U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 17,1996
H.E.R.C. PRODUCTS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-13012 86-0570800
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2202 West Lone Cactus Drive, Suite #15, Phoenix, Arizona 85027
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(Address of principal executive offices) (Zip code)
N/A
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(Former name or former address, if changed since last report)
Registrant's telephone number, including area code: (602) 492-0336
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Item 2. Acquisition or Disposition of Assets
On December 17, 1996, H.E.R.C. Products Incorporated ("Company")
completed a private placement of 170,000 shares of Class A Preferred Stock to
accredited investors. The Company received aggregate proceeds of $1,700,000 from
this offering. Perrin, Holden & Davenport Capital Corp. ("PHD") acted as the
exclusive placement agent of the offering. PHD was paid commissions of $170,000
(10%) and was issued a warrant entitling it to purchase 85,000 shares of Common
Stock of the Company at a purchase price of $3.00 per share, exercisable until
December 10, 2001.
The Class A Preferred Stock has a stated value of $10.00 per share. The
holders of the Class A Preferred Stock are entitled to receive dividends at the
rate of 10% of the stated value ($1.00 per share) per annum from the date of
issuance through the conversion date ("Conversion Date"), payable solely in
shares of Common Stock of the Company. The holders of Class A Preferred Stock
shall have the right, at such holder's option, at any time or from time to time,
to convert each share of Class A Preferred Stock and the accrued amount of
dividends thereon into a number of shares of Common Stock determined by dividing
the stated value of the Class A Preferred Stock being converted, plus the
accrued dividends thereon through the Conversion Date, by the greater of (i) 75%
of the average closing bid price of the Common Stock for the five consecutive
trading days ending immediately prior to the date notice of conversion is given
to the Company ("Fair Market Value"), or (ii) $.10. The Class A Preferred Stock
will automatically convert at the above rate on December 17, 1999. Generally,
the closing bid price will be as reported by The Nasdaq Stock Market, Inc.,
which is the principal market for the Company's Common Stock. The Company will
not issue any fractional shares of Common Stock pursuant to any conversion, but
instead, will round up or down to the nearest whole number of shares issuable
upon conversion.
The Class A Preferred Stock does not carry any redemption or voting
rights. In the event of a liquidation, dissolution or winding up of the Company,
the holders of the Class A Preferred Stock will participate with the holders of
the Common Stock as if the Class A Preferred Stock was fully converted
immediately prior to the event.
The Company has agreed to register for resale under a registration
statement filed pursuant to the Securities Act of 1933, as amended, and such
state "blue sky" laws as are reasonably requested by the holders of the Class A
Preferred Stock, the shares of Common Stock into which the Class A Preferred
Stock and the related dividends may be converted and the Common Stock underlying
the warrant issued to PHD. The Company has agreed to use its best efforts to
have the registration statement declared effective by February 14, 1997 and has
undertaken to have it declared effective by April 15, 1997. If the registration
statement is not declared effective by April 15, 1997, the conversion rate of
the Class A Preferred Stock will be reduced to 72.5% of the Fair Market Value.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Unaudited Financial Statements of Business Acquired
Not applicable.
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(b) Unaudited Pro Forma Financial Information
Not applicable.
(c) Exhibits
4.1 Form of Subscription Agreement between the Company and
purchasers of the Class A Preferred Stock.
4.2 Warrant issued by the Company to Perrin, Holden & Davenport Capital
Corp.
4.3 Agency Agreement between the Company and Perrin, Holden &
Davenport Capital Corp. dated as of November 15, 1996, as amended
on December 5, 1996.
99.1 Certificate of Designations, Preferences and Other Rights and
Qualification of the Class A Preferred Stock, as amended.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 19, 1996 H.E.R.C. PRODUCTS INCORPORATED
/s/ S. Steven Carl
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S. Steven Carl, Chairman of the Board
and Chief Executive Officer
/s/ Gary S. Glatter
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Gary S. Glatter, President, Chief Operating
Officer, Chief Financial Officer and Treasurer
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EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
H.E.R.C. Products Incorporated
2202 West Lone Cactus Drive, Suite 15
Phoenix, Arizona 85027
Ladies and Gentlemen:
Subscription. I (sometimes referred to herein as the "Investor") hereby
subscribe for and agree to purchase $___________ of shares of Class A Preferred
Stock , $.01 par value ("Preferred Stock"), of H.E.R.C. Products Incorporated, a
Delaware corporation ("Company"), on the terms and conditions set forth herein.
The per share offering price is $10.00 ("Share Price") and the number of shares
of Preferred Stock being purchased by me will be calculated by dividing the
above dollar amount by the per share offering price. Perrin, Holden & Davenport
Capital Corp. ("PHD") is acting as the exclusive placement agent for this
offering ("Placement Agent").
Description of Preferred Stock. The rights of each share of
Preferred Stock are as set forth in the Certificate of Designations which is
included as Exhibit A in the Disclosure Package given to you simultaneously with
this Agreement ("Disclosure Package").
Purchase.
I hereby tender (i) the purchase price by wire transfer
to the following account ("Account") maintained by the Company's attorneys,
Graubard Mollen & Miller:
Bankers Trust Company
280 Park Avenue
New York, New York 10017
ABA No.: 021001033
Attention: Florence Blanchard
For further credit to: Graubard Mollen & Miller
Attorney Trust Account No. 42834468,
and (ii) two executed copies of this Subscription Agreement and one copy of the
Subscriber Questionnaire to the Placement Agent at Perrin, Holden & Davenport
Capital Corp., 17 John Street, 3rd Floor, New York, New York 10038, Attention:
Mr. Jody Eisenman.
This offering will continue until the earlier of the
Final Closing (as defined in Section 4 hereof) or November 30, 1996, unless such
latter date is extended, without notice to the Investor, by mutual consent of
PHD and the Company to a date not later than December 15, 1996 ("Termination
Date"). Prior to the earlier of the closing, if any, with respect to my
subscription or the Termination Date, my payment for the Preferred Stock will be
held by Graubard Mollen & Miller in the Account subject to the terms and
conditions herein. If subscriptions for at least $1,000,000 of Preferred Stock
are not received and accepted by the Company by the Termination Date, my payment
will be returned to me without interest or deduction. Upon the earlier of a
closing for my subscription or completion of the offering, I will be notified
promptly by the Company as to whether my subscription has been accepted.
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Acceptance or Rejection of Subscription.
The Company and PHD have the right to reject this subscription for
the Preferred Stock, in whole or in part for any reason and at any time prior to
a Closing (as defined in Section 4 hereof), notwithstanding prior receipt by me
of notice of acceptance of my subscription.
In the event of the rejection of this subscription, my subscription
payment will be promptly returned to me without interest or deduction and this
Subscription Agreement shall have no force or effect. In the event my
subscription is accepted and the offering is completed, the funds specified
above shall be released to the Company and the certificates representing the
Preferred Stock will be promptly delivered to me.
Closing. The initial closing of this offering may occur at any
time after the sale by the Company of Preferred Stock aggregating $1,000,000
("Initial Closing"), as determined jointly by the Company and PHD. Thereafter,
closings may occur from time to time, as determined jointly by the Company and
PHD, until Preferred Stock aggregating $1,500,000 have been sold ("Final
Closing" and, with the Initial Closing and any interim closing, a "Closing") or
the Termination Date, whichever occurs sooner. Notwithstanding the foregoing,
PHD, with the Company's consent, will be able to adjourn any Closing until the
Termination Date to enable it to continue to obtain subscriptions for additional
Preferred Stock up to the maximum number of shares of Preferred Stock being
offered by the Company in this offering. The Preferred Stock subscribed for
herein shall not be deemed issued to or owned by me until two copies of this
Subscription Agreement have been executed by me and countersigned by the Company
and a Closing with respect to such Preferred Stock has occurred.
Issuance of Securities. At each Closing, the Company will
deliver the certificates representing the Preferred Stock to me or my agent for
deposit into my personal securities account at PHD or for delivery to me. The
certificates representing the Preferred Stock and the common stock, $.01 par
value, of the Company ("Common Stock") into which the Preferred Stock is
convertible shall be legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT") OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND COMPLIANCE WITHIN ANY APPLICABLE STATE SECURITIES
LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
After the Registration Statement, referenced in Section 6
hereinbelow, is declared effective by the Securities and Exchange Commission,
the Investor may deliver to the Company the certificate representing the Common
Stock of the Company issued to such Investor upon conversion of the Preferred
Stock and the Company will, within three days after receipt by the Company of
the foregoing, issue a new certificate representing and in exchange for the
aforementioned certificate, which new certificate shall be legended as follows:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY BE SOLD PURSUANT TO THE REGISTRATION STATEMENT
PROVIDED THAT (i) THE REGISTRATION STATEMENT IS CURRENT AND
EFFECTIVE, (ii) THE HOLDER COMPLIES WITH THE PROSPECTUS
DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND (iii) THE SALE IS IN COMPLIANCE WITH THE PLAN OF
DISTRIBUTION SET FORTH IN THE PROSPECTUS.
