<PAGE>
As Filed with the Securities and Exchange Commission on January 26, 2000.
Registration No. 333 -______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
______________
SAF T LOK INCORPORATED
(Exact name of Company as specified in its charter)
Florida 65-0142837
---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1101 Northpoint Parkway
West Palm Beach, Florida 33407
(561) 478-5625
(Name, address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)
<TABLE>
<S> <C> <C>
Franklin W. Brooks, CEO Copies to: Steven I. Weinberger, Esq.
Saf T Lok Incorporated Atlas, Pearlman, Trop & Borkson, P.A.
1101 Northpoint Parkway 350 East Las Olas Blvd., Suite 1700
West Palm Beach, Florida 33407 Fort Lauderdale, Florida 33301
Telephone: (561) 478-5625 Telephone: (954) 766-7834
(Name, address, including Zip Code, and telephone number, Telecopier: (954) 766-7800
including area code, of agent for service)
</TABLE>
Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
[_]
<PAGE>
CALCULATION OF REGISTRATION FEE/(1)/
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Security Offering Price Registration Fee
- ------------------- ------------ -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Common Stock issuable
upon conversion of
outstanding Debentures/(2)/ 1,892,850 $ 1.20 $ 2,271,420 $ 631.43
Common Stock issuable
as dividends on outstanding
Debentures/(2)/ 227,150 $ 1.20 $ 272,580 $ 75.78
Common Stock issuable
upon exercise of Option/(3)/ 60,000 $ 1.31 $ 78,600 21.85
Common Stock issued to
Placement Agents/(2)/ 132,500 $ 1.20 $ 159,000 $ 44.20
----------------
Total Registration Fee $ 773.28
================
</TABLE>
/(1)/ Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457.
/(2)/ The registration fee was calculated based upon the average of the
closing bid and asked prices for the Common Stock on January 24,
2000.
/(3)/ The registration fee was calculated based upon the exercise price of
the Option.
Pursuant to Rule 416 under the Securities Act of 1933 as amended,
there are also being registered such additional number of shares as may be
issuable as a result of the anti-dilution provisions of the debentures, but
not as result of pure adjustments attributable to changes in market price.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the SEC, acting pursuant
to said Section 8(a), may determine.
ii
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED JANUARY 26, 2000
SAF T LOK INCORPORATED
2,312,500 Shares of Common Stock
This Prospectus relates to the 2,312,500 shares of Common Stock of Saf T
Lok Incorporated, being offered by certain selling security holders. We will
not receive any proceeds from the sale of shares by the selling security
holders. The selling security holders acquired their shares:
. upon conversion of our 6% convertible debentures;
. as dividend payments on our convertible debentures; and
. upon exercise of outstanding options.
Our common stock is traded on the Nasdaq SmallCap Market under the trading
symbol "LOCK". On January 24, 2000, the closing bid and asked prices for our
common stock were $1.1875 and $1.2188, respectively.
______________________
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss of your investment. See "Risk Factors"
beginning on page 3 for a discussion of important matters that should be
considered by you prior to investing.
______________________
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the SEC or any
state securities commission determined if this prospectus is truthful or
complete.
______________________
The date of this Prospectus is _____________, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
BUSINESS............................................................ 2
RISK FACTORS........................................................ 3
WHERE YOU CAN FIND MORE INFORMATION................................. 6
SELLING SECURITY HOLDERS............................................ 9
PLAN OF DISTRIBUTION................................................ 10
DESCRIPTION OF SECURITIES........................................... 11
LEGAL MATTERS....................................................... 12
EXPERTS............................................................. 13
INDEMNIFICATION..................................................... 13
</TABLE>
<PAGE>
BUSINESS
Saf T Lok Incorporated, through its wholly-owned subsidiary Saf T Lok
Corporation,
. designs,
. develops,
. manufactures, and
. distributes
safety locks for guns. Saf T Lok Incorporated and Saf T Lok Corporation are
jointly referred to in this Prospectus as "Saf T Lok", "we", "us" and "our".
Our gunlocks are intended to reduce the possibility of unauthorized or
accidental use of firearms, including unintentional discharge by children and
assailants. Our target markets include:
. newly manufactured handguns in the U.S.; and
. previously manufactured, used handguns in the U.S., which is known as the
"retrofit market".
Our gunlocks are used by federal, state and local law enforcement agencies
and other consumers in the U.S. Our combination gun locks are the subject of
eleven United States patents, one United States patent application, as well as
Canadian and other foreign patent applications
During December 1999, we completed the sale of an aggregate of $1,325,000
principal amount of our 6% convertible debentures to a total of eight accredited
investors. The debentures, which were placed through Alexander, Westcott & Co.,
Inc. and J.P. Carey Securities, Inc., were sold in two separate raises, and are
convertible at a 25% discount to market, with a maximum conversion price of
$2.00 per share and a minimum conversion price of $.70 per share. Unless
converted, the debentures mature in December 2001.
We have determined that the current political and social climate relating
to handguns requires that we raise substantial capital in order to fund
operations and effectively lobby for regulatory changes that will enable us to
substantially increase our revenues. Alternatively, we must consummate a
strategic alliance or business combination that will allow us to remain viable.
Towards this end, we have engaged an investment banking firm to advise us on
mergers, acquisitions and similar business combinations. We may be unsuccessful
in attracting a strategic partner or acquirer.
Our executive offices are located at 1101 Northpoint Parkway, West Palm
Beach, Florida 33407. Our telephone number at that location is (561) 478-5625.
Except for the historical information contained herein, the matters
discussed in this prospectus under "Risk Factors", in addition to certain
statements contained elsewhere in this prospectus or in our filings under the
Securities Exchange Act of 1934, (the "Exchange Act"), are "Forward-Looking
Statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and are thus prospective. Such forward-looking statements are subject
to risks, uncertainties and other factors which could cause actual future
results or trends to differ
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<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following Risk Factors,
in addition to the other information set forth in this prospectus in evaluating
an investment in the securities offered hereby.
Inferior, but less expensive competitive gun locks, have reduced our revenues
and may continue to make our market penetration difficult
The market for our gun locking devices is unproven even though there are
millions of handguns in the United States. Our gun locking devices retail for
approximately $70 to $90 each while simple, key operated trigger locks retail
for less than $20. Our belief in the existence of a large market for our gun
locking devices is based solely on anecdotal evidence, without the benefit of
any broad-based market study. There is no assurance that a market will develop
that will provide sufficient revenues for us to make a profit. If a market for
our products does develop, we may have to compete against larger entities with
substantially more resources. There is no assurance that we could compete
successfully against those competitors.
We have an accumulated deficit, a history of net losses and our auditors have
raised doubts about our continued viability; investors could lose their entire
investment
As of September 30, 1999, we had an accumulated deficit of $21,885,884.
For the year ended December 31, 1998 and the none months ended September 30,
1999, we incurred net losses of $(6,066,394) and $(2,462,817), respectively.
Management projects that we require monthly operating revenues averaging at
least $300,000, but since January 1, 1999, our monthly operating revenues
averaged only approximately $21,700. As a result of the foregoing, the report
of our independent auditors for the year ended December 31, 1998 raises doubt
about our continued existence and states that in order to remain viable, we must
. raise additional capital; and
. achieve a successful level of sales.
Our inability to raise capital or achieve substantial sales could result in our
discontinuance of operations and our investors could lose the entire amount of
their investment.
Our success requires us to attract a partner for a business combination or
strategic alliance, in the absence of which we may fail
We believe that consolidation in the gun industry and the resources
necessary in order to focus the current political and social climate in a manner
that will allow us to successfully market our gun locks requires us to align
ourselves with a larger, more financially secure business partner. Accordingly,
we are seeking a candidate with whom to complete a business combination or
strategic alliance, and have engaged a recognized investment banking firm to
assist us in our efforts. However, in the event we are unsuccessful in
identifying and completing such a strategic transaction, we will continue to
have difficulty implementing our business plan and achieving success. We have
not yet identified any party interested in consummating a business combination
or strategic alliance with us.
3
<PAGE>
Our deficit and history of losses will make raising additional capital more
difficult
We have recently raised approximately $1,725,000, which we believe will
satisfy our cash requirements for approximately the next six to nine months. In
the event we are unable to consummate a business combination or other third
party alliance, and we require additional funding, our accumulated deficit and
net losses will likely have an adverse impact upon our ability to raise
additional funding. To the extent that additional financing is made available
to us, it may not be on favorable terms.
We have substantial outstanding debt and if we are unable to generate revenues
or otherwise finance debt repayment, we will be subject to legal proceedings and
judgments
We currently have long-term debt of approximately $1,266,750, which matures
in December 2001. Our current rate of revenue generation is insufficient to
enable us to repay this indebtedness on maturity. In the event this
indebtedness is not converted into common stock and we are unable to generate
increased operating revenues or otherwise finance our repayment of these debts,
we will become subject to lawsuits and judgments against us. Lawsuits and
judgments against us will adversely affect our ability to raise additional
capital or consummate a business combination or strategic alliance and,
accordingly, our continued viability will be suspect.
We are the subject of an SEC investigation, an unfavorable outcome to which will
likely have a negative effect on our stock price
We have been responding to informal requests for information from the SEC
since receiving notice of an "informal inquiry" from the SEC's Division of
Enforcement on May 29, 1998. On September 22, 1998, the SEC issued its formal
Order Directing Private Investigation and Designating Officers to Take Testimony
which revealed that members of the SEC's Staff have reported information to the
SEC that, in the Staff's view, tends to show that during the period from at
least January 1, 1996 and continuing thereafter, the Company, its present or
former officers, directors or employees or others, may have violated federal
securities laws. Pursuant to this formal order of investigation, the Company
and certain of our current and former officers and directors have produced
documents pursuant to requests and subpoenas from the SEC. The investigation is
continuing and we are not able to speculate as to its specific subject matter.
There can be no assurance as to the timing of the completion of the
investigation or as to the final result thereof, and no assurance can be given
that the final result of the investigation will not have a material adverse
effect on the Company. We are cooperating with the SEC, and have responded and
will continue to respond to requests for information in connection with the
investigation.
If class action lawsuits or other legal proceedings pending against us are not
resolved in our favor, our future remains questionable
We are defendants in a number of class action law suits, which allege
violations of federal securities laws, and other law suits that have been
initiated against us. We are currently involved in settlement negotiations with
respect to a number of these actions. Settlement of the class action suits has
been reached but is subject to court approval. No assurance can be provided,
however, that these actions will be resolved in a manner favorable to us.
Unfavorable judgments rendered against us in these actions, or a portion of
these actions, may have a material adverse effect on our business and financial
condition.
4
<PAGE>
Political climate or events may have a material adverse effect on the market for
our gun locking devices
The issue of gun control is a highly political issue in the United States.
We believe that the National Rifle Association will oppose any legislation that
touches on gun control, including any gun lock legislation. Other groups are
promoting gun lock legislation at the federal and state levels. However, we
cannot rely on, and no assurance can be given regarding, the passage of any type
of gun control or gun safety legislation to create a market for our gun locking
devices.
State and Federal regulations could present obstacles to our operations
While gun locking devices are currently not regulated under state or
federal regulations, it is likely in the future that such devices will be
regulated. There can be no assurance that our locks will meet the requirements
of such future regulations, in which case, sales of our products may be
materially adversely affected.
Patent protection will not eliminate competition
We hold eleven U. S. patents that pertain to the Saf T Lok(R) combination
gun locks. Two U.S. patents are pending. Patent applications have also been
filed for protection in Canada and other countries. We expect these applications
to be approved. However, there can be no assurance that any of these patents
will adequately protect us from competitors offering similar devices or that we
will have adequate resources to protect ourselves from infringers. We believe
our trademarks and other proprietary rights are important to our success and our
competitive position. The actions we take to establish and protect our
trademarks and other proprietary rights, however, may be inadequate to prevent
imitation of our products by others or to prevent others from claiming
violations of their trademarks and proprietary rights by us. In addition, others
may assert rights in our trademarks and other proprietary rights.
Purchasers of our shares could suffer substantial dilution if all or a
substantial portion of outstanding options, warrants and debentures are
converted
We currently have reserved for issuance:
. 3,176,637 shares in the event of exercise of options which we
have granted;
. 132,500 shares payable as compensation to the placement agents of
our debenture offerings;
. 214,725 shares in the event of conversion of outstanding
warrants; and
. 2,120,000 shares in the event of conversion of principal and
interest on outstanding debentures.
The issuance of our reserved common stock will increase the number of
outstanding shares of common stock by approximately 40%, and may cause
substantial dilution to purchasers of shares covered by this prospectus.
5
<PAGE>
If all or a substantial portion of our shares that are eligible for public
resale are sold, the market price for our shares may be adversely affected
All of the 5,643,862 shares that have been reserved for issuance have been
registered with the SEC so that the holders of such shares may resell them
publicly. In addition, approximately 479,000 shares of our outstanding common
stock have been held for at least one year and may, therefore, be publicly
resold under Rule 144. If all or a substantial portion of the shares which may
be publicly resold become available in the marketplace, the market price of our
shares may be adversely affected.
If the market price for our shares declines and causes us to be delisted from
the Nasdaq SmallCap market, additional sales practices imposed upon broker-
dealer could adversely affect the market for our shares
In the event our shares do not remain listed on the Nasdaq SmallCap Market,
they may become subject to Rule 15g-9 under the Exchange Act. That rule imposes
additional sales practice requirements on broker-dealers that sell low-priced
securities ("penny stock") to persons other than established customers and
institutional accredited investors. The SEC's regulations define a "penny
stock" to be an equity security that has a market price less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, the
rule may affect the ability of broker-dealers to sell our shares and may affect
the ability of holders to sell our shares in the secondary market.
The penny stock restrictions will not apply to our shares if they remain
listed on the Nasdaq Small Cap Market. We cannot assure you that our shares
will continue to qualify for exemption from these restrictions. If our shares
became subject to the penny stock rules, a holder's ability to sell our shares
could be materially adversely affected.
Our products are characterized by continuous and rapid technological advances
and evolving industry standards
Compatibility with industry standards in areas such as operating systems
and communications protocols is material to our marketing strategy and product
development efforts. In order to remain competitive, we must respond
effectively to technological changes by continuing to enhance and improve our
existing products to incorporate emerging or evolving standards, and by
successfully developing and introducing new products that meet customer
requirements. There can be no assurance that we will successfully develop,
market, or support such products or that we will respond effectively to
technological changes or new product announcements or introductions by others.
If we do not enhance and improve our products, our sales and financial results
could be materially adversely affected. In addition, there can be no assurance
that, as a result of technological changes, all or a portion of our inventory
would not be rendered obsolete.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with SEC. You may read and copy any document we file at the SEC's
public reference rooms in Washington, D.C.,
6
<PAGE>
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on public reference rooms.
