest in Securities of the Issuer.
- ----------------------------------------------
The Reporting Person may be deemed to own beneficially in the
aggregate 333,333 shares of Stock (representing the 66,667 shares issued August
29, 1997 and the 266,666 shares issuable upon conversion of the $200,000
principal amount of the New Note issued by the Company to the Reporting Person.
Based on the 2,395,680 shares of Stock outstanding as reflected on the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1997, plus the
133,333 shares issued August 29, 1997 to the Reporting Person and Cohen upon the
Conversion, and the 266,666 additional shares issuable to the Reporting Person
upon conversion of its New Note, the Reporting Person's 333,333 shares
beneficially owned constitute approximately 11.9% of the shares of Stock
outstanding. The Reporting Person has the sole power to vote and direct the vote
or to dispose and direct the disposition of the Stock which he owns. The
Reporting Person does not have any interest in 333,333 shares owned by Cohen.
The Reporting Person acquired this interest from the original holder of the Note
in a private transaction, on or about August 7, 1997, for an aggregate purchase
price of $325,000, of which $162,500 is payable to the Reporting Person by Cohen
in accordance with their Agreement.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer
------------------------------------------------------
The Reporting Person and Eastlake do not have any contracts,
arrangements or understandings with any other person with respect to the
securities of the Company, other than the Agreement (as defined below) and the
Agreement of Intent. The Agreement provided that(i) Cohen had a 50% interest in
the Note, including all proceeds derived therefrom and (ii) that Cohen shall pay
to the Reporting Person $162,500 within 30 days of written demand. Subsequent
thereto, the Reporting Person and Cohen split their interest in the Note, and
the Company issued shares and New Notes to them, as set forth above.
<PAGE>
Item 7. Material to be Filed as Exhibits.
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EX 99.1 Agreement dated August 7, 1997 between Cohen and the
Reporting Person (the "Agreement").
EX 99.2 The Note, dated August 31, 1996.
EX 99.3 New Note, dated August 29, 1997.
<PAGE>
Signatures
- ----------
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
September 23, 1997
/s/Murray Koppelman
-------------------
Murray Koppelman
AGREEMENT
For valuable consideration given by Richard W. Cohen ("Cohen")
to Murray Koppelman ("Koppelman") in connection with his acquisition for
$325,000, of a 6% Convertible Note Due August 31, 2001, dated August 31, 1996
made by Quality Products, Inc. to PI, Inc. in the principal amount of $500,000
(the "Note"), and in further consideration of the promises set forth below,
Koppelman and Cohen agree as follows:
1. Cohen has a 50% interest in the Note and in all proceeds
therefrom, including payments of principal and interest, shares of stock issued
upon conversion of the Note ("Note Shares") and net proceeds of any sale of all
or any part of the Note or Note Shares.
2. Cohen shall pay Koppelman within 30 days of written demand
by Eastlake, the sum of $162,500.
Dated: August 7, 1997
New York, New York
/s/Murray Koppelman
-------------------
Murray Koppelman
/s/Richard W. Cohen
-------------------
Richard W. Cohen
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE (THE "NOTE SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), AND NEITHER THIS NOTE NOR SUCH SHARES MAY BE SOLD, ENCUMBERED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN
EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
QUALITY PRODUCTS, INC.
6% Convertible Note Due August 31, 2001
$ 500,000.00
Dublin, Ohio
August 31, 1996
Quality Products, Inc., a Delaware corporation (herein called the
"Company"), for value received, hereby promises to pay to PI, Inc., a Delaware
corporation with offices at P.O. Box S, 70 Airport Road, Hyannis, Massachusetts
02601 (the "Holder"), the principal sum of Five Hundred Thousand Dollars
($500,000.00) on August 30, 2001, at Hyannis, Massachusetts or such other
address as the Holder shall have specified by written notice to the Company
(the "Payment Address") , in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and, except as otherwise provided herein, to pay
interest (computed on the basis of a 365-day year, using the number of days
actually elapsed) at such Payment Address, in like coin or currency, on said
principal sum from the date hereof, quarterly on November 30, February 22, May
31 and August 31 in each year, commencing as of the date hereof, at the rate of
six percent (6%) per annum. Interest shall be payable at the rate of twelve
(12%) percent on the entire unpaid principal amount of this Note from and after
the time such entire unpaid principal amount shall have become due and payable
(whether at maturity or by acceleration).