Registration Rights.
The Company agrees with the Investor and PHD to
register under a registration statement ("Registration Statement") filed
pursuant to the Securities Act of 1933, as amended ("Securities Act") and such
state "Blue Sky" laws of those states as are reasonably selected by the
Investor, the shares of Common Stock into which the Preferred Stock may be
converted and the shares of Common Stock underlying the warrants to be issued to
PHD in connection with this sale of securities by the Company (collectively, the
"Registrable Securities"). The Company agrees to file the Registration Statement
on or before the 30-day anniversary of the Initial Closing of the Offering. The
Company agrees to use its best efforts to have the Registration Statement
declared effective by February 14, 1997 and undertakes to have the Registration
Statement declared effective by April 15, 1997. If the Registration Statement is
not declared effective by the close of business on April 15, 1997, as provided
in the Certificate of Designations, the conversion rate will be lowered.
Notwithstanding the foregoing reduction in the conversion rate, the Investor may
pursue all other legal remedies available to it for the failure to file and have
declared effective the Registration Statement as agreed to by the Company in
this Agreement. The Company shall bear all the expenses and pay all the fees it
incurs in connection with the preparation, filing and modification or amendment
of the Registration Statement. The Company shall keep the Registration Statement
effective and current until all the securities registered thereunder are sold or
until all such securities may be sold by the holders thereof under Rule 144
without volume limitations. Notwithstanding the foregoing, during any
consecutive 365-day period, the Company may suspend the availability of the
Registration Statement for no more than two periods of up to 20 consecutive days
and for no more than an aggregate of 40 days during any 365-day period, if the
Company's Board of Directors determines, based upon the opinion of legal
counsel, that there is valid purpose for such suspension.
To the extent permitted by law, the Company will indemnify and
hold harmless each holder of the Registrable Securities ("Holder"), the officers
and directors of each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or Securities Exchange Act of 1934, as
amended ("Exchange Act") against any losses, claims, damages, or liabilities to
which they may become subject under the Securities Act, the Exchange Act or any
state securities law or regulation (including all reasonable attorneys' fees and
other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever incurred by the indemnified party in any action or
proceeding between the indemnitor and indemnified party or between the
indemnified party and any third party or otherwise) to which any of them may
become subject under the Securities Act, the Exchange Act or any other statute
or common law or otherwise under the laws of foreign countries, arising from
such registration statement or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) any preliminary prospectus, the
registration statement or prospectus
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(as from time to time each may be amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which it included the Registrable Securities; or (iii) any
application or other document or written communication (collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Registrable
Securities under the securities laws thereof or filed with the Securities and
Exchange Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, unless
such statement or omission is made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to such Holder
expressly for use in any preliminary prospectus, such registration statement or
prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. The Company agrees promptly to notify the Holder of the
Registrable Securities of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale or resale of the Registrable Securities or in
connection with any such registration statement or prospectus.
Investor Agreements Representations and Warranties. I acknowledge,
represent and warrant to, and agree with, the Company and the Placement Agent as
follows:
I am aware that my investment in the Company involves a high degree
of risk, and I carefully have read and fully understand the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995, the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996, the
Company's Proxy Statement dated June 11, 1996 and the Company's Prospectus dated
June 12, 1996, which are included as Exhibits B, C, D and E, respectively, in
the Disclosure Package.
I acknowledge and am aware that there is no assurance as to the
future performance of the Company.
I acknowledge that notwithstanding the Company's commitment herein,
there can be no assurance that the Company will file any Registration Statement
for the securities I am purchasing, that such Registration Statement, if filed,
will be declared effective or, if declared effective, that the Company will be
able to keep it effective until I sell the Common Stock registered thereon.
I am purchasing the Preferred Stock for my own account for
investment and not with view to or for sale in connection with the distribution
of the Preferred Stock, nor with any present intention of selling or otherwise
disposing of all or any part of the Preferred Stock. I understand that there may
not be any market for the Preferred Stock. I agree that (1) the purchase of the
Preferred Stock is a long-term investment, (2) I may have to bear the economic
risk of investment for an indefinite period of time because neither the
Preferred Stock nor the Common Stock underlying the Preferred Stock have been
registered under the Securities Act and, notwithstanding the Company's
commitment herein, may not be registered and, cannot be resold, pledged,
assigned, or otherwise disposed of unless they are subsequently registered under
said Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. I understand that the Company is
under no obligation to register the Preferred Stock and, except as set forth
herein, the Company is under no obligation to register the Common Stock
underlying the Preferred Stock on my behalf or to assist me in
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complying with any exemption from such registration under the Securities Act or
any state securities laws. I hereby authorize the Company to place legends
denoting the restrictions on the Preferred Stock and the Common Stock to be
issued hereunder or conversion of the Preferred Stock, as the case may be.
I recognize that the Preferred Stock, as an investment, involves a
high degree of risk including, but not limited to, the risk of economic losses
from operations of the Company and the total loss of my investment. I believe
that the investment in the Preferred Stock is suitable for me based upon my
investment objectives and financial needs, and I have adequate means for
providing for my current financial needs and contingencies and have no need for
liquidity with respect to my investment in the Company.
I have been given access to full and complete information regarding
the Company and have utilized such access to my satisfaction for the purpose of
obtaining information in addition to, or verifying information included in, the
Disclosure Package, and I have either met with or been given reasonable
opportunity to meet with officers of the Company for the purpose of asking
questions of, and receiving answers from, such officers concerning the terms and
conditions of the offering of the Preferred Stock and the business and
operations of the Company and to obtain any additional information, to the
extent reasonably available. I have received all information and material
regarding the Company that I have requested.
I have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Preferred Stock and have obtained, in my judgment, sufficient information
from the Company to evaluate the merits and risks of an investment in the
Company. I have not utilized any person as my purchaser representative as
defined in Regulation D promulgated by the Securities and Exchange Commission
pursuant to the Securities Act in connection with evaluating such merits and
risks.
I have relied solely upon my own investigation in making a decision
to invest in the Company.
I have received no representation or warranty from the Company or
the Placement Agent or any of their respective officers, directors, employees or
agents in respect of my investment in the Company and I have received no
information (written or otherwise) from them relating to the Company or its
business other than as set forth herein and in the Disclosure Package. I am not
participating in the offer as a result of or subsequent to: (I) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
I have had full opportunity to ask questions and to receive
satisfactory answers concerning the offering and other matters pertaining to my
investment and all such questions have been answered to my full satisfaction. In
addition, as required by Section 517.061(11)(a)(3), Florida Statutes and by Rule
3-500.05(a) thereunder, if I am a Florida resident I may have, at the offices of
the Company, at any reasonable hour, after reasonable notice, access to the
materials set forth in the Rule which the Company can obtain without
unreasonable effort or expense.
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I have been provided an opportunity to obtain any additional
information concerning the offering and the Company and all other information to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
I am an "accredited investor" as defined in Section 2(15) of the Act
and in Rule 501 promulgated thereunder.
I understand that (i) the Preferred Stock and the underlying
securities have not been registered under the Securities Act, or the securities
laws of certain states in reliance on specific exemptions from registration,
(ii) no securities administrator of any state or the federal government has
recommended or endorsed this offering or made any finding or determination
relating to the fairness of an investment in the Company and (iii) the Company
is relying on my representations and agreements for the purpose of determining
whether this transaction meets the requirements of the exemptions afforded by
the Securities Act and certain state securities laws.
I have been urged to seek independent advice from my professional
advisors relating to the suitability of an investment in the Company in view of
my overall financial needs and with respect to the legal and tax implications of
such investment.
If the Investor is a corporation, company, trust, employee benefit
plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it
is authorized and qualified to become an Investor in the Company and the person
signing this Subscription Agreement on behalf of such entity has been duly
authorized by such entity to do so.
I hereby acknowledge and am aware that except for any rescission
rights that may be provided under applicable laws, I am not entitled to cancel,
terminate or revoke this subscription, and any agreements made in connection
herewith shall survive my death or disability.
I hereby acknowledge that I have been told that (ii) PHD is being
compensated as the Placement Agent and will receive a cash commission equal to
10% of the aggregate purchase price of the Preferred Stock sold in the offering
to all Investors and will be issued a warrant to purchase that number of shares
of Common Stock that equals the number of shares of Preferred Stock sold in the
Offering divided by two, exercisable at $3.00 per share for the five years after
the last Closing and (iii) the Common Stock underlying the warrant issued to PHD
is being registered under the Securities Act on the same registration statement
as the shares of Common Stock which will be issuable on conversion of the
Preferred Stock.
I agree that prior to the conversion of all the Preferred Stock
purchased hereunder, I will not sell the Common Stock "short" on any securities
market on which the Common Stock is traded.