Our SEC filings are also available to the public from the SEC's website at
"http://www.sec.gov." The SEC also allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and the
information that we file later with the SEC will automatically update and
supersede this information. We filed a registration statement with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
regarding the securities offered by this prospectus. This prospectus does not
contain all of the information included in the registration statement. For
further information with respect to us and the securities offered by this
prospectus, please see the registration statement. This prospectus is a part of
the registration statement. Statements contained in this prospectus regarding
any contract or other document referred to are not necessarily complete, and in
each instance you should see the copy of such contract or statement filed as an
exhibit to the registration statement. A copy of the registration statement may
be inspected without charge at the SEC's principal office. We will provide,
without charge, to each person to whom a copy of this prospectus is delivered,
upon written or oral request, a copy of any document incorporated by reference
in this prospectus. To request this information, please contact Franklin W.
Brooks, President, Saf T Lok Incorporated, 1101 Northpoint Parkway, West Palm
Beach, Florida 33407 (561) 478-5625.
INFORMATION INCORPORATED BY REFERENCE
This Prospectus incorporates by reference the following documents and
information we previously filed with the SEC under the Exchange Act:
(a) our annual report on Form 10-KSB for the fiscal year ended December
31, 1998;
(b) our quarterly report on Form 10-QSB for the fiscal quarter ended March
31, 1999;
(c) our quarterly report on Form 10-QSB for the fiscal quarter ended June
30, 1999;
(d) our quarterly report on Form 10-QSB for the fiscal quarter ended
September 30, 1999;
(e) our current report on Form 8-K dated June 4, 1999 and an amended Form
8-K dated February 11, 1999.
All documents filed with the SEC by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this registration statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be part of it from the date of filing of those
documents.
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information and representations provided in this
prospectus. We have authorized no one to provide you with different
information. We are not making offers for the securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
7
<PAGE>
materially from future results or trends expressed or implied by such forward-
looking statements. The most significant of such risks, uncertainties and other
factors are discussed in this prospectus under "Risk Factors" and prospective
investors are urged to carefully consider such factors. Updated information will
be periodically provided by us as required by the Securities Act and the
Exchange Act. We, however, undertake no obligation to publicly release the
results of any revisions to such forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
SELLING SECURITY HOLDERS
Shares covered by this prospectus
Of the 2,312,500 shares covered by this prospectus, 1,892,850 shares are
issuable upon conversion of our outstanding 6% convertible debentures, 227,150
shares cover two years' dividend payments on the debentures, 132,500 shares are
outstanding shares of our common stock which were issued for services rendered
in connection with the offering of our debentures and 60,000 shares are issuable
upon exercise of an option which has been granted. All of the shares covered by
this prospectus are being registered for resale by the registered owner. We
agreed to register the shares as part of the consideration for our sale of these
securities.
The following table sets forth the name of each selling security holder,
the number of shares owned, the number of shares being registered for resale by
each selling security holder and the number of shares to be owned by the selling
security holder following this offering. All references to shares offered by
this prospectus are to shares issuable upon conversion of our 6% convertible
debentures, including two years' dividend payments thereon, except the
references to Pegasus Capital Inc. and Gary J. Shemano are to shares of our
common stock owned by such persons, and the reference to Ralph Nichols is to
shares issuable upon exercise of an option.
<TABLE>
<CAPTION>
Number of Shares to Shares to be owned
Name of selling security holder shares owned(1) be offered after offering
- --------------------------------- --------------- ---------- ------------------
<S> <C> <C> <C>
Sage Capital Investments Ltd. 160,000 160,000 -0-
Arab Commerce Bank Ltd. 240,000 240,000 -0-
BarAub Corp. 40,000 40,000 -0-
Lufeng Investments, Ltd. 80,000 80,000 -0-
Philip S. & Janice B. Sirianni 80,000 80,000 -0-
G.P.S. America Fund Ltd. 200,000 200,000 -0-
Ashfield Investments Corp. 520,000 520,000 -0-
Cache Capital (USA) L.P. 800,000 800,000 -0-
Alexander, Westcott, Inc. 37,500 37,500 -0-
J. P. Carey Securities, Inc. 57,000 57,000 -0-
Pegasus Capital Inc. 31,000 31,000 -0-
Gary J. Shemano 7,000 7,000 -0-
Ralph Nichols 60,000 60,000 -0-
</TABLE>
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We have agreed to pay full costs and expenses, incentives to the issuance,
offer, sale and delivery of the shares, including but not limited to, all fees
and expenses in preparing, filing and printing the registration statement and
prospectus and related exhibits, amendments and supplements thereto and mailing
of such items. We will not pay selling commissions and expenses associated with
any sale by the selling security holders.
PLAN OF DISTRIBUTION
The shares offered hereby by the selling security holders may be sold from
time to time by the selling security holders, or by pledgees, donees,
transferees or other successors in interest. Such sales may be made on one or
more exchanges or in the over-the-counter market (including the Nasdaq National
Market of The Nasdaq Stock Market), or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares may be sold by one or more of the following
methods, including, without limitation:
. a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
. purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. face-to-face or other direct transactions between the selling security
holders and purchasers without a broker-dealer or other intermediary;
and
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling security holders
may arrange for other brokers or dealers to participate in the resales.
Brokers, dealers or agents may receive compensation in the form of commissions,
discounts or concessions from selling security holders in amounts to be
negotiated in connection with the sale. Such broker-dealers and agents and any
other participating broker-dealers, or agents may be deemed to be "underwriters"
within the meaning of the Act, in connection with such sales. In addition, any
securities covered by this prospectus that qualify for sale pursuant to Rule 144
might be sold under Rule 144 rather than pursuant to this prospectus.
In connection with distributions of the shares or otherwise, the selling
security holders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered hereunder in the course of hedging the positions they
assume with selling security holders. The selling security holders may also
sell shares short and deliver the shares to close out such short positions. The
selling security holders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell pursuant to this
prospectus. The selling security
10
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registered hereunder, which the broker-dealer may resell pursuant to this
prospectus. The selling security holders may also be pledged the shares
registered hereunder to a broker or dealer and upon a default, the broker or
dealer may effect sales of the pledged shares pursuant to this prospectus.
Information as to whether an underwriter(s) who may be selected by the
selling security holders, or any other broker-dealer, is acting as principal or
agent for the selling security holders, the compensation to be received by
underwriters who may be selected by the selling security holders, or any broker-
dealer, acting as principal or agent for the selling security holders and the
compensation to be received by other broker-dealers, in the event the
compensation of such other broker-dealers is in excess of usual and customary
commissions, will, to the extent required, be set forth in a supplement to this
prospectus. Any dealer or broker participating in any distribution of the
shares may be required to deliver a copy of this prospectus, including the
supplement, if any, to any person who purchases any of the shares from or
through such dealer or broker.
We have advised the selling security holders that during such time as they
may be engaged in a distribution of the shares included herein they are required
to comply with Regulation M promulgated under the Exchange Act. With certain
exceptions, Regulation M precludes any selling security holders, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchase made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of our common stock.
It is anticipated that the selling security holders will offer all of the
shares for sale. Further, because it is possible that a significant number of
shares could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of our common stock.
DESCRIPTION OF SECURITIES
Common Stock
Subject to the dividend rights of the holders of preferred stock, if any,
holders of our common stock are entitled to share, on a ratable basis, such
dividends as may be declared by our board of directors, out of funds legally
available therefor. Upon our liquidation, dissolution or winding up, after
payment to creditors and holders of preferred stock, if any, that may be
outstanding, our assets will be divided pro rata on a per share basis among the
holders of our common stock.
Each share of common stock entitles the holder to one vote. Holders of
common stock do not have cumulative voting rights which means that the holders
of more than 50% of the shares voting for the election of directors can elect
all of the directors if they choose to do so, and, in such event, the holders of
the remaining shares will not be able to elect any directors. Our By-Laws
require that only a majority of the issued and outstanding shares need be
represented to constitute a quorum and to transact business at a shareholders'
meeting. Our common stock has no preemptive, subscription or conversion rights
and is not redeemable by us.
11
<PAGE>
Convertible Debentures
We have authorized, and there are currently outstanding, an aggregate of
$1,325,000 principal amount of our convertible debentures. The debentures bear
interest at the rate of 6% per year, which may be paid by us in cash or by the
issuance of common stock. The debentures mature on various dates between
October 27, 2001 and December 30, 2001. The outstanding principal amount of the
debentures, and accrued but unpaid dividends thereon, may be converted at the
option of the holder into our common stock at a 25% discount to the market price
for our shares at the time of conversion, subject to a minimum conversion price
of $.70 per share and a maximum conversion price of $2.00 per share.
Shares Eligible for Future Sale
As of December 31, 1999, there were 13,983,615 shares of common stock
issued and outstanding. Of such shares, 13,504,614 shares comprise the public
float and 2,312,500 shares are being registered for sale pursuant to this
prospectus. The balance of 479,001 shares are "restricted securities which may
be sold in compliance with Rule 144. In general, Rule 144 permits a shareholder
who has beneficially owned restricted shares for at least one year to sell
without registration, within a three-month period, a number of shares not
exceeding the greater of one percent of the then outstanding shares of common
stock or, generally, the average weekly trading volume during the four calendar
weeks preceding the sale, assuming our compliance with certain reporting
requirements of Rule 144. Furthermore, if such shares are held for at least two
years by a person not affiliated with us (in general, a person who is not an
executive officer, director or principal shareholder during the three month
period prior to resale), such restricted shares can be sold without any volume
limitation.
We have also registered on Form S-8 under the Act 4,376,500 shares of
common stock issuable upon exercise of options, of which 4,177,304 have been
granted and are currently available for exercise. An additional 110,000 shares
are covered by a currently effective registration statement on Form S-3.
The public sale of shares, under Rule 144 or pursuant to a registration
statement, can be expected to have a depressive effect on the market price of
our common stock.
NASDAQ SmallCap Market
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"LOCK".
Transfer and Warrant Agent and Registrar
Our transfer agent and registrar for the common stock is Florida Atlantic
Stock Transfer, Inc. 7130 Nob Hill Road, Tamarac, Florida 33321, telephone
number (954) 726-4954.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for us by Atlas, Pearlman, Trop & Borkson P.A., Fort Lauderdale,
Florida.
12
<PAGE>
EXPERTS
Our audited consolidated financial statements, as of December 31, 1998 and
1997, and for each of the two fiscal years in the period ended December 31,
1998, incorporated by reference into this prospectus, have been audited by
Goldberg & Company, P.A., independent certified public accountants, as indicated
in their report with respect thereto, and incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
INDEMNIFICATION
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of a Florida corporation. Our
articles of incorporation and bylaws provide that we shall indemnify to the
fullest extent permitted by the Florida Business Corporation Act any person whom
we may indemnify under the act.
The provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available. In addition, each director will continue to be subject to
liability for:
. violations of criminal laws, unless the director has reasonable cause
to believe that his or her conduct was lawful or had no reasonable
cause to believe his conduct was unlawful,
. deriving an improper personal benefit from a transaction,
. voting for or assenting to an unlawful distribution and
. willful misconduct or conscious disregard for our best interests in a
proceeding by or in our right to procure a judgment in its favor or in
a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other law,
such as the federal securities laws.
The effect of Florida law, our articles of incorporation and our bylaws is
to require us to indemnify our officers and directors for any claim arising
against such persons in their official capacities if such person acted in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
To the extent indemnification for liabilities arising under the Securities
Act, may be permitted to our directors, officers or control persons control, we
have been informed that in the opinion of the SEC, this indemnification is
against public policy as expressed in the Securities Act and is unenforceable.
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Registration Fees - Securities and
Exchange Commission $ 750*
Cost of Printing 1,000*
Legal Fees and Expenses 7,500*
Accounting Fees and Expenses 1,000*
Blue Sky Fees and Expenses 500*
Miscellaneous 1,750*
-------
Total $12,500*
=======
*Estimated
Item 15. Indemnification of Directors and Officers.
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of a Florida corporation. Our
articles of incorporation and bylaws provide that we shall indemnify to the
fullest extent permitted by the Florida Business Corporation Act any person whom
we may indemnify under the act.
The provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available. In addition, each director will continue to be subject to
liability for:
. violations of criminal laws, unless the director has reasonable cause
to believe that his or her conduct was lawful or had no reasonable
cause to believe his conduct was unlawful,
. deriving an improper personal benefit from a transaction,
. voting for or assenting to an unlawful distribution and
. willful misconduct or conscious disregard for our best interests in a
proceeding by or in our right to procure a judgment in its favor or in
a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other law,
such as the federal securities laws.
The effect of Florida law, our articles of incorporation and our bylaws is
to require us to indemnify our officers and directors for any claim arising
against such persons in their official capacities if such person acted in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
II-1
<PAGE>
To the extent indemnification for liabilities arising under the Securities
Act, may be permitted to our directors, officers or control persons control, we
have been informed that in the opinion of the Securities and Exchange
Commission, this indemnification is against public policy as expressed in the
Securities Act and is unenforceable.
Item 16. Exhibits and Consolidated Financial Statement Schedules.
a. The exhibits constituting part of the Registration Statement are as
follows:
4.1 Form of 6% Convertible Debenture (2)
5.1 Opinion and Consent of Atlas, Pearlman, Trop & Borkson, P.A. (2)
10.1 Agency Agreement between the Company and Alexander, Westcott & Co.,
Inc. dated April 20, 1999 (1)
10.2 Letter Agreement between the Company and Alexander, Westcott & Co.,
Inc. dated July 8, 1999 (1)
10.3 Placement Agency Agreement between the Company and J. P. Carey
Securities, Inc. dated December 30, 1999 (2)
10.4 Form of Securities Purchase Agreement relating to the Company's
Debenture offering through J. P. Carey Securities, Inc. (2)
10.5 Form of Registration Rights Agreement relating to the Company's
Debenture offering through J. P. Carey Securities, Inc. (2)
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included in opinion
filed as Exhibit 5.1)
23.2 Consent of Goldberg & Company, P.A. (2)
27 Financial Data Schedule (3)
_________________
(1) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1999, as filed with the
Securities and Exchange Commission.
(2) Filed herewith.
(3) Incorporated by reference to Exhibit 27 to the Company's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1999, as filed with the
Securities and Exchange Commission.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement which includes any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(d) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's Annual Report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officer, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Palm Beach and the State of Florida, on the 25th
day of January 2000.
SAF T LOK INCORPORATED
By: /s/ Franklin W. Brooks
-------------------------
FRANKLIN W. BROOKS, CEO
POWER OF ATTORNEY
The undersigned directors and officers of Saf T Lok Incorporated hereby
constitute and appoint Franklin W. Brooks and William Schmidt and each of them,
with full power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to execute
in our name and behalf in the capacities indicated below any and all amendments
(including post-effective amendments and amendments thereto) to this
registration statement and time to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission and hereby ratify and confirm that such attorneys-in-fact, or either
of them, or their substitutes shall lawfully do or use to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Franklin W. Brooks Chairman of the Board, Chief January 25, 2000
- -------------------------
FRANKLIN W. BROOKS Executive Officer and Director
(Principal Executive Officer)
/s/ Jeffrey W. Brooks Vice President, Secretary January 25, 2000
- -------------------------
JEFFREY W. BROOKS and Director
/s/ William M. Schmidt Chief Financial Officer, January 25, 2000
- -------------------------
WILLIAM M. SCHMIDT Principal Accounting Officer
and Director
/s/ Dennis W. DeConcini Director January 25, 2000
- -------------------------
DENNIS W. DECONCINI
/s/ James V. Stanton Director January 25, 2000
- -------------------------
JAMES V. STANTON
</TABLE>
<PAGE>
EXHIBIT 4.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
("REGULATION") AND OR RULE 4(2) PROMULGATED UNDER THE ACT. THE SECURITIES MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No. ________________ $________________ U.S.
