<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 8, 1997
MOLTEN METAL TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-21042 52-1659959
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
400-2 TOTTEN POND ROAD, WALTHAM, MASSACHUSETTS 02154
- --------------------------------------------------------------------------------
Address of principal executive offices
Registrant's telephone number, including area code: (617) 487-9700
--------------
<PAGE> 2
ITEM 5. OTHER EVENTS
On September 8, 1997, Molten Metal Technology, Inc. (the "Company")
completed a private placement with a group of institutional investors (the
"Private Placement") whereby the Company sold, for an aggregate purchase price
of $20.4 million, shares of its Series A Convertible Participating Preferred
Stock, par value $.01 per share (the "Series A Shares"). The Series A Shares are
convertible into shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock") on the basis described below. The institutional investor
group consists of CC Investments, LDC, Stark International, Sheperd Investments
International, Ltd., Nelson Partners and Olympus Securities, Ltd. In connection
with the Private Placement, the Company paid cash in the amount of $500,000 to
GEM Advisors, Inc. ("GEM") as a placement fee and issued a warrant (the
"Warrant") to a GEM affiliate exercisable for 566,000 shares of Common Stock at
an exercise price of $6.625 per share. The Company intends to use the proceeds
from the Private Placement primarily to support the start-up of its Bay City
Recycling Facility and to complete the construction of its first commercial
plant for the municipal waste market in Japan.
In connection with the Private Placement, the Company filed a Certificate
of Designations, Preferences and Rights of the Series A Shares with the
Secretary of State of Delaware on September 8, 1997 (the "Certificate of
Designations"). The Series A Shares have a stated value of $25,000 per share and
have an annual premium accruing at five percent. The Series A Shares are
non-voting, are subject to voluntary conversion at the option of the holders at
any time commencing 120 days after September 8, 1997, and will automatically
convert into Common Stock on September 8, 2000. The conversion price per share
will be the lower of (i) a fixed price (the "Fixed Price") of $5.83 (110% of the
average closing bid prices of the Company's Common Stock over the five trading
days ending September 5, 1997), or (ii) a variable price (the "Variable Price")
equal to an 85% discount of the average of the closing bid prices of the Common
Stock for the five trading days immediately preceding a notice of conversion.
However, during the first year after closing, any holder of Series A Shares who
converts any Series A Shares based on the Variable Price and sells the
underlying shares of Common Stock will pay a penalty to the Company, initially
in the amount of 8% and decreasing over time to 0% by September 1998.
The conversion price of the Series A Shares is subject to possible upward
performance adjustments. If, at the time of conversion, the closing bid price of
the Common Stock has increased by more than 40% over the original Fixed Price,
the Fixed Price will be automatically increased to equal:
C
-----------------
[(C/F) + (1.4)]/2
Where: C = the average of the closing bid prices of the Common Stock for the
five trading days immediately preceding a notice of conversion;
and
F = the original Fixed Price ($5.83 per share).
The Series A Shares are subject to optional redemption by the Company for
cash at any time at the amounts set forth in the Certificate of Designations and
for Common Stock upon the achievement of certain price levels of the Common
Stock. Upon the occurrence of certain events specified in the Certificate of
Designations, the Series A Shares must be redeemed by the Company at the amounts
set forth in the Certificate of Designations.
In connection with the sale of the Series A Shares and issuance of the
Warrant, the Company agreed to file a registration statement with the Securities
and Exchange Commission within 20 business days to register the Common Stock
issuable upon conversion of the Series A Shares and exercise of the Warrant.
The above discussion of the Series A Preferred Stock and the Warrant and
the agreements between the Company, the purchasers of the Series A Preferred
Stock and the GEM affiliate is qualified in its entirety by Exhibits 99.1
through 99.4 filed as part of this Current Report.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit
Number Description of Document
99.1 Securities Purchase Agreement, dated as of September 5, 1997, by
and among the Company, CC Investments, LDC, Stark International,
Sheperd Investments International, Ltd., Nelson Partners and
Olympus Securities, Ltd. (the "Purchasers").
99.2 Certificate of Designations, Preferences and Rights of Series A
Convertible Participating Preferred Stock.
99.3 Warrant, dated September 8, 1997, by and between the Company and
GEM Ventures, Ltd.
99.4 Registration Rights Agreement, dated as of September 5, 1997 by
and among the Company, the Purchasers and GEM Ventures, Ltd.
99.5 Press Release, dated September 8, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MOLTEN METAL TECHNOLOGY, INC.
Dated: September 11, 1997 By: /s/ Benjamin T. Downs
--------------------------------------------
Benjamin T. Downs
Executive Vice President of Finance and
Administration and Chief Financial Officer
3
<PAGE> 1
Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
-----------------------------
This SECURITIES PURCHASE AGREEMENT ("AGREEMENT") is entered into as of
September 5, 1997, by and between Molten Metal Technology, Inc., a Delaware
corporation (the "Company"), with headquarters located at 400-2 Totten Pond Road
Waltham, MA 02154 and the purchasers (each a "Purchaser" and together the
"PURCHASERS") set forth on the execution pages hereof, with regard to the
following:
RECITALS
--------
A. The Company and Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. Purchasers desire to purchase, upon the terms and conditions
stated in this Agreement, Series A Convertible Participating Preferred Stock of
the Company set forth in the Certificate of Designations, Preferences and Rights
(the "CERTIFICATE OF DESIGNATION") attached hereto as EXHIBIT A (the "PREFERRED
STOCK" or the "CONVERTIBLE SECURITIES"), which shall be convertible into shares
of the Company's Common Stock, par value $.01 per share (the "COMMON STOCK").
The shares of Common Stock issuable upon conversion of or otherwise pursuant to
the Preferred Stock are referred to herein as the "CONVERSION SHARES". The
Preferred Stock and the Conversion Shares are collectively referred to herein as
the "SECURITIES." In connection herewith, the Company is also issuing to GEM
Ventures Ltd. warrants to purchase 566,000 shares of Common Stock in the form of
Exhibit A-1 hereto, pursuant to the Warrant Agreement, dated as of the date
hereof, between GEM Ventures Ltd. and the Company (the "Warrant Agreement").
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Purchasers hereby agree as
follows:
<PAGE> 2
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 PURCHASE OF PREFERRED STOCK. Subject to the terms and conditions
of this Agreement, the Company shall issue and sell, and each Purchaser shall
purchase, the Preferred Stock as further contemplated hereby. The purchase price
(the "PURCHASE PRICE") per share of Preferred Stock shall be equal to $25,500.
Each Purchaser shall purchase the number of shares of Preferred Stock having the
total gross purchase price set forth on the signature page executed by such
Purchaser.
1.2 FORM OF PAYMENT. Each Purchaser shall pay the aggregate Purchase
Price for the Preferred Stock being purchased by such Purchaser by wire transfer
to, or for the benefit of, the Company, in accordance with the Company's written
wiring instructions, against delivery of duly executed stock certificates for
the same, and the Company shall deliver such Preferred Stock against delivery of
such aggregate Purchase Price. The obligations in this Agreement of each
Purchaser shall be separate from the obligations of each other Purchaser and
shall relate solely to the number of shares to be purchased by such Purchaser.
The obligations of the Company with respect to each Purchaser shall be separate
from the obligations of each other Purchaser and shall not be conditioned as to
any Purchaser upon the performance of obligations of any other Purchaser.
1.3 CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions set forth in Articles VI and VII below, the closing (the "Closing")
of the issuance, sale and purchase of the Securities pursuant to this Agreement
shall occur at 10:00 a.m. Chicago time, on September 8, 1997 (the "Closing
Date"), at the offices of Altheimer & Gray, 10 S. Wacker Drive, Chicago, IL
60606.
ARTICLE II
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants, solely with respect to itself and
its purchase hereunder and not with respect to any other Purchaser or the
purchase hereunder by any other Purchaser (and no Purchaser shall be deemed to
make or have any liability for any representation or warranty made by any other
Purchaser), to the Company as set forth in this Article II. No Purchaser makes
any other representations or warranties, express or implied, to the Company in
connection with the transactions contemplated hereby and any and all prior
representations and warranties, if any, which may have been made by a Purchaser
to the Company in connection with the transactions contemplated hereby shall be
deemed to have been merged in this Agreement and any such prior representations
and warranties, if any, shall not survive the execution and delivery of this
Agreement.
2.1 INVESTMENT PURPOSE. Purchaser is purchasing the Convertible
Securities for Purchaser's own account for investment only and not with a view
toward or in connection with the public sale or distribution thereof. Purchaser
will not resell the Convertible Securities or any
2
<PAGE> 3
securities which may be issued upon conversion thereof except pursuant to sales
that are exempt from the registration requirements of the Securities Act and/or
sales registered under the Securities Act and any state securities laws, to the
extent applicable. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement. By making the representations in this
Section 2.1, the Purchaser does not agree to hold the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption from registration under the Securities Act and any state securities
laws, to the extent applicable.
2.2 ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
2.3 RELIANCE ON EXEMPTIONS. Purchaser understands that the Convertible
Securities are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Purchaser set forth herein in
order to determine the availability of such exemptions and the eligibility of
Purchaser to acquire the Convertible Securities.
2.4 INFORMATION. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Convertible Securities which
have been specifically requested by Purchaser. Purchaser has been afforded the
opportunity to ask questions of the Company and has received what Purchaser
believes to be complete and satisfactory answers to any such inquiries. Neither
such inquiries nor any other due diligence investigation conducted by Purchaser
or any of its representatives shall modify, amend or affect Purchaser's right to
rely on the Company's representations and warranties contained in Article III.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk.
2.5 GOVERNMENTAL REVIEW. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
2.6 TRANSFER OR RESALE. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless subsequently registered thereunder or an
exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof); (ii) any sale of such Securities made in reliance on Rule
144 under the Securities Act (or a successor rule) ("RULE 144") may be made only
in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities without registration under
3
<PAGE> 4
the Securities Act under circumstances in which the seller may be deemed to be
an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to this Agreement or
the Registration Rights Agreement).
2.7 LEGENDS. Purchaser understands that, subject to Article V hereof,
the certificates for the Convertible Securities, and until such time as the
re-sale of the Conversion Shares has been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold by
Purchaser pursuant to Rule 144 as contemplated by Section 5.1, the certificates
for the Conversion Shares will bear a restrictive legend (the "LEGEND") in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
2.8 AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their terms.
2.9 RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereto executed by Purchaser.
2.10 HART-SCOTT-RODINO. Purchaser is not currently affiliated with
another Purchaser hereunder such that acquisitions by Purchaser would be
aggregated with acquisitions by such other purchaser for purposes of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("H-S-R"). In
the event that a filing under H-S-R is ever required as a result of the issuance
to Purchaser of Conversion Shares upon conversion of the Preferred Stock held by
such Purchaser, such Purchaser will comply with the requirements of H-S-R.
4
<PAGE> 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser that:
3.1 ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation or limited partnership duly organized, validity
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, and has the requisite corporate power and authority
to own its properties and to carry on its business as now being conducted. The
Company and each of its subsidiaries is duly qualified as a foreign corporation
or limited partnership to do business and is in good standing in every
jurisdiction where the failure to so qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on either
(i) the business, operations, properties, financial condition, operating results
or prospects of the Company and its subsidiaries, taken as a whole on a
consolidated basis or (ii) the transactions contemplated hereby.
3.2 AUTHORIZATION; ENFORCEMENT. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue and sell, perform its obligations
with respect to, the Convertible Securities in accordance with the terms hereof
and to issue the Conversion Shares in accordance with the terms and conditions
of the Certificate of Designation; (b) the execution, delivery and performance
of this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Convertible Securities and the
reservation for issuance and issuance of the Conversion Shares) have been duly
authorized by all necessary corporate action and, except as set forth on
SCHEDULE 3.2 hereof, no further consent or authorization of the Company, its
board of directors, or its stockholders or any other person, body or agency is
required with respect to any of the transactions contemplated hereby or thereby
(whether under rules of the Nasdaq National Market System ("NASDAQ"), the
National Association of Securities Dealers or otherwise); (c) this Agreement,
the Registration Rights Agreement and the Convertible Securities have been duly
executed and delivered by the Company; and (d) this Agreement, the Registration
Rights Agreement and the Convertible Securities constitute legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms.
3.3 CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Convertible Securities) exercisable for,
or convertible into or exchangeable for any shares of Common Stock and the
number of shares to be initially reserved for issuance upon conversion of the
Convertible Securities is set forth on SCHEDULE 3.3. All of such outstanding
shares of capital stock have been, or upon issuance will be, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company
(including the Preferred Stock and the Conversion Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the
Company. Except as disclosed in SCHEDULE 3.3, as of the date of this Agreement,
(i) there are no outstanding options, warrants,
5
<PAGE> 6
scrip, rights to subscribe for, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
and (ii) there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement).
The Company has furnished to Purchaser true and correct copies of the Company's
Certificate of Incorporation as currently in effect ("CERTIFICATE OF
INCORPORATION"), and the Company's By-laws as currently in effect (the
"BY-LAWS"). The Company has set forth on SCHEDULE 3.3 all instruments and
agreements (other than the Certificate of Incorporation and By-laws) governing
securities convertible into or exercisable or exchangeable for Common Stock of
the Company (and the Company shall provide to Purchaser copies thereof upon the
request of Purchaser). The Company shall provide Purchaser with a written update
of this representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the date of the Closing.
3.4 ISSUANCE OF SHARES. The Conversion Shares are duly authorized and
reserved for issuance, and, upon conversion of the Convertible Securities in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and will
not be subject to preemptive rights or other similar rights of stockholders of
the Company. The Convertible Securities are duly authorized and reserved for
issuance, and, when issued and paid for in accordance with Article I of this
Agreement, will be validly issued, fully paid and nonassessable, and free from
all taxes, liens, claims and encumbrances (other than restrictions on transfer
imposed by federal and state securities laws and this Agreement and the
Registration Rights Agreement) and are not and will not be subject to preemptive
rights or other similar rights of stockholders of the Company. The Board of
Directors of the Company has unanimously approved the issuance of shares of
Common Stock upon conversion of shares of Preferred Stock pursuant to the terms
hereof in the aggregate in excess of twenty (20) percent of the outstanding
shares of Common Stock (the "RULE 4460(i) AUTHORIZATION") and has unanimously
recommended to the stockholders of the Company the approval of the Rule 4460(i)
Authorization. Accordingly, no further corporate authorization or approval
(other than the Shareholder Approval (as defined in Section 4.9)) is required
under the rules of the Nasdaq with respect to the transactions contemplated by
this Agreement, including, without limitation, the issuance of the Conversion
Shares and the inclusion thereof on the Nasdaq.
3.5 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance, as
applicable, of the Convertible Securities and Conversion Shares) will not (a)
result in a violation of the Certificate of Incorporation or By-laws, (b) except
as set forth on SCHEDULE 3.5, conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
6
<PAGE> 7
Company or any of its subsidiaries is a party (except for such conflicts,
defaults, terminations, amendments, accelerations, and cancellations as would
not, individually or in the aggregate, have a Material Adverse Effect), or (c)
assuming the accuracy of the Purchasers' representations in Article II and their
compliance with their agreements in Article II and assuming the accuracy of
GEM's representations in of the Warrant Agreement and the compliance by GEM with
its agreements in the Warrant Agreement, result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, U.S.
federal and state securities laws and regulations) applicable to the Company or
any of its subsidiaries, or by which any property or asset of the Company or any
of its subsidiaries, is bound or affected. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, by-laws or
other organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its subsidiaries are not being conducted, and shall
not be conducted so long as a Purchaser owns any of the Preferred Stock, in
violation of any law, ordinance, rule, regulation, order, judgment or decree of
any governmental entity, court or arbitration tribunal except for possible
violations the sanctions for which either singly or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. Except as set forth on
SCHEDULE 3.5, the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations in accordance with
the terms hereof or thereof. The Company is not in violation of the listing
requirements of Nasdaq and does not reasonably anticipate that the Common Stock
will be delisted by Nasdaq for the foreseeable future.
3.6 REGISTRATION AND SEC DOCUMENTS. The Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and has been so registered since 1993. Except as disclosed in
SCHEDULE 3.6, since December 31, 1993, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act. The Company
has delivered to each Purchaser true and complete copies of the 1997 SEC
Documents (as herein defined), except for exhibits, schedules and incorporated
documents (the Company's Annual Report on Form 10-K for the year ended December
31, 1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997, Current Reports on Form 8-K dated January 3, 1997 (as amended
on February 24, 1997), February 13, 1997, April 3, 1997 (as amended April 18,
1997), and June 25, 1997 (as amended August 29, 1997), Forms S-1 with respect to
$142,750,000 of 5 1/2% Convertible Subordinated Notes Due 2006 and 3,683,871
shares of Common Stock (subject to increase) upon conversion thereof and 307,735
shares of Common Stock, respectively, filed with the SEC on August 28, 1996 (as
amended on December 6, 1996, December 10, 1996 and June 25, 1997) and September
20, 1996 (as amended on December 18, 1996 and June 25, 1997) respectively,
referred to herein as the
7
<PAGE> 8
"1997 SEC DOCUMENTS"). As of their respective dates, the 1997 SEC Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to the
1997 SEC Documents, and none of the 1997 SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as set forth on SCHEDULE 3.6 or in a subsequently
filed 1997 SEC Document, none of the statements made in any such 1997 SEC
Documents is, or has been, required to be updated or amended under applicable
law. The financial statements of the Company included in the 1997 SEC Documents
have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, and the rules and regulations of the SEC
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they do not include footnotes or are condensed
or summary statements) and fairly present, in all material respects, the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, immaterial year-end audit adjustments). The Filed SEC
Documents contain a complete and accurate list of all material (within the
meaning of S-K Item 601) undischarged written or oral contracts, agreements,
leases or other instruments to which the Company or any subsidiary is a party or
by which the Company or any subsidiary is bound or to which any of the
properties or assets of the Company or any subsidiary is subject (each a
"CONTRACT"). None of the Company, its subsidiaries or, to the best knowledge of
the Company, any of the other parties thereto, is in breach or violation of any
Contract, which breach or violation could reasonably be expected to have a
Material Adverse Effect. No event, occurrence or condition exists which, with
the lapse of time, the giving of notice, or both, or the happening of any
further event or condition, would become a breach or default by the Company or
its subsidiaries under any Contract which breach or default could reasonably be
expected to have a Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996 there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in SCHEDULE 3.7 or disclosed in the 1997 SEC
Documents such that the Purchasers could reasonably be expected to understand
the significance of such disclosure.