The entire unpaid principal amount of this Note, together with interest
thereon shall, at the option of the Holder, exercised by written notice to the
Company, forthwith be accelerated and become and be due and payable without
further notice if the Company fails to pay any principal or
<PAGE>
interest payable hereunder as and when same become due and payable and such
failure shall not have been cured within thirty (30) days after written notice
thereof to the Company by the Holder of this Note.
This Note is issued pursuant to a settlement agreement (the "Settlement
Agreement") dated as of the date hereof, by and between the Company and PI, Inc.
The Company agrees that from the date hereof through the earlier of (i)
conversion of this Note or (ii) August 30, 2001, it will not issue any
indebtedness senior to the indebtedness evidenced by this Note other than
indebtedness issued to a Financial Institution (as defined). The term "Financial
Institution" shall mean any bank as defined in Section 3(a)(2) of the Act, any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, or any insurance company as defined in Section 2(13) of
the Act.
ARTICLE 1
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 than 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 to 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 representing 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)
<PAGE>
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 than 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 provisions of this Section 1.3, the registered holder of this 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 surrender 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
<PAGE>
$.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 provide, 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 be
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
<PAGE>
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 provisions 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 adjustments provided
for in this Note. The foregoing provisions of this Section 1.7 shall similarly
apply to successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, 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
<PAGE>
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 a
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 number 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.
ARTICLE 2
Registration under the Securities Act of 1933.
2.1 Piggyback Registration Rights. For the eight year period commencing the date
hereof, the Company shall advise the Holder of the Note or the Note Shares by
written notice at least two weeks prior to the filing of any registration
statement under the Act (other than a registration statement on Form S-4, Form
S-8 or subsequent similar forms) covering securities of the Company and will
upon the request of such holder, include in any such registration statement such
information as may be required to permit a public offering of the Note Shares;
provided, however, that if the registration statement relates to a public
offering by the Company of its securities and the managing underwriters advise
the Holder that the inclusion in the offering of securities being sold by the
Holder would adversely affect the ability of the Company to complete the public
offering (and other selling stockholders, if any, are similarly advised), then
the number of Note Shares to be registered by the Holder shall be reduced pro
rata to the extent necessary to reduce the amount of securities to be included
in the offering to the amount recommended by the managing underwriters. The
Holder hereby further agrees not to make any sales of the securities so included
for a period of one hundred eighty (180) days from the effective date of such
registration statement. The Company shall keep such registration statement
current for a period of up to six (6) months from the conclusion of such one
hundred eighty (180) day period; provided, however, that the Company shall not
be required
<PAGE>
to keep the registration statement effective beyond the date after which the
registration statement must be amended to include updated audited financial
statements. The Company shall supply prospectuses, qualify the Note Shares for
sale in such states as the Holder reasonably requests and furnish
indemnification in the manner as set forth in of this Article 2. Such holder
shall furnish information and indemnification in the manner set forth in of this
Article 2.
2.2 Demand Registration Rights. If the Holder of the Note Shares shall give
notice to the Company at any time during the five year period commencing three
years from the date hereof to the effect that such holder contemplates the
transfer of all of his Note Shares under such circumstances that a public
offering distribution (within the meaning of the Act) of the Note Shares will be
involved, then the Company shall, within sixty (60) days after receipt of such
notice, file a registration statement pursuant to the Act, to the end that the
Note Shares may be sold under said Act as promptly as practicable thereafter;
provided that such holder shall furnish the Company with appropriate information
(relating to the intentions of such holder) in connection therewith as the
Company shall reasonably request in writing. The Company shall keep such
registration statement current for such time, not to exceed six (6) months, as
the Holder of the Note Shares may request.