SAF T LOK INCORPORATED
6% SUBORDINATED CONVERTIBLE DEBENTURE DUE DECEMBER____, 2001
THIS DEBENTURE is one of a duly authorized issue of Debentures of Saf T Lok
Incorporated, a corporation duly organized and existing under the laws of the
State of Florida (the "Company"), designated as its 6% Subordinated Convertible
Debentures Due December _____, 2001, in an aggregate principal amount not
exceeding U.S. $1,500,000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to __________________, the
registered holder hereof (the "Holder"), the principal sum of ________ Dollars
($________ U.S.), on or prior to December _____, 2001, (the "Maturity Date"),
and to pay interest on the principal sum outstanding from time to time in
arrears on the Maturity Date, at the rate of 6% per
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
SAF T LOK INCORPORATED
Dated: December _____, 1999 By:_________________________________
Title:
<PAGE>
annum. Accrual of interest on this Debenture shall commence on the date that,
in connection with the consummation of the initial purchase of this Debenture
from the Company, the Company first had in its possession funds representing
full payment for this Debenture, and interest shall continue to accrue until
conversion has been completed or payment in full of the principal sum has been
made or duly provided for. The interest so payable will be paid on the Maturity
Date to the person in whose name this Debenture (or one or more predecessor
Debentures) is registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register") at the Company's
option in either cash or Common Stock. All accrued and unpaid interest shall
bear interest at the same rate of 6% per annum from the Maturity Date until the
date of payment. The principal of, and interest on, this Debenture are payable
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the address
of the Holder last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Debenture Register
shall represent the record of ownership and right to receive principal and
interest on this Debenture. Interest and principal shall be payable only to the
registered Holder as reflected in the Debenture Register. The right to receive
principal and interest under this Debenture shall be transferable only through
an appropriate entry in the Debenture Register as provided herein. The
forwarding of such payment shall constitute a payment of interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such payment.
This Debenture is subject to the following additional provisions:
1. Debentures. The Debentures are issuable in denominations of Twenty
----------
five Thousand Dollars ($25,000 U.S.). The Debentures are exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same, but shall not
be issuable in denominations less than integral multiples of Twenty Five
Thousand Dollars ($25,000 U.S.). No service charge or other charges of any kind
will be made for such registration of transfer or exchange.
2. Withholdings. Holder has represented to the Company in the Securities
------------
Purchase Agreement of even date hereunder that it is not subject to withholding
tax under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments. The Holder shall pay any
other taxes, charges, or levies in connection with the issuance or transfer
thereof.
3. Transfer. This Debenture is issued subject to investment
--------
representations of the original Holder hereof and may be transferred or
exchanged only with the consent of the Company (unless to an affiliate or
successor) in compliance with the Securities Act of 1933, as amended (the
"Act"), including Regulation D, if applicable, promulgated under the Act. Any
Holder of this Debenture, by acceptance hereof, agrees to the representations,
warranties and covenants herein. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture
2
<PAGE>
be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. Conversion. The record Holder of this Debenture shall have conversion
----------
rights as follows (the "Conversion Rights"):
(a) Right to Convert. The record Holder of this Debenture shall be
----------------
entitled, at the option of the Holder, subject to the Company's right of
redemption set forth in Section 5(a), to convert 100% of the aggregate
principal amount of Debentures held by such Holder, at any time beginning
on ________________ , 1999 (the "Conversion Commencement Date"), at the
office of the Company or any transfer agent for the Debentures, into that
number of fully-paid and non-assessable shares of Common Stock of the
Company, par value $0.01 ("Conversion Shares"), calculated in accordance
with the following formula:
Number of shares issued upon conversion = (Principal +
Interest)/Conversion Price, where
. Principal = The principal amount of the Debenture(s) to be converted,
. Interest = Principal x (N/365) x .06, where N = the number of days
between (i) the date of issuance of this Debenture, and (ii) the
applicable date of conversion for the Debenture for which conversion
is being elected, and
. Conversion Price = 75% (the "Applicable Discount") of the average
Closing Bid Price for the Company's Common Stock for the five (5)
trading days immediately preceding the Date of Conversion, as defined
below; provided however, that in no event shall the Conversion Price
be less than $0.70 per share (the "Floor Price") nor greater than
$2.00 per share( the "Ceiling Price") subject to adjustment in each
case pursuant to Section (h) herein. For purposes hereof, the term
"Closing Bid Price" shall mean the closing bid price of Company's
Common Stock as reported by Nasdaq Stock Market (or, if not reported
by the Nasdaq Stock Market, as reported by such other exchange or
market where traded).
(b) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of this Debenture. In lieu of any
fractional share to which the Holder would otherwise be entitled, the
Company shall pay cash to such Holder in an amount equal to such fraction
multiplied by the Conversion Price then in effect. In the case of a
dispute as to the calculation of the Conversion Rate, the Company's
calculation shall be deemed conclusive absent manifest error. In order to
convert Debentures into full shares of Common Stock, the Holder shall
surrender the certificate or certificates therefor, duly endorsed, by
either overnight courier or 2-day courier, to the office of the Company or
of any transfer agent for the Debentures, and shall give written notice to
the Company (the "Notice of Conversion") at such office that he elects to
convert the same, the number and principal amount of Debentures so
converted and a calculation of the Conversion Rate (with an advance copy of
the certificate(s) and the notice by facsimile);
3
<PAGE>
provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless either the certificates evidencing such Debentures are
delivered to the Company or its transfer agent as provided above, or the
Holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory
to the Company to indemnify the Company from any loss incurred by it in
connection with such certificates. Notwithstanding anything contained
herein to the contrary, in no event other than upon a Mandatory Payment or
Conversion pursuant to Section 4(g) or an Event of Default pursuant to
Section 6 hereof, shall any Holder be entitled to convert Debentures in
excess of that number of Debentures which, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.9% of the
outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Debentures
with respect to which the determination of such proviso is being made, but
shall exclude the number of shares of Common Stock which would be issuable
upon (i) conversion of the remaining, nonconverted Debentures beneficially
owned by the holder and its affiliates beneficially owned by the holder and
its affiliates. Except as set forth in the preceding sentence, for purposes
of this paragraph, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended.
The Company shall use reasonable efforts to issue and deliver within
five (5) business days after delivery to the Company of such certificates,
or after such agreement and indemnification, to such Holder of Debentures
at the address of the Holder on the books of the Company, a certificate or
certificates for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid. The date on which notice of conversion is
given (the "Date of Conversion") shall be deemed to be the date set forth
in such notice of conversion, provided that the original Debentures to be
converted are received by the transfer agent or the Company within five (5)
business days thereafter and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock
on such date. If the original Debentures to be converted are not received
by the transfer agent or the Company within five business days after the
Date of Conversion, the notice of conversion shall become null and void.
Following conversion of a Debenture, or a portion thereof, the
principal and interest owed on that Debenture or portion of the Debenture
so converted will be deemed paid in full and satisfied, and such Debenture
or portion thereof will no longer be outstanding.
In the event that some, but not all, of the Debenture is converted
hereunder, the Company shall issue a replacement debenture in the same form
as described herein for the remaining balance which is unconverted.
4
<PAGE>
(c) Reservation of Stock Issuable Upon Conversion. The Company shall
---------------------------------------------
take all action necessary to at all times have authorized, and reserved for
the purpose of issuance, 100% of the number of shares of Common Stock
needed to provide for the issuance of the Conversion Shares measured at the
time of the conversion of all outstanding Debentures based upon the Floor
Price. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding Debentures, the Company will take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
(d) Nothing contained in this Debenture or paragraph 4(e) hereof,
shall be deemed to establish or require the payment of interest to the
Holder at a rate in excess of the maximum rate permitted by governing law.
In the event that the rate of interest required to be paid under the
Debenture exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced to
the maximum rate permitted under the governing law and any amounts selected
in excess of the permissible amount shall be deemed a payment of principal.
To the extent that such excess amount exceeds the aggregate principal
amount of this Debenture, such excess shall be returned with reasonable
promptness by the Holder to the Company.
(e) In the event the Company does not make delivery of the
certificates of Common Stock, as instructed by Holder, within five (5)
business days after the Date of Conversion, then in such event the Company
shall pay to the Holder an amount, in immediately available funds or Common
Stock (based upon the Conversion Price), at the option of the Company, in
accordance with the following schedule, wherein "No. Business Days Late" is
defined as the number of business days beyond the five (5) business days
delivery period.
<TABLE>
<CAPTION>
Late Payment for Each
Principal Amount Being $10,000 of Debenture
No. Business Days Late Converted
<S> <C>
1 $ 50
2 $ 100
3 $ 150
4 $ 200
5 $ 250
6 $ 300
7 $ 350
8 $ 400
9 $ 450
10 $ 500
11 $500 + $100 for each
Calendar Days Late Beyond 10 days
</TABLE>
5
<PAGE>
To the extent that the failure of the Company to issue the
certificates of Common Stock pursuant to this Section 4(e) is due to the
unavailability of authorized but unissued shares of Common Stock, the
provisions of this Section 4(e) shall not apply but instead the provisions
of Section 4(f) shall apply. The Company shall pay any payments incurred
under this Section 4(e) in immediately available funds within five (5)
business days from the date of issuance of the certificates of applicable
Common Stock. Nothing herein shall limit a Holder's right to pursue actual
damages for the Company's failure to issue and deliver Common Stock to the
Holder within six (6) business days after the Date of Conversion.
(f) If, at any time, a Holder submits a Notice of Conversion and the
Company does not have sufficient authorized but unissued shares of Common
Stock available to effect, in full, a conversion of the Debentures (a
"Conversion Default," the date of such default being referred to herein as
the "Conversion Default Date"), the Company shall issue to the Holder a
certificate representing all of the shares of Common Stock which are
available, and the Notice of Conversion as to any Debentures requested to
be converted but not converted (the "Unconverted Debentures") shall become
null and void. The Company shall provide notice of such Conversion Default
("Notice of Conversion Default" to all existing Holders of outstanding
Debentures, by facsimile, within one (1) business day of such default (with
the original delivered by overnight or two day courier). No Holder may
submit a Notice of Conversion after receipt of Notice of Conversion Default
until the date additional shares of Common Stock are authorized by the
Company. The Company agrees to pay to all Holders of outstanding Debentures
payments for a Conversion Default ("Conversion Default Payments") in the
amount of (N/365 x (.15) x the principal amount of the outstanding
Debentures held by each Holder where N = the number of days from the
Conversion Default Date to the date (the "Authorization Date") that the
Company authorizes a sufficient number of shares of Common Stock to affect
conversion of all remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures that
additional shares of Common Stock have been authorized, the Authorization
Date and the amount of Holder's accrued Conversion Default Payments. The
accrued Conversion Default shall be paid in immediately available funds, or
shall be convertible into Common Stock at the Conversion Rate, at the
Purchaser's option, payable as follows: (i) in the event Holder elects to
take such payment in immediately available funds, payments shall be made to
such Holder of outstanding Debentures by the fifth day of the following
calendar month, or (ii) in the event Purchaser elects to take such payment
in stock, the Purchaser may convert such payment amount into Common Stock
at the Conversion Rate at anytime after the 5th day of the calendar month
following the month in which the Authorization Notice was received, until
the expiration of the Mandatory Conversion Date (as defined herein).
Nothing herein shall limit the Holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized
shares of common stock.
(g) Mandatory Payment or Conversion on Maturity Date. Each Holder of
------------------------------------------------
a Debenture outstanding on December _____, 2001, shall have the right to
demand, by written notice to the Company which is received by the Company
no later than December
6
<PAGE>
_____, 2001, (the "Payment Notice"), that payment of all principal and
accrued interest on this Debenture be paid to such Holder in cash or in
immediately available funds on December _____, 2001. Each outstanding
Debenture for which a Payment Notice is not timely received by the Company
on or before December _____, 2001, automatically shall be converted into
Common Stock on December _____, 2001, at the Conversion Price for each
share of Common Stock calculated in accordance with the formula in Section
4(a) above, and December _____, 2001, shall be deemed the Date of
Conversion with respect to such conversion. The Company shall not be
entitled to require conversion of the Debentures.
(h) Adjustment to Fixed Conversion Price.
------------------------------------
(i) If, prior to the conversion of all of the Debentures, the
number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion
Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed
Conversion Price shall be proportionately increased.
(ii) If, prior to the conversion of all Debentures, there shall
be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of
Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of
stock or securities of the Company or another entity, then the Holders
of Debentures shall thereafter have the right to purchase and receive
upon conversion of Debentures, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock
and/or securities as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the conversion of
Debentures held by such Holders had such merger, consolidation,
exchange of shares, recapitalization or reorganization not taken
place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Debentures
to the end that the provisions hereof shall thereafter be applicable,
as nearly as may be practicable in relation to any shares of stock or
securities thereafter deliverable upon the exercise hereof. The
Company shall not effect any transaction described in this subsection
4(h) unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to
the Holders of the Debentures such shares of stock and/or securities
as, in accordance with the foregoing provisions, the Holders of the
Debentures may be entitled to purchase.
(iii) If any adjustment under this Section 4(h) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be
the next higher number of shares.
7
<PAGE>
(i) No Short Sales of the Common Stock. So long as (i) a Holder owns
----------------------------------
at least 100,000 of Debentures, (ii) the Company has not issued any
publicly traded convertible securities and (iii) the Issuer is not in
material default under the terms of this Debenture, the Registration Rights
Agreement, the Securities Purchase Agreement or any related agreement, each
Holder shall not directly or indirectly engage in any short sales or third
party short sales of the Company's Common Stock or hold a "put equivalent
position" with respect to the Common Stock (as defined in Rule 16a-1 under
the 1934 Act). Notwithstanding anything contained to the contrary in this
section, in the event that the Company enters into a private placement
transaction (other than in connection with employee benefit plans, employee
or consultant compensation, or in connection with mergers and acquisitions)
which permits the investors rights to engage in short sales of Common
Stock, the restrictions contained in this section shall be automatically
modified to permit the Holder to engage in short sales of Common Stock
substantially to the extent permitted by the Company with respect to such
private placement investors.
5. Company's Right to Redeem at its Election.
-----------------------------------------
(a) At any time, commencing thirty (30) days after the date hereof
(the "Issuance Date") as long as the Holder has not submitted a Notice of
Conversion, the Company shall have the right, in it sole discretion, to
redeem ("Redemption at Company's Election"), from time to time, any or all
of the Debentures: provided (i) Company shall first provide ten (10) days
advance written notice as provided in subparagraph 5(a)(ii) below (which
can be given any time on or after thirty (30) days after the Issuance Date,
and (ii) that the Company shall only be entitled to redeem Debentures
having an aggregate Stated Value (as defined below) of at least Two Hundred
and Fifty Thousand Dollars ($250,000). If the Company elects to redeem
some, but not all, of the Debentures, the Company shall redeem a pro-rata
amount from each Holder of the Debentures.