3.8 ABSENCE OF LITIGATION. Except as disclosed in SCHEDULE 3.8 or
disclosed in the 1997 SEC Documents such that the Purchasers could reasonably be
expected to understand the significance of such disclosure, there is no action,
suit or proceeding before or by any court, public board, governmental agency or
authority, or self-regulatory organization or body (a "Public Authority")
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened, and to the knowledge of the Company there is no inquiry or
investigation before or by any Public Authority pending or threatened, against
or affecting the Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such, wherein an unfavorable
decision, ruling or finding could reasonably be expected to have a Material
Adverse Effect. To the Company's knowledge, there are no facts which, if known
by a potential claimant
8
<PAGE> 9
or governmental agency or authority, could give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company or any
of its subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
3.9 DISCLOSURE. No information relating to or concerning the Company
set forth in this Agreement or the 1997 SEC Documents, read together as a whole,
contains an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in light
of the circumstances under which they were made, not misleading. Except for the
execution and performance of this Agreement, the Company is not in possession of
any material fact (within the meaning of the federal securities laws of the
United States) with respect to the Company or any of its subsidiaries which has
not been publicly disclosed.
3.10 ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF THE SECURITIES.
The Company acknowledges and agrees that Purchasers are not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, that this
Agreement and the transaction contemplated hereby, and the relationship between
each Purchaser and the Company, are "arms-length", and that any statement made
by any Purchaser, or any of its representatives or agents, in connection with
this Agreement or the transactions contemplated hereby is not advice or a
recommendation, is merely incidental to each Purchaser's purchase of the
Securities and has not been relied upon in any way by the Company, its officers,
directors or other representatives. The Company further represents to Purchasers
that the Company's decision to enter into this Agreement and the transactions
contemplated hereby has been based solely on an independent evaluation by the
Company and its representatives.
3.11 NO GENERAL SOLICITATION. Neither the Company nor any person acting
on behalf of the Company has conducted any "general solicitation," as described
in Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.
3.12 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the Securities Act pursuant to the provisions of Regulation
D. The offer and sale of the Preferred Stock to the Purchasers as contemplated
by this Agreement and the offer and issuance of the Conversion Shares in
connection with the Preferred Stock are exempt from the registration
requirements of the Securities Act, assuming the accuracy of the representations
and warranties herein contained of each Purchaser to the extent relevant for
such determination and assuming the accuracy of GEM's representations in the
Warrant Agreement to the extent relevant for such determination.
3.13 NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with (i)
9
<PAGE> 10
Global Emerging Markets, Ltd. and GEM Advisors, Inc. (collectively, "GEM/GEMA")
pursuant to the August 11, 1997 letter agreement with the Company (the "GEM
AGREEMENT") and (ii) Lazard Freres & Co. and Oppenheimer & Co. Inc. (the fees of
which shall be paid in full by the Company). The Company will indemnify each
Purchaser from and against any fees and expenses sought by GEM/GEMA pursuant to
the GEM Agreement or by Lazard Freres & Co. or Oppenheimer & Co. Inc.
3.14 ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares
issuable upon conversion of the Convertible Securities may increase
substantially in certain circumstances, including the circumstance wherein the
trading price of the Common Stock declines. The Company's executive officers and
directors have studied and fully understand the nature of the securities being
sold hereunder and recognize that they have a potential dilutive effect. The
board of directors of the Company has concluded in its good faith business
judgment that such issuance is in the best interests of the Company. The Company
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Convertible Securities is binding upon it and enforceable regardless of the
dilution that such issuance may have on the ownership interests of other
stockholders.
3.15 INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all material 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") used or necessary for the conduct of its
business as now being conducted and as previously described in the 1997 SEC
Documents. There is no material claim pending or to the Company's knowledge
threatened against the Company or any of its subsidiaries to the effect that the
Company or any subsidiary infringes on or is in conflict with any right of any
other person with respect to any Intangibles, and to the Company's knowledge
there is no basis for any such material claim. The Company has properly paid all
required maintenance fees with respect to, and the Company owns all right, title
and interest in and to, U.S. Patent No. 5,177,304 and such patent is, and at all
times has been, duly and validly issued to the Company and in full force and
effect.
3.16 FOREIGN CORRUPT PRACTICES. Except for any of the following that
could not reasonably be expected individually or in the aggregate to have a
Material Adverse Effect: neither the Company, nor any of its subsidiaries, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for, or on behalf
of, the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
10
<PAGE> 11
3.17 KEY EMPLOYEES. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in SCHEDULE 3.17. No Key Employee,
to the best of the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its
subsidiaries to any liability with respect to any of the foregoing matters.
Except as set forth on SCHEDULE 3.17, no Key Employee has, to the best of the
knowledge of the Company, any intention to terminate or limit his employment
with, or services to, the Company, nor is any such Key Employee subject to any
constraints (e.g., litigation) which would cause such employee to be unable to
devote his full time and attention to such employment or services. "Key
Employee" means each of William Haney, III, Benjamin T. Downs and Charles
Shaver.
3.18 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. The Company does not
make any other representations or warranties, express or implied, to the
Purchasers in connection with the transaction contemplated hereby and any and
all prior representations and warranties, if any, which may have been made by
the Company to a Purchaser in connection with the transactions contemplated
hereby shall be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution and
delivery of this Agreement.
ARTICLE IV
COVENANTS
4.1 BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 SECURITIES LAWS. The Company agrees to file a Form D with respect
to the Securities with the SEC as required under Regulation D and to provide a
copy thereof to each Purchaser when filed. The Company agrees to file a Form 8-K
disclosing this Agreement and the transactions contemplated hereby with the SEC
within three business (3) days following the date of Closing. Such 8-K shall
include at least this Agreement, the Certificate of Designations, the
Registration Rights Agreement and the Warrants as exhibits thereto. The Company
shall, on or prior to the date of Closing, take such action as is necessary to
sell the Securities to each Purchaser in accordance with applicable securities
laws of the states of the United States, and shall provide evidence of any such
action so taken to each Purchaser on or prior to the date of the Closing.
Without limiting any of the Company's obligations under this Agreement, the
Registration Rights Agreement or the Certificate of Designation, from and after
the date of Closing, neither the Company nor any person acting on its behalf
shall take any action which would adversely affect any exemptions from
registration under the Securities Act with respect to the offer or sale of the
Preferred Stock to the Purchasers as contemplated by this Agreement or the
Conversion Shares to be issued pursuant to the terms of the Preferred Stock.
4.3 REPORTING STATUS. So long as any Purchaser beneficially owns any
Preferred Stock and for six months thereafter, the Company shall timely file all
reports required to be filed with
11
<PAGE> 12
the SEC pursuant to the Exchange Act, and except as permitted under Section 4.8
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
4.4 RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. (a) For a
period of one hundred and eighty (180) days following the date of Closing, the
Company shall not issue or agree to issue, any equity securities of the Company
(or any security convertible into or exercisable or exchangeable, directly or
indirectly, for equity securities of the Company) (collectively "Restricted
Securities") if such securities are issued at a price (or in the case of
securities convertible into or exercisable or exchangeable, directly or
indirectly, for Common Stock such securities provide for a conversion, exercise
or exchange price) which may be less than the then current market price for
Common Stock on the date of issuance (in the case of Common Stock) or the date
of conversion, exercise or exchange (in the case of securities convertible into
or exercisable or exchangeable directly or indirectly for Common Stock). The
preceding sentence shall not prohibit the Company from issuing or agreeing to
issue equity securities: (i) to Purchasers pursuant to this Agreement, (ii)
pursuant to any employee stock option, stock purchase or restricted stock plan
of the Company in effect on the date hereof up to the aggregate amounts set
forth on SCHEDULE 3.3 hereto, (iii) pursuant to any existing security, option,
warrant, scrip, call or commitment or right in each case as disclosed on
SCHEDULE 3.3 hereof, (iv) in connection with any bond or other debt financing
for MMT of Tennessee Inc. ("MMTT") for the purpose of reimbursing MMTT or the
Company for costs incurred in constructing the Quantum CEP plant located in Oak
Ridge, Tennessee, provided that such Restricted Securities are limited to the
issuance of warrants to acquire shares of Common Stock with such warrants having
an exercise price at or greater than the average of the Closing Bid Prices (as
defined in the Certificate of Designation) of the Common Stock for the five (5)
trading days immediately preceding the date of issuance of the warrants
(provided that such warrants may be at an exercise price less than such average
if consented to in writing by two-thirds in interest of the then outstanding
shares of Preferred Stock), or (v) pursuant to a strategic joint venture or
partnership entered into by the Company, undertaken at the reasonable discretion
of the Board of Directors of the Company, the primary purpose of which is not to
raise equity capital.
4.5 INFORMATION. The Company agrees to send the following reports to
each Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: (a) within five (5) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, any proxy
statements and any Current Reports on Form 8-K; and (b) within one (1) day after
release, copies of all press releases issued by the Company or any of its
subsidiaries. The Company further agrees to promptly provide to any Holder any
information with respect to the Company, its properties, or its business or
Holder's investment as such Holder may reasonably request; provided, however,
that the Company shall not be required to give any Holder any material nonpublic
information. If any information requested by a Holder from the Company contains
material nonpublic information, the Company shall inform the Holder in writing
that the information requested contains material nonpublic information and shall
in no event provide such information to Holder without the express prior written
consent of such Holder after being so informed.
12
<PAGE> 13
4.6 RESERVATION OF SHARES. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares to provide for the full conversion of the outstanding Preferred Stock and
issuance of the Conversion Shares in connection therewith and as otherwise
required by the Certificate of Designation. The Company shall not reduce the
number of shares reserved for issuance upon conversion of the Preferred Stock
without the consent of Purchasers holding a majority of the Preferred Stock then
held by all Purchasers.
4.7 LISTING. For so long as any Purchaser owns any of the Securities,
the Company shall continue the listing and trading of its Common Stock on the
Nasdaq, the Nasdaq Small Cap Market, the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "Amex"). In addition, during such period, the
Company shall secure (within 30 days after the Closing but in any event prior to
the earlier of the Filing Date as defined in, and the filing of the Registration
Statement required to be filed pursuant to, the Registration Rights Agreement)
and maintain listing and trading of the Conversion Shares on each national
securities exchange and each automated quotation system upon which shares of
Common Stock are then listed (subject, as appropriate to official notice of
issuance) and comply in all respects with the Company's reporting, filing and
other obligations under the by-laws or rules of the National Association of
Securities Dealers, the Nasdaq, any other such automated quotation system and
any such national securities exchange, as applicable. During the period of time
in which the Cap Amount (as defined in the Certificate of Designation) is in
effect, the Company shall not be required to secure the listing on Nasdaq of a
number of Conversion Shares in excess of such Cap Amount.
4.8 CORPORATE EXISTENCE. So long as any Purchaser beneficially owns
any Preferred Stock, the Company shall maintain its corporate existence, except
in the event of a merger, consolidation or sale of all or substantially all of
the Company's assets, as long as the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all Preferred Stock outstanding as of the date of such transaction
and (ii) is a publicly traded corporation whose Common Stock is listed for
trading on the Nasdaq, the Nasdaq Small Cap Market, the New York Stock Exchange
or the American Stock Exchange.
4.9 SHARE AUTHORIZATION. The Company covenants and agrees that it
shall (i) solicit by proxy the authorization and approval (the "SHAREHOLDER
APPROVAL") of the Rule 4460(i) Authorization by the stockholders of the Company
not later than 60 days following the date of the Closing, and (ii) use its best
efforts to obtain the Shareholder Approval not later than 120 days following the
date of the Closing, including, without limitation, with respect to the proxies
referred to in Section 7.1(x) hereof.
4.10 HEDGING TRANSACTIONS. The Company understands that some or all of
the Purchasers are so-called "hedge" funds and the Company hereby expressly
agrees that each Purchaser shall not in any way be prohibited or restricted from
any purchases or sales of any
13
<PAGE> 14
securities or other instruments of, or related to, the Company or any of its
securities, including, without limitation, puts, call, futures contracts, short
sales and hedging and arbitrage transactions. Each Purchaser acknowledges that
such purchases, sales and other transactions may be subject to various Federal
and state securities laws and agrees to comply with all such applicable
securities laws and any such transactions will not be effected with the
intention of reducing the price of the Common Stock.
ARTICLE V
LEGEND REMOVAL, TRANSFER, AND CERTAIN SALES
5.1 REMOVAL OF LEGEND. The Legend shall be removed and the Company
shall issue a certificate without any legend to the holder of any Security upon
which such Legend is stamped, and a certificate for a security shall be
originally issued without any legend, if, unless otherwise required by
applicable state securities laws, (a) the sale of such Security is registered
under the Securities Act, (b) other than with respect to Rule 144 (which is the
subject matter of clause (c) next below (except to the extent related to changes
in law or rules and regulations or practice with respect thereto after the date
hereof), such holder provides the Company with an opinion of counsel, such
counsel to be reasonably acceptable to the Company and with the form, substance
and scope of such opinion to be reasonably satisfactory to the Company, to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act or, (c) such Security can be sold pursuant
to Rule 144 and a registered broker dealer provides to the Company's transfer
agent and counsel copies of a customary broker's 144 letter (or an appropriate
"will sell" letter) and a customary seller's representation letter with respect
to such a sale made (or, as the case may be, to be made) pursuant to Rule 144
(and, in the case of such a "will sell" letter, in a form reasonably
satisfactory to the Company) or (d) such Security can be sold pursuant to Rule
144(k). Each Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the Legend has been removed, or which
were originally issued without the Legend, pursuant to an effective registration
statement and to deliver a prospectus in connection with such sale or in
compliance with an exemption from the registration requirements of the
Securities Act. In the event the Legend is removed from any Security or any
Security is issued without the Legend and thereafter the effectiveness of a
registration statement covering the resale of such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to Purchaser
holding such Security, the Company may require that the Legend be placed on any
such Security that cannot then be sold pursuant to an effective registration
statement or Rule 144(k) or with respect to which the opinion referred to in
clause (b) next above has not been rendered, which Legend shall be removed when
such Security may be sold pursuant to an effective registration statement or
Rule 144(k) or such holder provides the opinion with respect thereto described
in clause (b) next above or the materials referred to in clause (c) above have
been delivered.
5.2 TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its
transfer agent to issue certificates, registered in the name of each Purchaser
or its nominee, for the Conversion Shares in such amounts as specified from time
to time by such Purchaser to the Company upon, and in accordance with, the
conversion of the Preferred Stock. Such certificates shall bear a legend only
14
<PAGE> 15
in the form of the Legend, and only to the extent permitted by Section 5.1
above, and the legend referred to in Section 5.3. The Company warrants that no
instruction other than such instructions referred to in this Article V, and no
stop transfer instructions other than stop transfer instructions to give effect
to Section 2.6 hereof in the case of the Conversion Shares prior to registration
of the Conversion Shares under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company. Nothing in this Section
shall affect in any way a Purchaser's obligations and agreement set forth in the
second sentence of Section 2.1 and Section 5.1 hereof to resell the Securities
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of applicable securities laws. Without limiting the
foregoing, if (a) a Purchaser provides the Company with an opinion of counsel,
which counsel must be reasonably satisfactory to the Company and which opinion
must be in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration or (b) a Purchaser transfers Securities pursuant to Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denomination as specified by such Purchaser in order to effect
such a transfer or sale. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Article V will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Article V, that a
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
5.3 LEGEND REMOVAL FEE. If Purchaser or any Affiliate (as defined
under the Exchange Act) to whom the Preferred Stock is transferred in accordance
with the provisions of paragraph 5.2, within one year after the date of Closing
acquires Common Stock in a conversion based solely on the Variable Conversion
Price (as provided in Exhibit A) and either such shares of Common Stock are
originally issued without the Legend or within such one year period the Legend
is removed therefrom (in each case in accordance with this Article V), then such
Purchaser or Affiliate, as the case may be, shall pay to the Company, within ten
(10) business days following such acquisition of such Common Stock without such
Legend or such removal of such Legend, as the case may be, in consideration of
the issuance without the Legend of such Common Stock or the removal of such
Legend, a fee in cash (or, at the Company's option (to be exercised by written
notice to Purchasers from time to time prior to the twentieth (20th) day of a
calendar month with respect to payments for the next calendar month (or portion
thereof as the Company may specify) in Common Stock) equal to "X" times the
number of Common Shares so issued or de-legended (as the case may be) times the
average of the Closing Bid Prices of the Common Stock for the five trading days
immediately preceding the date of conversion or de-legending (as the case may
be) with respect to such shares of Common Stock, as follows (and only to such
extent):
15
<PAGE> 16
<TABLE>
<CAPTION>
DAYS AFTER CLOSING "X"
------------------ ---
<S> <C>
121-180 .08
181-240 .06
241-300 .04
301-360 .02
greater than 360 0.00
</TABLE>
Subject to the Company's compliance with its obligations to deliver Conversion
Shares in accordance with this Agreement and the Certificate of Designation, any
such fee not paid within ten (10) business days after receipt by the Purchaser
of the applicable shares of Common Stock shall bear interest at a rate per annum
of 18% until such payment is made. In addition, while any such payment is past
due, and provided the Company has provided written notice to such effect to a
Purchaser and such Purchaser does not, in good faith, dispute such default, and
the Company is not then otherwise in default with respect to the delivery of
Conversion Shares in accordance with this Agreement and the Certificate of
Designation, the Company shall not be required to remove a Legend or issue
shares of Common Stock not bearing a Legend on behalf of such Purchaser or
Affiliate until such payment is made in full. Notwithstanding anything to the
contrary contained in this Agreement, until the first anniversary of the Closing
the Preferred Stock may bear a legend referring to (but not summarizing or
reproducing) "the existence of a Legend Removal Fee" under this Agreement. The
obligations in this Section 5.3 shall expire and be of no further force or
effect if the Common Stock becomes listed on the Nasdaq Small Cap Market or in
the event of an Override Election (as defined in the Certificate of
Designations). There shall be only one fee payable under this Section 5.3 with
respect to any particular shares of Common Stock acquired upon conversion of the
Preferred Stock (whether or not new certificates for such shares are
subsequently issued and whether or not any certificates representing directly or
indirectly such shares are subsequently re-legended pursuant to terms hereof).
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Convertible Securities to a
Purchaser at the Closing is subject to the satisfaction, as of the date of the
Closing and with respect to such Purchaser, of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
(i) Such Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement and delivered the
same to the Company.
(ii) Such Purchaser shall deliver the applicable Purchase Price
for the Convertible Securities purchased at the Closing.
(iii) The representations and warranties of such Purchaser shall
be true and correct as of the date when made and as of the Closing as
though made at that time, and such Purchaser shall have performed,
satisfied and complied in all material respects with
16
<PAGE> 17
the covenants and agreements required by this Agreement to be performed
or complied with by such Purchaser at or prior to the Closing.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which restricts or prohibits the consummation of any
of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of each Purchaser hereunder to purchase the
Convertible Securities to be purchased by it on the date of the Closing is
subject to the satisfaction of each of the following conditions, provided that
these conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser (with respect to it) at any time in such Purchaser's sole discretion:
(i) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered the same to
Purchaser.
(ii) The Company shall have delivered duly executed certificates
for the Preferred Stock (in such denominations as Purchaser shall
request) being so purchased by Purchaser at the Closing.
(iii) The Common Stock shall be listed on the Nasdaq and trading
in the Common Stock shall not have been suspended by the Nasdaq, the SEC
or other regulatory authority and no delisting or suspension shall be
reasonably likely for the foreseeable future.