Indemnification. I hereby agree to indemnify and hold harmless
PHD and the Company, each of their respective officers, directors, shareholders,
employees, agents, and attorneys against any and all losses, claims, demands,
liabilities, and expenses (including reasonable legal or other expenses,
including reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever incurred by
the indemnified party in any action or proceeding between the indemnitor and
indemnified party or between the indemnified party and any third party or
otherwise) incurred by
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each such person in connection with defending or investigating any such claims
or liabilities, whether or not resulting in any liability to such person, to
which any such indemnified party may become subject under the Securities Act,
under any other statute, at common law or otherwise, insofar as such losses,
claims, demands, liabilities and expenses (a) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact made by me and
contained in this Subscription Agreement, or (b) arise out of or are based upon
any breach by me of any representation, warranty, or agreement made by me
contained herein. PHD is a third-party beneficiary of this Section, and this
Section may not be modified or amended without the prior written agreement of
PHD.
Severability. In the event any part of this Subscription
Agreement are found to be void, the remaining provisions of this Subscription
Agreement shall nevertheless be binding with the same effect as though the void
parts were deleted.
Choice of Law and Jurisdiction. This Subscription Agreement will
be deemed to have been made and delivered in New York City and will be governed
as to validity, interpretation, construction, effect and in all other respects
by the internal laws of the State of New York. The Company and the Investor each
hereby (i) agrees that any legal suit, action or proceeding arising out of or
relating to this Subscription Agreement shall be instituted exclusively in New
York State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (ii) waives any objection to the
venue of any such suit, action or proceeding and the right to assert that such
forum is not a convenient forum, proceeding, and (iii) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York, and
the United States District Court for the Southern District of New York in any
such suit, action or proceeding and the Company further agrees to accept and
acknowledge service or any and all process which may be served in any such suit,
action or proceeding in New York State Supreme Court, County of New York or in
the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
suit, action or proceeding.
Counterparts. This Subscription Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Subscription Agreement may be by actual or facsimile signature.
Benefit. This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto (and PHD to the extent it is a
third-party beneficiary hereof) and their respective heirs, executors, personal
representatives, successors and assigns. PHD shall be deemed to be a third-party
beneficiary with respect to any sections hereof which so state or which
otherwise indicate that PHD would be entitled to rely on the representations,
warranties or covenants made by me therein.
Notices and Addresses. All notices, offers, acceptance and any
other acts under this Subscription Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addressees in
person, by Federal Express or similar courier delivery by facsimile delivery or,
if mailed, postage prepaid, by certified mail, return receipt requested, as
follows:
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Investor: At the address designated on the signature page of
this Subscription Agreement.
The Company: H.E.R.C. Products Incorporated
2202 West Lone Cactus Drive, Suite 15
Phoenix, Arizona 85027
Attention: S. Steven Carl, Chief Executive Officer
Fax: (602) 492-0336
Placement Agent: Perrin, Holden & Davenport Capital Corp.
17 John Street, 3rd Floor
New York, New York 10038
Attention: Jody Eisenman
Fax: (212) 566-4977
in any case,
with a copy to: Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attention: David Alan Miller, Esq.
Fax: (212) 818-8881
or to such other address as any of them, by notice to the others may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile deliver.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
Oral Evidence. This Subscription Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior oral and written agreements between the parties hereto
with respect to the subject matter hereof. This Subscription Agreement may not
be changed, waived, discharged, or terminated orally but, rather, only by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver, discharge or termination is sought.
Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part, any of the terms or
provisions of this Subscription Agreement.
Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
delivery of, and the payment for, the Preferred Stock.
Acceptance of Subscription. The Company may accept this
Subscription Agreement at any time for all or any portion of the Preferred Stock
subscribed for by executing a copy hereof as provided and notifying me within a
reasonable time thereafter.
RESIDENTS OF ALL STATES: THE UNITS OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE UNITS
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ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS
CONFIDENTIAL INVESTMENT SUMMARY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR CONNECTICUT RESIDENTS: THE UNITS OFFERED HAVE NOT BEEN REGISTERED
UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND ARE OFFERED
AND SOLD PURSUANT TO AN EXEMPTION RELATING TO TRANSACTIONS NOT INVOLVING A
PUBLIC OFFERING PURSUANT TO SECTION 36- 490(b)(9)(A) THEREOF. THE UNITS CANNOT
BE RESOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR MARYLAND RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE MARYLAND SECURITIES ACT BY REASON OF AN EXEMPTION RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING. THESE SECURITIES MAY NOT BE TRANSFERRED OR SOLD
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE MARYLAND SECURITIES ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION.
FOR NEW JERSEY RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE BUREAU OF SECURITIES OF THE STATE OF NEW JERSEY NOR HAS THE
BUREAU PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. THE FILING OF THE
WITHIN OFFERING DOES NOT CONSTITUTE APPROVAL OF THE ISSUE OR THE SALE THEREOF BY
THE BUREAU OF SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE ARE SPECULATIVE SECURITIES AND INVOLVE A HIGH DEGREE OF RISK.
THESE SECURITIES ARE OFFERED ONLY TO BONA FIDE ADULT RESIDENTS OF THE
STATE OF NEW JERSEY.
FOR FLORIDA RESIDENTS: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT ("FLORIDA
SECURITIES ACT") , AND THEY THEREFORE HAVE THE STATUS OF SECURITIES ACQUIRED IN
AN EXEMPT TRANSACTION UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT. EACH
OFFEREE WHO IS A FLORIDA RESIDENT SHOULD BE AWARE THAT SECTION 517.061(11)(a)(5)
OF THE FLORIDA SECURITIES ACT PROVIDES THAT WHEN SALES ARE MADE TO FIVE OR MORE
PERSONS IN FLORIDA, ANY SALE MADE IN FLORIDA IS VOIDABLE BY THE PURCHASER WITHIN
THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO
THE COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGREEMENT OR WITHIN THREE DAYS
AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER,
WHICH EVER OCCURS LATER.
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THE AVAILABILITY OF THE PRIVILEGE TO VOID SALES PURSUANT TO SECTION
517.061(11)(a)(5) IS HEREBY COMMUNICATED TO EACH FLORIDA OFFEREE.
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Manner in Which Title is to be Held. (check one)
____ Individual Ownership
____ Community Property
____ Joint Tenant with Right of Survivorship (both parties must sign)
____ Partnership
____ Tenants in common
____ Corporation
____ Trust
____ Other (please indicate)
INDIVIDUAL INVESTORS ENTITY INVESTORS
- ---------------------------------------- -------------------------------
Signature (Individual) Name of Entity, if any
By:
*Signature
Its
- ----------------------------------------- ----------------------------
Signature (all record holders should sign) Title
- ----------------------------------------- ----------------------------
Name(s) Typed or Printed Name Typed or Printed
Address to Which Correspondence Address to Which Correspondence
Should be Directed Should be Directed
- ----------------------------------------- -------------------------------
- ----------------------------------------- -------------------------------
- ----------------------------------------- -------------------------------
City, State and Zip Code City, State and Zip Code
- ----------------------------------------- -------------------------------
Social Security Number Tax Identification
* If Preferred Stock is being subscribed for by any entity, the
Certificate of Signatory on the next page must also be completed.
The foregoing subscription is accepted and the Company hereby agrees to be bound
by its terms.
H.E.R.C. PRODUCTS INCORPORATED
Dated:------------------, 1996 By:
15
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Preferred Stock is being subscribed for by an entity)
I, _______________________________, the
- --------------------------------
(name of signatory) (title)
of ----------------------------------------------------------("Entity"), a
(name of entity)
-----------------------------------------------.
(type of entity)
hereby certify that the above entity is duly empowered and authorized to
purchase the Preferred Stock and that I am duly empowered and authorized by the
entity to execute the Subscription Agreement on its behalf.
IN WITNESS WHEREOF, I have executed this Certificate this ____ day of
_________, 1996.
-----------------------------
(Signature)
16
<PAGE>
EXHIBIT 4.2
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN
THIS WARRANT EXCEPT AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, DECEMBER 10, 2001
WARRANT
For the Purchase of
85,000 Shares of Common Stock
of
H.E.R.C. PRODUCTS INCORPORATED
I. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good and
valuable consideration, duly paid by or on behalf of Perrin, Holden & Davenport
Capital Corp. ("PHD" or "Holder"), as registered owner of this Warrant, to
H.E.R.C. Products Incorporated ("Company"), older is entitled, at any time or
from time to time at or after, December 17, 1996 ("Commencement Date"), and at
or before 5:00 p.m., Eastern Time December 10, 2001 ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
eighty-five thousand (85,000) shares of Common Stock of the Company, $.01 par
value ("Common Stock"). If the Expiration Date is a day on which banking
institutions are authorized by law to close, then this Warrant may be exercised
on the next succeeding day which is not such a day in accordance with the terms
herein. During the period ending on the Expiration Date, the Company agrees not
to take any action that would terminate the Warrant. This Warrant is initially
exercisable at $3.00 per share of Common Stock purchased; provided, however,
that upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Warrant, including the exercise price and the number of
shares of Common Stock to be received upon such exercise, shall be adjusted as
therein specified. The term "Exercise Price" shall mean the initial exercise
price or the adjusted exercise price, depending on the context, of a share of
Common Stock. The term "Securities" shall mean the shares of Common Stock
issuable upon exercise of this Warrant. This Warrant is being issued in
connection with the offering (the "Offering") by the Company of Class A
Preferred Stock, in which PHD has acted as the exclusive placement agent.