Notwithstanding the foregoing, the filing of the registration statement
contemplated by this Section 2.2 may be delayed for a period not exceeding six
(6) months if the Board of Directors of the Company determines that such delay
is in the Company's best interests. The rights granted pursuant to this Section
2.2 may only be exercised (i) on one occasion; and (ii) subsequent to the
acquisition of the Note Shares upon conversion of the Note.
2.3 Other Provisions Pertaining to Registration Rights. The following
provision of this Article 2 shall also be applicable:
(a) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Article 2 hereof;
provided, however, that any Holder whose Note Shares are included in
such registration statement pursuant to this Article 2 shall, however,
bear the fees of his own counsel and accountants and any transfer taxes
or underwriting discounts or commissions applicable to the Note Shares
sold by him pursuant thereto.
(b) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Note Shares from and
against any and any losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for any post-effective
amendment thereto or any registration statement under the Act or any
prospectus included therein required to be filed or furnished by reason
of this Article 2 or any application or other filing under any state
securities law caused by any omission or alleged omissions to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading to which such holder or any
such underwriter or any of them may become subject under the Act, the
Securities Exchange Act of 1934, as amended, or other Federal or state
statutory law or regulation, at common law or otherwise, except insofar
as such losses, claims, damages or
<PAGE>
liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information
furnished or required to be furnished to the Company by any such holder
or underwriter expressly for use therein, which indemnification shall
include each person, if any, who controls any such underwriter within
the meaning of such Act; provided, however, that any such holder or
underwriter shall at the same time indemnify the Company, its
directors, each officer signing the related registration statement,
each person, if any, who controls the Company within the meaning of
such Act and each other holder, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or
furnished by reason of this Article 2 or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by
any untrue statement or alleged untrue statement or omission is based
upon information furnished to the Company by any such holder or
underwriter expressly for use therein.
(c) Notwithstanding anything to the contrary herein, the
Holder shall not be entitled to register the Note Shares pursuant to
Section 2.1 or 2.2 hereof if at such time, the Holder is then able, in
the opinion of counsel for the Company, to sell such securities
pursuant to Rule 144 under the Act, without regard to the volume
limitations contained therein.
ARTICLE 3
Miscellaneous
3.1 Notices. Notice shall be given to the Company by certified mail, return
receipt requested. Notices to the Company shall be addressed to Quality
Products, Inc., 560 Dublin Avenue, Columbus, Ohio 43215, Attention: Bruce
Weaver, President, or such other address as the Company may, from time to time
advise the Holder. Notices to the Holder shall be addressed to their respective
Payment Addresses and shall be given by certified mail, return receipt
requested. Notices shall be deemed given on the date mailed.
3.2 Governing Law. This Note shall be governed by the laws of the State of
Delaware applicable to agreements executed and to be performed wholly within
such state.
<PAGE>
3.3 Waiver of Trial by Jury. In any legal proceeding to enforce payment of this
Note, the Company waives trial by jury and counterclaims, if any.
QUALITY PRODUCTS, INC.
By:/s/ Bruce Weaver
-------------------
Bruce Weaver,
President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
[To be Signed Only Upon Conversion
of Part or All of Notes]
QUALITY PRODUCTS, INC.
The undersigned, the holder of the foregoing
Note, hereby surrenders such Note for conversion into shares of Common Stock of
QUALITY PRODUCTS, INC. to the extent of Five Hundred Thousand Dollars $500,000
unpaid principal amount due on such Note, and requests that the certificates for
such shares be issued in the name of _________________________, and delivered to
____________________________whose address is __________________________________.
DATED:
___________________________
(Signature)
Signature must conform in all respects to name
of holder as specified on the face of the Note
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE (THE "NOTE SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), AND NEITHER THIS NOTE NOR SUCH SHARES MAY BE SOLD, ENCUMBERED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN
EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
QUALITY PRODUCTS, INC.