(iv) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing as though
made at that time and the Company shall have performed, satisfied and
complied in all material respects with the covenants and agreements
required by this Agreement to be performed or complied with by the
Company at or prior to the Closing. Purchaser shall have received a
certificate, executed on behalf of the Company by the Chief Executive
Officer or Chief Financial Officer of the Company, dated as of the
Closing to the foregoing effect and as to such other matters as may be
reasonably requested by Purchaser.
(v) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
17
<PAGE> 18
(vi) Purchaser shall have received the officer's certificate
described in Section 3.3, dated as of the Closing.
(vii) Purchaser shall have received opinions of the Company's
counsel, dated as of the Closing, in the form attached hereto as
EXHIBIT C.
(viii) The Company's transfer agent has agreed to act in
accordance with irrevocable instructions in the form attached hereto as
EXHIBIT D.
(ix) The Company shall have obtained agreements with each of
Messrs. Haney, Preston, Nagel, Downs and Shaver restricting dispositions
of Common Stock beneficially owned by such persons and in the form
attached hereto as EXHIBIT E.
(x) The Company shall have received from each director of the
Company and each executive officer of the Company an irrevocable proxy in
the form attached hereto as EXHIBIT F.
(xi) The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware and a copy
thereof certified by the Secretary of State of Delaware shall have been
delivered to Purchaser.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts
located in the State of Delaware and the state courts located in the County of
New Castle in the State of Delaware in any suit or proceeding based on or
arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and each Purchaser irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company and each Purchaser further agree that service of process upon the
Company and each Purchaser mailed by first class mail shall be deemed in every
respect effective service of process upon the Company and each Purchaser in any
suit or proceeding arising hereunder. Nothing herein shall affect a Purchaser's
or the Company's right to serve process in any other manner permitted by law.
The parties hereto agree that a final non-appealable judgment in any such suit
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
8.2 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered
18
<PAGE> 19
by facsimile transmission, the party using such means of delivery shall cause
additional original executed signature pages to be delivered to the other
parties.
8.3 HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4 SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
8.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the maters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and Purchasers holding two-thirds in interest of the then
outstanding Preferred Stock purchased hereunder; provided, however, that no such
amendment shall affect any Purchaser differently than any other Purchaser
without the written consent of such Purchaser so differently affected.
8.6 NOTICE. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
facsimile-machine confirmed telecopy, and shall be deemed delivered at the time
and date of receipt (which shall include telephone line facsimile transmission).
The addresses for such communications shall be:
If to the Company:
Molten Metal Technology, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Telecopy: (617)768-6545
Attention: William M. Haney, III
CEO
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Telecopy: (617)951-8736
Attention: John R. Utzschneider, Esq.
19
<PAGE> 20
If to CC Investments, LDC:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
with a copy to:
Castle Creek Partners, LLC
333 West Wacker Drive
Suite 1410
Chicago, IL 60606
Telecopy: (312) 435-2636
Attention: Portfolio Manager
and with a copy to:
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
Telecopy: (312) 715-4800
Attention: Peter H. Lieberman, Esq.
If to any other Purchaser, to such address set forth under such Purchaser's name
on the signature page hereto executed by such Purchaser. Each party shall
provide notice to the other parties of any change in address.
8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, each Purchaser may assign its rights and
obligations hereunder to any of its "affiliates," as that term is defined under
the Exchange Act, without the consent of the Company so long as such affiliate
is an accredited investor. This Section 8.7 shall not limit each Purchaser's
right to transfer the Securities pursuant to the terms of this Agreement
(including, without limitation, to any pledgee), or to assign such Purchaser's
rights hereunder to any such transferee (and all such rights may in fact be so
assigned to any such transferee) (provided such transferee does not acquire the
securities pursuant to a registration under the Securities Act or Rule 144. No
Purchaser will without the prior consent of the Company transfer (other than to
an Affiliate or a pledgee) any shares of Preferred Stock unless the amount
transferred is at least 4 shares (or such lesser number as then owned by such
Purchaser).
20
<PAGE> 21
8.8 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.9 SURVIVAL. The representations and warranties of the Company and
the agreements and covenants set forth in Articles III, IV, V and VIII shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of Purchasers. The Company agrees to indemnify and
hold harmless each Purchaser and each of such Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or related to (a) any material breach by the Company of any of its
representations or covenants set forth herein or (b) any cause of action, suit
or claim brought or made against such indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto or
contemplated hereby, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the Preferred
Stock or the status of any Purchaser, or any holder of Preferred Stock or the
Conversion Shares, as an investor in the Company, except for any such loss or
damage which directly and primarily results from the particular indemnitee's
gross negligence, willful misconduct or intentional breach of any representation
and warranty or covenant thereof contained in this Agreement (it being
understood that to the extent that the foregoing undertaking by the Company in
this clause (b) is unenforceable for any reason with respect to any loss or
damage, the Company shall make the maximum contribution to the payment and
satisfaction of each such loss and damage which is permissible under applicable
law), in each case including advancement of expenses as they are incurred. The
representations and warranties of the Purchasers and the agreements and
covenants set forth in Articles II, IV, V and VIII shall survive the closing
hereunder notwithstanding any investigation conducted by or on behalf of the
Company. Any party seeking indemnification under this Section 8.9 (the
"INDEMNIFIED PARTY") shall promptly notify the other party hereto obligated to
provide indemnification hereunder (the "INDEMNIFYING PARTY") of any action,
suit, proceeding, demand or breach (a "CLAIM") with respect to which the
Indemnified Party claims indemnification hereunder; PROVIDED that, failure of
the Indemnified Party to give such notice shall not relieve any Indemnifying
Party of its obligations under this SECTION 8.9 except to the extent, if at all,
that such Indemnifying Party shall have been prejudiced thereby. If such Claim
relates to any action, suit, proceeding or demand instituted against the
Indemnified Party by a third party (a "THIRD PARTY CLAIM"), upon receipt of such
notice from the Indemnified Party, the Indemnifying Party shall be entitled to
assume the defense of such Third Party Claim, and in the case of such an
assumption the Indemnifying Party shall diligently and in good faith prosecute
the defense of such Third Party Claim and shall, subject to the foregoing, have
the authority to negotiate, compromise and settle such Third Party Claim.
Notwithstanding the foregoing provisions, (i) no Indemnifying Party shall be
entitled to settle any Third Party Claim without the Indemnified Party's prior
written consent (which consent shall not be unreasonably withheld), and (ii) no
Indemnified Party seeking indemnification hereunder with respect to a Third
Party Claim shall be entitled to settle any Third Party Claim without the
Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld).
21
<PAGE> 22
8.10 PUBLIC FILINGS; PUBLICITY. Immediately following execution on this
Agreement, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and each Purchaser shall have the
right to approve before issuance any press releases (including the foregoing
press release), SEC or other filings, or any other public statements, with
respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
approval of each Purchaser shall not be unreasonably withheld and such Purchaser
agrees that it will review and respond to any proposed disclosure in a timely
manner; and PROVIDED FURTHER that the Company shall be entitled, without the
prior approval of any Purchaser, to make any press release or SEC, NASDAQ, NASD
or exchange filings with respect to such transactions as is required by
applicable law and regulations (although each Purchaser shall (to the extent
time permits) be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof).
8.11 FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby. In addition, promptly following the Closing,
the Company shall use its reasonable efforts to legend the shares subject to
proxy in accordance with the provisions of the proxies contemplated by 7.1(x)
and to obtain a proxy, in the form of Exhibit F, from the Travelers Companies.
8.12 REMEDIES. No provision of this Agreement providing for any remedy
to the Company or a Purchaser shall limit any remedy which would otherwise be
available to such Purchaser or the Company at law or in equity. Nothing in this
Agreement shall limit any rights a Purchaser may have with any applicable
federal or state securities laws with respect to the investment contemplated
hereby.
8.13 TERMINATION. In the event that the Closing shall not have occurred
on or before September 10, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
8.14 COMPANY'S KNOWLEDGE. Whenever the phrase "to the Company's
knowledge" or "to the knowledge of the Company" or similar qualifiers is used
such phrase shall mean the actual knowledge of any of the following persons:
William M. Haney, III; Charles W. Shaver; Benjamin T. Downs or Ethan E. Jacks.
* * *
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
MOLTEN METAL TECHNOLOGY, INC.
/s/ Benjamin T. Downs
_____________________________________
Executive Vice President and
Chief Financial Officer
Initial Purchasers:
PURCHASER:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
/s/ John D. Ziegelman
By:____________________________
Director
Its:___________________________
With a copy to:
Castle Creek Partners, LLC
333 West Wacker Drive, Suite 1410
Chicago, IL 60606
Tel#: (312) 554-2771
Fax#: (312) 435-2636 Total Gross Purchase Price: US$8,160,000
Attn: Portfolio Manager Net Stated Value: US$8,000,000
PURCHASER:
Stark International
Arthur Morris, Christensen Century House
31 Richmond Road
Hamilton, Bermuda HM08
Tel#: (809) 292-7478
Fax#: (809) 295-4164
/s/ Michael A. Roth
By:_____________________________
Member of Managing G.P.
Its:____________________________
23
<PAGE> 24
With a copy to:
Stark Investments
1500 West Market Street, Suite 200
Mequon, WI 53092
Tel#: (414) 241-1820
Fax#: (414) 241-7704 Total Gross Purchase Price: US$3,060,000
Attn: Brian Davidson Net Stated Value: US$3,000,000
PURCHASER:
Sheperd Investments International, Ltd.
International Fund Administration Ltd.
48 Par-la-Ville Road, Suite 464
Hamilton, Bermuda HM11
Tel#: (441) 295-4718
Fax#: (441) 295-9637
/s/ Michael A. Roth
By:______________________________
Member of Investment Manager
Its:_____________________________
With a copy to:
Stark Investments
1500 West Market Street, Suite 200
Mequon, WI 53092
Tel#: (414) 241-1820
Fax#: (414) 241-7700 Total Gross Purchase Price: US$3,060,000
Attn: Brian Davidson Net Stated Value: US$3,000,000
PURCHASER:
Nelson Partners
c/o Leeds Management Services
129 Front St., 5th Floor
Hamilton, Bermuda HM12
Fax#: (441) 292-2239
Attn: Anne Dupuy
/s/ Anne Dupuy
By:_____________________________
Officer
Its:____________________________
24
<PAGE> 25
With a copy to:
Citadel Investment Group LLC
225 West Washington Street, 9th Floor
Chicago, IL 60606
Tel#: (312) 696-2165
Fax#: (312) 368-4347 Total Gross Purchase Price: US$2,754,000
Attn: Malcolm Fairbairn Net Stated Value: US$2,700,000
PURCHASER:
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton, Bermuda HM12
Fax#: (441) 292-2239
Attn: Anne Dupuy
/s/ Anne Dupuy
By:_____________________________
Director
Its:____________________________
With a copy to:
Citadel Investment Group LLC
225 West Washington Street, 9th Floor
Chicago, IL 60606
Tel#: (312) 696-2165
Fax#: (312) 368-4347 Total Gross Purchase Price: US$3,366,000
Attn: Malcolm Fairbairn Net Stated Value: US$3,300,000
25
<PAGE> 1
Exhibit 99.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
MOLTEN METAL TECHNOLOGY, INC.
I, Benjamin T. Downs, being the Vice President and Chief Financial
Officer of Molten Metal Technology, Inc., a Delaware corporation (the
"CORPORATION"), being duly authorized to execute and file this Certificate, do
hereby certify and attest that pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation and Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors
of the Corporation duly adopted the following resolutions providing for the
establishment and designation of a series of preferred stock:
RESOLVED: That it is desirable and in the best interests of the Corporation
to establish a series of preferred stock of the Corporation,
designated as Series A Convertible Participating Preferred Stock,
$.01 par value per share (the "SERIES A PREFERRED STOCK"),
consisting of 800 shares, having such voting powers, designations,
preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions as are set
forth in the form of the Certificate of Designations, Preferences
and Rights attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"), said proposed Certificate of Designation to become
effective upon the filing thereof with the Secretary of State of
Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand as Vice President and
Chief Financial Officer of the Corporation on this 8th day of September 1997,
and I hereby affirm that the foregoing Certificate is my act and deed and the
act and deed of the Corporation and that the facts stated therein are true.
/s/ Benjamin T. Downs
-----------------------------------------------
Benjamin T. Downs
Vice President and Chief Financial Officer
<PAGE> 2
DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
MOLTEN METAL TECHNOLOGY, INC.
I. DESIGNATION AND AMOUNT
The designation (this "CERTIFICATE OF DESIGNATION") of this series, which
consists of 800 shares of Preferred Stock of Molten Metal Technology, Inc., a
Delaware corporation (the "COMPANY"), is the Series A Convertible Participating
Preferred Stock (the "PREFERRED STOCK") and the face amount shall be Twenty-Five
Thousand Dollars ($25,000.00) per share (the "FACE AMOUNT").
II. DIVIDENDS
The Preferred Stock will bear no dividends.
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Company and reasonably acceptable to holders of the Preferred
Stock (each, a "HOLDER") then holding two-thirds of the then outstanding shares
of Preferred Stock ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not
then reporting closing bid prices of such security (collectively, "BLOOMBERG"),
or if the foregoing does not apply, the last reported sale price of such
security in the over-the-counter market on the electronic bulletin board of such
security as reported by Bloomberg, or, if no sale price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as reasonably determined by an
investment banking firm selected by the Company and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the Company.
B. "COMMON STOCK" means the Company's Common Stock, par value $.01
per share.
<PAGE> 3
C. "CONVERSION DATE" means, for any Optional Conversion, the date
specified in the notice of conversion, in the form attached hereto (the "NOTICE
OF CONVERSION"), so long as the copy of the Notice of Conversion is faxed (or
delivered by other means) to the Company before 11:59 p.m., New York time, on
the Conversion Date indicated in the Notice of Conversion. If the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the Holder faxes or otherwise delivers the
Notice of Conversion to the Company. The Conversion Date for the Required
Conversion at Maturity shall be the Maturity Date (as such terms are defined
herein).
D. "CONVERSION PRICE" means, with respect to any Conversion Date, the
lower of the Fixed Conversion Price and the Variable Conversion Price, each as
in effect as of such date and subject to adjustment as provided herein.
E. "FIXED CONVERSION PRICE" means $5.83 (I.E., 110% of the average of
the Closing Bid Prices of the Common Stock for the five (5) consecutive trading
days ending on the trading day immediately preceding the Closing Date (as
defined below) (subject to equitable adjustment for any stock splits, stock
dividends, reclassifications or similar events during such five (5) trading day
period)), which shall be subject to adjustment as provided herein (the "INITIAL
FIXED CONVERSION PRICE"); provided, however, that in the event that, with
respect to a particular Conversion Date, if the average of the Closing Bid
Prices of the Common Stock for the five (5) consecutive trading days immediately
preceding the Conversion Date shall exceed 140% of the Initial Fixed Conversion
Price, then in such case the Fixed Conversion Price shall be adjusted for
purposes of such Conversion Date to equal:
C
-----------------
[(C/F) + (1.4)]/2
Where: C = the average of the Closing Bid Prices of the Common Stock for the
five (5) consecutive trading days immediately preceding the
applicable Conversion Date; and
F = Initial Fixed Conversion Price.
F. "N" means the number of days from, but excluding, the date (the
"CLOSING DATE") of the Closing under the Securities Purchase Agreement through
and including the Conversion Date for such Preferred Stock.
G. "PREMIUM" means 25,000 x (N/365) x (.05).
H. "SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement, dated as of September 5, 1997, among the Company and the purchasers
named therein, as amended from time to time in accordance with the terms
thereof.
-2-
<PAGE> 4
I. "VARIABLE CONVERSION PRICE" means, as of any Conversion Date, 85%
(but 83% in the event of a Blackout (as defined in Section 2.3 of the
Registration Rights Agreement (as herein defined)), 80% in the event the Common
Stock is listed on the Nasdaq Small Cap Market and 50% in the event of an
Override Election (as defined in Article VIII hereof)) of the average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive trading days
ending on the trading day immediately preceding the Conversion Date (subject to
equitable adjustment for any stock splits, stock dividends, reclassifications or
similar events during such five (5) trading day period), subject to adjustment
as provided herein.
Capitalized terms not defined above shall have the meanings set forth in
the remainder of this document.
IV. CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER. Subject to the limitations
on conversions contained in Section IV.G, each Holder may, at any time and from
time to time beginning on the one hundred and twentieth (120th) day after the
Closing Date, convert (an "OPTIONAL CONVERSION") each of its shares of Preferred
Stock (in whole or in part) into a number of fully paid and nonassessable shares
of Common Stock determined in accordance with the following formula for each
share of Preferred Stock:
(Premium + 25,000)
------------------
Conversion Price
In the event a fraction of a share of Preferred Stock is being converted, the
foregoing formula shall be multiplied by such fraction with respect to the
conversion of such fractional share.
B. MECHANICS OF CONVERSION. In order to effect an Optional
Conversion, a Holder shall: (x) fax (or otherwise deliver) a copy of the fully
executed Notice of Conversion as provided in Section XIV.J and (y) as soon as
reasonably practicable thereafter surrender or cause to be surrendered (or
satisfy the provisions of Section XIV.B, if applicable) the certificates
representing the Preferred Stock being converted (the "PREFERRED STOCK
CERTIFICATES") accompanied by duly executed stock powers and a copy of the
Notice of Conversion. Upon receipt by the Company of the fax copy of a Notice of
Conversion from a Holder, the Company shall promptly and in no event later than
the next business day send, via fax, a confirmation to such Holder stating that
the Notice of Conversion has been received, the date upon which the Company
expects to deliver the Common Stock issuable upon such conversion and the name
and telephone number of a contact person at the Company regarding the
conversion.
C. DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the delivery of a
Notice of Conversion, the Company shall, no later than the later of (a) the
third business day following the
-3-
<PAGE> 5
Conversion Date and (b) the day that is the first business day following the
date of the surrender of the Preferred Stock Certificates (or satisfaction of
the provisions of Section XIV.B, if applicable) (the "DELIVERY PERIOD"), issue
and deliver to the Holder (or at its direction) (x) that number of shares of
Common Stock issuable upon conversion of such shares of Preferred Stock being
converted and (y) a certificate representing the number of whole or partial
shares of Preferred Stock not being converted, if any. The person or persons
entitled to receive shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such shares at the close of
business on the Conversion Date.
D. TAXES. The Company shall pay any and all taxes (other than
transfer taxes) which may be imposed with respect to the issuance and delivery
of the shares of Common Stock pursuant to conversion of the Preferred Stock.
E. NO FRACTIONAL SHARES. No fractional shares of Common Stock are to
be issued upon the conversion of Preferred Stock, but the Company shall instead
round up to the next whole number the number of shares of Common Stock to be
issued upon such conversion.