Capitalized terms used herein, but not otherwise defined, shall have the
meanings set forth in the Agency Agreement between PHD and the Company with
respect to the Offering.
II. Exercise.
1. Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date,
this Warrant shall become and be void without further force or effect, and all
rights represented hereby shall cease and expire.
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<PAGE>
2. Legend. Each certificate for Securities purchased under this Warrant
shall bear a legend as follows, unless such Securities have been registered
under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or
applicable state law. The securities may not be offered for sale, sold
or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act and applicable state law."
3. Conversion Right.
(a) Determination of Amount. In lieu of the payment of the
Exercise Price in cash, the Holder shall have the right (but not the obligation)
to convert this Warrant, in whole or in part, into Common Stock ("Conversion
Right"), as follows: upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (x) the "Value" (as defined below) of the portion of the Warrant being
converted at the time the Conversion Right is exercised by (y) the Market Price.
The "Value" of the portion of the Warrant being converted shall equal the
remainder derived from subtracting (a) the Exercise Price multiplied by the
number of shares of Common Stock being converted from (b) the Market Price of
the Common Stock multiplied by the number of shares of Common Stock being
converted. As used herein, the term "Market Price" at any date shall be deemed
to be the last reported sale price of the Common Stock on such date, or, in case
no such reported sale takes place on such day, the average of the last reported
sale prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
(b) Exercise of Conversion Right. The Conversion Right may be
exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date by delivering the Warrant with a duly
executed exercise form attached hereto with the conversion section completed to
the Company, exercising the Conversion Right and specifying the total number of
shares of Common Stock the Holder will purchase pursuant to such conversion.
III. Transfer.
1. General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver
2
<PAGE>
a new Warrant or Warrants of like tenor to the appropriate assignee(s) expressly
evidencing the right to purchase the aggregate number of shares of Common Stock
purchasable hereunder or such portion of such number as shall be contemplated by
any such assignment.
2. Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
IV. New Warrants to be Issued.
1. Partial Exercise or Transfer. Subject to the restrictions in Section
3 hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon surrender of this
Warrant for cancellation, together with the duly executed exercise or assignment
form and funds (or conversion equivalent) sufficient to pay any Exercise Price
and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Warrant of like tenor to this Warrant in the name of the
Holder evidencing the right of the Holder to purchase the aggregate number of
shares of Common Stock and Warrants purchasable hereunder as to which this
Warrant has not been exercised or assigned.
2. Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
and of reasonably satisfactory indemnification, the Company shall execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed and
delivered as a result of such loss, theft, mutilation or destruction shall
constitute a substitute contractual obligation on the part of the Company.
V. Registration Obligation.
1. Filing of Registration Statement. The Company shall register under
the registration statement ("Registration Statement") to be filed for the
subscribers for shares of Preferred Stock in the Offering, the shares of Common
Stock underlying this Warrant ("Registrable Securities"). The Company shall file
the Registration Statement on or before the 30-day anniversary of the Initial
Closing of the Offering. The Company shall use its best efforts to have the
Registration Statement declared effective by February 14, 1997 and undertakes to
have it declared effective by April 15, 1997. The Company shall bear all the
expenses and pay all the fees it incurs in connection with the preparation,
filing and modification or amendment of the Registration Statement. The Company
shall keep the Registration Statement effective and current until all the
Registrable Securities are sold or until all such securities may be sold by the
holders thereof under Rule 144, without volume limitations. During any
consecutive 365-day period, the Company may suspend the availability of the
Registration Statement for no more than two periods of up to 20 consecutive days
and for no more than an aggregate of 40 days during any 365-day period, if the
Company's Board of Directors determines, based upon the opinion of legal
counsel, that there is a valid purpose for such suspension.
3
<PAGE>
2. General Terms
(a) Indemnification.
a. The Company shall indemnify the Holder(s) of the Registrable Securities
to be sold pursuant to any registration statement hereunder and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such Holders or underwriters or persons deemed to be underwriters
within the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement. The
Holder(s) of the Registrable Securities to be sold pursuant to such registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, against all loss, claim, damage, expense or liability
(including all reasonable attorneys' fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, in writing, for
specific inclusion in such registration statement.
b. If any action is brought against a party hereto, ("Indemnified Party")
in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if Indemnified
Party shall assume the defense of such action as provided above, Indemnifying
Party shall not be liable for any settlement of any such action effected without
its written consent.
c. If the indemnification or reimbursement provided for hereunder is
finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying
such Indemnified Party, to contribute to the amount paid or payable by such
Indemnified Party (i) in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by Indemnifying Party on
the one hand and by such Indemnified Party on the other or (ii) if (but only if)
the allocation provided in clause (i) of this sentence is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) but also the relative fault of
Indemnifying Party and of such Indemnified Party; provided, however, that in no
event shall the aggregate
4
<PAGE>
amount contributed by a Holder exceed the profit, if any, earned by such Holder
as a result of the exercise by him of the Warrants and the sale by him of the
underlying shares of Common Stock.
d. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
(b) Exercise of Warrants. Nothing contained in this Warrant shall be
construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.
VI. Adjustments
1. Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of shares of Common Stock underlying this Warrant shall be
subject to adjustment from time to time as hereinafter set forth:
(a) Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
(b) Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
(c) Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
(d) Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
5
<PAGE>
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
(e) Changes in Form of Warrant. This form of Warrant need not be changed
because of any change pursuant to this Section, and Warrants issued after such
change may state the same Exercise Price and the same number of shares of Common
Stock and Warrants as are stated in the Warrants initially issued pursuant to
this Agreement. The acceptance by any Holder of the issuance of new Warrants
reflecting a required or permissive change shall not be deemed to waive any
rights to a prior adjustment or the computation thereof.
2. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
VII. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.
VIII. Certain Notice Requirements.
1. Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
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<PAGE>
2. Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its shares of Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.
3. Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
4. Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
IX. Miscellaneous.
1. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
2. Entire Agreement. This Warrant (together with the other agreements and
documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
3. Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
4. Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District
7
<PAGE>
of New York, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any process
or summons to be served upon the Company may be served by transmitting a copy
thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The Company agrees that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
5. Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions of this
Warrant shall be effective unless set forth in a written instrument executed by
the party or parties against whom or which enforcement of such waiver is sought;
and no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 7th day of December, 1996.
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Gary S. Glatter
-------------------------
Name: Gary S. Glatter
Title: President
8
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Form to be used to exercise Warrant:
H.E.R.C. Products Incorporated
2202 West Lone Cactus Drive, #15
Phoenix, Arizona 85027
Date: _____________________, 19___
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ________ shares of Common Stock of H.E.R.C.
Products Incorporated and hereby makes payment of $____________ (at the rate of
$_________ per share of Common Stock) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock as to which this Warrant is exercised in
accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right
to purchase ____________ shares of Common Stock purchasable under the within
Warrant into __________ shares of Common Stock of H.E.R.C. Products Incorporated
(based on a "Market Price" of $________ per share of Common Stock). Please issue
the Common Stock in accordance with the instructions given below.
--------------------------------------
Signature
- ---------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
Form to be used to assign Warrant:
9
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ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED, ________________________________ does
hereby sell, assign and transfer unto _________________________________ the
right to purchase _____________________ shares of Common Stock of H.E.R.C.
Products Incorporated ("Company") evidenced by the within Warrant and does
hereby authorize the Company to transfer such right on the books of the Company.
Dated:____________________, 19___
--------------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
10
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EXHIBIT 4.3
H.E.R.C. PRODUCTS INCORPORATED
AGENCY AGREEMENT
As of November 15, 1996
Perrin, Holden & Davenport Capital Corp.
17 John Street
3rd Floor
New York, New York 10038
Gentlemen:
H.E.R.C. Products Incorporated, a Delaware corporation ("Company"),
proposes to offer for sale in a private placement ("Offering"), up to $1,500,000
in aggregate purchase price of shares of preferred stock, $.01 par value
("Preferred Stock"), as more fully described in the Certificate of Designations
attached hereto as Exhibit A. The per-share offering price ("Offering Price") to
purchasers ("Subscribers") will be $10.00 and the stated value will be $10.00
per share.
The Offering will be made on a "best efforts, minimum $1,000,000,
maximum $1,500,000 basis." The Preferred Stock will be sold only to "accredited
investors" in accordance with Section 4(2) and/or 3(b) of the Securities Act of
1933, as amended ("Securities Act"), and Rules 501-506 of Regulation D ("Reg D")
promulgated thereunder.
The Subscribers shall have the rights and be subject to the terms and
conditions reflected in the subscription agreement to be executed by each
Subscriber and the Company (collectively, the "Subscription Agreements"),
together with the exhibits thereto, including, but not limited to the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, and
the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
September 30, 1996, and the Company's Proxy Statement, dated January 11, 1996,
and the Company's Prospectus, dated June 12, 1996, all of which together will be
referred to herein as the "Offering Documents." Perrin, Holden & Davenport
Capital Corp. is sometimes referred to herein as the "Placement Agent" or as
"PHD."