(i) Redemption Price At Company's Election. The Redemption Price
--------------------------------------
shall be calculated as (a) 110% of the Stated Value for the first 90
days commencing December __, 1999, (b) as 120% of the Stated Value
for the next 90 days thereafter and (c) 130% of the Stated Value
thereafter (each of (a), (b) and (c), as applicable, shall be known
as the "Redemption Percentage"). For purposes hereof, "Stated Value"
shall mean the original principal amount of Debentures being redeemed,
plus the accrued and unpaid 6% per annum interest payment.
(ii) Mechanics of Redemption at Company's Election. The Company
---------------------------------------------
shall effect each such redemption by giving at least ten (10) days
prior written notice ("Notice of Redemption at Company's Election") to
(A) the Holders of the Debentures selected for redemption at the
address and facsimile number of such Holder appearing in the Company's
Debenture register and (B) the Transfer Agent, which Notice of
Redemption At Company's Election shall be deemed to have been
delivered two (2) business days after the Company's mailing (by
overnight or two (2) day courier, with a copy by facsimile) of such
Notice of Redemption at Company's Election. Such Notice of Redemption
At Company's
8
<PAGE>
Election shall indicate (i) the number of Debentures that have been
selected for redemption, (ii) the date which such redemption is to
become effective (the "Date of Redemption At Company's Election") and
(iii) the applicable Redemption Price At Company's Election, as
defined in subsection (a)(i) above.
(b) Company Must Have Immediately Available Funds or Credit
-------------------------------------------------------
Facilities. The Company shall not be entitled to send any Redemption
----------
Notice and begin the redemption procedure under Sections 5(a) unless it
has:
(i) the full amount of the redemption price to cash, available
in a demand or other immediately available account in a bank or
similar financial institution; or
(ii) immediately available credit facilities, in the full
amount of the redemption price with a bank or similar financial
institution, or
(iii) an agreement with a standby underwriter willing to
unconditionally purchase from the Company a sufficient number of
shares of stock to provide proceeds necessary to redeem any stock that
is not converted prior to redemptions; or
(iv) a combination of the items set forth in (i), (ii), and
(iii) above, aggregating the full amount of the redemption price.
(c) Payment of Redemption Price. Each Holder submitting Debentures
---------------------------
being redeemed under this Section 5 shall send their Debenture Certificates
to be redeemed to the Company or its Transfer Agent, and the Company shall
pay the applicable redemption price to that Holder within five (5) business
days of the Date of Redemption at Company's Election, the "Cash Redemption
Due Date"). In the event that the applicable redemption price is not paid
by the Cash Redemption Due Date, then the late payment penalty provisions
of Section 4(e) shall apply commencing on the sixth (6/th/) business day of
the Date of Redemption at Company's Election.
6. The following shall constitute an "Event of Default":
(a) The Company shall default in the timely payment of Principal or
Interest on this Debenture; or
(b) Any of the representations, warranties, or covenants made by the
Company herein, in the Securities Purchase Agreement, Registration Rights
Agreement, the Escrow Agreement, or any other related agreements, or in any
certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and
delivery of this Debenture or the Security Purchase Agreement shall be
false or misleading in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement, or
obligation of the Company
9
<PAGE>
under this Debenture, the Registration Rights Agreement, the Escrow
Agreement, or any other related agreement and such failure shall continue
uncured for a period of ten (10) days after written notice from the Holder
of such failure; or
(d) The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or
for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60) days thereafter; or
(g) Any money judgement, writ or warrant of attachment, or similar
process in excess of One Hundred Thousand ($100,000) Dollars in the
aggregate shall be executed against the Company or any of its properties or
other assets and shall remain unpaid, unvacated, unbonded, or unstayed for
a period of sixty (60) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, the Company shall by any action or answer
approve of, consent to, or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition filed in any
such proceeding; or
(i) The Company shall have its Common Stock suspended or delisted
from trading on the NASDAQ Small Cap Market. Then, or any time thereafter,
and in each and every such case, unless such Event of Default shall have
been waived in writing by the holder (which waiver shall not be deemed to
be a waiver of any subsequent default) at the option of the Holder and in
the Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable without presentment, demand, protest or notice
of any kinds, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights
and remedies provided herein or any other rights or remedies afforded by
law.
7. No Impairment. Except as expressly provided herein, no provision of
-------------
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate,
10
<PAGE>
and in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued in similar terms are direct obligations of
the Company.
8. Termination. After this Debenture shall have been surrendered for
-----------
conversion as herein provided or notice of conversion or redemption shall have
been given by the Company pursuant to Section 4(g) herein, this Debenture shall
no longer be deemed to be outstanding and all rights with respect to this
Debenture, including, without limitation, the right to receive interest hereon
and the principal hereof, shall forthwith terminate as of the Date of
Conversion, except only the right of the Holder hereof to receive shares of
Common Stock in exchange herefor.
9. Protective Provisions. So long as Debentures are outstanding, the
---------------------
Company shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the Holders of at least a majority of principal
amount of the then outstanding Debentures alter or change the rights,
preferences or privileges of the Debentures so as to affect adversely the
Debentures. Notwithstanding the above, the Company may incur debt with respect
to trade credit, purchase money security interests, inventory and other debt
incurred in the ordinary course of business.
10. No Voting Rights. This Debenture shall not entitle the Holder hereof
----------------
to any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company.
11. Lost or Destroyed Debenture. If this Debenture shall be mutilated,
---------------------------
lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
12. Sales in Compliance with Applicable Law. Subject to the Company's
---------------------------------------
consent, any Holder of this Debenture, by acceptance hereof, agrees that such
Holder will not offer, sell (except with respect to affiliates and successors of
the Holder) or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon exercise thereof except under circumstances which will not result
in a violation of the Act (including, but not limited to, any prospectus
delivery requirements which may apply), including Regulation D, if applicable,
promulgated under the Act, or any applicable state Blue Sky law or similar laws
relating to the sale of securities and the Holder agrees to provide the Company
with the documentation required by the Security Purchase Agreement executed by
the original Holder hereof to demonstrate that such offer, sale or disposition
complies with applicable securities laws.
13. Governing Law. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. Company acknowledges that upon any breach of
Holder's conversion rights hereunder, Holder's resulting injury may not be
adequately compensated by a remedy at law. Accordingly, upon such breach,
Holder, at its election and without limitation of its other remedies, shall be
11
<PAGE>
entitled to pursue a claim for specific performance of this Agreement, and
Company hereby waives the right to assert any defense thereto that Holder has an
adequate remedy at law. The parties expressly consent to the jurisdiction and
venue of the Fulton County Georgia, and the United States District Court for the
Northern District of Georgia for the adjudication of any civil action asserted
pursuant to this Paragraph.
14. Business Day Definition. For purposes hereof, the term "business day"
-----------------------
shall mean any day on which banks are generally open for business in the State
of New York, USA and excluding any Saturday and Sunday.
15. Notices. Any notice, demand or request required or permitted to be
-------
given by either the Company or the Subscriber pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile (with a hard copy to follow by two day courier),
addressed to the Company at 1101 Northpoint Parkway, West Palm Beach, Florida
33407, (561) 478-5625 and with respect to the Holder as disclosed in the
Securities Purchase Agreement or such other addresses as a party may request by
notifying the other in writing.
16. Waiver. Any waiver by the Company or the Holder hereof of a breach of
------
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder hereof to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
17. Unenforceable Provisions. If any provision of this Debenture is
------------------------
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
12
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture
No(s).___________ into shares of Common Stock, $0.01 par value (the "Common
Stock"), of Saf T Lok Incorporated the ("Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates,
opinions, and signature guarantee as reasonably requested by the Company or its
Transfer Agent. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Debenture shall be made only pursuant to (i) registration of
the Common Stock under the Act or (ii) advice of counsel in a form reasonably
acceptable to the Company that such sale is exempt from registration required by
Section 5 under the Act.
Conversion calculations:
_____________________ Signature: _______________________________
Date of Conversion Print Name:_______________________________
Address:__________________________________
____________________________ __________________________________________
Applicable Conversion Price __________________________________________
13
<PAGE>
EXHIBIT 5.1
Atlas, Pearlman, Trop & Borkson, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
January 26, 2000
Saf T Lok Incorporated
1101 Northpoint Parkway
West Palm Beach, FL 33407
Re: Registration Statement on Form S-3; Saf T Lok Incorporated (the
"Company")
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration for public
sale of 2,312,500 shares (the "Registerable Shares") of common stock, $.01 par
value ("Common Stock"), including up to 2,180,000 shares of Common Stock
reserved for issuance upon conversion of outstanding debentures, the payment of
dividends thereon and exercise of certain outstanding options (the "Reserved
Shares").
In connection therewith, we have examined and relied upon original,
certified, conformed, photostat or other copies of (a) the Articles of
Incorporation, as amended, and Bylaws of the Company; (b) resolutions of the
Board of Directors of the Company authorizing the offering and the issuance of
the Common Stock and related matters; (c) the Registration Statement and the
exhibits thereto; (d) the instruments defining the terms and conditions of the
Reserved Shares; and (e) such other matters of law as we have deemed necessary
for the expression of the opinion herein contained. In all such examinations, we
have assumed the genuineness of all signatures on original documents, and the
conformity to originals or certified documents of all copies submitted to us as
conformed, photostat or other copies. In passing upon certain corporate records
and documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company, and we
express no opinion thereon. As to the various questions of fact material to this
opinion, we have relied, to the extent we deemed reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such documents, records and
instruments.
<PAGE>
Based upon and subject to the foregoing, we are of the opinion that (1) the
currently outstanding Registerable Shares have been legally issued and are fully
paid and non-assessable, and (2) the Reserved Shares, when issued and upon
payment of the agreed upon consideration therefore, will be legally issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to use our name under the caption "Legal Matters" in
the prospectus comprising part of the Registration Statement.
Sincerely,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
<PAGE>
EXHIBIT 10.3
PLACEMENT AGENCY AGREEMENT
THIS AGREEMENT ("Agreement"), made as of the 30th day of December 1999, by
and between Saf T Lok Incorporated, a Florida corporation ("Company"), and J.P.
Carey Securities, Inc., a Georgia corporation (the "Agent").
WITNESSETH:
WHEREAS, the Company proposes to issue and sell 6% Subordinated Convertible
Debentures (the "Securities") resulting in gross proceeds to the Company of a
maximum of $1,500,000 in an offering (the "Offering") not involving a public
offering without registration under the Securities Act of 1933, as amended (the
"Act"), pursuant to exemptions from the registration requirements of the Act
under Regulation D promulgated under the Act ("Regulation D") and or Rule 4(2)
under the Act as described below; and
WHEREAS, the Agent has offered to assist the Company in placing the
Securities on a "best efforts" basis with respect to the sale of Debentures and
the Company desires to secure the services of the Agent on the terms and
conditions hereinafter set forth;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises, conditions and covenants herein contained, the parties hereto do
hereby agree as follows:
1. Engagement of Agent. The Company hereby appoints the Agent as its non-
-------------------
exclusive placement agent for the Offering, to sell on a "best efforts" basis up
to a maximum of $1,500,000 of Securities (the "Maximum Securities") in one or
more tranches. The parties hereto acknowledge that the Maximum Securities
includes any shares to be sold through the efforts of Alexander, Wescott & Co.,
Inc., which the Company has separately engaged and will compensate in connection
with the Offering. The Agent, on the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth,
accepts such appointment and agrees to use its best efforts to find purchasers
for the Securities. This appointment shall be irrevocable for the period
commencing on December 30, 1999, and ending thirty (30) days, which period maybe
extended by the consent of the Company and the Agent (the "Offering Period").
2. Representations and Warranties of the Company. In order to induce the
---------------------------------------------
Agent to enter into this Agreement, the Company hereby represents and warrants
to and agrees with the Agent as follows:
2.1 Offering Documents. The Company and the Placement Agent have
------------------
prepared a Securities Purchase Agreement, certain exhibits thereto, Registration
Rights Agreement, and the Debentures regarding the Securities, which documents
have been or will be sent to proposed investors. Since January 1, 1997, the
documents which have been filed by the Company with the U.S. Securities and
Exchange Commission have been prepared in conformity with the requirements (to
the extent applicable) of the Securities and Exchange Act of 1934, as amended,
and the rules and regulations ("Rules and Regulations") of the Commission
promulgated thereunder. As used in this Agreement, the term "Offering
Documents" refers to and means the SEC Documents, the Subscription Agreement and
all amendments,
<PAGE>
exhibits and supplements thereto, together with any other documents which are
approved for Agent's use by the Company for the purpose of this Offering.
2.2 Provision of Offering Documents. The Company shall deliver to
-------------------------------
the Agent, without charge, as many copies of the Offering Documents as the Agent
may reasonably require for the purposes contemplated by this Agreement. The
Company authorizes the Agent, in connection with the Offering of the Securities,
to use the Offering Documents as from time to time amended or supplemented in
connection with the offering and sale of the Securities and in accordance with
the applicable provisions of the Act and Regulation D. The Company consents to
the Agent's distribution of the Offering Documents to prospective subscribers as
a disclosure document about the Company, its business, prospects, financial
condition and other matters and is legally permitted to do so.
2.3 Accuracy of Offering Documents. Taken together, the Offering
------------------------------
Documents, at the time of delivery to subscribers for the Securities, conformed
in all material respects with the requirements, to the extent applicable, of the
Act and the applicable Rules and Regulations and did not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. On the Closing Date
(as hereinafter defined), the Offering Documents, taken together, will contain
all material statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations for the purposes of the proposed
Offering, and all statements of material fact contained in the Offering
Documents will be true and correct, and the Offering Documents will not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
--------
however, that the Company does not make any representations or warranties as to
the information contained in or omitted from the Offering Documents in reliance
upon written information furnished on behalf of the Agent specifically for use
therein.
2.4 Duty to Amend. If during such period of time, as in the opinion of
-------------
the Agent or its counsel, any Offering Documents relating to this Offering are
required to be delivered under the Act, any event occurs, or any event known to
the Company relating to or affecting the Company shall occur as a result of
which the Offering Documents as then amended or supplemented would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time after
the date hereof to amend or supplement the Offering Documents to comply with the
Act or the applicable Rules and Regulations, the Company shall forthwith notify
the Agent thereof and shall prepare such further amendment or supplement to the
Offering Documents as may be required and shall furnish and deliver to the Agent
and to others, whose names and addresses are designated by the Agent, all at the
cost of the Company, a reasonable number of copies of the amendment or
supplement or of the amended or supplemented Offering Documents which, as so
amended or supplemented, will not contain an untrue statement of a material fact
or omit to state any material fact necessary in order to make the Offering
Documents not misleading in the light of the circumstances when it is delivered
to a purchaser or prospective purchaser, and which will comply in all respects
with the requirements (to the extent applicable) of the Act and the applicable
Rules and Regulations.