F. CONVERSION DISPUTES. In the case of any dispute with respect to a
conversion, the Company shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with Sections IV.A and IV.C hereof. If
such dispute involves the calculation of the Conversion Price, the Company shall
submit the disputed calculations to an independent accounting firm of national
standing, acceptable to Holder, via facsimile within two (2) business days of
receipt of the Notice of Conversion. The accounting firm shall be instructed to
audit the calculations and notify the Company and the Holder of the results no
later than two (2) business days from the date it receives the disputed
calculations. The accounting firm's calculation shall be deemed conclusive,
absent manifest error. The Company shall then issue the appropriate number of
shares of Common Stock in accordance with Sections IV.A and IV.C hereof. The
expense of such accounting firm's calculation shall be shared equitably between
the Company and such Holder based on the outcome of such resolutions..
G. LIMITATION ON CONVERSIONS. The conversion of shares of Preferred
Stock shall be subject to the following limitations (each of which limitations
shall be applied independently):
(i) CAP AMOUNT. Prior to Stockholder Approval (as herein
defined), unless otherwise permitted by the Nasdaq National Market ("NASDAQ"),
in no event shall the total number of shares of Common Stock issued upon
conversion of the Preferred Stock and exercise of the Warrants (as defined in
the Securities Purchase Agreement) exceed the maximum number of shares of Common
Stock that the Company can without stockholder approval so issue pursuant to
Nasdaq Rule 4460(i) (or any successor rule) (the "CAP AMOUNT"), which, as of the
date of issuance of the Preferred Stock, shall be 4,731,557 shares. The Cap
Amount shall be allocated pro-rata to the Holders as provided in Article XIV.C.
In the event the Company is prohibited from issuing shares of Common Stock as a
result of the operation of this subparagraph (i), the Company shall comply with
Article VIII to the extent applicable.
-4-
<PAGE> 6
(ii) FIVE PERCENT HOLDINGS. Notwithstanding anything to the
contrary contained herein, the Preferred Stock shall not be convertible by a
Holder to the extent (but only to the extent) that, if converted by such Holder,
the Holder would beneficially own in excess of 4.9% of the shares of Common
Stock. To the extent the foregoing limitation applies, the determination of
whether Preferred Stock shall be convertible (vis-a-vis other securities owned
by such Holder) and of which Preferred Stock shall be convertible (as among
shares of Preferred Stock) shall be in the sole discretion of the Holder and
submission of the Preferred Stock for conversion shall be deemed to be the
Holder's determination of whether such Preferred Stock is convertible (vis-a-vis
other securities owned by such Holder) and of which shares of Preferred Stock
are convertible (as among shares of Preferred Stock), subject to such aggregate
percentage limitation. No prior inability to convert Preferred Stock pursuant to
this Section shall have any effect on the applicability of the provisions of
this Section with respect to any subsequent determination of convertibility. For
the purposes of this Section, beneficial ownership and all determination and
calculations, including without limitation, with respect to calculations of
percentage ownership, shall be made in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D - G thereunder.
The provisions of this Section may be implemented in a manner otherwise than in
strict conformity with the terms of this Section with respect to a Holder with
the approval of the Board of Directors of the Company and such Holder: (i) with
respect to any matter to cure any ambiguity herein, to correct this subsection
(or any portion thereof) which may be defective or inconsistent with the
intended 4.9% beneficial ownership limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
4.9% limitation; and (ii) with respect to any other matter, with the further
consent of the holders of majority of the then outstanding shares of Common
Stock; the provisions of this Section may be waived by a Holder with respect to
it upon ninety (90) days prior written notice from such Holder to the Company.
The limitations contained in this Section shall apply to a successor Holder of
Preferred Stock if, and to the extent, elected by such successor Holder
concurrently with its acquisition of such Preferred Stock, such election to be
promptly confirmed in writing to the Company (provided no transfer or series of
transfers to a successor Holder or Holders shall be used by a Holder to evade
the limitations contained herein).
(iii) H-S-R. Notwithstanding anything to the contrary contained
herein, the Preferred Stock shall not be convertible by a Holder to the extent
(but only to the extent) that the acquisition of shares of Common Stock by such
Holder upon such conversion would violate the applicable provisions, if any, of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
H. REQUIRED CONVERSION AT MATURITY. Subject to the limitations set
forth in Section IV.G. and provided all shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock are then (i) authorized
and reserved for issuance, (ii) registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT") for resale by all Holders of such shares of
Preferred Stock and (iii) eligible to be traded on either the Nasdaq, the Nasdaq
Small
-5-
<PAGE> 7
Cap Market, the New York Stock Exchange or the American Stock Exchange, each
share of Preferred Stock outstanding on the third anniversary of the Closing
Date (the "MATURITY DATE") (and any accrued and unpaid Conversion Default
Payments) automatically shall be converted into shares of Common Stock on such
date in accordance with the conversion formula set forth in Section IV.A (the
"REQUIRED CONVERSION AT MATURITY"). If a Required Conversion at Maturity occurs,
the Company and the Holders shall follow the applicable conversion procedures
set forth in this Article IV; provided, however, that a Notice of Conversion
shall be deemed to be delivered to the Company on the Maturity Date.
I. ELECTRONIC TRANSMISSION. In lieu of delivering physical
certificates representing the Common Stock issuable upon conversion, provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program (the "FAST PROGRAM") and to
the extent that the following may be accomplished consistent with Sections 2.7
and 5.1 of the Securities Purchase Agreement, upon request of a Holder, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting
the account of Holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system. The Company shall use its reasonable efforts
to participate in the FAST Program.
V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK
A. RESERVED AMOUNT. The Company shall have authorized and reserved
and keep available for issuance not less than 9.2 million shares of Common Stock
(the "RESERVED AMOUNT") solely for the purpose of effecting the conversion of
the Preferred Stock. The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to provide for the full conversion of all outstanding
Preferred Stock and issuance of the shares of Common Stock in connection
therewith. The Reserved Amount shall be allocated among the Holders as provided
in Section XIV.C.
B. INCREASES TO RESERVED AMOUNT. Without limiting any other provision
of this Article V, if the Reserved Amount for any three (3) consecutive trading
days (the last of such three (3) trading days being the "AUTHORIZATION TRIGGER
DATE") is less than one hundred seventy-five percent (175%) of the number of
shares of Common Stock issuable upon conversion of the Preferred Stock on such
trading days, the Company shall immediately notify the Holders of such
occurrence and shall immediately take all necessary action (including
stockholder approval to authorize the issuance of additional shares of Common
Stock) to increase the Reserved Amount to two hundred percent (200%) of the
number of shares of Common Stock then issuable upon conversion of the
outstanding Preferred Stock.
-6-
<PAGE> 8
VI. COMPLIANCE WITH CAP AMOUNT RESTRICTIONS
A. SHARE AUTHORIZATION. The Company shall, not later than 60 days
following the date of the Closing, solicit by proxy the authorization (the
"STOCKHOLDER APPROVAL") by the stockholders of the Company of the issuance of
shares of Common Stock upon conversion of shares of Preferred Stock pursuant to
the terms hereof and exercise of the Warrants pursuant to the terms thereof in
the aggregate in excess of twenty (20) percent of the outstanding shares of
Common Stock and to eliminate any prohibitions under applicable rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or any of its
securities on the Company's ability to issue shares of Common Stock in excess of
the Cap Amount and use its best efforts to obtain the Stockholder Approval no
later than 120 days following the date of the Closing.
B. OBLIGATION TO NOTIFY. If at any time after the date which is one
hundred and twenty (120) days following the Closing the then unissued portion of
any Holder's Cap Amount is less than one hundred seventy-five percent (175%) of
the number of shares of Common Stock then issuable upon conversion of such
Holder's shares of Preferred Stock (a "TRADING MARKET TRIGGER EVENT"), the
Company shall immediately notify the Holders of such occurrence.
VII. FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) a Holder submits
a Notice of Conversion (or is deemed to submit such notice pursuant to Section
IV.H) and the Company fails for any reason (other than because such issuance
would exceed such Holder's allocated portion of the Reserved Amount or the Cap
Amount, for which failure the Holders shall have the remedies set forth in
Article VIII) to deliver, on or prior to the second business day following the
expiration of the Delivery Period for such conversion (the "EXTENDED DELIVERY
PERIOD"), such number of shares of Common Stock to which such Holder is entitled
upon such conversion, or (y) the Company provides notice (including by way of
public announcement) to any Holder at any time of its intention not to issue
freely tradeable shares of Common Stock upon exercise by any Holder of its
conversion rights in accordance with the terms of this Certificate of
Designation (other than because such issuance would exceed such Holder's
allocated portion of the Reserved Amount or the Cap Amount or because of the
provisions of Section IV.G(iii)) (each of (x) and (y) being a "CONVERSION
DEFAULT"), then the Company shall pay to the affected Holder, in the case of a
Conversion Default described in clause (x) above, an amount equal to 0.5% of the
Face Amount of the Preferred Stock with respect to which the Conversion Default
exists (determined based on the number of shares of Preferred Stock tendered for
conversion) for each day after the expiration of the applicable Extended
Delivery Period to but excluding the day the Company cures the applicable
Conversion Default, and the Company shall pay to all Holders, in the case of a
Conversion Default described in clause (y) above, an amount equal to 0.5% of the
Face Amount of all of the Preferred Stock then outstanding for each day from and
including the day of the notice causing such Conversion Default to but excluding
the day the Company cures the applicable Conversion Default by appropriately
retracting the applicable notice.
-7-
<PAGE> 9
The payments to which a Holder shall be entitled pursuant to this Section
VII.A are referred to herein as "CONVERSION DEFAULT PAYMENTS." A Holder may
elect to receive accrued Conversion Default Payments in cash or to convert all
or any portion of such accrued Conversion Default Payments, at any time, into
Common Stock at the lowest Conversion Price in effect during the period
beginning on the date of the Conversion Default to but not including the Cure
Date for such Conversion Default. In the event a Holder elects to receive any
Conversion Default Payments in cash, it shall so notify the Company in writing.
Such payment shall be made in accordance with and be subject to the provisions
of Section XIV.E. In the event a Holder elects to convert all or any portion of
the Conversion Default Payments, the Holder shall indicate on a Notice of
Conversion such portion of the Conversion Default Payments which such Holder
elects to so convert and such conversion shall otherwise be effected in
accordance with the provisions of Article IV. "CURE DATE" means (i) with respect
to a Conversion Default described in clause (x) of its definition, the date of
the Company effects the conversion of the portion of the Preferred Stock
submitted for conversion and (ii) with respect to a Conversion Default described
in clause (y) of its definition, the date the Company undertakes in writing to
issue Common Stock in satisfaction of all conversions of Preferred Stock in
accordance with the terms of this Certificate of Designation.
B. ADJUSTMENT TO CONVERSION PRICE. If a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) day after
the expiration of the Delivery Period with respect to a conversion of Preferred
Stock for any reason (other than because such issuance would exceed such
Holder's allocated portion of the Reserved Amount or the Cap Amount, for which
failure the Holders shall have the remedies set forth in Article VIII, and other
than because of the provisions of Section IV.G(iii)), then the Fixed Conversion
Price in respect of any shares of Preferred Stock held by such Holder shall
thereafter be the lesser of (i) the lower of the Initial Fixed Conversion Price
and the Fixed Conversion Price on the Conversion Date specified in the Notice of
Conversion which resulted in the Conversion Default and (ii) the lowest
Conversion Price in effect during the period beginning on, and including, such
Conversion Date through but excluding the Cure Date. If there shall occur a
Conversion Default of the type described in clause (y) of Section VII.A, then
the Fixed Conversion Price with respect to any conversion thereafter shall be
the lower of the Initial Fixed Conversion Price and the lowest Conversion Price
in effect at any time during the period beginning on, and including, the date of
the occurrence of such Conversion Default through but excluding the Cure Date.
The Fixed Conversion Price shall thereafter be subject to further adjustment as
described in Section XI.
C. BUY-IN CURE. If (i) the Company fails for any reason to deliver
during the Delivery Period shares of Common Stock to a Holder upon a conversion
of shares of Preferred Stock in accordance with the terms of Article IV and (ii)
after the applicable Delivery Period with respect to such conversion, such
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to make delivery in satisfaction of a sale by such Holder of shares of
Common Stock (the "SOLD SHARES") as to which delivery such Holder anticipated
using shares of Common Stock to be received upon such conversion (a "BUY-IN"),
the Company shall
-8-
<PAGE> 10
pay such Holder (in addition to any other remedies available to the Holder) the
amount by which (x) such Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
net proceeds received by such Holder from the sale of the Sold Shares. For
example, if a Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to shares of Common Stock it
sold for $10,000, the Company will be required to pay the Holder $1,000. A
Holder shall provide the Company written notification indicating any amounts
payable to such Holder pursuant to this Section VII.C. The Company shall make
any payments required pursuant to this Section VII.C in accordance with and
subject to the provisions of Section XIV.E.
VIII. REDEMPTION DUE TO CERTAIN EVENTS
A. REDEMPTION EVENTS. A "REDEMPTION EVENT" means any one of the
following:
(i) from and after the date which is 120 days after the
Closing, the Common Stock (including any of the shares of Common Stock issuable
upon conversion of the Preferred Stock) is suspended from trading on any of, or
is not listed (and authorized) for trading on any of, the Nasdaq, the Nasdaq
Small Cap Market, the American Stock Exchange, or the New York Stock Exchange
for five (5) consecutive trading days or an aggregate of ten (10) trading days
in any nine (9) month period;
(ii) the Company fails, and any such failure continues uncured
for five (5) business days after the Company has been notified thereof in
writing by the Holder, to remove any restrictive legend on any certificate or
any shares of Common Stock issued to the Holders of Preferred Stock upon
conversion of the Preferred Stock as and when required by this Certificate of
Designation, the Securities Purchase Agreement, or the Registration Rights
Agreement, dated as of September 5, 1997, by and among the Company and the other
signatories thereto (the "REGISTRATION RIGHTS AGREEMENT");
(iii) the Company provides notice to any Holder, including by way
of public announcement, at any time, of its intention not to issue shares of
Common Stock to any Holder upon conversion in accordance with the terms of this
Certificate of Designation (other than because such issuance would exceed such
holder's allocated portion of the Reserved Amount or Cap Amount, for which
failures the holders shall have the remedies set forth elsewhere herein, and
other than because of the provisions of Section IV, G (iii)); provided any such
notice is not inadvertent error which is corrected and retracted (by written
notice to each Holder (and public announcement if such error occurred via public
announcement)) within two (2) business days after discovery thereof by the
Company;
(iv) the Company breaches any covenant or other material term or
condition of this Certificate of Designation, the Securities Purchase Agreement
or the Registration Rights Agreement the breach of which would have a material
adverse effect on the Company or on the rights of a Holder with respect to any
of the shares of Preferred Stock or the shares of Common
-9-
<PAGE> 11
Stock issuable upon conversion of the Preferred Stock and such breach continues
for a period of ten (10) business days after written notice thereof to the
Company; provided, however, that if such breach (and the attendant consequences)
may be cured by the Company within thirty (30) days of such written notice and
the Company is using its best efforts to cure such breach, such breach shall not
constitute a Redemption Event until such breach continues for a period of thirty
(30) days after written notice thereof to the Company;
(v) any representation or warranty of the Company in the
Securities Purchase Agreement or any of the officers' certificates delivered
pursuant thereto was false or misleading in any material respect when made and
the Company or the applicable officer knew that the applicable representation or
warranty was false or misleading in any material respect when made;
(vi) the Registration Statement required to be filed by the
Company pursuant to the Registration Rights Agreement has not been declared
effective by the 180th day following the Closing Date or, with respect to any
period after the Registration Deadline (as defined in the Registration Rights
Agreement) (or, if such Registration Statement has been declared effective prior
to the Registration Deadline, the later of the date of such effectiveness and
the date which is the 90th day following the Closing Date), such Registration
Statement, after being declared effective, together with any other registration
statement filed pursuant to the Registration Rights Agreement cannot be utilized
by the holders of Preferred Stock for the resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement) for an aggregate of
more than twenty (20) consecutive days (sixty (60) consecutive days prior to
June 30, 1998) or fifty (50) days (ninety (90) days with respect to any period
prior to June 30, 1998) in any twelve month period (provided the Company shall
only be entitled to the grace periods contemplated by this clause (vi) if the
Company is, and such grace periods shall terminate (and a Redemption Event shall
be deemed to occur) if the Company is not, using its best efforts to remedy such
inability to utilize the Registration Statement);
(vii) the Company fails, and such failure continues uncured for
five (5) business days after the Company has been notified thereof in writing by
the Holder, for any reason to issue shares of Common Stock within ten (10) days
after the expiration of the Delivery Period with respect to any conversion of
Preferred Stock (other than because such issuance would exceed such holder's
allocated portion of the Reserve Amount or Cap Amount, for which failures the
holders shall have the remedies set forth elsewhere herein, and other than
because of the provisions of Section IV.G(iii));
(viii) the Company fails to increase the Reserved Amount within
ten (10) days following an Authorization Trigger Date if such increase requires
solely approval of the Company's Board of Directors and otherwise within ninety
(90) days thereafter;
(ix) the Company fails to eliminate the Cap Amount prohibitions
or other prohibitions described in Section VI.A within one hundred twenty (120)
days following the Closing and thereafter a Trading Market Trigger Event occurs;
-10-
<PAGE> 12
(x) the Company fails to prepare, file and obtain the
effectiveness of any amendment to an existing registration statement within
twenty (20) days (but fifty (50) days prior to June 30, 1998) or of any new
registration statement within ninety (90) days (but one hundred and twenty (120)
days prior to June 30, 1998) following a Registration Trigger Date (as defined
in the Registration Rights Agreement) as required by Section 3.2 of the
Registration Rights Agreement (provided the Company shall only be entitled to
the grace periods contemplated by this clause (x) if the Company is, and such
grace periods shall terminate (and a Redemption Event shall be deemed to occur)
if the Company is not, using its best efforts to comply with said Section 3.2);
or
(xi) A Default (as defined in paragraph F below) occurs.
Notwithstanding the foregoing, an event referred to in clause (i), (vi), (viii),
(ix) or (x) of this paragraph A and, in each case not within the control of the
Company, an event referred to in clause (iv) of this paragraph A arising from a
breach by the Company of its obligations in Sections 4.6 or 4.7 of the
Securities Purchase Agreement or Sections 3.13 or 3.19 of the Registration
Rights Agreement shall not constitute a Redemption Event if (i) the Company
elects (an "Override Election"), within one business day following the
occurrence of such an event by written notice via facsimile (with a copy by
reputable overnight courier) to each Holder, to pay to each Holder, in cash, 5%
per week of the sum of the aggregate Face Amount of the then outstanding
Preferred Stock held by such Holder (including for these purposes shares of
Common Stock received upon conversion of Preferred Stock and then still owned by
such Holder) PLUS any accrued Premium with respect thereto, until such event no
longer exists, but in no event shall the Company be required to pay more than
25% of such amount in the aggregate to such Holder with respect to any such
event, and (ii) the Company so pays such amounts to such Holder each such week.