6. Appointment of Placement Agent; The Offering.
(a) Appointment of Placement Agent. You are hereby appointed exclusive
Placement Agent of the Company for the purpose of assisting the Company in
finding qualified Subscribers. You hereby accept such agency and agree to assist
the Company in finding qualified Subscribers. You are hereby authorized to
engage, at your option, the services of other broker-dealers who are members of
the National Association of Securities Dealers, Inc. ("NASD") to assist you in
soliciting Subscribers and to remit to the broker-dealers all or a portion of
the commissions payable to you under Section 4.3 hereof and the Placement Agent
Option issuable to you under Section 4.4 hereof, as you shall determine.
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(b) Offering Period; Closings. The offering period ("Offering Period")
shall commence on November 15, 1996 and shall continue until November 30, 1996
("Termination Date"), unless extended by the Company and the Placement Agent to
a date not later than December 15, 1996, without notice to Subscribers. If at
any time prior to the Termination Date, subscriptions for at least $1,000,000 in
aggregate purchase price for the shares of Preferred Stock have been received
and accepted (and funds in payment have cleared), then, upon the mutual consent
of the Company and the Placement Agent, a closing ("Initial Closing") shall take
place with respect to such accepted subscriptions and the Company shall continue
the Offering until all the Preferred Stock is sold or the end of the Offering
Period, whichever occurs first. After the Initial Closing, subsequent closings
of Preferred Stock with respect to accepted subscriptions may take place at any
time during the Offering Period as mutually determined by the Company and the
Placement Agent (the Initial Closing and any subsequent closing will each be
referred to herein as a "Closing"). If subscriptions for at least $1,000,000 in
aggregate purchase price for the shares of Preferred Stock are not received and
accepted (and funds in payment therefor cleared) by the Termination Date, then
the Offering will be terminated and all funds received from Subscribers will be
returned, without interest and without any deduction.
(c) Offering Documents. The Company will provide the Placement Agent with a
sufficient number of copies of the Offering Documents for delivery to potential
Subscribers and such other information, documents and instruments which the
Placement Agent deems reasonably necessary to act as placement agent hereunder
and to comply with the rules, regula tions and judicial and administrative
interpretations respecting compliance with applicable state and federal statutes
related to the Offering.
(d) Segregation of Funds. Each Subscriber for Preferred Stock shall wire
the purchase price to a designated account maintained by Attorneys Graubard
Mollen & Miller.
(e) No Firm Commitment. The Company understands and acknowledges that the
undertaking by the Placement Agent pursuant to this Agreement is not a "firm
commitment" offering and that the Placement Agent is not obligated in any way to
purchase or sell the Preferred Stock offered hereby.
7. Representations and Warranties of the Company. The Company represents
and warrants upon the execution of this Agreement and again at the Initial
Closing and any subsequent Closings as follows:
(a) Due Incorporation and Qualification. The Company has been duly
incorporated, is validly existing and is in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation (except
where the failure to so qualify would not have a material adverse effect on the
Company) for the transaction of business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business requires such qualification.
(b) Authorized Capital. The Company is authorized to issue 40,000,000
shares of Common Stock and 1,000,000 shares of preferred stock, of which
6,356,487 shares of Common Stock and no shares of Preferred Stock are currently
issued and outstanding. All of the issued and outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully paid and
non-assessable. The offers and sales of such outstanding shares of Common Stock
were at all relevant times either registered under the Securities Act and the
applicable state securities or Blue Sky laws, or exempt from such registration.
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(c) Financial Statements; No Material Adverse Changes. The financial
statements of the Company included in the Offering Documents ("Financials")
fairly present the consolidated financial position and results of operations of
the Company at the dates thereof and for the periods covered thereby, subject to
year-end adjustments and normal recurring accruals. Other than as set forth on
the September 30, 1996 balance sheet contained in the Financials ("Balance
Sheet"), the Company has no material liabilities or obligations, contingent,
direct, indirect or otherwise, except those incurred in the ordinary course of
business since the date of the Balance Sheet. Except as otherwise stated in the
Offering Documents or incurred in the ordinary course of the Company's business
since September 30, 1996, there has not been any change in the condition,
financial or otherwise, of the Company which could materially adversely affect
its ability to conduct its operations as described in the Offering Documents.
(d) No Pending Actions. There are no actions, suits, proceedings, claims,
hearings, any investigations or inquiries before or by any court, governmental
authority, tribunal or instrumentality (or to the Company's knowledge, any state
of facts which would give rise thereto), pending or, to the Company's knowledge,
threatened against the Company or involving the properties of the Company, which
might result in any material adverse change in the business, properties,
financial position or results of operations of the Company, or which might
adversely affect the transactions or other acts contemplated by this Agreement
or the validity or enforceability of this Agreement.
(e) Private Offering Exemption. Assuming that (i) a proper Form D is filed
in accordance with Rule 503 of Reg D, (ii) that the offer and the sale of the
Preferred Stock by the Placement Agent is made in compliance with Rule 502(c) of
Reg D and (iii) that the representations of the Subscribers in the Subscription
Agreements signed by them are true and correct (which facts will not be
independently verified by the Company), the sale of Preferred Stock in the
Offering is exempt from registration under the Securities Act and is in
compliance with Reg D.
(f) Due Authorization; Consents. The Company has full right, power and
authority to enter into this Agreement, the Subscription Agreements and the
Placement Agent Option (as defined in Section 4.4) and to perform all of its
obligations hereunder and thereunder. This Agreement has been, and the
Subscription Agreements and Placement Agent Option will be, duly authorized,
executed and delivered by the Company. The execution and delivery of this
Agreement has been, and the Subscription Agreements and Placement Agent Option,
when executed and delivered will have been, duly authorized by all necessary
corporate action and no further corporate action or approval is or will be
required for their respective execution, delivery and performance. This
Agreement constitutes, and the Subscription Agreements and Placement Agent
Option, upon execution and delivery will constitute, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms (except (i) as the enforceability thereof may be limited by bankruptcy or
other laws now or hereafter in effect relating to or affecting creditors' rights
generally, (ii) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought,
and (iii) that the enforceability of the indemnification and contribution
provisions of the respective agreements may be limited by the federal and state
securities laws and public policy), and no consent, approval, authorization,
order of, or filing with, any court or governmental authority or any other third
party is required to consummate the transactions contemplated by this Agreement,
the Subscription Agreements or Placement Agent Option, except that the offer and
sale of the Preferred Stock in certain jurisdictions may be subject to the
provisions of the securities or Blue Sky laws of such jurisdictions.
Additionally, other than such consents as may have already been
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obtained, no consent, approval, authorization, order of, filing with, any court
or governmental authority or any other third party is required to consummate the
transactions contemplated by this Agreement, the Subscription Agreements and the
Placement Agent Option.
(g) Non-Contravention. The Company's execution and delivery of this
Agreement, the Subscription Agreements and the Placement Agent Option, and the
incurring of the obligations herein and therein set forth, and the consummation
of the transactions contemplated herein and therein, will not (i) conflict with,
or constitute a breach of, or a default under, the Certificate of Incorporation
or By-Laws of the Company, or any contract, lease or other agreement or
instrument to which the Company is a party or in which the Company has a
beneficial interest or by which the Company is bound, except where such
breach(es) or default(s), singly or in the aggregate, would not have a material
adverse effect on the Company; (ii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, except where such violation(s), singly or in the
aggregate, would not have a material adverse effect on the Company; or (iii)
have any material adverse effect on any approval necessary for the Company to
own, lease or operate any of its properties or to conduct its business.
(h) Valid Issuances. The Preferred Stock, when issued and delivered in
accordance with the terms of the Offering Documents, will be duly and validly
issued, fully paid and non-assessable. The Placement Agent Option when issued
and delivered in accordance with the terms of this Agreement or the Placement
Agent Option, as the case may be, will be duly and validly issued. The Common
Stock issuable upon conversion of the Preferred Stock and exercise of the
Placement Agent Option when issued and delivered in accordance with their terms,
will be duly and validly issued, fully paid and non-assessable. The Company has
reserved for issuance a sufficient number of shares of Common Stock to be issued
upon conversion of the Preferred Stock and exercise of the Placement Agent
Option.
(i) Offering Documents; 10b-5 Representation. The Offering Documents
conform in all material respects with the requirements of Section 4(2) and/or
3(b) of the Securities Act and Rules 501-506 of Reg D and with the requirements
of all other applicable rules and regulations of the Securities and Exchange
Commission (the "Commission") currently in effect relating to "private
offerings." The Offering Documents, taken as a whole, do not con tain 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.
(j) Exchange Act Reports. The Company is subject to the reporting
requirements of the Securities Act and Securities Exchange Act of 1934, as
amended ("Exchange Act") and has filed all reports and statements required under
the Securities Act and Exchange Act on a timely basis, and each report and
statement was true and complete in all material respects when filed.