2.5 Corporation Condition. The Company's condition is as described
---------------------
in its Offering Documents, except for changes in the ordinary course of business
and normal year-end adjustments that are not in the aggregate materially adverse
to the Company. The Offering Documents, taken as a whole, present fairly the
business and financial position of the Company as of the Closing Date.
2.6 No Material Adverse Change. [LEFT INTENTIONALLY BLANK]
--------------------------
2
<PAGE>
2.7 No Defaults. The execution and delivery of this Agreement, and
-----------
the consummation of the transactions herein contemplated, and compliance with
the terms of this Agreement will not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, the
Articles of Incorporation or By-Laws of the Company (in any respect that is
material to the Company), any material note, indenture, mortgage, deed of trust,
or other material agreement or instrument to which the Company is a party or by
which the Company or any property of the Company is bound, or to the Company's
knowledge, any existing law, order, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality, agency or body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the Company or
any property of the Company. The consent, approval, authorization or order of
any court or governmental instrumentality, agency or body is not required for
the consummation of the transactions herein contemplated except such as may be
required under the Act or under the Blue Sky or securities laws of any state or
jurisdiction.
2.8 Incorporation and Standing. The Company is, and at the Closing
--------------------------
Date will be, duly formed and validly existing in good standing as a corporation
under the laws of the State of Florida with full power and authority (corporate
and other) to own its properties and conduct its business, present and proposed,
as described in the Offering Documents; the Company, has full power and
authority to enter into this Agreement; and the Company is duly qualified and in
good standing as a foreign entity in each jurisdiction in which the failure to
so qualify would have a material adverse effect on the Company or its
properties.
2.9 Legality of Outstanding Securities. Prior to the Closing Date,
----------------------------------
the outstanding securities of the Company have been duly and validly authorized
and issued, fully paid and nonassessable and conform in all material respects to
the statements with regard thereto contained in the Offering Documents.
2.10 Legality of Securities. The Securities, when sold and delivered, will
----------------------
constitute legal, valid and binding obligations of the Company, enforceable in
accordance with the terms thereof, and shall be duly and validly issued and
outstanding, fully paid and nonassessable. The Common Stock into which the
Securities are convertible, upon conversion in accordance with the Company's
Debentures shall be duly and validly issued and outstanding, fully paid and non-
assessable.
2.11 Litigation. Except as set forth in the Offering Documents, there is
----------
now, and at the Closing Date there will be, no action, suit or proceeding before
any court or governmental agency, authority or body pending or, to the knowledge
of the Company, threatened, which might result in judgements against the Company
not adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise) or business of
the Company or which would materially adversely affect the properties or assets
of the Company.
2.12 Finders. The Company does not know of any outstanding claims
-------
for services in the nature of a finder's fee or origination fees with respect to
the sale of the Securities hereunder for which the Agent may be responsible.
2.13 Tax Returns. The Company has filed all federal and state tax
-----------
returns which are required to be filed, and has paid all taxes shown on such
returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which the Company is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
2.14 Authority. The execution and delivery by the Company of this
---------
Agreement have been duly authorized by all necessary action, and this Agreement
is the valid, binding and legally enforceable obligation of the Company subject
to standard qualifications as to the availability of equitable remedies,
3
<PAGE>
the effect of bankruptcy and other laws relating to the protection of debtors
and public policy opinions promulgated by the Commission with respect to
indemnification against liabilities under the Act.
2.15 Actions by the Company. Except as contemplated hereby, the
----------------------
Company will not take any action which will impair the effectiveness of the
transactions contemplated by this Agreement.
3. Issue, Sale and Delivery of the Securities.
------------------------------------------
3.1 Deliveries of Securities. Certificates in such form that, subject
------------------------
to applicable transfer restrictions imposed by applicable law, and as described
in the Subscription Agreement, they can be negotiated by the purchasers thereof
(issued in such denominations and in such names as the Agent may direct the
Company to issue) for the Securities, and shares of Common Stock representing
the Agent's compensation described in Section 3.4 below (the "Agent Shares"),
shall be delivered by the Company to the Escrow Agent, with copies made
available to the Agent for checking at least one (1) full business day prior to
the Closing Date, it being understood that the directions from the Agent to the
Company shall be given at least two (2) full business days prior to the Closing
Date. The certificates for the Securities and the Warrants shall be delivered at
the Closing and at each Subsequent Closing (as defined hereinafter).
3.2 Escrow of Funds. Pursuant to the Escrow Agreement, a copy of
---------------
which is attached hereto as Exhibit "A" (the "Escrow Agreement"), executed by
the Company, the Agent and the escrow agent (the "Escrow Agent"), the
subscribers shall place all funds for purchase of Securities for each Closing in
an escrow account. The Company shall have the right to approve or reject the
subscriptions of each subscriber, as described in the Subscription Agreement
prior to each closing. At such time as subscribers subscribing for at least
$200,000 of Securities (but not more than the Maximum Securities, unless
otherwise agreed by the Company and Agent) have delivered to the Agent their
signed subscription documents, those subscribers have been approved by the
Company and all other Closing conditions have been met, Escrow Agent shall
release the subscription funds to the Company and the Agent shall release the
certificates representing the Securities to the subscribers (the "Initial
Closing"). In the event that the Initial Closing shall be for an amount of
Securities less than the Maximum Amount, the Offering may be continued, and
additional Closings may be held ("each a "Subsequent Closing") throughout the
Offering Period. In addition, the Agent shall have the right to act as agent
for the sale of additional Debentures or Securities as set forth in Section 5
herein.
3.3 Closing Date. The Initial Closing and any Subsequent Closing
------------
shall take place at the offices of Sims Moss Kline & Davis LLP, 400 Northpark
Town Center, Suite 310, 1000 Abernathy Road, NE, Atlanta, Georgia 30328 at such
time and date ("Closing Date") as will be fixed either orally or in writing by
notice to be given by the Agent to the Company after consultation with the
Company, such Closing Date to be not less than one (1) full business day after
the date on which such notice shall have been given and not less than one (1)
and not more than three (3) full business days after the date on which the
Escrow Agent shall have given written notice to the Company and the Agent that
funds deposited with the Escrow Agent total at least the Minimum Proceeds. The
Closing Date may be changed by mutual agreement of the Agent and the Company.
3.4 Agent's Compensation. The Company shall pay the Agent:
--------------------
(a) A commission of six percent (6.0%) of the gross subscription
proceeds of the Initial Offering and any subsequent Offerings; and
(b) In addition to the fees and reimbursement of costs set forth in
Section 3.5 of this Agreement, the Company shall issue to the Agent six
shares of the Company's Common Stock for each $100.00 of gross subscription
proceeds raised by the Agent in the Offering (the "Agent
4
<PAGE>
Shares"). The Agent shares shall have piggy-back registration rights. The
Agent Shares shall be delivered by the Company to the Agent simultaneous
with each Closing. However, the Agent shares to be delivered at the first
Closing shall be delivered to the Agent no later than 15 days following the
first Closing.
3.5 Payment of Fees. The Escrow Agent shall be instructed to pay the
---------------
Escrow Agent's fees and commissions pursuant to section 3.4 of this Agreement,
directly to the Agent from the proceeds of the Closing and all Subsequent
Closing, simultaneous with the transfer of proceeds to the Company.
4. Offering of the Securities on Behalf of the Company.
---------------------------------------------------
4.1 In offering the Securities for sale, the Agent shall offer them solely
as an agent for the Company, and such offer shall be made upon the terms and
subject to the conditions set forth in the Offering Documents. The Agent shall
commence making such offer as an agent for the Company as soon as possible
following delivery of the Offering Documents.
4.2 The Agent will not make offers to sell the Securities to, or solicit
offers to subscribe for any Securities from, persons or entities that are not
"accredited investors" as defined in Regulation D.
4.3 The Agent shall make offers and sales of the securities only in such
jurisdictions where it is permitted to do so in accordance with applicable law.
5. Right of First Refusal. The Company hereby grants Agent rights
----------------------
of first refusal as follows:
5.1 Beginning the date hereof and ending 90 days from the final Closing,
the Company grants to the Agent a right of first refusal to act as the Company's
exclusive placement agent for the sale of any debt or equity to be issued by the
Company ("Financing Transaction"). The Agent shall have five (5) business days
from the date of its receipt from the Company of a detailed and complete summary
of any proposed Financing Transaction to exercise its right of first refusal to
act as Agent upon the same terms and conditions on an all or nothing basis. In
the event that the Company materially changes or deviates from any of the terms
of the proposed Financing Transaction contained in such written notice, then
such changes or deviation shall be deemed to constitute a new proposed Financing
Transaction and the Company shall be required to submit a new written right of
first refusal notice to Agent and Agent shall have five (5) business days from
the date of such notice to exercise its right of first refusal as described
herein.
5.2 The Company agrees to maintain the confidentiality of the Agent's
clients, except as required by applicable law. Such clients shall be those
entities which invest in the Offering (the "Clients"). For a period of two years
from the Closing (the "Exclusivity Period"), the Company will not solicit or
enter into any financing transaction ("Transaction") with the clients without
the written consent of Agent and payment to the Agent of like compensation as
the compensation described herein.
5.3 In the event that Company breaches Section 5.2 of this Agreement and
engages in a Transaction with the Clients during the Exclusivity Period or
breaches Section 5.1 of this Agreement, Agent shall be entitled to receive
compensation in the same proportion to the financing done without Agent's
participation as the compensation to Agent under this Agreement bears to the
financing raised in this Offering.
6(a) Covenants of the Company. The Company covenants and agrees with
------------------------
the Agent that:
5
<PAGE>
6.1 As a condition precedent to the Initial Closing, the Company will
deliver to the Agent a true and correct copy of the Articles of Incorporation of
the Company, and all amendments and certificates of designation of preferences
of preferred stock, including without limitation the certificate of designation
of preferences regarding the Securities, if applicable, certified by the
Secretary of State of Delaware.
6.2 Prior to the Closing Date, the Company will cooperate with the Agent
in such investigation as it may make or cause to be made of all of the
properties, business and operations of the Company in connection with
the Offering of the Securities. The Company will make available to it
in connection therewith such information in its possession as the
Agent may reasonably request and will make available to the Agent such
persons as the Agent shall deem reasonably necessary and appropriate
in order to verify or substantiate any such information so supplied,
subject to the limitations arising pursuant to the federal securities
laws.
7. Indemnification.
---------------
7.1 The Company agrees to indemnify and hold harmless the Agent, each
person who controls the Agent within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended, and the Agent's
employees, accountants, attorneys and agents (the "Agent's Indemnitees") against
any and all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act or any other statute or at
common law for any legal or other expenses (including the costs of any
investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as such
losses, claims, damages, liabilities and litigation arise out of or are based
upon any untrue statement of material fact contained in the Offering Documents
or any amendment or supplement thereto or the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, under the circumstances under which they were made, not misleading, all
as of the date of the Offering Documents or of such amendment as the case may
be; provided, however, that the indemnity agreement contained in this Section
--------
7.1 shall not apply to amounts paid in settlement of any such litigation, if
such settlements are made without the consent of the Company, nor shall it apply
to the Agent's Indemnitees in respect to any such losses, claims, damages or
liabilities arising out of or based upon any such untrue statement or alleged
untrue statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Agent specifically for use in connection with the preparation of
the Offering Documents or any such amendment or supplement thereto. This
indemnity agreement is in addition to any other liability which the Company may
otherwise have to the Agent's Indemnitees. The Agent's Indemnitees agree,
within a reasonable time after the receipt by them of written notice of the
commencement of any action against them in respect to which indemnity may be
sought from the Company under this Section 7.1, to notify the Company in
writing of the commencement of such action, and if the Agent's Indemnitees shall
notify the Company of the commencement thereof, the Company shall be entitled to
participate in (and, to the extent that the Company shall wish, to direct) the
defense thereof at its own expense, but such defense shall be conducted by
counsel of recognized standing and reasonably satisfactory to the Agent's
Indemnitees, defendant or defendants, in such litigation. The Company agrees to
notify the Agent's Indemnitees promptly of the commencement of any litigation or
proceedings against the Company or any of the Company's officers or directors of
which the Company may be advised in connection with the issue and sale of any of
the Securities and to furnish to the Agent's Indemnitees, at their request,
copies of all pleadings therein and to permit the Agent's Indemnities to be
observers therein and apprise the Agent's Indemnitees of all developments
therein, all at the Company's expense.
7.2 The Agent agrees, in the same manner and to the same extent as set
forth in Section 7.1 above, to indemnify and hold harmless the Company, and the
Company's employees, accountants,
6
<PAGE>
attorneys and agents (the "Company's Indemnitees") with respect to (i) any
statement in or omission from the Offering Documents or any amendment or
supplement thereto or any application or any information furnished pursuant to
Section 3.4 hereof, if such statement or omission was made in reliance upon
information furnished in writing to the Company by the Agent or on its behalf
specifically for use in connection with the preparation thereof or supplement
thereto, or (ii) any untrue statement of a material fact made by the Agent or
its agents not based on statements in the Offering Documents or authorized in
writing by the Company, or with respect to any misleading statement made by the
Agent or its agents resulting from the omission of material facts which
misleading statement is not based upon the Offering Documents, or information
furnished in writing by the Company or, (iii) any breach of any representation,
warranty or covenant made by the Agent in this Agreement. The Agent shall not be
liable for amounts paid in settlement of any such litigation if such settlement
was effected without its consent. In case of the commencement of any action in
respect of which indemnity may be sought from the Agent, the Company's
Indemnitees shall have the same obligation to give notice as set forth in
Section 7.1 above, subject to the same loss of indemnity in the event such
notice is not given, and the Agent shall have the same right to participate in
(and, to the extent that it shall wish, to direct) the defense of such action at
its own expense, but such defense shall be conducted by counsel of recognized
standing reasonably satisfactory to the Company. The Agent agrees to notify the
Company's Indemnitees and, at their request, to provide copies of all pleadings
therein and to permit the Company's Indemnitees to be observers therein and
apprise them of all the developments therein, all at the Agent's expense.
7.3 If for any reason the indemnity provided for in Section 7.1 or 7.2 is
unavailable to an Indemnified Person or insufficient to hold an Indemnified
Person harmless, then the Indemnifying Party, to the fullest extent permitted by
law, shall contribute to the amount paid or payable by such Indemnified Person
as a result of such claims, liabilities, losses, damages or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on one hand and by the Agent on the other, from the transaction or
proposed transaction under this Agreement or if allocation on that basis is not
permitted under applicable law, in such proportion as is appropriate to reflect
not only the relative benefits received by the Company on the one hand and the
Agent on the other, but also the relative fault of the Company and the Agent, as
well as any relevant equitable considerations. It is hereby further agreed that
the relative benefits to the Company on the one hand and the Agent on the other
with respect to any transaction contemplated by this Agreement shall be deemed
to be paid in the same proportion as (i) the total value of the transaction
bears to (ii) the fees paid to the Agent with respect to the transaction. The
relative fault of the Company on the one hand and the Agent on the other with
respect to the transaction shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Agent and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The indemnity, contribution and expense reimbursement
obligations set forth herein (i) shall be in addition to any liability an
Indemnifying Party may have to any Indemnified Person at common law of
otherwise, (ii) shall survive the termination of this Agreement, (iii) shall
apply to any modification of this Agreement and shall remain in full force and
effect following the completion or termination of the Agreement, (iv) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Agent or any other Indemnified Person, and (v) shall
be binding on any successor or assign of the Company or the Agent and the
respective successors or assigns to all or substantially all of the Company's or
the Agent's business and assets.