B. REDEMPTION BY HOLDER. Upon the occurrence of a Redemption Event,
each Holder shall have the right to elect at any time and from time to time by
delivery of a Redemption Notice (as defined herein) to the Company while such
Redemption Event continues, to require the Company to purchase for cash for an
amount per share equal to the Redemption Amount (as defined herein), (i) in the
case of a Redemption Event described in clause (i) through (vii) or clause (xi),
any or all of the then outstanding shares of Preferred Stock held by such
Holder, (ii) in the case of a Redemption Event described in clause (viii), a
portion of the Holder's Preferred Stock such that, after giving effect to such
purchase, the Holder's allocated portion of the Reserved Amount exceeds two
hundred percent (200%) of the total number of shares of Common Stock issuable to
such Holder upon conversion of its Preferred Stock then outstanding, (iii) in
the case of a Redemption Event described in clause (ix), a portion of the
Holder's Preferred Stock such that, after giving effect to such purchase, the
Holder's allocated portion of the Cap Amount exceeds two hundred percent (200%)
of the total number of shares of Common Stock issuable to such Holder upon
conversion of its Preferred Stock then outstanding and (iv) in the case of a
Redemption Event described in clause (x), a portion of the Holder's Preferred
Stock
-11-
<PAGE> 13
such that, after giving effect to such purchase, the Holder's allocated portion
of the Registrable Securities (as defined in the Registration Rights Agreement)
covered by a Registration Statement exceeds two hundred percent (200%) of the
total number of shares of Common Stock issuable to such Holder upon conversion
of its Preferred Stock then outstanding.
C. DEFINITION OF REDEMPTION AMOUNT. The "REDEMPTION AMOUNT" with
respect to a share of Preferred Stock means an amount equal to the greater of
(i) 1.4 times the Face Amount with respect thereto and (ii) an amount determined
by the following formula:
FACE AMOUNT + PREMIUM
----------------------
CP X M
where:
"CP" means the Conversion Price in effect on the date of the Redemption
Notice; and
"M" means the highest closing bid price of the Company's Common Stock
during the period beginning on the date of the Redemption Notice and ending on
the date of the redemption, as reported on the principal securities exchange or
trading market on which the Common Stock is traded.
D. REDEMPTION DEFAULTS. If the Company fails to pay any Holder the
Redemption Amount with respect to any share of Preferred Stock, including,
without limitation, pursuant to paragraph G hereof, within five (5) business
days of its receipt of a notice requiring such redemption (a "REDEMPTION NOTICE"
(upon receipt of which the Company shall immediately send a copy thereof by
facsimile and reputable overnight courier to each other Holder)), then the
Holder delivering such Redemption Notice (i) shall be entitled to interest on
the Redemption Amount at a per annum rate equal to the lower of eighteen percent
(18%) and the highest interest rate permitted by applicable law from the date of
the Redemption Notice until the date of redemption hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Company, upon
written notice, to immediately convert (in accordance with the terms of Section
IV.A) all or any portion of the Redemption Amount, plus interest as aforesaid,
into shares of Common Stock at the lowest Conversion Price in effect during the
period beginning on the date of the Redemption Notice and ending on the
Conversion Date with respect to the conversion of such Redemption Amount. In the
event the Company is not able to redeem all of the shares of Preferred Stock
subject to Redemption Notices, the Company shall redeem shares of Preferred
Stock from each Holder pro rata, based on the total number of shares of
Preferred Stock included by such Holder in its Redemption Notice relative to the
total number of shares of Preferred Stock in all of the Redemption Notices.
E. ADDITIONAL CAP AMOUNT REMEDIES. Upon a Redemption Event described
in clause (ix), any Holder who is so prohibited from converting its Preferred
Stock may require, with the
-12-
<PAGE> 14
consent of the Majority Holders (including any shares of Preferred Stock held by
the requesting Holder), the Company to be listed on the over-the-counter
electronic bulletin board.
F. REDEMPTION AT COMPANY'S OPTION.
(i) Provided no Redemption Event shall have occurred and
provided that no event has occurred which (with notice or passage of time or
both) would constitute a Redemption Event and provided that the Company is not
in possession of material non-public information (other than with respect to a
subsequent financing transaction), in each case at either the time of service of
the Optional Notice or the applicable Effective Time, then, subject to the
remainder of this paragraph F, the Company shall have the right to redeem or
convert, as the case may be, but not both and not a combination thereof (a
"COMPANY ELECTION"), outstanding Preferred Stock (other than shares which are
the subject of a Notice of Conversion delivered prior to the delivery date of
the Optional Notice (as herein defined)) for the Optional Amount (as herein
defined). Such right shall be exercisable once (and only once) with respect to a
redemption for cash and three times (and only three times) with respect to a
forced conversion, in each case after the Closing Date by delivery of an
Optional Notice in accordance with the procedures set forth below.
Notwithstanding anything to the contrary contained herein, holders may convert
all or any part of their Preferred Stock into Common Stock at the Conversion
Price by delivering a Notice of Conversion to the Company at any time prior to
any applicable Effective Time (as herein defined). The "OPTIONAL AMOUNT" with
respect to each share of Preferred Stock means 140% of the Face Amount thereof,
in cash in the case of a redemption and in Common Stock (at the Conversion Price
in effect at the applicable Effective Time) in the case of a forced conversion.
The Optional Notice shall specify whether the Company is making a redemption of
the Preferred Stock for cash or a forced conversion of the Preferred Stock into
Common Stock and shall specify the Effective Time(s) in accordance with the
remainder of this paragraph F.
(ii) The Company may not deliver an Optional Notice for a
redemption for cash unless such redemption is with respect to all
then-outstanding shares of Preferred Stock and unless the Company has ("FUNDING
AVAILABILITY"): (a) the full amount of the Optional Amount in cash, available in
a demand or other immediately available account in a bank or similar financial
institution; or (b) immediately available credit facilities, in the full amount
of the Optional Amount in cash with a bank or similar financial institution (or
binding commitment letters with respect thereto which commitment letters shall
be subject only to commercially reasonable conditions to closing as to which the
Company's Board of Directors has made a good faith business judgment will be
fulfilled to permit consummation of the redemption hereunder); or (c) an
agreement with a standby underwriter or qualified buyer ready, willing and able
to purchase from the Company a sufficient number of shares of stock to provide
proceeds necessary to redeem for the Optional Amount in cash any stock that is
not converted prior to redemption; or (d) a combination of the items set forth
in the preceding clauses (A), (B) and (C), aggregating the full amount of the
Optional Amount in cash. Any Optional Notice delivered in accordance with the
immediately preceding sentence shall be accompanied by a statement executed by a
duly
-13-
<PAGE> 15
authorized officer of the Company certifying that the Company has Funding
Availability and by other appropriate documentation as evidence thereof.
(iii) The Company shall effect a Company Election under this
paragraph F by giving 30 days' written notice (the "OPTIONAL NOTICE"), of, in
the event of a redemption for cash, the redemption date or, in the event of a
forced conversion for Common Stock, the date for the conversion thereof in
accordance with this paragraph F (each of such redemption date and such
conversion date shall be an "EFFECTIVE TIME") which notice may only be delivered
prior to 3:00 p.m. New York time on a business day to all Holders at the address
and facsimile number of the Holders appearing in the Register (as defined in
Article XIV, paragraph J). The Optional Notice shall be delivered to a Holder
via facsimile provided that, for any notice required under this subsection to be
valid, a copy of such notice must be sent to the Holders on the same day by
reputable overnight courier. No Optional Notice may be delivered if a Default
exists or during the pendency of another Optional Notice and, in the case of a
forced conversion for Common Stock, until the conversion with respect to such
prior Optional Notice has been effected or, with respect to a forced conversion
for Common Stock, if the Closing Bid Price for each of the twenty trading days
immediately preceding the date of the Optional Notice (as defined below) shall
not exceed 140% of the Initial Fixed Conversion Price. If, with respect to a
cash redemption, the Closing Bid Price for each of the twenty trading days
immediately preceding the date of the Optional Notice (as defined below) shall
not exceed 140% of the Initial Fixed Conversion Price, then the notice
requirement shall be 60 days instead of 30 days.
(iv) Subject to Section IV.G(i), the number of shares of
Preferred Stock of a Holder to be converted into Common Stock, if any, on an
applicable Effective Time shall be the sum of (x) one-third of the number of
shares of Preferred Stock originally acquired by such Holder as a purchaser
under the Securities Purchase Agreement (such number of shares of Preferred
Stock so originally acquired reduced by any such shares transferred to another
person) and (y) one-third of the number of shares of Preferred Stock, if any,
acquired by such Holder, directly or indirectly, from a purchaser who acquired
such shares under the Securities Purchase Agreement (such number of shares of
Preferred Stock so acquired reduced by any such shares transferred to another
person); provided that in each case the number of shares of Preferred Stock of a
Holder subject to redemption at an Effective Time shall be reduced by any shares
of Preferred Stock previously converted into Common Stock by such Holder prior
to such Effective Time (but only to the extent such reduction with respect to
such shares of Preferred Stock so converted was not effected with respect to a
prior Effective Time (if any)).
(v) If the Company fails to pay or issue, as the case may be,
when due and owing (a "DEFAULT"), any Optional Amount, then each Holder entitled
to receive such Optional Amount shall have the right, at any time and from time
to time, to require the Company, upon written notice, to immediately convert (in
accordance with the terms of Article IV) any or all of the shares of Preferred
Stock which are the subject of a Company Election into shares of Common Stock at
the lower of the Initial Fixed Conversion Price and the lowest Conversion Price
in effect following such Default. After such Default, a Holder may, at its
election by
-14-
<PAGE> 16
written notice to the Company, void such Company Election and the related
Optional Notice with respect to the Preferred Shares held by it (provided no
such election shall give the Company the ability to make an additional Company
Election or to give an additional Optional Notice or to otherwise redeem or
force convert the Preferred Shares pursuant to this paragraph F or to limit or
adversely affect any rights or remedies that such Holder would otherwise have
with respect to such Default).
(vi) Notwithstanding anything to the contrary contained in this
paragraph F, the Company shall not be entitled to effect a forced conversion
with respect to a Holder to the extent that the Holder would not have been
entitled at such time, under Section IV.G(ii) (assuming for purposes of this
clause (vi) (and this clause (vi) only) that the 4.9% limitation contained
therein were a 9.9% limitation) or under Section IV.G(iii), to convert shares of
Preferred Stock into the number of shares of Common Stock which would otherwise
be received by such Holder upon such forced conversion. In the event this clause
(vi) is applicable, such Holder shall, as soon as reasonably practicable,
dispose of such number of shares of Common Stock which would thereafter permit
the completion of such forced conversion pursuant to this paragraph F and
without operation of the limitations of this clause (vi) and sixty-one days
thereafter the Company shall have the option, exercisable by ten days' prior
written notice to such Holder, to complete such forced conversion (subject,
however, to the further operation of this clause (vi)).
G. CAPITAL IMPAIRMENT. In the event that Section 160 of the Delaware
General Corporation Law ("GCL"), would be violated by the redemption of any
shares of Preferred Stock that are otherwise subject to redemption pursuant to
this Article VIII, the Company: (i) will redeem the greatest number of shares of
Preferred Stock possible without violation of said Section; (ii) the Company
thereafter shall use its best efforts to take all necessary steps permitted
pursuant to this Certificate of Designation and the agreements entered into in
connection with the issuance of Preferred Stock pursuant hereto in order to
remedy its capital structure in order to allow further redemptions without
violation of said remaining Section ( and not take any action inconsistent with
so remedying such capital structure); and (iii) from time to time thereafter as
promptly as possible the Company shall redeem remaining shares of Preferred
Stock at the request of the Holders to the greatest extent possible without
causing a violation of Section 160 of the GCL (such redemption to be at the
greater of the Redemption Price in effect at the time of the original Redemption
Event giving rise to such violation and the redemption price which would be
applicable for a Redemption Event at the time of such later election under this
clause (iii)). In the event the Company is not able to redeem all the shares of
the stock subject to Redemption Notices, the Company shall redeem shares of
Preferred Stock from each Holder pro rata, based on the total number of shares
of Preferred Stock included by such Holder in the Redemption Notice relative to
the total number of Preferred Stock in all Redemption Notices. In addition, and
notwithstanding anything to the contrary contained in this Section VIII.G, so
long as the Company is prevented from redeeming shares of Preferred Stock
pursuant to this Section VIII.G, the Company shall be (and shall be deemed to
be) in breach of the redemption obligations
-15-
<PAGE> 17
set forth in this Section VIII and each Holder shall have all rights and
remedies under this Certificate of Designations or otherwise at law for damages,
with respect to such breach.
IX. RANK; PARTICIPATION
A. RANK. All shares of the Preferred Stock shall rank (i) prior to
the Common Stock; (ii) prior to any class or series of capital stock of the
Company hereafter created (unless, with the consent of the Holders obtained in
accordance with Article XIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or PARI PASSU with the Preferred
Stock) (collectively, with the Common Stock, "JUNIOR SECURITIES"); (iii) PARI
PASSU with any class or series of capital stock of the Company hereafter created
(with the consent of the Holders obtained in accordance with Article XIII
hereof) specifically ranking, by its terms, on parity with the Preferred Stock
(the "PARI PASSU SECURITIES"); and (iv) junior to any class or series of capital
stock of the Company hereafter created (with the consent of the Holders obtained
in accordance with Article XIII hereof) specifically ranking, by its terms,
senior to the Preferred Stock (the "SENIOR SECURITIES"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
B. PARTICIPATION. Subject to the rights of the holders (if any) of
PARI PASSU Securities and Senior Securities, the Holders shall, as Holders of
Preferred Stock, be entitled to such dividends paid and distributions made to
the holders of Common Stock to the same extent as if such Holders had converted
such Preferred Stock into Common Stock (without regard to any limitations on
conversion herein or elsewhere contained) and had such Common Stock been issued
on the day before the record date for said dividend or distribution. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
X. LIQUIDATION PREFERENCE
B. LIQUIDATION OF THE COMPANY. If the Company shall commence a
voluntary case under the U.S. Federal bankruptcy laws or any other applicable
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 Company 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 Company shall be entered by a court having jurisdiction
in the premises in an involuntary case under the U.S. Federal bankruptcy laws or
any other applicable bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Company 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
sixty (60) consecutive days and, on account of any such event, the Company shall
liquidate, dissolve or wind up, or if
-16-
<PAGE> 18
the Company shall otherwise liquidate, dissolve or wind up (a "LIQUIDATION
EVENT"), no distribution shall be made to the Holders of any shares of capital
stock of the Company (other than Senior Securities) upon liquidation,
dissolution or winding up unless prior thereto the Holders shall have received
the Liquidation Preference (as herein defined) with respect to each share. If,
upon the occurrence of a Liquidation Event, the assets and funds available for
distribution among the Holders 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 Company legally
available for distribution to the 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.
C. CERTAIN ACTS NOT A LIQUIDATION. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company.
D. DEFINITION OF LIQUIDATION PREFERENCE. The "LIQUIDATION PREFERENCE"
with respect to a share of Preferred Stock means an amount equal to the Face
Amount thereof plus the Premium with respect thereto plus any other amounts that
may be due from the Company with respect thereto through the date of final
distribution. The Liquidation Preference with respect to any PARI PASSU
Securities shall be as set forth in the Certificate of Designation filed in
respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS;
RELATIONSHIP OF CONVERSION PRICE TO PAR VALUE
The Conversion Price shall be subject to adjustment from time to time as
follows:
B. STOCK SPLITS, STOCK DIVIDENDS, ETC. If at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, the Fixed Conversion Price (including, without limitation, the Initial
Fixed Conversion Price) shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the Fixed
Conversion Price (including, without limitation, the Initial Fixed Conversion
Price) shall be proportionately increased. In such event, the Company shall
notify the Company's transfer agent of such change on or before the effective
date thereof.
C. [Intentionally Deleted]
-17-
<PAGE> 19
D. MAJOR TRANSACTIONS. If the Company shall consolidate with or merge
into any corporation or reclassify its outstanding shares of Common Stock (other
than by way of subdivision or reduction of such shares) (each a "MAJOR
TRANSACTION"), then each Holder shall thereafter be entitled to receive
consideration, in exchange for each share of Preferred Stock held by it, equal
to the greater of, as determined in the sole discretion of such Holder: (i) the
number of shares of stock or securities or property of the Company, or of the
entity resulting from such consolidation or merger (the "MAJOR TRANSACTION
CONSIDERATION"), to which a holder of the number of shares of Common Stock
delivered upon conversion of such shares of Preferred Stock would have been
entitled upon such Major Transaction had the Holder exercised its right of
conversion (without regard to any limitations on conversion herein or elsewhere
contained) on the date of consummation of the transaction resulting in such
Major Transaction and had such Common Stock been issued and outstanding and had
such Holder been the holder of record of such Common Stock at the time of
consummation of such Major Transaction, and (ii) 125% of the Face Amount of such
shares of Preferred Stock in cash; and the Company shall make lawful provision
therefor as a part of such consolidation, merger or reclassification. No sooner
than ten (10) days nor later than five (5) days prior to the consummation of the
Major Transaction, but not prior to the public announcement of such Major
Transaction, the Company shall deliver written notice ("NOTICE OF MAJOR
TRANSACTION") to each Holder, which Notice of Major Transaction shall be deemed
to have been delivered one (1) business day after the Company's sending such
notice by telecopy (provided that the Company sends a confirming copy of such
notice on the same day by overnight courier) of such Notice of Major
Transaction. Such Notice of Major Transaction shall indicate the amount and type
of the Major Transaction Consideration which such Holder would receive under
clause (i) of this Section XI.B. If the Major Transaction Consideration does not
consist entirely of United States currency, such Holder may elect to receive
United States currency in an amount equal to the value of the Major Transaction
Consideration in lieu of the Major Transaction Consideration by delivering
notice of such election to the Company within five (5) days of the Holder's
receipt of the Notice of Major Transaction.
E. [Intentionally Deleted]
F. [Intentionally Deleted]
G. [Intentionally Deleted]
H. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI, the Company,
at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to each Holder a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any time
of any Holder, furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Preferred Stock.
-18-
<PAGE> 20
I. RELATIONSHIP OF CONVERSION PRICE TO PAR VALUE. Notwithstanding
anything to the contrary contained in this Certificate of Designation, if the
Conversion Price would be less than $.01, then such Conversion Price shall be
deemed to be $.01. In addition, the Company shall not permit the par value of
the Common Stock to exceed $.01 per share and the Company shall not take (or
permit to be taken) any action which results, or any series of actions which
result, in the par value of the Common Stock being greater than the Conversion
Price then in effect (or which would be in effect after giving effect to such
action or series of actions).
XII. VOTING RIGHTS
The holders of Preferred Stock shall have no voting power whatsoever,
except as otherwise provided by the Delaware General Corporation Law (the
"GENERAL CORPORATION LAW"), in this Article XII and in Article XIII below.