(k) Subsidiaries. Whenever the context of this Agreement permits, the
representations and warranties made by the Company in this Agreement shall also
apply and be true with respect to each subsidiary individually and as to the
Company taken as a whole with all the subsidiaries, as if each representation
and warranty contained herein made specific reference to the subsidiary each
time the term "Company" is used.
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8. Representations and Warranties of the Placement Agent. The Placement
Agent represents and warrants as follows:
(a) Due Incorporation. The Placement Agent is duly incorporated and validly
existing and in good standing under the laws of its state of incorporation and
is duly qualified as a foreign corporation for the transaction of business and
is in good standing in each jurisdiction where the failure to be so qualified
would not have a materially adverse effect on the business of the Placement
Agent.
(b) Broker-Dealer Registration. The Placement Agent is registered as a
broker-dealer under Section 15 of the Exchange Act.
(c) Good Standing. The Placement Agent is a member in good standing of the
NASD.
(d) Sales in Certain Jurisdictions. Sales of Preferred Stock by the
Placement Agent will be made only in such jurisdictions in which the Placement
Agent is a registered broker-dealer or where an applicable exemption from such
registration exists.
(e) Compliance with Laws. Offers and sales of Preferred Stock by the
Placement Agent will be made in compliance with the provisions of Rule 502(c) of
Reg D of the Securities Act, and the Placement Agent will furnish to each
investor a copy of the Offering Documents prior to accepting any payments for
the Preferred Stock. The Placement Agent will offer the Preferred Stock only in
the jurisdictions indicated in the Blue Sky Survey delivered by Graubard Mollen
& Miller ("GM&M") and in accordance with the limitations set forth therein.
(f) Disqualification Provisions. Neither the Placement Agent nor any
principal, director, officer or agent thereof is subject to any of the
disqualification provisions set forth in Rules 262(b) or (c) under the
Securities Act or state law applicable to the transactions contemplated hereby.
9. Closings.
(a) Closings. The Closings will take place at the offices of GM&M, located
at 600 Third Avenue, New York, New York. At each Closing, the Company shall
deliver to the Subscribers for the shares of Preferred Stock being purchased at
such Closing, certificates representing the Preferred Stock against payment
therefor by wire transfer.
(b) Deliveries at each Closing. At each Closing, and as a condition to each
Closing, the Company shall deliver or cause to be delivered to the Placement
Agent on behalf of the Placement Agent and the Subscribers:
a. Officers' Certificate. A certificate of the Company, signed by an
executive officer thereof stating that (a) the representations and warranties
contained in Section 2 hereof are true and accurate in all material respects at
each Closing, with the same effect as though expressly made at each Closing and
(b) that all covenants and agreements to be complied with by the Company prior
to the Closing have been complied with;
b. Secretary's Certificate. A certificate of the Company, signed by the
Secretary or Assistant Secretary thereof, certifying that the attached copy of
the Certificate of
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Incorporation, as amended by the Certificate of Designations related to the
Preferred Stock, is in full force and effect, and has not been amended.
c. Certificates. The certificates representing the Preferred Stock in the
names of the Subscribers at such Closing and, at the last Closing,
notwithstanding the preamble to this Section 4.2, the Placement Agent Option in
such names as it designates.
d. Other Documents. Such other Closing documents as shall be reasonably
requested by the Placement Agent.
(c) Placement Agent's Fees and Expenses. At each Closing, the Company shall
pay to the Placement Agent a commission equal to 10% of the aggregate purchase
price of the Preferred Stock sold. On or before the Initial Closing, the Company
shall pay the legal fees and disbursements of GM&M referred to in paragraph 5.2
below. All the foregoing amounts are payable directly to the parties who are
owed same by deduction from the aggregate pur chase price of the Preferred Stock
sold.
(d) Issuance of Placement Agent Option. At the last Closing with respect to
the Offering, the Company shall issue to the Placement Agent or its designees,
five-year options ("Placement Agent Option") to purchase that number of shares
of Common Stock equivalent to one share of Common Stock for every two shares of
Preferred Stock sold to subscribers in the Offering, at a purchase price of
$3.00 per share of Common Stock, exercisable until the fifth anniversary date of
the Initial Closing. The Placement Agent Option shall contain registration
rights with respect to the shares underlying the Placement Agent Option
identical to the registration rights granted to the Subscribers in the Offering.
(e) GKN Securities Corp. Letter. At the first Closing, with respect to the
Offering, the Company will deliver to the Placement Agent a letter pursuant to
which GKN Securities Corp. will waive its right of first refusal in respect of
the Offering and agreeing not to release certain officers and directors from the
lockup agreements given in connection with offering of securities by the Company
on April 3, 1996.
10. Covenants. The Company covenants and agrees that:
(a) Amendments to Offering Documents. Until the Offering has been completed
or terminated, if there shall occur any event relating to or affecting, among
other things, the Company or any affiliate, or the proposed operations of the
Company taken as a whole as described in the Offering Documents, as a result of
which it is necessary, in the opinion of counsel for the Company, to amend or
supplement the Offering Documents in order that the Offering Documents will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Company shall
immediately prepare and furnish to the Placement Agent a reasonable number of
copies of an appropriate amendment of or supplement to the Offering Documents,
in form and substance satisfactory to the Placement Agent.
(b) Expenses of Offering. The Company shall be responsible for, and shall
pay, all fees, disbursements and expenses incurred in connection with the
Offering, including, but not limited to, the Company's legal (including the fees
and disbursements of GM&M) and accounting fees and disbursements, the costs of
preparing, mailing and delivering the Offering Documents and amendments and
supplements thereto, this Agreement, the Subscription
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Agreements and the Placement Agent Option and related documents (all in such
quantities as the Placement Agent may reasonably require), preparing and
printing stock, filing fees, costs and expenses (including fees and
disbursements of GM&M) incurred in qualifying the Offering under the "Blue Sky"
laws of the states reasonably specified by the Placement Agent (which fees,
excluding disbursements, shall be $5,000).
(c) Further Assurances. The Company will take such actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated hereby.
(d) Accuracy of Representations and Warranties. The Company hereby agrees
that, prior to the Termination Date, it will take no action, and use its best
efforts to prevent the occurrence of any event, which could result in any of its
representations, warranties or covenants contained in this Agreement or any of
the Offering Documents not to be true and correct, or not to be performed as
contemplated, at and as of the time immediately after the occurrence of such
transaction or event.
11. Registration Rights; Subscriber Lockup.
(a) Registration Rights. As additional consideration for this Agreement and
the transactions contemplated hereby, the Company agrees with the Placement
Agent and will agree with each Subscriber, as the case may be, to register for
resale under a Registration Statement ("Registration Statement") pursuant to the
Securities Act and the Blue Sky or state securities laws of states reasonably
selected by the Placement Agent, the Common Stock into which the Preferred Stock
is convertible and the Common Stock underlying the Placement Agent Option. The
Company agrees that the Registration Statement will be filed on or before the
one-month anniversary of the Initial Closing. The Company agrees to use its best
efforts to have the Registration Statement declared effective by February 14,
1997. If the Registration Statement is not declared effective by the close of
business on April 15, 1997, as provided in the Certificate of Designations for
the Preferred Stock, the conversion rate will be lowered. The Company shall keep
the Registration Statement effective and current until all the securities
registered thereunder are sold or the securities may be sold by the holder
pursuant to Rule 144, subject to customary "blackout" periods referred to in the
Placement Agent Option and the Subscription Agreement. The Company shall bear
all the expenses and pay all the fees it incurs in connection with the
preparation, filing and modification or amendment of the Registration Statement.
12. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Placement Agent and each person, if any, who controls the
Placement Agent within the meaning of the Securities Act and/or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
the Placement Agent or such controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
(A) in the Offering Documents, or (B) in any blue sky application or other
document executed by the Company specifically for blue sky purposes or based
upon any other written information furnished by the Company or on its behalf to
any state or other jurisdiction in order to qualify any or all of the Preferred
Stock under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"); (ii) the
omission or alleged omission by the Company to state in the Offering Documents
or in any Blue Sky Application a material fact required to be
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stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iii) any breach by
the Company of any of its representations, warranties or covenants contained
herein or in the Subscription Agreements or Placement Agent Option and will
reimburse the Placement Agent and each such controlling person for any legal or
other expenses reasonably incurred by the Placement Agent or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based solely upon (a) an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information regarding the Placement Agent which
is furnished to the Company by the Placement Agent specifically for inclusion in
the Offering Documents or any such Blue Sky Application; or (b) any breach by
the Placement Agent of its representations, warranties or covenants contained
herein (collectively, (a) and (b) above are referred to as the "Non-Indemnity
Events").
(b) Indemnification by the Placement Agent. The Placement Agent agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act and/or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
the Company or such controlling person may become subject, under the Securities
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any Non-Indemnity
Event; and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such
loss, claim, damage, liability or action provided that such loss, claim, damage
or liability is found ultimately to arise out of or be based upon any
Non-Indemnity Event.