8. Effectiveness of Agreement. This Agreement shall become effective at
--------------------------
9:00 A.M., Atlanta, Georgia time, on the date hereof.
9. Conditions of the Agent's Obligations. The Agent's obligations to act
-------------------------------------
as agent of the Company hereunder and to find purchasers for the Securities
shall be subject to the accuracy, as of the
7
<PAGE>
Closing Date, of the representations and warranties on the part of the Company
herein contained, to the fulfillment of or compliance by the Company with all
covenants and conditions hereof, and to the following additional conditions:
9.1 Counsel to the Agent shall not have objected in writing or shall not
have failed to give his consent to the Offering Documents (which objection or
failure to give consent shall not have been done unreasonably).
9.2 The Agent shall not have disclosed to the Company that the Offering
Documents, or any amendment thereof or supplement thereto, contains an untrue
statement of fact, which, in the opinion of counsel to the Agent, is material,
or omits to state a fact, which, in the opinion of such counsel, is material and
is required to be stated therein, or is necessary to make the statements
therein, under the circumstances in which they were made, not misleading.
9.3 Between the date hereof and the Closing Date, the Company shall not
have sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause of such character as would materially adversely affect its
business or property considered as an entire entity, whether or not such loss is
covered by insurance.
9.4 Between the date hereof and the Closing Date, there shall be no
material litigation instituted or threatened against the Company, and there
shall be no proceeding instituted or threatened against the Company before or by
any federal or state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign, wherein an unfavorable ruling,
decision or finding would materially adversely affect the business, franchises,
license, permits, operations or financial condition or income of the Company
considered as an entity.
9.5 Except as contemplated herein or as set forth in the Offering
Documents, during the period subsequent to the most recent financial statements
contained in the Offering Documents, if any, and prior to the Closing Date, the
Company (i) shall have conducted its business in the usual and ordinary manner
as the same is being conducted as of the date hereof and (ii) except in the
ordinary course of business, the Company shall not have incurred any material
liabilities or obligations (direct or contingent) or disposed of any assets, or
entered into any material transaction or suffered or experienced any
substantially adverse change in its condition, financial or otherwise. At the
Closing Date, and except as otherwise contemplated hereby, the equity account of
the Company shall be substantially the same as reflected in the most recent
balance sheet contained in the Offering Documents without considering the
proceeds from the sale of the Securities other than as may be set forth in the
Offering Documents.
9.6 The authorization of the Securities by the Company and all proceedings
and other legal matters incident thereto and to this Agreement shall be
reasonably satisfactory in all respects to counsel to the Agent, who shall have
furnished the Agent on the Closing Date with such favorable opinion with respect
to the sufficiency of all corporate proceedings and other legal matters relating
to this Agreement as the Agent may reasonably require, and the Company shall
have furnished such counsel such documents as he may have requested to enable
him to pass upon the matters referred to in this subparagraph.
9.7 The Company shall have furnished to the Agent the opinion, dated the
Closing Date, addressed to the Agent, from counsel to the Company, as required
by the Securities Purchase Agreement.
9.8 The Company shall have furnished to the Agent a certificate of the
Chief Executive Officer or the Chief Financial Officer of the Company, dated as
of the Closing Date, in the form attached hereto.
8
<PAGE>
10. Termination.
-----------
10.1 This Agreement may be terminated by the Agent by notice to the Company
in the event that the Company shall have failed or been unable to comply with
any of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times,
if any, herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by the Agent in writing.
10.2 This Agreement may be terminated by the Company by notice to the Agent
in the event that the Agent shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Agent to be performed, complied with or fulfilled within the respective times,
if any, herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by the Company in writing.
10.3 This Agreement may be terminated by the Agent by notice to the Company
at any time, if, in the reasonable, good faith judgment of the Agent, payment
for and delivery of the Securities is rendered impracticable or inadvisable
because: (i) additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon trading in securities
generally; (ii) a war or other national calamity shall have occurred; or (iii)
the condition of the market (either generally or with reference to the sale of
the Securities to be offered hereby other than the delisting of the Company's
shares on the Nasdaq SmallCap Market) or the condition of any matter affecting
the Company or any other circumstance is such that it would be undesirable,
impracticable or inadvisable, in the judgment of the Agent, to proceed with this
Agreement or with the Offering.
10.4 Any termination of this Agreement pursuant to this Section shall be
without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company shall remain obligated to pay the costs and expenses
provided to be paid by it specified in Sections 3.5; and the Company and the
Agent shall be obligated to pay, respectively, all losses, claims, damages or
liabilities, joint or several, under Section 7.1 in the case of the Company and
Section 7.2 in the case of the Agent.
11. Agent's Representations, Warranties and Covenants. The Agent
-------------------------------------------------
represents and warrants to and agrees with the Company that:
11.1 Agent is a corporation duly incorporated and existing under the laws
of the state of Georgia. Agent is registered with the Securities Exchange
Commission and the NASD and is authorized to receive the compensation from the
Company provided hereunder.
11.2 All corporate actions by Agent required for the execution, delivery
and performance of this Agreement have been taken. The execution and delivery
of this Agreement by the Agent, the observance and performance thereof, and the
consummation of the transactions contemplated herein or in the Memorandum do not
and will not constitute a material breach of, or a material default under, any
instrument or agreement by which the Agent is bound, and does not and will not,
to the best of the Agent's knowledge, contravene any existing law, decree or
order applicable to it. This Agreement constitutes a valid and binding
agreement of Agent, enforceable in accordance with its terms.
11.3 Agent understands that the Company is relying upon Agent's
representations and warranties in connection with the Offering and the sale of
the Securities contemplated by this Agreement.
11.4 Agent's representations and warranties under this Section shall be
true and correct as of each Closing, and shall survive each Closing for a period
of six months.
9
<PAGE>
11.5 No Short Sales of the Common Stock. The Agent shall not directly or
----------------------------------
indirectly engage in any short sales or third party short sales of the Company's
Common Stock or hold a "put equivalent position" with respect to the Common
Stock (as defined in Rule 16a-1 under the 1934 Act). Notwithstanding anything
contained to the contrary in this section, in the event that the Company enters
into a private placement transaction (other than in connection with employee
benefit plans, employee or consultant compensation, or in connection with
mergers and acquisitions) which permits the investors rights to engage in short
sales of Common Stock, the restrictions contained in this section shall be
automatically modified to permit the Agent to engage in short sales of Common
Stock substantially to the extent permitted by the Company with respect to such
private placement investors.
12. Notices. Except as otherwise expressly provided in this Agreement:
-------
12.1 Whenever notice is required by the provisions of this Agreement to be
given to the Company, such notice shall be in writing, addressed to the Company,
at:
If to Company: 1101 Northpoint Parkway
West Palm Beach, Florida 33407
Telephone: (561) 478-5625
Facsimile: (561) 688-8784
With a copy to: Atlas Pearlman Trop & Borkson, P.A.
350 E. Las Olas Blvd.
Ft. Lauderdale, FL 33301
Attn: Steven Weinberger, Esq.
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
12.2 Whenever notice is required by the provisions of this Agreement to be
given to the Agent, such notice shall be given in writing, addressed to the
Agent, at:
If to the Agent: J.P. Carey Securities, Inc.
Atlanta Financial Center, East Tower
3343 Peachtree Road, Suite 500
Atlanta, Georgia 30326
Telephone: (404) 816-5339
Facsimile: (404) 816-6268
with a copy to: Raymond L. Moss, Esq.
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, Georgia 30328
Telephone: (770) 481-7201
Facsimile: (770) 481-7210
12.3 Any notice instructing the Escrow Agent to distribute monies or
Securities held in Escrow must be signed by authorized agents of both the
Company and the Agent in order to be valid.
10
<PAGE>
13. Miscellaneous.
-------------
13.1 Benefit. This Agreement is made solely for the benefit of the Agent
-------
and the Company, their respective officers and directors and any controlling
person referred to in Section 15 of the Act and their respective successors and
assigns, and no other person may acquire or have any right under or by virtue of
this Agreement, including, without limitation, the holders of any Securities.
The term "successor" or the term "successors and assigns" as used in this
Agreement shall not include any purchasers, as such, of any of the Securities.
13.2 Survival. The respective indemnities, agreements, representations,
--------
warranties, covenants and other statements of the Company and the Agent, or the
officers, directors or controlling persons of the Company and the Agent as set
forth in or made pursuant to this Agreement and the indemnity agreements of the
Company and the Agent contained in Section 7 hereof shall survive and remain in
full force and effect, regardless of (i) any investigation made by or on behalf
of the Company or the Agent or any such officer, director or controlling person
of the Company or of the Agent; (ii) delivery of or payment for the Securities;
or (iii) the Closing Date, and any successor of the Company or the Agent or any
controlling person, officer or director thereof, as the case may be, shall be
entitled to the benefits hereof.
13.3 Governing Law. The validity, interpretation and construction of this
-------------
Agreement and of each party hereof will be governed by the Laws of the State of
Georgia. This Agreement and each Warrant Certificate hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. The parties further
agree that any action between them shall be heard in Atlanta, Georgia, and
expressly consent to the jurisdiction and venue of the Superior Court of Fulton
County, Georgia, and the United States District Court for the Northern District
of Georgia, Atlanta Division for the adjudication of any action asserted
pursuant to this Paragraph.
13.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
13.5 Confidential Information. All confidential financial or business
------------------------
information (except publicly available or freely usable material otherwise
obtained from another source) respecting either party will be used solely by the
other party in connection with the within transactions, be revealed only to
employees or contractors of such other party who are necessary to the conduct of
such transactions, and be otherwise held in strict confidence.
13.6 Public Announcements. Except as required by law, prior to the Closing
--------------------
Date, neither party hereto will issue any public announcement concerning the
within transactions without the approval of the other party.
13.7 Finders. The parties acknowledge that no person has acted as a finder
-------
in connection with the transactions contemplated herein and each will agree to
indemnify the other with respect to any other claim for a finder's fee in
connection with the offering. However, the Company represents that it has
separately engaged, at its own cost and expense, Alexander, Wescott & Co., Inc.
on an non-exclusive basis in connection with the Offering and agrees to
indemnify and hold Agent harmless for any commissions, fees or other expenses
due or payable by the Company to Alexander, Wescott & Co., Inc..
13.8 Recitals. The recitals to this Agreement are a material part hereof,
--------
and each recital is incorporated into this Agreement by reference and made a
part of this Agreement.
11
<PAGE>
13.9 Entire Agreement; Merger; Amendments. This Agreement and the
------------------------------------
agreements referred to herein constitute the entire agreement of the parties
hereto with respect to the subject matter and supersedes all other prior oral or
written agreements between the parties. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the parties
hereto.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the day and year first above written.
"THE COMPANY"
SAF T LOK INCORPORATED
By: /s/ Franklin W. Brooks
------------------------------
Name: Franklin W. Brooks
------------------------
Title: President and CEO
-----------------------
"THE AGENT"
J.P. CAREY SECURITIES, INC.
By: /s/ James P. Canouse
--------------------------
Name: James P. Canouse
------------------------
Title:
13
<PAGE>
EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December
_______, 1999, by and among Saf T Lok Incorporated, a Florida corporation, with
headquarters located at 1101 Northpoint Parkway, West Palm Beach, Florida 33407
(the "Company"), and the investor listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" or collectively "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration pursuant to Section
4(2) and/or Regulation D of the Securities Act of 1933, as amended (the "1933
Act"),
B. The Company is offering for sale to the Buyer 6% Subordinated
Convertible Debentures (the "Debentures") of the Company, due on December
______, 2001, and offered in denominations of $2,500 up to an aggregate
principal amount of $1,500,000. The terms of the Debentures, including the terms
on which the Debentures may be converted into the common stock of the Company,
$0.01 par value, are set forth in the Debenture, in substantially the form
attached as Exhibit "A" hereto.
C. The Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, an aggregate principal amount of up to $1,500,000 of Debentures
in the respective amounts set forth opposite each Buyer's name on the Schedule
of Buyers;
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially 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 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1 . PURCHASE AND SALE OF DEBENTURES.
-------------------------------
a. Purchase of Debentures. Subject to the satisfaction (or waiver)
----------------------
of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to the Buyers and the Buyers shall purchase from the Company
an aggregate principal amount of not more than $1,500,000 Debentures, in
the respective amounts set forth opposite each Buyer's name on the Schedule
of Buyers (the "Closing").
<PAGE>
b. Closing Date. The date and time of the Closing (the "Closing
------------
Date") shall be 10:00 a.m. Eastern Standard Time, within five (5) business
days following the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7
below (or such later date as is mutually agreed to by the Company and the
Buyer). The Closing shall occur on the Closing Date at the offices of Sims
Moss Kline & Davis LLP, 400 Northpark Town Center, Suite 310, 1000
Abernathy Road, N.E., Atlanta, Georgia 30328.
c. Form of Payment. On the Closing Date, (i) the Escrow Agent shall
----------------
pay the Purchase Price to the Company for the Debentures to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions,
and (ii) the Company shall deliver to each Buyer, certificates representing
such Debentures which such Buyer is then purchasing (as indicated opposite
such Buyer's name on the Schedule of Buyers), duly executed on behalf of
the Company and registered in the name of such Buyer or its designee (the
"Certificates").
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
--------------------------------------
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Debentures
------------------
and, (ii) upon conversion of the Debentures will acquire the Conversion
Shares then issuable, for its own account for investment only and not with
a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act; provided, however, that by making the representations herein,
such Buyer does not agree to hold any Debentures or Conversion Shares for
any minimum or other specific term and reserves the right to dispose of
Debentures or Conversion Shares at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.
b. Accredited Investor/Tax Status. Such Buyer is an "accredited
------------------------------
investor" as that term is defined in Rule 501(a)(3) of Regulation D
("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC"). The Buyer is not subject to U.S.
withholding tax or other similar state tax.
c. Reliance on Exemptions. Such Buyer understands that the Debentures
----------------------
and Conversion Shares are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of such Buyer set forth herein in order to determine the availability of
such exemptions and the eligibility of such Buyer to acquire such
securities.
d. Information. Such Buyer and its advisors, if any, have been
-----------
furnished with all appropriate materials relating to the business, finances
and operations of the
2
<PAGE>
Company and materials relating to the offer and sale of the Debentures and
Conversion Shares which have been requested by such Buyer. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions
of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained in Section 3 below.