Notwithstanding the above, the Company shall provide each Holder with
prior notification of any meeting of the stockholders (and copies of proxy
materials and all other information sent to stockholders). If the Company takes
a record of its stockholders for the purpose of determining stockholders
entitled to (a) 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 (b) to vote in
connection with any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed merger, consolidation,
liquidation, dissolution or winding up of the Company, the Company shall mail a
notice to each Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier, but in no event earlier than public
announcement of such proposed transaction), of the date on which any such record
is to be taken for the purpose of such vote, dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
vote, dividend, distribution, right or other event to the extent known at such
time.
To the extent that under the General Corporation Law the vote of the
holders of the Preferred Stock, voting separately as a class or series, as
applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the Majority Holders represented at a duly held
meeting at which a quorum is present or by written consent of the Majority
Holders (except as otherwise may be required under the General Corporation Law)
shall constitute the approval of such action by the class. To the extent that
under the General Corporation Law Holders are entitled to vote on a matter with
holders of Common Stock, voting together as one class, each share of 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 stockholders as the date as of which the Conversion Price
is calculated.
-19-
<PAGE> 21
XIII. PROTECTION PROVISIONS
The Company shall not, without first obtaining the approval of the
Majority Holders and, to the extent their interests may be adversely affected,
each initial Holder of Preferred Stock (but in the event of clause (d) below
only if such adverse effect is a material adverse effect (taking into account,
to the extent appropriate, the number of shares of Preferred Stock originally
purchased by such Holder and the number of shares of Preferred Stock then owned
by such Holder)): (a) alter or change the rights, preferences or privileges of
the Preferred Stock; (b) alter or change the rights, preferences or privileges
of any capital stock of the Company so as to affect adversely the Preferred
Stock; (c) create any Senior Securities; (d) create any PARI PASSU Securities;
(e) increase the authorized number of shares of Preferred Stock; or (f) do any
act or thing not authorized or contemplated by this Certificate of Designation
which would result in any taxation with respect to the 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 otherwise suffer to exist any such taxation as a result thereof).
If the Majority Holders agree to allow the Company to alter or change the
rights, preferences or privileges of the shares of Preferred Stock pursuant to
subsection (a) above, then the Company shall deliver notice of such approved
change to the Holders that did not agree to such alteration or change (the
"DISSENTING HOLDERS") and the Dissenting Holders shall have the right, for a
period of thirty (30) days, to convert into shares of Common Stock pursuant to
the terms of this Certificate of Designation as they existed prior to such
alteration or change or to continue to hold their shares of Preferred Stock.
XIV. MISCELLANEOUS
A. CANCELLATION OF PREFERRED STOCK. If any shares of Preferred Stock
are converted pursuant to Article IV, the shares so converted shall be canceled,
shall return to the status of authorized but unissued preferred stock of no
designated series, and shall not be issuable by the Company as Preferred Stock.
B. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the
Holder contemporaneously requests the Company to convert such Preferred Stock.
C. ALLOCATION OF CAP AMOUNT AND RESERVED AMOUNT. The initial Cap
Amount and Reserved Amount shall be allocated to the Holders in the same
proportion as the number of shares of Preferred Stock held by such Holder bears
to the aggregate number of outstanding
-20-
<PAGE> 22
shares of Preferred Stock. Each increase to the Cap Amount or Reserved Amount
shall be allocated pro rata among the Holders based on the number of shares of
Preferred Stock held by each Holder at the time of the increase in the Cap
Amount or Reserved Amount, as the case may be. In the event a Holder shall sell
or otherwise transfer any of such Holder's shares of Preferred Stock, each
transferee shall be allocated a pro rata portion of such transferor's Cap Amount
and Reserved Amount. Any portion of the Cap Amount or Reserved Amount which
remains allocated to any person or entity which does not hold any Preferred
Stock shall be allocated to the remaining Holders, pro rata based on the number
of shares of Preferred Stock then held by such Holders.
D. STATEMENTS OF AVAILABLE SHARES. Upon request, the Company shall
deliver to each Holder a written report notifying the Holders of any occurrence
which prohibits the Company from issuing Common Stock upon any such conversion.
The report shall also specify (i) the total number of shares of Preferred Stock
outstanding as of the date of the request, (ii) the total number of shares of
Common Stock issued upon all conversions of Preferred Stock through the date of
the request, (iii) the total number of shares of Common Stock which are reserved
for issuance upon conversion of the Preferred Stock as of the date of the
request, and (iv) the total number of shares of Common Stock which may
thereafter be issued by the Company upon conversion of the Preferred Stock
before the Company would exceed the Cap Amount and Reserved Amount. The Company
shall provide, within fifteen (15) days after delivery to the Company of a
written request by any Holder, all of the information enumerated in clauses (i)
- - (v) of this Section XIV.D and shall, at the request of a Holder, make public
disclosure thereof to the extent any such information may reasonably be deemed
to be material non-public information.
E. PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to
make any cash payment to a Holder under this Certificate of Designation (as a
Conversion Default Payment, Redemption Amount or otherwise), such cash payment
shall be made to the Holder by the method (check or wire transfer of immediately
available funds) elected by such Holder. If such payment is not delivered when
due such Holder shall thereafter be entitled to interest on the unpaid amount at
a per annum rate equal to the lower of eighteen percent (18%) and the highest
interest rate permitted by applicable law until such amount is paid in full to
the Holder. Payment of interest under this Section XIV.E shall not be
duplicative of the interest provided for in clause (i) of Section VIII.D.
F. STATUS AS STOCKHOLDER. Upon submission of a Notice of Conversion
by a Holder of Preferred Stock, the shares covered thereby shall be deemed
converted into shares of Common Stock and the Holder's rights as a Holder of
such converted shares of Preferred Stock shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock and to
any remedies provided herein or otherwise available at law or in equity to such
Holder because of a failure by the Company to comply with the terms of this
Certificate of Designation. Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Extended Delivery Period with respect
to a conversion of Preferred Stock for any reason, then (unless the Holder
otherwise
-21-
<PAGE> 23
elects to retain its status as a holder of Common Stock) the Holder shall regain
the rights of a holder of Preferred Stock with respect to such unconverted
shares of Preferred Stock and the Company shall, as soon as practicable, return
such unconverted shares to the Holder. In all cases, the Holder shall retain all
of its rights and remedies (including, without limitation, (i) the right to
receive Conversion Default Payments pursuant to Section VII.A to the extent
required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to
subsequent conversions determined in accordance with Section VII.B) for the
Company's failure to convert Preferred Stock.
G. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder that there shall be no
characterization concerning this instrument other than or expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder hereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of Preferred Stock and that
the remedy at law for any such breach may he inadequate. The Company therefore
agrees, in the event of any such breach or threatened breach, the Holders shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
H. SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.
I. FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the part
of a Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, not shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
J. REGISTER AND NOTICE. The Company shall register the shares of
Preferred Stock, upon records to be maintained by the Company for such purpose
(the "REGISTER"), in the name of the holders thereof from time to time. The
Register shall contain the address and facsimile number of such holders for
purposes of receiving notices hereunder. Notices to be served upon the Company
hereunder, including, without limitation, Notice of Conversion in accordance
with
-22-
<PAGE> 24
the procedures with respect thereto set forth in this Certificate of Designation
shall be sent to the Company at the following address and facsimile number:
Molten Metal Technology, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Fax: (617) 487-7870
Attention: Chief Financial Officer
General Counsel
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: (617) 951-8736
Attention: John R. Utzschneider, Esq.
Barry N. Hurwitz, Esq.
or to such other address and facsimile number as the Company may from time to
time reasonably specify in the continental United States by ten (10) business
days prior written notice to each Holder (as shown on the Register) by facsimile
(with a copy delivered to such Holder by reputable overnight courier within two
(2) business days of such facsimile notice). The address and facsimile number of
the initial Holders shall be as specified for notices thereto under the
Securities Purchase Agreement. Any Holder may from time to time change its
address and facsimile number on the Register by written notice to the Company.
-23-
<PAGE> 25
EXHIBIT A
---------
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert (the "CONVERSION")
$__________ Face Amount of the Series A Convertible Participating Preferred
Stock (the "Preferred Stock") plus the accrued and unpaid Premium in respect
thereof plus all accrued and unpaid Conversion Default Payments (if any) as
specified below (each defined term used but not defined in this notice shall
have the meaning assigned to it in the Designation, Preferences and Rights of
Series A Convertible Participating Preferred Stock of Molten Metal Technology,
Inc. (the "Certificate of Designation")), for a total conversion amount of
$_____, into shares of common stock ("COMMON STOCK") of Molten Metal Technology,
Inc. (the "COMPANY") according to the conditions of the Certificate of
Designation, as of the date written below. If securities are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holder for any conversion except as provided herein.
The undersigned covenants that all offers and sales by the undersigned of the
securities issuable to the undersigned upon conversion of this Preferred Stock
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
In the event of partial exercise, please reissue an appropriate certificate(s)
for Preferred Stock for the shares (or portion thereof) which have not been
converted.
Date of Conversion:_____________________________
Applicable Conversion Price:____________________
Amount of Conversion Default
Payments to be Converted,
if any:_________________________________________
Number of Shares of
Common Stock to be Issued:______________________
Signature:______________________________________
Name:___________________________________________
Address:________________________________________
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: (617) 951-8736
Attention: John R. Utzschneider, Esq.
Barry N. Hurwitz, Esq.
-24-
<PAGE> 1
Exhibit 99.3
VOID AFTER 5:00 P.M. NEW YORK
TIME ON SEPTEMBER 8, 2000
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Right to Purchase 566,000 Shares of
Common Stock, par value $.01 per share
Date: September 8, 1997
MOLTEN METAL TECHNOLOGY, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, GEM Ventures Ltd. or its
registered assigns, is entitled to purchase from Molten Metal Technology, Inc.,
a Delaware corporation (the "COMPANY"), at any time or from time to time during
the period specified in Section 2 hereof, 566,000 (I.E., the number of shares
equal to (a) .15 times (b) the aggregate (face) amount invested by the
Purchasers divided by (c) the average of the Closing Bid Prices (as defined in
the Certificate of Designations) (as herein defined) of the Common Stock for the
five (5) consecutive trading days ending on the trading day immediately
preceding the Closing Date (as defined in the Securities Purchase Agreement (as
herein defined))) fully paid and nonassessable shares of the Company's common
stock, par value $.01 per share (the "COMMON STOCK"), at an exercise price of
$6.625 per share (the "EXERCISE PRICE") (I.E., the exercise price equal to 125%
of the average of the Closing Bid Prices (as defined in the Certificate of
Designations) of the Common Stock for the five (5) consecutive trading days
ending on the trading day immediately preceding the Closing Date). The number of
shares of Common Stock purchasable hereunder (the "WARRANT SHARES") and the
Exercise Price are subject to adjustment as provided in Section 4 hereof. The
term "WARRANTS" means this Warrant and any other warrants of the Company issued
pursuant to the terms of that certain Warrant Agreement dated September 5, 1997
by the Company and GEM Ventures Ltd. For the purposes hereof: (i) "SECURITIES
PURCHASE AGREEMENT" means that certain Securities Purchase Agreement dated as of
September 5, 1997 between and among the Company
<PAGE> 2
and the Purchasers party thereto; (ii) "CERTIFICATE OF DESIGNATIONS" means the
Certificate of Designations filed with the Delaware Secretary of State pursuant
to the Securities Purchase Agreement, in the form of Exhibit A to the Securities
Purchase Agreement; and (iii) "PREFERRED STOCK" means the Company's Series A
Convertible Participating Preferred Stock as contemplated by the Securities
Purchase Agreement and the Certificate of Designations.
The term "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Company and reasonably acceptable to the holder hereof (the
"HOLDER") if Bloomberg Financial Markets is not then reporting closing bid
prices of such security (collectively, "BLOOMBERG"), or if the foregoing does
not apply, the last reported sale price of such security in the over-the-counter
market on the electronic bulletin board of such security as reported by
Bloomberg, or, if no sale price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to the Holder with the costs
of such appraisal to be borne by the Company.
This Warrant is subject to the following terms, provisions, and
conditions:
1. MECHANICS OF EXERCISE. Subject to the provisions hereof,
including, without limitation, the limitations contained in Section 7(f) hereof,
this Warrant may be exercised as follows:
(a) MANNER OF EXERCISE. This Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant (or evidence of loss,
theft, destruction or mutilation thereof in accordance with Section 7(c)
hereof), together with a completed exercise agreement in the Form of Exercise
Agreement attached hereto as Exhibit 1 (the "EXERCISE AGREEMENT"), to the
Company at the Company's principal executive offices (or such other office or
agency of the Company as it may reasonably designate by ten (10) business days'
written notice to the Holder), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of the
Company, of the Exercise Price for the Warrant Shares specified in the Exercise
Agreement or (ii) if the Holder elects to effect a Cashless Exercise (as defined
in Section 11(c) below), delivery to the Company of a written notice of an
election to effect a Cashless Exercise for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the Holder or Holder's designees, as the record owner of such shares, as of
the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment (or notice of an
election to effect a Cashless Exercise) shall have been made for such shares as
set forth above.
2
<PAGE> 3
(b) ISSUANCE OF CERTIFICATES. Subject to Section 1(c), certificates
for the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the Holder within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have been so exercised (the "DELIVERY PERIOD"). The certificates so delivered
shall be in such denominations as may be requested by the Holder and shall be
registered in the name of Holder or such other name as shall be designated by
such Holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the Holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.
(c) EXERCISE DISPUTES. In the case of any dispute with respect to an
exercise, the Company shall promptly issue such number of shares of Common Stock
as are not disputed in accordance with this Section. If such dispute only
involves the calculation of the Exercise Price, the Company shall submit the
disputed calculations to an independent accounting firm of national standing
(selected by the Holder) via facsimile within two (2) business days of receipt
of the Exercise Agreement. The accountant shall audit the calculations and
notify the Company and the converting Holder of the results no later than two
(2) business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error. The
Company shall then issue the appropriate number of shares of Common Stock in
accordance with this Section.
(d) FRACTIONAL SHARES. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but the Company shall instead round up
to the next whole number the number of shares of Common Stock to be issued upon
such exercise.
(e) BUY-IN. If (i) the Company fails for any reason to deliver during
the Delivery Period shares of Common Stock to Holder upon an exercise of this
Warrant and (ii) after the applicable Delivery Period with respect to such an
exercise, Holder purchases (in an open market transaction or otherwise) shares
of Common Stock to make delivery in satisfaction of a sale by such Holder of
shares of Common Stock (the "SOLD SHARES") as for which delivery such Holder
anticipated using shares of Common Stock upon such exercise (a "BUY-IN"), the
Company shall pay Holder (in addition to any other remedies available to Holder)
the amount by which (x) Holder's total purchase price (including brokerage
commission, if any) for the shares of Common Stock so purchased exceeds (y) the
net proceeds received by Holder from the sale of the Sold Shares. For example,
if Holder purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to shares of Common Stock sold for
$10,000, the Company will be required to pay such Holder $1,000. Holder shall
provide the Company written notification indicating any amounts payable to
Holder pursuant to this subsection.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or
from time to time on or after the date hereof and before 5:00 p.m., New York
time on the third (3rd) anniversary of the date hereof (the "EXERCISE PERIOD").
3
<PAGE> 4
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances
(other than restrictions on transfer, if any, imposed by federal and state
securities laws).
(b) RESERVATION OF SHARES. Subject to the obligations of the
Company with respect to the Preferred Stock, during the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant. In the event that the
Reserved Amount (as defined in the Certificate of Designations) shall, at any
time, be less than 200% of the number of shares of Common Stock then issuable
upon conversion of such Preferred Stock (without regard to any limitations on
conversion with respect thereto), then the Company and each holder of this
Warrant each agree that all shares of Common Stock reserved for issuance upon
exercise of this Warrant shall, until such Reserved Amount again exceeds such
200% threshold for a period of ten consecutive days, automatically be reserved
for issuance with respect to conversions of shares of Preferred Stock instead of
with respect to exercises of this Warrant. The holders of such shares of
Preferred Stock shall be third party beneficiaries of this paragraph.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon the
Nasdaq National Market ("NASDAQ") or, if such shares of Common Stock are not so
listed, on the Nasdaq Small Cap Market, the New York Stock Exchange, or the
American Stock Exchange, and upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed or
become listed and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4. In the event that any adjustment of the
Exercise Price as required herein results in a fraction of a cent, such Exercise
Price shall be rounded up or down to the nearest cent.
(a) [Intentionally deleted]
4
<PAGE> 5
(b) [Intentionally deleted]
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company,
at any time after the initial issuance of this Warrant, subdivides (by any stock
split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced. If
the Company, at any time after the initial issuance of this Warrant, combines
(by reverse stock split, recapitalization, reorganization, reclassification or
otherwise) its shares of Common Stock into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price in
effect immediately prior to such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) MAJOR TRANSACTIONS. If the Company shall consolidate with
or merge into any corporation or reclassify its outstanding shares of Common
Stock (other than by way of subdivision or reduction of such shares) (each a
"MAJOR TRANSACTION"), then each holder of a Warrant shall thereafter be entitled
to receive upon exercise of such Warrant the number of shares of stock or
securities or property to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon exercise of such Warrant would
have been entitled upon such Major Transaction had the holder of such Warrant
exercised the Warrant on the date of consummation of such Major Transaction
(without regard to any restrictions on the exercise of this Warrant either
herein or otherwise) and had such Common Stock been issued and outstanding and
had such holder been the holder of record of such Common Stock at the time of
such Major Transaction, and the Company shall make lawful provision therefor as
a part of such consolidation, merger or reclassification.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION"), at any time after the initial issuance of this
Warrant, then the Holder shall be entitled upon exercise of this Warrant for the
purchase of any or all of the shares of Common Stock subject hereto, to receive
the amount of such assets (or rights) which would have been payable to the
Holder had such Holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution
(such determination to be made without regard to any limitations on exercise
herein or elsewhere contained).
5
<PAGE> 6
(g) PURCHASE RIGHTS. If at any time after the Closing Date, the
Company issues any securities which are convertible into or exchangeable or
exercisable for Common Stock or any rights to purchase stock, warrants, or other
securities (the "Distributed Items"), in either case pro rata to the record
holders of any class of Common Stock, then the Holder will be entitled to
acquire, upon the terms applicable to such Distributed Items and at the time of
issuance thereof, the aggregate number of the Distributed Items which such
Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on conversion or exercise herein or elsewhere contained)
immediately before the date on which a record is taken for such issuance of such
Distributed Items, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for such issue of such
Distributed Items.
(h) NOTICES OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the Holder, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(i) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(j) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall
instead round up to the next whole number the number of shares of Common Stock
to be issued upon such exercise.
(k) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
6
<PAGE> 7
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. To the extent not covered by (e), (f) or (g),
such notice shall be given at least 30 days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
(l) CERTAIN EVENTS. If, at any time after the initial
issuance of this Warrant, any event occurs of the type contemplated by the
adjustment provisions of this Section 4 but not expressly provided for by such
provisions, the Company will give notice of such event as provided in Section
4(h) hereof, and the Company's board of directors will make an appropriate
adjustment in the Exercise Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the Holder shall
be neither enhanced nor diminished by such event.