(c) Procedure. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 7, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying party will
relieve the indemnifying party from any liability under this Section 7 as to the
particular item for which indemnification is then being sought (if such failure
materially prejudices the indemnifying party), but not from any other liability
which it may have to any indemnified party. In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may wish, jointly with any other indemnifying
party, similarly notified, to assume the defense thereof, with counsel who shall
be to the reasonable satisfaction of such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Any such indemnifying
party shall not be liable to any such indemnified party on account of any
settlement of any claim or action effected without the consent of such
indemnifying party, which consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this Section 7 is
unavailable to any indemnified party in respect to any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, will contribute to the amount paid
or payable by such indemnified party, as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand, and the
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Placement Agent on the other hand, from the Offering, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above, but also the relative fault of the Company on the one
hand, and of the Placement Agent on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand, and the Placement
Agent on the other hand, shall be deemed to be in the same proportion as the
total proceeds from the Offering (net of sales commissions, but before deducting
other expenses) received by the Company, bear to the commissions received by the
Placement Agent. The relative fault of the Company on the one hand, and the
Placement Agent on the other hand, will be determined with reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company, and its relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Equitable Considerations. The Company and the Placement Agent agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in the
immediately preceding paragraph.
(f) Attorneys' Fees. The amount payable by a party under this Section 7 as
a result of the losses, claims, damages, liabilities or expenses referred to
above will be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim (including, without limitation, fees and disbursements of counsel
incurred by an indemnified party in any action or proceeding between the
indemnifying party and indemnified party or between the indemnified party and
any third party or otherwise).
13. Termination of Agreement. The Placement Agent will have the right to
terminate this Agreement by giving written notice, as herein specified, at any
time, at or prior to the Closing if: (i) material information comes to the
attention of the Placement Agent relating to the Company, its management or its
position in the industry which would preclude a successful Offering; (ii) a
material adverse change has occurred in the financial condition, business or
prospects of the Company (it being understood that losses not significantly in
excess of losses for prior periods shall not be deemed to be material adverse
changes); or (iii) the Company has breached any of its material representations,
warranties or obligations hereunder, or failed to expeditiously proceed with the
Offering. Notwithstanding anything contained herein to the contrary, if a
Closing does not occur by December 15, 1996, through no fault of the Company,
the Company may terminate this Agreement. The provisions of Sections 7, 8 and 18
of this Agreement shall survive the termination of this Agreement for any
reason.
14. Notices. Any notice hereunder shall be in writing and shall be
effective when delivered in person or by facsimile transmission, or mailed by
certified mail, postage prepaid, return receipt requested, to the appropriate
party or parties, at the following addresses: if to the Placement Agent, to
Perrin, Holden & Davenport Capital Corp., 17 John Street, 3rd Floor, New York,
New York 10038, Attention: Jody Eisenman, President (Fax No. 212/566-4977); if
to the Company, to H.E.R.C. Products Incorporated, 2202 West Lone Cactus Drive,
#15, Phoenix, Arizona 85027, Attention: Gary S. Glatter, President (Fax No.
602/233-1107); and, in either case, a copy to Graubard Mollen & Miller, 600
Third Avenue, New York, New York 10016, Attention: David Alan Miller, Esq. (Fax
No. 212/687-6989); or, in each case, to such other address as the parties may
hereinafter designated by like notice.
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15. Parties. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Neither
party may assign this Agreement or its obligations hereunder without the prior
written consent of the other party. This Agreement is intended to be, and is for
the sole and exclusive benefit of the parties hereto and the persons described
in Section 7.1 and 7.2 hereof, and their respective successors and assigns, and
for the benefit of no other person, and no other person will have any legal or
equitable right, remedy or claim under, or in respect of this Agreement.
16. Amendment and/or Modification. Neither this Agreement, nor any term or
provision hereof, may be changed, waived, discharged, amended, modified or
terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
17. Further Assurances. Each party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
18. Validity. In case any term of this Agreement will be held invalid,
illegal or unenforceable, in whole or in part, the validity of any of the other
terms of this Agreement will not in any way be affected thereby.
19. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.
20. Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, respectively, and there are no representations, inducements, promises
or agreements, oral or otherwise, not embodied in this Agreement. Any and all
prior discussions, negotiations, commitments and understanding relating to the
subject matter of these agreements are superseded by them.
21. Counterparts. This Agreement may be executed in counterparts and each
of such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.
22. Law. This Agreement will be deemed to have been made and delivered in
New York City and will be governed as to validity, interpretation, construction,
effect and in all other respects by the internal laws of the State of New York.
The Company (i) agrees that any legal suit, action or proceeding arising out of
or relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection to the venue of any
such suit, action or proceeding, and (iii) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding brought in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
suit, action or proceeding.
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23. Representations, Warranties and Covenants to Survive Delivery. The
respective representations, indemnities, agreements, covenants, warranties and
other statements of the Company and the Placement Agent shall survive execution
of this Agreement and delivery of the Preferred Stock and/or the termination of
this Agreement prior thereto.
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
H.E.R.C. PRODUCTS INCORPORATED
/s/ Gary S. Glatter
-------------------------------
Gary S. Glatter, President
AGREED:
PERRIN, HOLDEN & DAVENPORT
CAPITAL CORP.
By: /s/ Jody Eisenman
---------------------------
Jody Eisenman, President
11
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED
2202 WEST LONE CACTUS DRIVE
SUITE 15
PHOENIX, ARIZONA 85027
December 5, 1996
Perrin, Holden & Davenport Capital Corp.
17 John Street, 3rd Floor
New York, New York 10038
Re: Private Offering of Preferred Stock of H.E.R.C. Products Incorporated
Gentlemen:
Reference is made to the Agency Agreement, dated as of
November 15, 1996, between you and H.E.R.C. Products Incorporated ("Company"),
pursuant to which the Company proposed to offer for sale in a private placement
("Offering"), up to $1,500,000 in aggregate purchase price of shares of
preferred stock, $.01 par value ("Preferred Stock") on a "best efforts, minimum
$1,000,000, maximum $1,500,000 basis." This is to confirm our agreement to
increase the Offering to up to $1,850,000 in aggregate purchase price of shares
of Preferred Stock on a "best efforts, minimum $1,000,000, maximum $1,850,000
basis."
If you find the foregoing is in accordance with our
understanding, please execute a copy of this letter where indicated below.
Sincerely,
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Gary S. Glatter
---------------------------
Gary S. Glatter, President
AGREED:
PERRIN, HOLDEN & DAVENPORT CAPITAL CORP.
By: /s/ Jody Eisenman
-----------------------------
Jody Eisenman, President
12
<PAGE>
EXHIBIT 99.1
H.E.R.C. PRODUCTS INCORPORATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND OTHER RIGHTS AND QUALIFICATIONS OF
CLASS A PREFERRED STOCK
----------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
----------------------------------
H.E.R.C. PRODUCTS INCORPORATED, a corporation organized and existing under
the Business Corporation Law of the State of Delaware ("Corporation") ,
DOES HEREBY CERTIFY:
FIRST: That, pursuant to authority conferred upon the Board of
Directors of the Corporation ("Board") by the amended Certificate of
Incorporation of said Corporation, and pursuant to the provisions of Section 151
of the Delaware General Corporation Law, said Board duly determined that 150,000
shares of Preferred Stock, $.01 par value per share, shall be designated "Class
A Preferred Stock," and to that end the Board adopted a resolution providing for
the designation, preferences and relative, participating, optional or other
rights, and the qualifications, limitations and restrictions, of the Class A
Preferred Stock, which resolution is as follows:
RESOLVED, that the Board, pursuant to the authority vested in
it by the provisions of the Certificate of Incorporation of the
Corporation, as amended, hereby creates a series of Preferred Stock of
the corporation, par value $.01 per share, to be designated as "Class A
Preferred Stock" and to consist of an aggregate of 150,000 shares. The
Class A Preferred Stock shall have such designations, preferences and
relative, participating, optional or other rights, and the
qualifications, limitations and restrictions as follows:
1. Designations and Amount. 150,000 shares of the Preferred Stock of the
Corporation, par value $ .01 per share, shall constitute a class of Preferred
Stock designated as "Class A Preferred Stock" ("Class A Preferred Stock"). The
Class A Preferred Stock shall have a stated value of $10.00 per share ("Stated
Value").
2. Redemption Rights. The Class A Preferred Stock shall not be subject to
any right of redemption by the Corporation or by the holder thereof.
3. Dividends. The holders of shares of Class A Preferred Stock shall be
entitled to receive dividends at the rate of 10% per annum of Stated Value (or
$1.00 per share) of the Class A Preferred Stock ("Preferred Dividend") from the
date of issuance through the Conversion Date (as defined below), payable solely
in shares of Common Stock of the Company on the next business day after the
Conversion Date, such number of shares of Common Stock to be calculated in
accordance with paragraph 6(b) hereof.
4. Rights on Liquidation, Dissolution or Winding Up, Etc. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, as a result of which the assets of the Corporation, whether from
capital, surplus or earnings, shall be distributed to the stockholders of the
Company, such assets shall be distributed simultaneously to both the holders of
the Common Stock and the holders of the Class A Preferred Stock,
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calculated as if the Class A Preferred Stock (together with Preferred Dividends
through the record date for such distribution) was fully converted immediately
prior to such distribution.