6% Convertible Note Due August 31, 2001
$ 200,000.00 Columbus, Ohio
August 29, 1997
Quality Products, Inc., a Delaware corporation (herein called the
"Company"), for value received, hereby promises to pay to Murray Koppelman, with
an address at 575 Lexington Avenue, New York, New York (the "Holder"), the
principal sum of Two Hundred Thousand Dollars ($200,000.00) on August 30, 2001,
at 575 Lexington Avenue, New York, New York or such other address as the Holder
shall have specified by written notice to the Company (the "Payment Address") ,
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and,
except as otherwise provided herein, to pay interest (computed on the basis of a
365-day year, using the number of days actually elapsed) at such Payment
Address, in like coin or currency, on said principal sum from the date hereof,
quarterly on November 30, February 22, May 31 and August 31 in each year,
commencing as of the date hereof, at the rate of six percent (6%) per annum.
Interest shall be payable at the rate of twelve (12%) percent on the entire
unpaid principal amount of this Note from and after the time such entire unpaid
principal amount shall have become due and payable (whether at maturity or by
acceleration).
The entire unpaid principal amount of this Note, together with interest
thereon shall, at the option of the Holder, exercised by written notice to the
Company, forthwith be accelerated and
<PAGE>
become and be due and payable without further notice if the Company fails to pay
any principal or interest payable hereunder as and when same become due and
payable and such failure shall not have been cured within thirty (30) days after
written notice thereof to the Company by the Holder of this Note.
ARTICLE 1
Redemption or Conversion of Note.
1.1 Optional Conversion at Holder's Request. Subject to and upon compliance with
the provisions of this Section 1.1, the registered holder of this 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, 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 1.1.
(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 surrender 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.
<PAGE>
1.2 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.
1.3 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.
1.4 Reservation of Shares; Shares to be Fully Paid, Compliance with
Governmental Requirements; Listing of Common Stock.
(a) The Company shall provide, 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 be
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 Common Stock shall be so listed on such exchange, upon official
notice of issuance, all Common Stock issuable upon conversion of this
Note.
1.5 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
<PAGE>
shall, as a condition precedent to such transaction, cause effective provisions
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 adjustments provided for in this Note.
The foregoing provisions of this Section 1.5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
1.6 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.
1.7 Conversion Price. The conversion price is $.75 per share, subject to
adjustment as provided in section 1.8 herein.
1.8 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) split or subdivide
its outstanding Common Stock, or (3) combine its outstanding Common Stock into a
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 number 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 1.8 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 split, subdivision or combination. If, as a result of an adjustment made
pursuant to this Section 1.8, 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.
<PAGE>
ARTICLE 2
Registration under the Securities Act of 1933.
2.1 Piggyback Registration Rights. For the five year period commencing the date
hereof, the Company shall advise the Holder of the Note or the Note Shares by
written notice at least thirty (30) days prior to the filing of any registration
statement under the Act (other than a registration statement on Form S-4, Form
S-8 or subsequent similar forms) covering securities of the Company and will
upon the request of such holder, include in any such registration statement such
information as may be required to permit a public offering of the Note Shares;
provided, however, that if the registration statement relates to a public
offering by the Company of its securities and the managing underwriters advise
the Holder that the inclusion in the offering of securities being sold by the
Holder would adversely affect the ability of the Company to complete the public
offering (and other selling stockholders, if any, are similarly advised), then
the number of Note Shares to be registered by the Holder shall be reduced pro
rata to the extent necessary to reduce the amount of securities to be included
in the offering to the amount recommended by the managing underwriters. The
Holder hereby further agrees not to make any sales of the securities so included
for a period of one hundred eighty (180) days from the effective date of such
registration statement. The Company shall keep such registration statement
current for a period of up to six (6) months from the conclusion of such one
hundred eighty (180) day period; provided, however, that the Company shall not
be required to keep the registration statement effective beyond the date after
which the registration statement must be amended to include updated audited
financial statements. The Company shall supply prospectuses, qualify the Note
Shares for sale in such states as the Holder reasonably requests and furnish
indemnification in the manner as set forth in of this Article 2. Such holder
shall furnish information and indemnification in the manner set forth in of this
Article 2.