(m) CERTAIN DEFINITIONS.
"COMMON STOCK," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
(n) PAR VALUE OF COMMON STOCK. Without limiting any of
the Company's other obligations pursuant to this Warrant the Company agrees that
it shall not take (or permit to
7
<PAGE> 8
be taken) any action which results, or any series of actions which result, in
the par value of the Common Stock being greater than the exercise price for this
Warrant as then in effect (or which would be in effect after giving effect to
such action or series of actions).
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder of such
shares for any issuance tax or other costs in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than the Holder.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
a. RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the Holder are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the Form of
Assignment attached hereto as Exhibit 2, at the office or agency of the Company
referred to in Section 7(e) below, provided, however, that any transfer or
assignment shall be subject to the provisions of the Warrant Agreement. Until
due presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of September 5, 1997, by and among the Company and the other
signatories thereto (the "REGISTRATION RIGHTS AGREEMENT").
b. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company referred to in Section 7(e) below, for new Warrants, in
the form hereof, of different denominations representing in the aggregate the
right to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the Holder of at the time of such
surrender.
c. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant or, in the case of any such loss, theft, or destruction, upon
delivery, of an indemnity agreement reasonably satisfactory
8
<PAGE> 9
in form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrants, in the form hereof, in
such denominations as Holder may request.
d. CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and charges payable in connection with the preparation, execution, and delivery
of Warrants pursuant to this Section 7.
e. WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
f. ADDITIONAL RESTRICTION ON EXERCISE OR TRANSFER.
(i) Notwithstanding anything to the contrary contained
herein, the Warrants shall not be exercisable by the Holder to the extent (but
only to the extent) that, if exercisable by Holder, Holder would beneficially
own in excess of 4.9% of the shares of Common Stock. To the extent the above
limitation applies, the determination of whether the Warrants shall be
exercisable (vis-a-vis other securities owned by Holder) and of which Warrants
shall be exercisable (as among Warrants) shall be in the sole discretion of the
Holder and submission of the Warrants for exercise shall be deemed to be the
Holder's determination of whether such Warrants are exercisable (vis-a-vis other
securities owned by Holder) and of which warrants are exercisable (among
Warrants), in each case subject to such aggregate percentage limitation. No
prior inability to exercise Warrants pursuant to this paragraph shall have any
effect on the applicability of the provisions of this paragraph with respect to
any subsequent determination of exercisability. For the purposes of this
paragraph, beneficial ownership and all determinations and calculations,
including without limitation, with respect to calculations of percentage
ownership, shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
The provisions of this paragraph may be waived and/or implemented in a manner
otherwise than strictly in conformity with the foregoing provisions of this
paragraph (i) with the approval of the Board of Directors of the Company and the
Holder of this Warrant: (i) with respect to any matter to cure any ambiguity
herein, to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended 4.9% beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such 4.9% limitation; and (ii) with respect to any other matter,
with the further consent of the holders of a majority of the then outstanding
shares of Common Stock. In addition, the provisions of this paragraph (i) may be
waived by Holder upon ninety (90) days prior written notice from Holder to the
Company. The limitations contained in this paragraph shall apply to a successor
holder of Warrants if, and to the
9
<PAGE> 10
extent, elected by such successor holder concurrently with its acquisition of
such Warrants, such election to be promptly confirmed in writing to the Company
(provided no transfer or series of transfers to a successor holder or holders
shall be used by a Holder to evade the limitations contained in this paragraph).
(ii) Prior to Shareholder Approval (as defined in the
Securities Purchase Agreement), unless otherwise permitted by the Nasdaq
National Market, in no event shall the total number of shares of Common Stock
issued upon exercise of the Warrants, when taken together with Common Stock to
be issued upon full conversion of the Preferred Stock, exceed the maximum number
of shares of Common Stock that the Company can without stockholder approval
issue pursuant to Nasdaq Rule 4460(i) (or any successor rule) (the "CAP
AMOUNT"), which, as of the date of issuance of the Warrant, shall be 4,731,557
shares. The Company and the holder of this Warrant agree that the Cap Amount
shall be allocated pro-rata to the holders of Preferred Stock and so long as the
Cap Amount is in existence, this Warrant shall not be exercisable without the
prior written consent of two-thirds in interest of the then outstanding shares
of Preferred Stock. The holders of shares of Preferred Stock shall be third
party beneficiaries of this paragraph.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) are entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in that certain
Registration Rights Agreement.
9. NOTICES. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
confirmed telecopy, and shall be deemed delivered at the time and date of
receipt (which shall include telephone line facsimile transmission). The
addresses for such communications shall be:
If to the Company:
Molten Metal Technology, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Fax: (617) 487-7870
Attention: Chief Financial Officer
General Counsel
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: (617) 951-8736
Attention: John R. Utzschneider, Esq.
10
<PAGE> 11
and if to the Holder, at such address as Holder shall have provided in writing
to the Company, or at such other address as each such party furnishes by notice
given in accordance with this Section 9.
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
holder of this Warrant each irrevocably consents to the jurisdiction of the
United States federal courts located in the State of Delaware in any suit or
proceeding based on or arising under this Warrant and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company and the holder of this Warrant each irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company and the holder of this Warrant each agrees that service of process
upon the Company or such Holder mailed by first class mail shall be deemed in
every respect effective service of process upon the Company or such Holder in
any such suit or proceedings. Northing herein shall affect the Holder's or the
Company's right to serve process in any other manner permitted by law. The
Company agrees that a final nonappealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
11. MISCELLANEOUS.
a. AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the Holder.
b. DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
c. CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the Holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "CASHLESS EXERCISE").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the Holder shall surrender this Warrant for the number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
(as defined below) and the Exercise Price, and the denominator of which shall be
such then current Market Price per share of Common Stock. For purposes of this
Warrant, the term "Market Price," as of any date, (i) means the average of the
closing bid prices for the shares of Common Stock as reported to Nasdaq for the
five (5) trading days immediately preceding such date, or (ii) if the Nasdaq is
not the principle trading market for the Common Stock, the average
11
<PAGE> 12
of the last reported bid prices on the principal trading market for the Common
Stock, the average of the last reported bid prices on the principal trading
market for the Common Stock during the same period, or, if there are no bid
price for such period, the last reported sales price for such period, or (iii)
if market value cannot be calculated as of such date on any of the foregoing
bases, the Market Price shall be the average fair market value as reasonably
determined by an investment banking firm selected by the Company and reasonably
acceptable to the Holder, with the costs of the appraisal to be borne by the
Company. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
d. ASSIGNABILITY. This Warrant shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of Holder
and its successors and assigns. The Holder shall notify the Company upon the
assignment of this Warrant.
* * *
12
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
MOLTEN METAL TECHNOLOGY, INC.
/s/ Benjamin T. Downs
By:____________________________________
Benjamin T. Downs
Name:__________________________________
Executive Vice President and
Chief Financial Officer
Title:_________________________________
13
<PAGE> 14
EXHIBIT 1
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase
____________ of the shares of common stock of Molten Metal Technology, Inc., a
Delaware corporation (the "COMPANY"), evidenced by the attached Warrant, and
[herewith makes payment of the Exercise Price with respect to such shares in
full/ elects to effect a Cashless Exercise pursuant to the terms of the
Warrant], all in accordance with the conditions and provisions of said Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
(ii) The undersigned requests that stock certificates for such shares
be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder (or such other person or
persons indicated below) and delivered to the undersigned (or designee(s)) at
the address (or addresses) set forth below:
Date:_____________ __________________________________
Signature of Holder
__________________________________
Name of Holder (Print)
Address:
__________________________________
__________________________________
14
<PAGE> 15
EXHIBIT 2
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Date:____________, _____,
In the presence of
Name:_____________________________________
Signature:________________________________
Title of Signing Officer or Agent
(if any):
________________________
Address:________________________
________________________
Note: The above signature should
correspond exactly with the
name on the face of the
within Warrant.
15
<PAGE> 1
Exhibit 99.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), is made as of
September 5, 1997, by and among Molten Metal Technology, Inc., a Delaware
corporation (the "COMPANY"), with headquarters located at 400-2 Totten Pond
Road, Waltham, MA 02154, and the undersigned (the "INITIAL PURCHASERS" ).
RECITALS
--------
A. In connection with the Securities Purchase Agreement dated of even
date herewith by and between the Company and the Initial Purchasers (the
"SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to the Initial
Purchasers shares of Series A Convertible Participating Preferred Stock of the
Company (the "PREFERRED STOCK") that is convertible into shares (the "CONVERSION
SHARES") of the Company's common stock, par value $.01 per share (the "COMMON
STOCK"), upon the terms and subject to the limitations and conditions set forth
in the Certificate of Designations, Preferences and Rights with respect to such
Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"), in the form attached as
Exhibit A to the Securities Purchase Agreement. In connection with the
transactions contemplated by the Securities Purchase Agreement, the Company has
also agreed to issue to GEM Ventures Ltd. (the "Agent") pursuant to that certain
Warrant Agreement dated September 5, 1997 (the "Warrant Issuance Agreement")
warrants (the "Warrants"), in the form attached as Exhibit A-1 to the Securities
Purchase Agreement, to acquire 566,000 shares of Common Stock (the "Warrant
Shares").
B. To induce the Initial Purchasers to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.
AGREEMENTS
----------
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Initial
Purchasers and the Agent hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "PURCHASERS" means the Initial Purchasers and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Article IX hereof.
(b) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(c) "REGISTRABLE SECURITIES" means the Conversion Shares
(including any Conversion Shares issuable with respect to conversion default
payments under the Certificate of Designation as well as any other shares of
Common Stock which may be issued as provided for under Section 2.3 hereof)
issued or issuable with respect to the Preferred Stock, the Warrant Shares
issued or issuable with respect to the Warrants, and any shares of capital stock
issued or issuable, from time to time (with any adjustments), on or in exchange
for or otherwise with respect to any such Common Stock or any other Registrable
Securities. "Registrable Securities" will cease to constitute Registrable
Securities for purposes of this Agreement when sold pursuant to a Registration
Statement or Rule 144, provided that after such sale the applicable securities
are freely tradeable under the Securities Act.
(d) "REGISTRATION STATEMENT" means a registration statement of
the Company under the Securities Act.
1.2 CAPITALIZED TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
ARTICLE II
REGISTRATION
2.1 MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to twenty (20) business days after the date of the Closing (the "FILING
DATE"), file with the SEC a Registration Statement on Form S-1 covering the
resale of all of the Registrable Securities, which Registration Statement, to
the extent allowable under the Securities Act and the Rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Preferred Stock (i) to prevent
dilution resulting from stock splits,
2
<PAGE> 3
stock dividends or similar transactions or (ii) by reason of changes in the
Conversion Price of the Preferred Stock in accordance with the terms thereof.
The Registrable Securities included in the Registration Statement shall be
allocated among the Purchasers as set forth in Section 11.11 hereof. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to (and
subject to the approval of (which approval shall not be unreasonably withheld or
denied)) the Initial Purchasers and their counsel prior to its filing or other
submission.
2.2 UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering, the
Purchasers who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of the Initial Purchasers, shall
have the right to select a total of one legal counsel to represent the
Purchasers and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
2.3 PAYMENTS BY THE COMPANY. The Company shall cause the registration
statement to become effective as soon as practicable, but in no event later than
the one hundred and twentieth (120th) day (but the ninetieth (90th) day in the
event that the Registration Statement is not filed by the Filing Date) following
the date of the Closing (the "REGISTRATION DEADLINE"). If (i) the registration
statement(s) covering the Registrable Securities required to be filed by the
Company pursuant to Section 2.1 hereof is not declared effective by the SEC on
or before the Registration Deadline, or (ii) after the later of the date the
registration statement has been declared effective by the SEC and the
Registration Deadline, sales of all the Registrable Securities (including any
Registrable Securities required to be registered pursuant to Section 3.2 hereof)
cannot be made pursuant to the registration statement (by reason of a stop order
or the Company's failure to update the registration statement or any other
reason outside the control of the Purchasers), then the Company will make
payments to the Purchasers in such amounts and at such times as shall be
determined pursuant to this Section 2.3 as partial relief for the damages to the
Purchasers by reason of any such delay in or reduction of their ability to sell
the Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). In such event, the Company shall pay to
each Purchaser an amount equal to (i) (A) .02 times (B) the aggregate Face
Amount (as defined in the Certificate of Designations) of the Preferred Stock
held by such Purchaser (including, without limitation, shares of Preferred Stock
that have been converted into Conversion Shares) (in each case taking into
account any dispositions of such shares of Preferred Stock or Conversion Shares
as the case may be) times (ii) the sum of: (A) the number of months (prorated
per day for partial months) following the Registration Deadline prior to the
date the Registration Statement filed pursuant to Section 2.1 is declared
effective by the SEC plus (B) the number of months (prorated per day for partial
months) following the Registration Deadline but prior to the termination of the
Registration Period that, following a three (3) day grace period in each event
(but a sixty (60) consecutive days grace period prior to June 30, 1998), sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (any period prior to June
3
<PAGE> 4
30, 1998 during which such registration statement cannot be utilized as
contemplated by this clause (B) for more than three (3) consecutive days being a
"Blackout"). Such amounts shall be paid in cash or, at each Purchaser's option,
may be convertible into Common Stock at the "CONVERSION PRICE" (as defined in
the Certificate of Designation). Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Purchaser
desires to convert or exercise the amounts due hereunder into Registrable
Securities it shall so notify the Company in writing within two (2) days prior
to the date on which such amounts are first payable in cash and such amounts
shall be so convertible (pursuant to the terms of the Certificate of
Designation), beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, payments shall be made for each such thirty (30)
day period within five (5) days after the end of such thirty (30) day period.
2.4 PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), then the Company shall send to each Purchaser who
has a right to have Registrable Securities covered by a Registration Statement
(and which are not so covered by a Registration Statement) written notice of
such determination and, if within fifteen (15) days after the date of such
notice, such Purchaser shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Purchaser requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Purchaser has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Purchasers seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Purchasers; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement. No right to registration of Registrable Securities under
this Section 2.4 shall be construed to limit any registration required under
Section 2.1 or 3.2 hereof. If an offering in connection with which a Purchaser
is entitled to
4
<PAGE> 5
registration under this Section 2.4 is an underwritten offering, then each
Purchaser whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
2.5 ELIGIBILITY FOR FORM S-3. The Company covenants that by June 1,
1998 it will meet the eligibility requirements for the use of Form S-3 for
registration of the re-sale by the Initial Purchasers and any other Purchaser
and the Agent, as the case may be, of the Registrable Securities and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to obtain by such time, and thereafter maintain, such
eligibility for the use of Form S-3. The Company shall as soon as possible
(using its best efforts) following June 1, 1998, but in any event by July 31,
1998, have converted the Registration Statement from a Form S-1 to a Form S-3 by
amendment or filing of a new registration statement as may be required by
applicable law and the rules and regulations thereunder.
ARTICLE III
OBLIGATIONS OF THE COMPANY
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2.1, and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, and use its best efforts to keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is the
EARLIER OF (i) the date on which all of the Registrable Securities have been
sold (and no further Registrable Securities may be issued in the future), (ii)
the date on which all of the Registrable Securities (in the reasonable opinion
of counsel to the Initial Purchasers) may be immediately sold to the public
without registration and without restriction as to the number of Registrable
Securities to be sold, whether pursuant to Rule 144 or otherwise and (iii) four
years from the date hereof (the "REGISTRATION PERIOD"). The Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
3.2 The Company shall use its best efforts to prepare and file with
the SEC such amendments (including post-effective amendments) and supplements to
a Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until the
5
<PAGE> 6
termination of the Registration Period (it being understood in the operation of
this paragraph that, prior to June 1, 1998, the Company will not be eligible for
use of an S-3 Registration Statement and thus the Registration Statement prior
to such time may not be updated by filing of a Form 8-K). In the event the
number of shares available under a Registration Statement filed pursuant to this
Agreement is, for any three (3) consecutive trading days (the last of such three
(3) trading days being the "REGISTRATION TRIGGER DATE"), insufficient to cover
one hundred seventy-five percent (175%) of the Registrable Securities the
Company shall use its best efforts to file an amendment to, if permissible, the
Registration Statement, or file a new Registration Statement (on the shortest
form available therefor, if applicable), or both, so as to cover two hundred
percent (200%) of the Registrable Securities in each case, as soon as
practicable after the Registration Trigger Date (based on the market price of
the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof.
3.3 The Company shall furnish to each Purchaser whose Registrable
Securities are included in the Registration Statement and its legal counsel (a)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2.1, each letter written by or on behalf of the Company to the SEC
or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion, if any, thereof which contains information for which the
Company has sought confidential treatment), and (b) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by such Purchaser. All correspondence to or from the SEC
or its staff shall, subject to applicable law and legal process, be kept
confidential by the Purchasers.
3.4 The Company shall use reasonable efforts to (a) register and
qualify the Registrable Securities covered by the Registration Statement under
securities laws of such jurisdictions in the United States as each Purchaser who
holds (or has the right to hold) Registrable Securities being offered reasonably
requests, (b) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (c) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (d) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (i) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3.4, (ii) subject itself to general taxation in any such jurisdiction,
(iii) file a general consent to service of process in any such jurisdiction,
6
<PAGE> 7
(iv) provide any undertakings that cause the Company material expense or burden,
or (v) make any change in its charter or by-laws, which in each case the board
of directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
3.5 In the event the Purchasers who hold a majority in interest of the
Registrable Securities being offered in an offering pursuant to a Registration
Statement or any amendment or supplement thereto under Section 2.1 or 3.2 hereof
select underwriters for the offering, the Company shall enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
3.6 As soon as practicable after becoming aware of such event, the
Company shall notify each Purchaser of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts to as soon as practicable to prepare a supplement or amendment to and,
in the event of an amendment, obtain the effectiveness thereof, the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Purchaser as such Purchaser
may reasonably request.
3.7 The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable time and to notify (by telephone and also by facsimile and
reputable overnight carrier) each Purchaser who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.
3.8 The Company shall permit a single firm of counsel designated by
the Initial Purchasers to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
and timely objects.
3.9 The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
3.10 At the request of any Purchaser, the Company shall use its
reasonable efforts to furnish to such Purchaser, on the date of effectiveness of
the Registration Statement and thereafter from time to time on such dates as a
Purchaser may reasonably request (a) an opinion, dated as of such applicable
date, from counsel representing the Company addressed to the
7
<PAGE> 8
Purchasers and in form, scope and substances as is customarily given in an
underwritten public offering and (b) a letter, dated as of such applicable date,
from the Company's independent certified public accountants addressed to the
Purchasers and in form, scope and substance as customarily given to underwriters
in an underwritten public offering; provided, however, that a Purchaser shall
only be entitled to the foregoing to the extent it is reasonably requested by
such Purchaser and consented to by the Company after consultation with its
counsel (which consent will not be unreasonably withheld based upon all relevant
facts and circumstances and advice of such counsel) and in any event no more
than one time in any six-month period (unless a shorter period would otherwise
be reasonable under the applicable circumstances).