5. Voting Rights. The holders of Class A Preferred Stock shall not be
entitled to vote on any matter, except as may be required by law.
6. Conversion of Class A Preferred Stock.
(a) The holders of Class A Preferred Stock shall have the
right, at such holders' option, at any time or from time to time, to convert
each share of Class A Preferred Stock, together with the accrued Preferred
Dividends thereon through the Conversion Date, into the number of shares of
Common Stock calculated in accordance with paragraph 6(b) below.
(b) The number of shares of Common Stock to be issued upon
conversion of the Class A Preferred Stock and payment of the Preferred Dividend
will be determined by dividing the Stated Value of the Class A Preferred Stock
being converted, plus the Preferred Dividends thereon through the Conversion
Date, by the greater of (i) 75% of the average Closing Bid Price (as hereinafter
defined) of the Common Stock for the five consecutive trading days ending
immediately prior to the date of the Written Notice (as hereinafter defined) or
(ii) $.10. Notwithstanding the foregoing, if the Common Stock issuable by the
Corporation upon conversion of the Class A Preferred Stock and payment of the
Preferred Dividend is not registered with the Securities and Exchange Commission
for resale by the holder thereof on or before the close of business on April 15,
1997, the aforementioned rate of 75% shall be reduced to 72.5%. The "Closing Bid
Price" shall mean the closing bid price for the Corporation's Common Stock, as
reported by The Nasdaq Stock Market if the Common Stock is quoted on the Nasdaq
National Market or Nasdaq SmallCap Market, or the last sales price of the Common
Stock if the Common Stock is listed on a national securities exchange, whichever
is the principal trading market for the Common Stock. If the Common Stock is not
listed on a national securities exchange or quoted on the Nasdaq National Market
or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the
Closing Bid Price shall mean the closing bid price for the Common Stock, as
reported by the OTC Bulletin Board or the National Quotation Bureau,
Incorporated, or similar publisher of such quotations. If the Closing Bid Price
cannot be determined pursuant to the above, the Closing Bid Price shall be such
price as the Board of Directors of the Company shall determine in good faith.
(c) Before any holder of Class A Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall give
written notice ("Written Notice") to the Corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. The Written Notice must be delivered via telecopier prior to 3:00
p.m. EST on any day and shall be deemed to be received by the Corporation upon
receipt by it or by its general counsel. The Corporation shall, as soon as
practicable, but not later than one business day thereafter, issue and deliver
to a location in New York City designated by such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Simultaneously with such delivery, such holder shall
surrender the certificate or certificates for the Class A Preferred Stock duly
endorsed for transfer. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date which the Written Notice
is received by the Corporation in accordance herewith ("Conversion Date"), 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 as of such Conversion Date.
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(d) The Corporation shall not be required to issue fractions
of shares of Common Stock upon conversion of the Class A Preferred Stock or
payment of the Preferred Dividend. If any fractions of a share would, but for
this Section, be issuable upon any conversion of Class A Preferred Stock or
payment of the Preferred Stock, in lieu of such fractional share the Company
shall round up or down to the nearest whole number of shares.
(e) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of Common Stock sufficient
shares of Common Stock to permit the conversion of the then outstanding shares
of the Class A Preferred Stock and payment of the Preferred Dividend pursuant to
this Section 6. All shares of Common Stock which may be issued upon conversion
of shares of the Class A Preferred Stock and payment of the Preferred Dividend
pursuant to this Section 6 shall be validly issued, fully paid and
nonassessable. In order that the Corporation may issue shares of Common Stock
upon conversion of shares of the Class A Preferred Stock and payment of the
Preferred Dividend, the Corporation will endeavor to comply with all applicable
Federal and state securities laws and will endeavor to list such shares of
Common Stock to be issued upon conversion on each securities exchange on which
Common Stock is listed and endeavor to maintain such listing for such period of
time as either the Class A Preferred Stock or Common Stock underlying such Class
A Preferred Stock remains outstanding.
(f) If any of the following shall occur: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of shares of the Class A Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification of, or change in, outstanding shares of Common Stock, then in
addition to all of the rights granted to the holders of the Class A Preferred
Stock as designated herein, the Corporation, or such successor or purchasing
corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, consolidation or merger ("Corporate Change"), provide
in its certificate of incorporation or other charter document that each share of
the Class A Preferred Stock shall be convertible into the kind and amount of
shares of capital stock and other securities and property (including cash)
receivable upon such Corporate Change by a holder of the number of shares of
Common Stock deliverable upon conversion of such share of the Class A Preferred
Stock and the payment of the Preferred Dividend thereon immediately prior to the
Corporate Change. If, in the case of any such Corporate Change, the stock or
other securities and property (including cash) receivable thereupon by a holder
of Common Stock includes shares of capital stock or other securities and
property of a corporation other than the corporation which is the successor of
the Corporation in such Corporate Change, then the certificate of incorporation
or other charter document of such other corporation shall contain such
additional provisions to protect the interests of the holders of shares of the
Class A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 6(f) shall
similarly apply to successive reclassifications, changes, consolidations or
mergers.
(g) If any Class A Preferred Stock is issued and outstanding
on November __, 1999, such Class A Preferred Stock and the Preferred Dividend
thereon shall, without any action on the part of the holder thereof, be
automatically converted into Common Stock on that date on the above terms.
3
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(h) In the event any shares of Class A Preferred Stock shall
be converted pursuant to Section 6 hereof, the shares of Class A Preferred Stock
so converted shall be canceled.
(i) The Corporation will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class A Preferred Stock against impairment.
Such resolution was signed by the President and Assistant Secretary of
the Corporation.
IN WITNESS WHEREOF, we have executed this Certificate of Designation
this 21st day of November, 1996.
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Gary S. Glatter
--------------------------------------
Gary S. Glatter, President
By: /s/ Kristi A. Cordray
--------------------------------------
Kristi A. Cordray, Assistant Secretary
4
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND OTHER RIGHTS AND QUALIFICATIONS OF
CLASS A PREFERRED STOCK
----------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
----------------------------------
H.E.R.C. PRODUCTS INCORPORATED, a corporation organized and existing under
the General Corporation Law of the State of Delaware ("Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, pursuant to authority conferred upon the Board of
Directors of the Corporation ("Board") by the amended Certificate of
Incorporation of said Corporation, and pursuant to the provisions of Section 151
of the Delaware General Corporation Law, said Board duly determined that the
number of shares of Preferred Stock, $.01 par value per share, shall be
increased from 150,000 shares to 185,000 shares, and to that end the Board
adopted a resolution, which resolution is as follows:
RESOLVED, that the Board, pursuant to the authority vested in
it by the provisions of the Certificate of Incorporation of the
Corporation, as amended, hereby increases the number of shares of Class
A Preferred Stock of the Corporation, par value $.01 per share,
designated as Class A Preferred Stock from 150,000 shares to 185,000
shares.
Such resolution was signed by the President and Assistant Secretary of
the Corporation.
IN WITNESS WHEREOF, we have executed this Certificate of Designation
this 6th day of December, 1996.
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Gary S. Glatter
---------------------------------------
Gary S. Glatter, President
By: /s/ Kristi A. Cordray
---------------------------------------
Kristi A. Cordray, Assistant Secretary
5
<PAGE>
H.E.R.C. PRODUCTS INCORPORATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND OTHER RIGHTS AND QUALIFICATIONS OF
CLASS A PREFERRED STOCK
----------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
----------------------------------
H.E.R.C. PRODUCTS INCORPORATED, a corporation organized and existing under
the General Corporation Law of the State of Delaware ("Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, pursuant to authority conferred upon the Board of
Directors of the Corporation ("Board") by the amended Certificate of
Incorporation of said Corporation, and pursuant to the provisions of Section 151
of the Delaware General Corporation Law, said Board duly determined that the
mandatory conversion date of the Class A Preferred Stock, $.01 par value per
share, specified in Section 6(g) of the Certificate of Designations, Preferences
and Other Rights and Qualifications of the Class A Preferred Stock shall be
December 17, 1999, and to that end the Board adopted a resolution, which
resolution is as follows:
RESOLVED, that the Board, pursuant to the authority vested in
it by the provisions of the Certificate of Incorporation of the
Corporation, as amended, hereby designates that the mandatory
conversion date of the Class A Preferred Stock, par value $.01 per
share, specified in Section 6(g) of the Certificate of Designations,
Preferences and Other Rights and Qualifications of the Class A
Preferred Stock shall be the third anniversary of the Final Closing
Date.
Such resolution was signed by the President and Assistant Secretary of
the Corporation.
IN WITNESS WHEREOF, we have executed this Certificate of Designation
this 17th day of December, 1996.
H.E.R.C. PRODUCTS INCORPORATED
By: /s/ Gary S. Glatter
----------------------------------------
Gary S. Glatter, President
By: /s/ Kristi A. Cordray
----------------------------------------
Kristi A. Cordray, Assistant Secretary
6
<PAGE>