Such Buyer understands that its investment in the Debentures and the
Conversion Shares involves a high degree of risk. Such Buyer has sought
such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Debentures and the Conversion Shares.
e. No Governmental Review. Such Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Debentures, the Conversion Shares, or the fairness or suitability of the
investment in the Debentures and the Conversion Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the
Debentures, and the Conversion Shares.
f. Transfer or Resale. Such Buyer understands that except as
------------------
provided in the Registration Rights Agreement: (i) the Debentures and the
Conversion Shares have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless such sale, assignment, or transfer is
approved (unless to an affiliate or successor entity) by the Company and
(a) subsequently registered thereunder, (b) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption
from such registration, or (c) such Buyer provides the Company with
reasonable assurance that such securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a
successor rule thereto); (ii) any sale of such securities made in reliance
on Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
("Rule 144") may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to register such
securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
-------
instruments representing the Debentures, until such time as the sale of the
Conversion Shares have been registered under the 1933 Act as contemplated
by the Registration Rights Agreement, the stock certificates representing
the Conversion Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against transfer of
such stock certificates):
3
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Debentures and the
Conversion Shares, upon which it is stamped, if, unless otherwise required by
applicable securities laws, (i) the sale of the Conversion Shares is registered
under the 1933 Act, (ii) in connection with a sale transaction, such holder
provides the Company with an opinion of counsel, reasonably satisfactory to the
Company, to the effect that a public sale, assignment or transfer of the
Debentures and the Conversion Shares may be made without registration under the
1933 Act, or (iii) such holder provides the Company with reasonable assurances
that the Debentures or the Conversion Shares can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
In addition to the foregoing, to the extent that the Holder receives a
certificate for Conversion Shares that does not contain the foregoing legend,
such holder understands that, (A) the Conversion Shares may be sold only by
means of a current prospectus or pursuant to an applicable exemption from
registration under the 1933 Act, (B) in connection with a prospectus sale, such
holder is required to deliver to the purchaser a current prospectus at the time
of resale of the Conversion Shares and (C) in that event, such holder is
responsible for determining that any such prospectus is current at the time of
resale. The Company undertakes to promptly notify the Holder in writing in the
event that facts and circumstances cause the prospectus to no longer be current
and shall indemnify and hold the Holder harmless from any costs, losses, or
damages, including reasonable attorney's fees that the Holder may suffer by
reason of the Company failing to provide such prompt notice. Holder hereby
indemnifies and holds the Company harmless from any costs, losses or damages,
including reasonable attorneys' fees, that the Company may suffer by reason of
holder's failure to comply with the provisions of this paragraph.
h. Authorization, Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with
its terms, subject as
4
<PAGE>
enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that state and country
---------
specified in its address on the Schedule of Buyers.
3 . REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its subsidiaries
------------------------------
are corporations duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
b. Authorization, Enforcement, Compliance with Other Instruments.
-------------------------------------------------------------
(i) The Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Registration Rights Agreement and any
related agreements, and to issue the Debentures, the Conversion Shares, in
accordance with the terms hereof and thereof, (ii) the execution and
delivery of this Agreement, the Registration Rights Agreement and any
related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation
the issuance of the Debentures and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or exercise
thereof, have been duly authorized by the Company's Board of Directors and
no further consent or authorization is required by the Company, its Board
of Directors or its stockholders, (iii) this Agreement, the Registration
Rights Agreement, and any related agreements have been duly executed and
delivered by the Company, and (iv) this Agreement, the Registration Rights
Agreement, and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company consists of 20,000,000 shares of Common Stock, par
value $0.01 per share, zero shares of Preferred Stock and $375,000 in
principal amount of 6% Convertible Debentures, of which as of the date
hereof 13,983,615 shares of Common Stock and zero shares of Series
Preferred Stock, and $175,000 in principal amount of 6% subordinated
Convertible Debentures were issued and outstanding. All of such
outstanding shares
5
<PAGE>
have been validly issued and are fully paid and nonassessable. Except as
disclosed in this Agreement or the SEC Documents (as defined herein), no
shares of Common Stock or preferred stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in this Agreement or the SEC
Documents (as defined herein), as of the effective date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or 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 or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii)
there are no outstanding debt securities and (iii) except as set forth in
the Company's SEC Documents, there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement). There are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of
the Debentures or the Conversion Shares as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Debentures are duly authorized and,
----------------------
upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and nonassessable, are free from all taxes, liens and
charges with respect to the issue thereof and are entitled to the rights
and preferences set forth in the Debentures. The Conversion Shares
issuable upon conversion of the Debentures have been duly authorized and
reserved for issuance. Upon conversion or exercise in accordance with the
Debentures, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded
to a holder of Common Stock.
e. No Conflicts. Except as disclosed in the SEC Documents, the
------------
execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
will not (i) result in a violation of the Certificate of Incorporation or
By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation
of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and regulations of
the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its subsidiaries or by which
any property or
6
<PAGE>
asset of the Company or any of its subsidiaries is bound or affected.
Neither the Company nor its subsidiaries is in violation of any term of or
in default under its Certificate of Incorporation or Bylaws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is not
being conducted, and shall not be conducted in violation of any law,
ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, to the best of the Company's knowledge,
the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement and the Registration
Rights Agreement in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
f. SEC Documents: Financial Statements. Since January 1, 1997, the
-----------------------------------
Company had filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and being hereinafter referred to as the "SEC Documents").
The SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents,
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. As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments). No other information provided by or on behalf of
the Company to the Buyer which is not included in the SEC Documents,
including, without limitation information referred to in Section 2(d) of
this Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were
made, not misleading.
7
<PAGE>
g. Absence of Certain Changes. The Company has not taken any steps,
--------------------------
and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or its subsidiaries
have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. Except as set forth in the SEC Documents,
---------------------
there is no action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company, the Common Stock
or any of the Company's subsidiaries, wherein an unfavorable decision,
ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform
its obligations under, this Agreement or any of the documents contemplated
herein or (iii), except as expressly set forth in the SEC Documents, have a
material adverse effect on the business, operations, properties, financial
condition or results of operation of the Company and its subsidiaries taken
as a whole.
i. No Undisclosed Events, Liabilities, Developments or Circumstances.
-----------------------------------------------------------------
No known event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
subsidiaries or their respective business, properties, prospects,
operations or financial condition, which could be material but which is not
disclosed in an SEC Document or has not been publicly announced or
disclosed in writing to the Buyer.
j. No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning
of Regulation D under the 1933 Act) in connection with the offer or sale of
the Debentures or the Conversion Shares.
k. 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 require
registration of the Debentures or the Conversion Shares under the 1933 Act
or cause this offering of Debentures or the Conversion Shares to be
integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable stockholder approval provisions.
l. Employee Relations. Neither the Company nor any of its
------------------
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None
of the Company's or its subsidiaries' employees is a member of a union and
the Company and its subsidiaries believe that their relations with their
employees are good.
8
<PAGE>
m. Intellectual Property Rights. To the best of the Company's
----------------------------
knowledge, the Company and its subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and rights necessary to conduct their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company's
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property
rights have expired or terminated, or are expected to expire or terminate
in the near future. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical
information by others and, except as disclosed in the SEC Documents, there
is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing. The Company and its subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.
n. Environmental Laws. To the best of the Company's knowledge, the
------------------
Company and its subsidiaries are (i) in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
o. Title. The Company and its subsidiaries have good and marketable
-----
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are disclosed in the SEC Documents
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries.
p. Insurance. The Company and each of its subsidiaries are insured
---------
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for
9
<PAGE>
and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its subsidiaries possess
------------------
all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
r. Internal Accounting Controls. The Company and each of its
----------------------------
subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
s. No Materially Adverse Contracts, Etc. Except as disclosed in the
------------------------------------
SEC Documents, neither the Company nor any of its subsidiaries is subject
to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company's
officers has or is expected in the future to have a material adverse effect
on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries. Except as
disclosed in the SEC Documents, neither the Company nor any of its
subsidiaries is a party to any contract or agreement which in the judgment
of the Company's officers has or is expected to have a material adverse
effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
t. Tax Status. The Company and each of its subsidiaries has made or
----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless
and only to the extent that the Company and each of its subsidiaries has
set aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
10
<PAGE>
u. Certain Transactions. Except as disclosed in the SEC Documents,
--------------------
and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than
the grant of stock options disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
v. Dilutive Effect. The Company understands and acknowledges that
---------------
the number of Conversion Shares issuable upon conversion of the Debentures
will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Debentures in accordance with this Agreement and the Debentures, in each
case, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of
the Company.
w. Fees and Rights of First Refusal. The Company is not obligated to
--------------------------------
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or
former shareholders of the Company, underwriters, brokers, agents, or other
third parties.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely to
------------
satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the
------
Debentures and the Conversion Shares as required under Regulation D. The
Company has not registered its Shares in any of the states of the United
States.
c. Reporting Status. Until the earlier of (i) the date as of which
----------------
the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all
the Conversion Shares and (B) none of the Debentures are outstanding (the
"Registration Period"), the Company shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934
Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
11
<PAGE>
d. Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Debentures for working capital and research and development.
e. [INTENTIONALLY LEFT BLANK.]
f. Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed
to provide for the issuance of the Conversion Shares, which could be issued
at any time at the Floor Price as defined in the Debentures.
g. Listings. The Company shall promptly secure the listing of the
--------
Conversion Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement. The Company shall use its
best efforts to maintain the Common Stock's authorization for quotation in
the NASDAQ Small Cap Market.
h. Expenses. Each of the Company and the Buyer shall pay all costs
--------
and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of this Agreement and
the Registration Rights Agreement.
i. [LEFT INTENTIONALLY BLANK]
j. Listing. [LEFT INTENTIONALLY BLANK]
-------
k. Corporate Existence. So long as any Debentures remain
-------------------
outstanding, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a "Sale of the Company")
except if the surviving or successor entity in such transaction (i)
expressly assumes, in writing, the Company's obligations hereunder and
under the Registration Rights Agreement, the Debentures and any other
agreements and instruments entered into or delivered by the Company in
connection herewith and (ii) is a publicly traded corporation whose Common
Stock is listed for trading on the New York Stock Exchange, Inc., the
American Stock Exchange or the NASDAQ National Market, NASDAQ SmallCap
Market, or electric bulletin board.
l. Shareholder Approval. The Company covenants to promptly submit to
--------------------
its shareholders at a shareholder's meeting a proposal for ratification of
the issuance of the Debentures, the Conversion Shares, if and as required
by the rules of the National Association of Securities Dealers, Inc.
("NASD") and any other applicable law, rules, and regulations applicable to
the transaction. The Company represents and warrants that
12
<PAGE>
Affiliates of the Company, including the Company's officers and directors,
have individually agreed in writing in their capacity as shareholders to
vote their shares of Common Stock in favor of such a proposal at such
meeting.
m. No Short Sales of the Common Stock. So long as (i) a Buyer owns
----------------------------------
at least $100,000 of Debentures, (ii) the Company has not issued any
publicly traded convertible securities and (iii) the Issuer is not in
material default under the terms of the Debentures, the Registration Rights
Agreement, this Agreement or any related agreement, each Buyer shall not
directly or indirectly engage in any short sales or third party short sales
of the Company's Common Stock or hold a "put equivalent position" with
respect to the Common Stock (as defined in Rule 16a-1 under the 1934 Act).
Notwithstanding anything contained to the contrary in this section, in the
event that the Company enters into a private placement transaction (other
than in connection with employee benefit plans, employee or consultant
compensation, or in connection with mergers and acquisitions) which permits
the investors rights to engage in short sales of Common Stock, the
restrictions contained in this section shall be automatically modified to
permit the Buyer to engage in short sales of Common Stock substantially to
the extent permitted by the Company with respect to such private placement
investors.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of the Buyer or its respective
nominee(s), for the Conversion Shares in such amounts as specified from time to
time by the Buyer to the Company upon conversion of the Debentures (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior
to registration of such shares under the 1933 Act) will be given by the Company
to its transfer agent and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement or the Registration Rights Agreement. Nothing in
this Section 5 shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Debentures or the
Conversion Shares. If the Buyer provides the Company with an opinion of
counsel, reasonably satisfactory in form, and substance to the Company, that
registration of a resale by the Buyer of any of the Debentures or the Conversion
Shares is not required under the 1933 Act, 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
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyer shall be entitled, in addition to all other available
remedies, to an injunction
13
<PAGE>
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.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Debentures to the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and the Registration
Rights Agreement and delivered the same to the Company.
b. The Buyer shall have delivered to the Escrow Agent the Purchase
Price for the Debentures being purchased by the Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer at or prior to the
Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer hereunder to purchase the Debentures at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Buyer's sole benefit and may be waived by the Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Common Stock shall be authorized for quotation on the over-
the-counter market, or the NASDAQ SmallCap Market , Inc., trading in the
Common Stock shall not have been suspended for any reason.
c. The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall
be true and correct without further qualification) as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or
14
<PAGE>
complied with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Closing Date regarding
the representation contained in Section 3(c) above.
d. The Buyer shall have received the opinion of the Company's counsel
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the form of Exhibit "C"
attached hereto.
e. The Company shall have executed and delivered to the Buyer the
Certificates (in such denominations as the Buyer shall request) for the
Debentures being purchased by the Buyer at the Closing.
f. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit "D" attached hereto.
g. As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Debentures, such number of shares of Common Stock no
less than 100% of the number of shares of Common Stock for which are
issuable upon conversion of all of the Debentures which could be issued at
any time at the Floor Price as defined in the Debentures.
h. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
8. INDEMNIFICATION.
---------------
a. In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Debentures and the Conversion Shares, hereunder
and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless
the Buyer and each other holder of the Debentures, the Conversion Shares,
and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the
action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement, the
Debentures or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Company contained in this
Agreement,
15
<PAGE>
the Debentures, the Registration Rights Agreement, or any other
certificate, instrument or document contemplated hereby or thereby, or (c)
any cause of action, suit or claim brought or made against such Indemnitee
by any third party 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 by any of the
Indemnities, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Debentures or the status of the Buyer or holder of the Debentures, the
Conversion Shares, as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
b. Each Buyer agrees to severally and not jointly indemnify, hold
harmless and defend, to the same extent and in the same manner as is set
forth in Section 8a., the Company from Indemnified Liabilities, in each
case to the extent, and only to the extent, that such Indemnified
Liabilities are incurred by the Company arising out of or relating to a
breach by that Buyer of (a) any misrepresentation or breach of any
representation or warranty made by the Buyer in this Agreement, the
Debentures or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Buyer contained in this
Agreement, the Debentures the Registration Rights Agreement, or any other
certificate, instrument or document contemplated hereby or thereby,
provided, further, however, that the Investor shall be liable under this
Section 8b. for only that amount of Indemnified Liabilities as does not
exceed the proceeds to such Buyer as a result of the sale of Registrable
Securities pursuant to the Registration Statement.