3.11 The Company shall make available for inspection by (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
retained by the Purchasers, and (iv) one firm of attorneys retained by all such
underwriters (collectively, the "INSPECTORS") all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to conduct such investigation as it deems
appropriate, if any, and cause the Company's officers, directors and employees
to supply all information which any Inspector may reasonably request for
purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to a Purchaser) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified in
writing, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (in which
event the Company shall promptly make appropriate public disclosure thereof, (b)
the release of such Records is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or is otherwise
required by applicable law or legal process or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement (to the knowledge of the relevant
Purchaser). The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and reasonable
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3.11. Each Purchaser agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing in this Section 3.11 shall be
deemed to limit a Purchaser's ability to sell Registrable Securities in a manner
which is consistent with applicable laws and regulations.
3.12 The Company shall hold in confidence and not make any disclosure
of information concerning a Purchaser provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration
8
<PAGE> 9
Statement, (c) the release of such information is ordered pursuant to a subpoena
or other order from a court or governmental body of competent jurisdiction or is
otherwise required by applicable law or legal process, (d) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement (to the knowledge of the Company), or
(e) such Purchaser consents to the form and content of any such disclosure. The
Company agrees that it shall, upon learning that disclosure of such information
concerning a Purchaser is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Purchaser prior to making such disclosure, and allow the Purchaser, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
3.13 The Company shall cause the listing and the continuation of
listing of all the Registrable Securities covered by the Registration Statement
on the Nasdaq National Market System or, if the Common Stock is no longer listed
thereon, on the Nasdaq Small Cap Market, the NYSE or the Amex, and cause the
Registrable Securities to be quoted or listed on each additional national
securities exchange or quotation system upon which the Common Stock is then
listed or quoted.
3.14 The Company shall provide 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.
3.15 The Company shall cooperate with the Purchasers who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Purchasers may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Purchasers may request, within one (1) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Purchasers whose Registrable Securities are included in such
Registration Statement) an opinion of such counsel in the form attached hereto
as EXHIBIT 1.
3.16 At the request of any Purchaser, the Company shall promptly
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary in order to
change the description of the plan of distribution set forth in such
Registration Statement.
3.17 The Company shall comply with all applicable laws related to the
Registration Statement and offering and sale of securities and all applicable
rules and regulations of
9
<PAGE> 10
governmental authorities in connection therewith (including, without limitation,
the Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission).
3.18 The Company shall take all such other actions as any Purchaser or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
3.19 The Company shall not, and shall not agree to, allow the holders
of any securities of the Company to include any of their securities in any
Registration Statement or any amendment or supplement thereto under Section 2.1
or 3.2 hereof without the consent of the holders of a majority of the
Registrable Securities.
ARTICLE IV
OBLIGATIONS OF THE PURCHASERS
-----------------------------
In connection with the registration of the Registrable Securities, the
Purchasers shall have the following obligations:
4.1 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 Purchaser that such Purchaser shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Purchaser of the information the
Company requires from each such Purchaser.
4.2 Each Purchaser, by such Purchaser's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser's election to exclude all of such Purchaser's Registrable
Securities from the Registration Statement.
4.3 Each Purchaser whose Registrable Securities are included in a
Registration Statement understands that the Securities Act may require delivery
of a prospectus relating thereto in connection with any sale thereof pursuant to
such Registration Statement, and each such Purchaser shall comply with the
applicable prospectus delivery requirements of the Securities Act in connection
with any such sale.
4.4 Each Purchaser agrees to notify the Company promptly, but in any
event within 72 hours, after the date on which all Registrable Securities owned
by such Purchaser have been sold
10
<PAGE> 11
by such Purchaser, if such date is prior to the expiration of the Registration
Period, so that the Company may comply with its obligation to terminate the
Registration Statement in accordance with Item 512(a)(3) of Regulation S-K.
4.5 Each Purchaser agrees that, upon receipt of written notice from
the Company of the happening of any event of the kind described in Section 3.6,
such Purchaser will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Purchaser's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.6 and, if so directed by the
Company, such Purchaser 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 Purchaser's possession (other than a limited number of
permanent file copies), of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
4.6 Without limiting a Purchaser's rights under Section 2.1 or 3.2
hereof, no Purchaser may participate in any underwritten distribution hereunder
unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (c)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to
Article V.
ARTICLE V
EXPENSES OF REGISTRATION
------------------------
All expenses, other than underwriting discounts and commissions, incurred
by the Company in connection with registrations, filings or qualifications
pursuant to Articles II and III, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company, shall be borne by the
Company.
ARTICLE VI
INDEMNIFICATION
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify, hold
harmless and defend (a) each Purchaser who holds such Registrable Securities,
(b) each underwriter of Registrable Securities and (c) the directors, officers,
partners, members, employees, agents and persons who control any Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any,
11
<PAGE> 12
(each, an "INDEMNIFIED PERSON"), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "CLAIMS") to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6.3 with respect to the number of legal
counsel, the Company shall reimburse the Purchasers, each such underwriter and
controlling person, and each such other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6.1: (x) shall
not apply to an Indemnified Person with respect to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (z) with respect
to any preliminary prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Purchasers pursuant to Article IX.
6.2 To the extent permitted by law, in connection with any
Registration Statement in which a Purchaser is participating, each such
Purchaser agrees to indemnify, hold harmless and defend, to the same extent and
in the same manner set forth in Section 6.1, the Company, each of its directors,
each of its officers who signs the Registration Statement, its employees, agents
and persons, if any, who control the Company within the meaning of Section 15 of
the Securities Act
12
<PAGE> 13
or Section 20 of the Exchange Act, and any other stockholder selling securities
pursuant to the Registration Statement, together with its directors, officers
and members, and any person who controls such stockholder or underwriter within
the meaning of the Securities Act or the Exchange Act (such an "INDEMNIFIED
PARTY"), against any Claim to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim (x) in the
event of a Violation of the type referred to in clause (i) or (ii) of Section
6.1, arises out of or is based upon such Violation, but only to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Purchaser
expressly for use in connection with such Registration Statement; or (y) arises
out of or is based upon any violation by such Purchaser of the Securities Act,
Exchange Act, any other law, including without limitation any state securities
laws, or any rule or regulation thereunder, in each case relating to the offer
or sale of the Registrable Securities under the Registration Statement; and
subject to Section 6.3 such Purchaser will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6.2
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Purchaser, which consent
shall not be unreasonably withheld; provided, further, however, that a Purchaser
shall be liable under this Agreement (including this Section 6.2 and Article
VII) for only that amount as does not exceed the net proceeds actually received
by such Purchaser as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Purchasers pursuant to Article IX. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6.2
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
6.3 Promptly after receipt by an Indemnified Person or Indemnified
Party under this Article VI of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Article VI, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall diligently pursue such defense and
that such indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the reasonable fees and expenses to be paid by the indemnifying
party, if the representation by such counsel of the Indemnified Person or
Indemnified Party and the
13
<PAGE> 14
indemnifying party would be inappropriate due to actual or potential conflicts
of interest between such Indemnified Person or Indemnified Party and any other
party represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and any such Indemnified Person or Indemnified
Party reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Purchasers holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Purchasers if they hold Registrable Securities included in such
Registration Statement), if the Purchasers are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Article VI, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Article VI shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable. To the extent any Indemnified Person or Indemnified
Party, as the case may be, is ultimately determined, by a court of competent
jurisdiction, in a judgment that is not subject to further appeal or review, not
to be entitled to indemnification under this Article VI, then such person shall,
except as may otherwise be required pursuant to Article VII hereof repay any
such advances to the indemnifying party which advanced such expenses.
ARTICLE VII
CONTRIBUTION
------------
To the extent any indemnification by an indemnifying party under Article
VI is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Article VI to the fullest extent permitted by law; provided,
however, that (i) 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 of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (ii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
ARTICLE VIII
REPORTS UNDER THE EXCHANGE ACT
------------------------------
With a view to making available to the Purchasers the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time
14
<PAGE> 15
permit the Purchasers to sell securities of the Company to the public without
registration ("RULE 144"), the Company agrees to, so long as any Purchaser owns
Preferred Stock and for six months thereafter:
8.1 File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4.3 of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
8.2 Furnish to each Purchaser, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Purchasers to sell such securities pursuant
to Rule 144 without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
---------------------------------
The rights of the Purchasers hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assigned by each Purchaser to any transferee of all or any portion
of the Preferred Stock or the Registrable Securities (other than pursuant to a
Registration Statement or Rule 144 (so long as the shares subject to such
transfer are thereafter freely tradeable under the Securities Act)) if: (a) the
Purchaser 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)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
or applicable state securities laws, (d) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing for the benefit of the Company to be
bound by all of the provisions contained herein, and (e) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement.
ARTICLE X
AMENDMENT OF REGISTRATION RIGHTS
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with
15
<PAGE> 16
written consent of the Company, the Initial Purchasers (but not an Initial
Purchaser who no longer owns any Preferred Stock or Registrable Securities and
who is not adversely affected by such amendment or waiver) and Purchasers who
hold a majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Article X shall be binding upon each Purchaser
and the Company. Notwithstanding the foregoing, no amendment or waiver shall
retroactively affect any Purchaser without its comment or prospectively
adversely affect any Purchaser who no longer owns any Preferred Stock or
Registrable Securities without its consent. Neither Article VI nor Article VII
hereof may be amended or waived in a manner adverse to a Purchaser without its
consent.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
11.2 Any notices herein required or permitted to be given shall be in
writing and may be personally served or delivered by courier or by confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:
If to the Company:
Molten Metal Technology, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Fax: (617) 487-7870
Attention: Chief Financial Officer
General Counsel
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Fax: (617) 951-8736
Attention: John R. Utzschneider, Esq.
16
<PAGE> 17
If to CC Investments, LDC:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
with a copy to:
Castle Creek Partners, LLC
440 South LaSalle Street
Suite 700
Chicago, Illinois 60605
Telecopy: (312) 362-4500
Attention: Portfolio Manager
and with a copy to:
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
Telecopy: (312) 715-4800
Attention: Peter H. Lieberman, Esq.
and if to any other Purchaser, at such address as such Purchaser, shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11.2.
11.3 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.
11.4 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in the State of Delaware. The Company and each Purchaser irrevocably
consents to the jurisdiction of the federal courts located in the state of
Delaware and the state courts of the State of Delaware located in the County of
New Castle in the State of Delaware in any suit or proceeding based on or
arising under this Agreement and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company and
each Purchaser irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The parties hereto further agree that
service of process upon the parties hereto mailed by first class mail shall be
deemed in every respect effective service of process upon each such party in any
such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any
18
<PAGE> 18
other manner permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
11.5 This Agreement, the Preferred Stock, the Warrants, the Securities
Purchase Agreement and the Warrant Issuance Agreement (including all schedules
and exhibits thereto and all certificates and opinions required thereby)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Preferred Stock, the Warrants and the Securities
Purchase Agreement and the Warrant Issuance Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof. Notwithstanding the foregoing, that certain
engagement letter dated August 11, 1997, between the Company and GEM Advisers
Inc. and Global Emerging Markets, Inc. shall not be superseded and shall remain
in full force and effect.
11.6 Subject to the requirements of Article IX hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
11.7 The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
11.8 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. This Agreement, once executed by a party, may be delivered
to the other party hereto, by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
11.9 Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
11.10 [Intentionally Omitted]
11.11 The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Purchasers based on the
number of Registrable Securities held by each Purchaser at the time of such
establishment or increase, as the case may be. In the event a Purchaser shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a
18
<PAGE> 19
Registration Statement and which remain allocated to any person or entity which
does not hold any Registrable Securities shall be allocated to the remaining
Purchasers, pro rata based on the number of shares of Registrable Securities
then held by such Purchasers. Without implication that the contrary would
otherwise be true, for purposes of this paragraph, all Preferred Stock then
outstanding shall be assumed converted into Registrable Securities.
11.12 The Agent shall have, with respect to the Warrant Shares, rights
hereunder as if it were a Purchaser (but not an Initial Purchaser) and the
Warrants and Warrant Shares were Preferred Stock and Conversion Shares,
respectively, provided, however, that the Agents' rights hereunder shall be
subordinated in all respects to the rights of the Purchaser's, including,
without limitation, with respect to the allocation, pursuant to Section 11.11,
of the numbers of shares of Common Stock included in a Registration Statement
(it being understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement, and without limiting the generality of the
foregoing, in the event of a Registration Trigger Date (assuming for this
purpose that the applicable percentage trigger is 200% rather than 175%), then
all shares of Common Stock covered by the applicable Registration Statement
shall be allocated to the Purchasers (not including for this purpose the Agent)
and not to the Agent until such time as no Registration Trigger Date (assuming
for this purpose that the applicable percentage trigger is 200% rather than
175%) has existed for a period of ten consecutive days. Following such cure, the
Agent shall again be entitled to participate in an allocable portion of shares
covered by the applicable Registration Statement as if the Agent were a
Purchaser hereunder.
11.13 If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.
* * *
19
<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
MOLTEN METAL TECHNOLOGY, INC.
/s/ Benjamin T. Downs
_______________________________________
Executive Vice President and
Chief Financial Officer
Initial Purchasers:
PURCHASER:
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
/s/ John D. Ziegelman
By:_______________________________
Director
Its:______________________________
With a copy to:
Castle Creek Partners, LLC
333 West Wacker Drive, Suite 1410
Chicago, IL 60606
Tel#: (312) 554-2771
Fax#: (312) 435-2636
Attn: Portfolio Manager
PURCHASER:
Stark International
Arthur Morris, Christensen Century House
31 Richmond Road
Hamilton, Bermuda HM08
Tel#: (809) 292-7478
Fax#: (809) 295-4164
/s/ Michael A. Roth
By:_______________________________
Member of Managing G.P.
Its:______________________________
20
<PAGE> 21
With a copy to:
Stark Investments
1500 West Market Street, Suite 200
Mequon, WI 53092
Tel#: (414) 241-1820
Fax#: (414) 241-7704
Attn: Brian Davidson
PURCHASER:
Sheperd Investments International, Ltd.
International Fund Administration Ltd.
48 Par-la-Ville Road, Suite 464
Hamilton, Bermuda HM11
Tel#: (441) 295-4718
Fax#: (441) 295-9637
/s/ Michael A. Roth
By:_______________________________
Member of Investment Manager
Its:______________________________
With a copy to:
Stark Investments
1500 West Market Street, Suite 200
Mequon, WI 53092
Tel#: (414) 241-1820
Fax#: (414) 241-7700
Attn: Brian Davidson
PURCHASER:
Nelson Partners
c/o Leeds Management Services
129 Front St., 5th Floor
Hamilton, Bermuda HM12
Fax#: (441) 292-2239
Attn: Anne Dupuy
/s/ Anne Dupuy
By:_______________________________
Officer
Its:______________________________
21
<PAGE> 22
With a copy to:
Citadel Investment Group LLC
225 West Washington Street, 9th Floor
Chicago, IL 60606
Tel#: (312) 696-2165
Fax#: (312) 368-4347
Attn: Malcolm Fairbairn
PURCHASER:
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street, 5th Floor
Hamilton, Bermuda HM12
Fax#: (441) 292-2239
Attn: Anne Dupuy
/s/ Anne Dupuy
By:_______________________________
Director
Its:______________________________
With a copy to:
Citadel Investment Group LLC
225 West Washington Street, 9th Floor
Chicago, IL 60606
Tel#: (312) 696-2165
Fax#: (312) 368-4347
Attn: Malcolm Fairbairn
GEM Ventures Ltd.
1330 Avenue of the Americas
36th Floor
New York, NY 10019
Tel#: (212) 582-3400
Fax#: (212) 265-4035
Attn: Thomas Tuttle
/s/ Thomas Tuttle
By:_______________________________
Director
Its:______________________________
22
<PAGE> 23
EXHIBIT 1
TO REGISTRATION
RIGHTS AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: [COMPANY NAME]
Ladies and Gentlemen:
We are counsel to , a Delaware corporation (the "COMPANY"), and we
understand that [Name of Purchaser] (the "HOLDER") has purchased from the
Company Series A Convertible Participating Preferred Stock of the Company (the
"PREFERRED STOCK"), convertible into shares of the Company's common stock, par
value $.01 per share (the "COMMON STOCK"). The Preferred Stock was purchased by
the Holder pursuant to a Securities Purchase Agreement, dated as of September 5,
1997, by and among the Company and the signatories thereto (the "AGREEMENT").
Pursuant to a Registration Rights Agreement, dated as of September 5, 1997, by
and among the Company and the signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT"), the Company agreed with the Holder, among other things, to register
the Registrable Securities (as that term is defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
upon the terms provided in the Registration Rights Agreement. In connection with
the Company's obligations under the Registration Rights Agreement, on _____ __,
1997, the Company filed a Registration Statement on Form S-_____ (File No. 333-
__________) (the "REGISTRATION Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other appropriate customary language to be included.]
Very truly yours,
cc: [Name of Purchaser]
23
<PAGE> 1
Exhibit 99.5
FOR IMMEDIATE RELEASE
MOLTEN METAL TECHNOLOGY RAISES $20 MILLION
THROUGH PRIVATE PLACEMENT
WALTHAM, Mass., September 8, 1997 - Molten Metal Technology, Inc. (NASDAQ: MLTN)
today announced it has raised $20 million in a private financing transaction
with three institutional investor groups. The investors purchased a three-year
preferred equity security.
The investors can convert the preferred shares into Molten Metal Technology
common stock after 120 days, although a significant penalty would be incurred
for conversion and sale prior to September 8, 1998. The shares will initially
convert into common stock at a premium to the average of the five day closing
bid prices of the common stock set the day prior to closing, or $5.83 per common
share, with an adjustment for market conditions at the time of conversion.
Molten Metal Technology can also choose to repurchase the shares for cash at any
time, or convert the shares into common stock upon achievement of certain price
levels of its common stock. The shares automatically convert into common stock
on the third anniversary of their issue and have an annual premium accruing at
five percent. Warrants to purchase 566,000 shares of common stock have been
issued to the placement agent in conjunction with the financing. These warrants
are exercisable over a three year period at an exercise price of $6.625 per
share.
The company plans to use the funds primarily to support the start-up of its Bay
City Recycling Facility and to complete the construction of its first commercial
plant for the municipal waste market in Japan.
The preferred stock and warrants were issued to accredited institutional
investors in a private placement in reliance upon the exemption from the
registration requirements of the Securities Act of 1933, as amended (the "Act")
provided by Regulation D of the Act. The preferred stock and warrants and common
stock issuable upon their conversion or exercise have not been registered under
the Act and may not be offered or sold in the United Sates without registration
under the Act or compliance with an applicable exemption from registration.
###
MOLTEN METAL TECHNOLOGY, INC.
Contact: Brian Payea (Investors): 617-487-7648
Michele Perry (Media): 617-487-7639