2.2 Demand Registration Rights. If the Holder of the Note Shares shall give
notice to the Company at any time during the two year period commencing October
1, 1998 hereof to the effect that such holder contemplates the transfer of all
of his Note Shares under such circumstances that a public offering distribution
(within the meaning of the Act) of the Note Shares will be involved, then the
Company shall, within sixty (60) days after receipt of such notice, file a
registration statement pursuant to the Act, to the end that the Note Shares may
be sold under said Act as promptly as practicable thereafter; provided that such
holder shall furnish the Company with appropriate information (relating to the
intentions of such holder) in connection therewith as the Company shall
reasonably request in writing. The Company shall keep such registration
statement current for such time, not to exceed six (6) months, as the Holder of
the Note Shares may request.
Notwithstanding the foregoing, the filing of the registration statement
contemplated by this Section 2.2 may be delayed for a period not exceeding six
(6) months if the Board of Directors of the Company determines that such delay
is in the Company's best interests. The rights granted pursuant to this Section
2.2 may only be exercised (i) on one occasion; and (ii) subsequent to the
acquisition of the Note Shares upon conversion of the Note.
2.3 Other Provisions Pertaining to Registration Rights. The following
provision of this Article 2 shall also be applicable:
(a) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Article 2 hereof;
provided, however, that any Holder whose Note Shares are included in
such registration statement pursuant to this Article 2 shall, however,
bear the fees of his own counsel and accountants and any transfer taxes
or underwriting discounts or commissions applicable to the Note Shares
sold by him pursuant thereto.
(b) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Note Shares from and
against any and any losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for any post-effective
amendment thereto or any registration statement under the Act or any
prospectus included therein required to be filed or furnished by reason
of this Article 2 or any application or other filing under any state
securities law caused by any omission or alleged omissions to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading to which such holder or any
such underwriter or any of them may become subject under the Act, the
Securities Exchange Act of 1934, as amended, or other Federal or state
statutory law or regulation, at common law or otherwise, except insofar
as such losses, claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished
to the Company by any such holder or underwriter expressly for use
therein, which indemnification shall include each person, if any, who
controls any such underwriter within the meaning of such Act; provided,
however, that any such holder or underwriter shall at the same time
indemnify the Company, its directors, each officer signing the related
registration statement, each person, if any, who controls the Company
within the meaning of such Act and each other holder, from and against
any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus required to
be filed or furnished by reason of this Article 2 or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement or omission
is based upon information furnished to the Company by any such holder
or underwriter expressly for use therein.
<PAGE>
ARTICLE 3
Miscellaneous
3.1 Notices. Notice shall be given to the Company by certified mail, return
receipt requested. Notices to the Company shall be addressed to Quality
Products, Inc., 560 Dublin Avenue, Columbus, Ohio 43215, Attention: President,
or such other address as the Company may, from time to time advise the Holder.
Notices to the Holder shall be addressed to its respective Payment Address and
shall be given by certified mail, return receipt requested. Notices shall be
deemed given on the date mailed.
3.2 Governing Law. This Note shall be governed by the laws of the State of
Delaware applicable to agreements executed and to be performed wholly within
such state.
3.3 Waiver of Trial by Jury. In any legal proceeding to enforce payment of this
Note, the Company waives trial by jury and counterclaims, if any.
QUALITY PRODUCTS, INC.
By:_____________________
Bruce C. Weaver,
President
<PAGE>
Exhibit A
NOTICE OF CONVERSION
[To be Signed Only Upon Conversion
of Part or All of Notes]
QUALITY PRODUCTS, INC.
The undersigned, the holder of the foregoing
Note, hereby surrenders such Note for conversion into shares of Common Stock of
QUALITY PRODUCTS, INC. to the extent of __________________ Dollars $_______
unpaid principal amount due on such Note, and requests that the certificates for
such shares be issued in the name(s)
of _____________________________________, and delivered to ________________
whose address(es) is(are)_______________________________________________________
_______________________________________________________________________________.
DATED:
_____________________________
------------------------------------
(Signature)
(Signature must conform in all respects to
name of holder as specified on the face of
the Note.)
<PAGE>