9. GOVERNING LAW: MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without
regard to the principles of conflict of laws. Company acknowledges that
upon any breach of Buyer's conversion rights hereunder, Buyer's resulting
injury may not be adequately compensated by a remedy at law. Accordingly,
upon such breach, Buyer, at its election and without limitation of its
other remedies, shall be entitled to pursue a claim for specific
performance of this Agreement, and Company hereby waives the right to
assert any defense thereto that Purchaser has an adequate remedy at law.
The parties expressly consent to the jurisdiction and venue of the Superior
Court of Fulton County, Georgia and the United States District Court for
the Northern District of Georgia for the adjudication of any civil action
asserted pursuant to this Paragraph.
b. Acknowledgment Regarding Buyer's Purchase of Debentures. The
-------------------------------------------------------
parties acknowledge and agree that the Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The parties further acknowledge that
the Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the
16
<PAGE>
transactions contemplated hereby and any advice given by the Buyer or any
of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to
such Buyer's purchase of the Debentures or the Conversion Shares. The
parties further acknowledge Buyer that the Company's decision to enter into
this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
c. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event any signature
page is delivered by facsimile transmission, the party using such means of
delivery shall cause four (4) additional original executed signature pages
to be physically delivered to the other party within five (5) days of the
execution and delivery hereof
d. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. 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 in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
f. Entire Agreement, Amendments. This Agreement supersedes all other
----------------------------
prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
g. Notices. Any notices consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return receipt requested; (iii)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (I) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
17
<PAGE>
If to the Company:
1101 Northpoint Parkway
West Palm Beach, Florida 33407
Telephone: (561) 478-5625
Facsimile: (561) 688-8784
If to the Transfer Agent:
Florida Atlantic Stock Transfer, Inc.
7130 Nob Hill Road
Tamarac, Florida 33321
Telephone: (954) 726-4954
Facsimile: (954) 726-6305
If to the Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to the Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to
the other party of any change in address or facsimile number.
h. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer. The
Buyer may assign its rights hereunder without the consent of the Company,
provided, however, that any such assignment shall not release the Buyer
from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption.
i. No 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.
j. Survival. Unless this Agreement is terminated under Section 9(m),
--------
the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4,
5 and 9, the indemnification provisions set forth in Section 8, shall
survive the Closing. The Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
k. Publicity. The Company and the Buyer shall have the right to
---------
approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however,
that the Company shall be entitled, without the prior approval of the
Buyer, to make any press release or other public
18
<PAGE>
disclosure with respect to such transactions as is required by applicable
law and regulations.
l. Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
m. Termination. In the event that the Closing shall not have
-----------
occurred with respect to the Buyer on or before five (5) business days from
the date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching
party shall have the option to terminate this Agreement with respect to
such breaching party at the close of business on such date without
liability of any party to any other party- provided, however, that if this
Agreement is terminated pursuant to this Section 9(l), the Company shall
remain obligated to reimburse the Buyer for the expenses described in
Section 4(h) above.
n. Finder. The Company acknowledges that it has engaged J.P. Carey
------
Securities, Inc. as placement agent in connection with the sale of the
Debentures, which placement agent may have formally or informally engaged
other agents on its behalf. The Company shall be responsible for the
payment of any placement agent or brokers' fees (which includes cash and
warrants to purchase Common Stock) relating to or arising out of the
transactions contemplated hereby as described in the Placement Agency
Agreement between the parties dated of even date herewith.
o. No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
19
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
"COMPANY"
SAF T LOK INCORPORATED
By:_______________________________________
Name: ____________________________________
Its: _____________________________________
"BUYER"
___________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
20
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Address and Facsimile Number of Face Amount of
Buyer's Name Buyer Debentures
- ------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
________, 1999, by and among Saf T Lok Incorporated, a Florida corporation, with
headquarters at 1101 Northpoint Parkway, West Palm Beach Florida, 33407 (the
"Company"), and the undersigned buyers (the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyer's, the Company's 6%
Subordinated Convertible Debenture (the "Debentures"), which will be convertible
into shares of the Company's common stock, $0.01 par value per share (the
"Common Stock") (as converted, the "Conversion Shares") in accordance with the
terms of the Debentures; and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means the Buyer and any transferee or assignee thereof
to whom the Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with
Section 9.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under
the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means the Conversion Shares issued or
issuable upon conversion of the Debentures and any shares of capital stock
issued or issuable with
<PAGE>
respect to the Conversion Shares or the Debentures as a result of any
stock split, stock dividend, recapitalization, exchange, or similar event.
e. "Registration Statement" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set for the in the Securities Purchase Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare and, on or
----------------------
prior to a date which is no more than ninety (90) days from the date that
the Company has sold a total of $950,000 in principal amount of Debentures
(the "Filing Deadline"), file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for
such a registration, subject to the consent of each Buyer and the
provisions of Section 2.e., which consent will not be unreasonably
withheld), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers
such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Debentures (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions and
(ii) by reason of changes in the Conversion Price or Conversion Rate of the
Debentures in accordance with the terms thereof. Such Registration
Statement shall initially register for resale at least 1,615,003 shares of
Common Stock for the Investors and others, subject to adjustment as
provided in Section 3.b., and 1,520,003 such registered shares of Common
Stock shall be allocated among the Investors pro rata based on the total
number of Registrable Securities issued or issuable as of each date that a
Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the SEC. The Company has
also agreed to include an additional 637,505 shares of Common Stock for the
benefit of other investors in connection with the sale of $375,000 of
convertible debentures through Alexander, Wescott & Co., Inc. The Company
shall use its best efforts to have the Registration Statement declared
effective by the SEC within ninety (90) days after the Filing Deadline (the
"Registration Deadline"). The Company shall permit the registration
statement to become effective within ten (10) business days after receipt
of a "no review" notice from the SEC. In the event that the Registration
Statement is not filed by the Company with the SEC by the Filing Deadline,
then the Company shall be required to deliver to the Investors within 10
calendar days of the end of each month in which the Company has not so
filed a cash penalty of 2% of the principal amount of Debentures per month
(pro-rated for partial months). If the Registration Statement is not
declared effective by the SEC by the Registration Deadline, then the
Company shall be required to deliver to the Investors within 10 calendar
days of the end of each month in which such Registration Statement has not
been declared effective a cash penalty of 2% of the principal amount of the
Debentures per month (pro-rated for partial months).
b. Underwritten Offering. If any offering pursuant to a Registration
---------------------
Statement pursuant to Section 2(a) involves an underwritten offering, the
Buyers shall have the right
2
<PAGE>
to select one legal counsel and one investment banker or manager at the
cost of the Company to administer their interest in the offering, which
investment banker or manager shall be reasonably satisfactory to the
Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) and at a time when
there is currently no effective registration statement covering the
Registrable Securities, the Company proposes to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to 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) the Company shall promptly send to each
Investor who is entitled to registration rights under this Section 2(c)
written notice of the Company's intention to file a Registration Statement
and of such Investor's rights under this Section 2(c) and, if within ten
(10) days after receipt of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all or
any part of the Registrable Securities such Investor requests to be
registered, subject to the priorities set forth in Section 2(d) below. No
right to registration of Registrable Securities under this Section 2(c)
shall be construed to limit any registration required under Section 2(a).
The obligations of the Company under this Section 2(c) may be waived by
Investors holding a majority of the Registrable Securities. If an offering
in connection with which an Investor is entitled to registration under this
Section 2(c) is an underwritten offering, then each Investor 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.
d. Priority in Piggy-Back Registration Rights in connection with
-------------------------------------------------------------
Registrations or Company Account. If the registration referred to in
--------------------------------
Section 2(c) is to be an underwritten public offering for the account of
the Company and the managing underwriter(s) advise the Company in writing,
that in their reasonable good faith opinion, marketing or other factors
dictate that a limitation on the number of shares of Common Stock which may
be included in the Registration Statement is necessary to facilitate and
not adversely affect the proposed offering, then the Company shall include
in such registration: (1) first, all securities the Company proposes to
sell for its own account, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of securities
entitled to inclusion of their securities in the Registration Statement by
reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, drawn from them pro rata based
on the number each has requested to be included in such registration.
3
<PAGE>
3. RELATED OBLIGATIONS.
-------------------
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) or (ii) the date on which (A) the Investors shall have
sold all the Registrable Securities and (B) none of the Debentures is
outstanding (the "Registration Period"), which Registration Statement(s)
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement(s) until such time as all of
such Registrable Securities shall have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement(s). In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement
is insufficient in the reasonable opinion of a majority of the Buyers to
cover all of the Registrable Securities, the Company shall promptly amend
the Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in
any event within thirty (30) days after the necessity therefor arises
(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. For
purposes of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued or issuable upon conversion of the Debentures is greater than the
quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.0;
provided that in the case of the initial registration of the Registrable
Securities pursuant to Section 2(a), the Company shall be required to
register at least 1,520,003 shares of Common Stock for the benefit of the
Investors. For purposes of the calculation set forth in the foregoing
sentence, any restrictions on the convertibility of the Debentures shall be
disregarded and such calculation shall assume that the Debentures are then
convertible into shares of Common Stock at the then
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<PAGE>
prevailing Conversion Rate together with accrued interest which shall be
payable in shares of Common Stock (as defined in the Debentures).
c. Upon request, the Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and
its legal counsel without charge (i) promptly after the same is prepared
and filed with the SEC at least one copy of the Registration Statement and
any amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the
prospectus(es) included in such Registration Statement(s) (including each
preliminary prospectus) and, with regards to the Registration Statement,
any correspondence by or on behalf of the Company to the SEC or the staff
of the SEC and any correspondence from the SEC or the staff of the SEC to
the Company or its representatives, (ii) upon the effectiveness of any
Registration Statement, three (3) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Investor may reasonably request) and (iii)
such other documents, including any preliminary prospectus, as such
Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Investor.
d. [INTENTIONALLY LEFT BLANK]
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering 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.
f. [INTENTIONALLY LEFT BLANK]
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction (acknowledging that, to date, no
such registrations have been made) and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
h. The Company shall permit each Investor a single firm of counsel or
such other counsel as thereafter designated as selling stockholders'
counsel by the Investors who hold a majority of the Registrable Securities
being sold at the Investor's expense, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at
least four (4) days prior to their filing with the SEC, provided that the
name, address and telephone number of such counsel shall have previously
been provided, in writing, to the Company, specifically designating such
counsel for purposes of this Section 3h.
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<PAGE>
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall use their best efforts
to furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement
(i) if required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) one underwriter participating in any disposition pursuant to
a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by such underwriter (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence
provided, however, that each Inspector shall hold in strict confidence and
shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is mutually determined to be
necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this or any other agreement. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or
any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor,
at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
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<PAGE>
l. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such
exchange, (ii) if, despite the Company's best efforts to satisfy the
preceding clause (i), the Company is unsuccessful in satisfying the
preceding clause (i), if at any time during the Registration Period the
Company is able to satisfy the relevant listing criteria, to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities or, (ii) if, despite the Company's best efforts to satisfy the
preceding clause (ii), the Company is unsuccessful in satisfying the
preceding clause (ii), to secure the inclusion for quotation on the over-
the-counter market for such Registrable Securities, and, without limiting
the generality of the foregoing, in the case of clause (ii) or (iii), to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to
such Registrable Securities. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any
managing underwriter, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the
case may be, as the managing underwriter, if any, or, if there is no
managing underwriter, a majority of the Investors may reasonably request
and registered in such names as the managing underwriter, if any, or the
Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit
resales of the Registrable Securities, without legend, in a timely fashion
that complies with then mandated securities settlement procedures for
regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall use the services of a transfer agent and
registrar for all such Registrable Securities not later than the effective
date of such Registration Statement.
p. Subject to the reasonable approval of counsel to the Company, if
requested by the managing underwriter or a majority of the Investors, the
Company shall immediately incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriter and the
majority of Investors agree should be included therein relating to the sale
and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold
to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or
best efforts underwritten) offering of the Registrable Securities to be
sold in such offering; make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters
to
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<PAGE>
be incorporated in such prospectus supplement or post-effective amendment;
and supplement or make amendments to any Registration Statement if
requested by a shareholder or any underwriter of such Registrable
Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
r. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
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<PAGE>
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least fourteen (14) days prior to the first anticipated filing
date of the Registration Statement, or any amendments thereto, the Company
shall notify each Investor in writing of the information the Company
requires from each such Investor if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration
Statement. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself,
the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and
shall execute such documents in connection with such registration as the
Company may reasonably request. An investor's failure to respond to the
Company's request for information prior to the specified filing date of the
Registration Statement shall toll the Company's obligations under Section 2
as to that Investor.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor
notifies the Company in writing of such Investor's election to exclude all
of such Investor's Registrable Securities from the Registration
Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement(s) covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents
reasonably required
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<PAGE>
under the terms of such underwriting arrangements, and (iii) agrees to pay
its pro rata share of all underwriting discounts and commissions.
f. Investor has been advised as to provisions of Regulation M and
agrees that Investors disposition of the Registrable Securities will be
made in a manner so as not to violate Regulation M.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company. The fees and
disbursements of counsel for the Investors and the Inspectors shall be borne by
each Investor.
6. INDEMNIFICATION
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the
1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending
any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto
("Indemnified Damages"), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact in a Registration Statement
or any post-effective amendment thereto or in any filing made in connection
with the qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, 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
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<PAGE>
statements therein were made, not misleading, or (iii) any violation or
alleged violation of the Company of the 1933 Act, the 1934 Act, any other
law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not
apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company by any Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to
Section 3(c); (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person) if the
untrue statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), 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; (iii) shall not be available to the extent such Claim is based on
a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company (i) and (iv) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if
any, who controls the Company within the meaning of the 1933 Act or the
1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(d),
such Investor will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior
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<PAGE>
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable
under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate
legal counsel for the Investors, and such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition
its consent. No indemnifying party shall, without the consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment
or enter into any settlement or other
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<PAGE>
compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim
or litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified
Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person
or Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and
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<PAGE>
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon written request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule
144(c)(1), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if the Company
consents (except for such transfer to an affiliate or successor, which shall not
require any such consent) and: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement; (vi) such transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who hold two-thirds of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
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b. Any notices consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is
mailed by U.S. certified mail, return receipt requested; (iii) three (3)
days after being sent by U.S. certified mail, return receipt requested, or
(d) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company: 1101 Northpoint Parkway
West Palm Beach
Florida, 33407
Facsimile: (561) 688-8784
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to the principles of
conflict of laws. 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 in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede
all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted successors
and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
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i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
- ------- ------
SAF T LOK INCORPORATED ___________________________________
By: _____________________________ By: __________________________________
Name: ___________________________ Name: ________________________________
Its: ____________________________ Its: _________________________________
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SCHEDULE OF BUYERS
Buyer Address
Buyer Name and Facsimile Number
---------- --------------------
18
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EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 and related Prospectus of Saf T Lok
Incorporated, in connection with the registration of 2,312,500 shares of its
common stock, and to the incorporation by reference therein of our report dated
March 24, 1999, with respect to the financial statements of Saf T Lok
Incorporated included in its Annual Report on Form 10-KSB for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Goldberg & Company, P.A.
----------------------------
Goldberg & Company, P.A.
West Palm Beach, FL
January 25, 2000
