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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 the
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): May 19, 1998
TECHNICAL CHEMICALS AND PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Florida 0-25406 65-0308922
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
</TABLE>
3341 S.W. 15th Street
Pompano Beach, Florida 33069
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 954/979-0400
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On May 19, 1998, Technical Chemicals and Products, Inc., a Florida
corporation (the "Company") issued to a single institutional investor 15,000
shares of Series A Convertible Preferred Stock ("Preferred Stock") and warrants
("Warrants") to purchase 150,000 shares of the Company's Common Stock, $.001 par
value ("Common Stock") for a gross purchase price of $15,000,000. The conversion
price of the Preferred Stock is fixed at $11.89, but is subject to adjustments
based on the future market price of the common stock. The Warrants are
exercisable at $11.89 per share. The Preferred Stock is entitled to dividends,
at the rate of 6% per annum.
The financing was arranged by placement agents who received a fee of
$487,500 plus a non-transferable option to purchase up to 1,200 additional
shares of Preferred Stock upon the same terms and conditions as the
institutional investor and expiring on December 31, 1998. The Company has issued
a press release announcing the foregoing event, a copy of which is attached as
Exhibit 99.1, which is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Number Description
3.1 Articles of Amendment to Articles of
Incorporation, as filed with the Secretary
of State of the State of Florida on May 18,
1998.
4.1 Stock Purchase Warrant for 150,000 shares of
Common Stock at $11.89 per share expiring on
May 19, 2003.
10.1 Securities Purchase Agreement dated May 18, 1998.
10.2 Registration Rights Agreement dated May 18, 1998.
99.1 Press Release dated May 20, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 21, 1998 TECHNICAL CHEMICALS & PRODUCTS, INC.
By: /s/ Stuart R. Streger
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Stuart R. Streger
Vice President, Chief Financial
Officer
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EXHIBIT 3.1
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
TECHNICAL CHEMICALS AND PRODUCTS, INC.
(Pursuant to Section 607.0602 of the
Florida Business Corporation Act)
Technical Chemicals and Products, Inc., a corporation
organized and existing under Florida Law (the "Corporation"), hereby certifies
that the following resolutions were adopted by the Board of Directors of the
Corporation on May 18, 1998 pursuant to authority of the Board of Directors as
required by Section 607.0602 of the Florida Business Corporation Act ("FBCA"). A
vote of Shareholders was not needed for the adoption of these Articles of
Amendment.
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Articles of Incorporation, the
Board of Directors hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series A Convertible Preferred Stock:
I. Designation and Amount
----------------------
The designation of this series, which consists of 16,200
shares of Preferred Stock, is Series A Convertible Preferred Stock (the "Series
A Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
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II. Rank
----
The Series A Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof, such class or series of capital
stock specifically, by its terms, ranks senior to or pari passu with the Series
A Preferred Stock) (collectively, with the Common Stock, "Junior Securities");
(iii) pari passu with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series A Preferred Stock ("Pari Passu Securities");
and (iv) junior to any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series A Preferred Stock ("Senior Securities"), in each
case as to distribution of assets upon liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary.
III. Dividends
---------
The Series A Preferred Stock shall not bear any dividends. In
no event, so long as any Series A Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of Junior
Securities be purchased or redeemed by the Corporation nor shall any moneys be
paid to or made available for a sinking fund for the purchase or redemption of
any Junior Securities (other than a distribution of Junior Securities), without,
in each such case, the written consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting together as a class.
IV. Liquidation Preference
----------------------
A. If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws
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or any other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto, the holders of
shares of Series A Preferred Stock, subject to Article VI, shall have received
the Liquidation Preference (as defined in Article IV.C) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series A Preferred Stock and
holders of Pari Passu Securities (including any dividends or distribution paid
on any Pari Passu Securities after the date of filing of these Articles of
Amendment) shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series A Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
Any prior dividends or distribution made after the date of filing of these
Articles of Amendment shall offset, dollar for dollar, the amount payable to the
class or series to which such distribution was made.
B. At the option of any holder of Series A Preferred Stock,
the sale, conveyance or disposition of all or substantially all of the assets of
the Corporation, the effectuation by the Corporation of a transaction or series
of related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person (as defined below)
or Persons when the Corporation is not the survivor (not including any internal
reorganization, reincorporation, merger or consolidation which does not involve
a change of (i) 50% of the Corporation's board of directors or (ii) 50% of the
Corporation's voting power prior to such transaction or series of related
transactions) shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute upon consummation of such transaction an amount equal to
115% of the Liquidation Preference with respect to each outstanding share of
Series A Preferred Stock in accordance with and subject to the terms of this
Article IV or (ii) be treated pursuant to Article VI.C(b) hereof. "Person" shall
mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series A Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof plus (ii) and amount equal to six
percent (6%) per annum of such Stated Value for the period beginning on the date
of issuance of the Series A Preferred Stock (the "Issue Date") and
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ending on the date of final distribution to the holder thereof (prorated for any
portion of such period). The liquidation preference with respect to any Pari
Passu Securities shall be as set forth in the Articles of Amendment filed in
respect thereof.
V. Redemption
----------
A. If any of the following events (each, a "Mandatory
Redemption Event") shall occur:
(i) The Corporation fails to issue shares of Common
Stock to the holders of Series A Preferred Stock upon exercise by the holders of
their conversion rights in accordance with the terms of these Articles of
Amendment (for a period of at least sixty (60) days if such failure is solely as
a result of the circumstances governed by the second paragraph of Article VI.F
below and the Corporation is using all commercially reasonable efforts to
authorize a sufficient number of shares of Common Stock as soon as practicable),
fails to transfer or to cause its transfer agent to transfer (electronically or
in certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series A Preferred Stock as and when required by
these Articles of Amendment or the Registration Rights Agreement, dated as of
May 18, 1998, by and among the Corporation and the other signatories thereto
(the "Registration Rights Agreement"), fails to remove any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the holders of Series A
Preferred Stock upon conversion of the Series A Preferred Stock as and when
required by these Articles of Amendment, the Securities Purchase Agreement dated
as of May 18, 1998, by and between the Corporation and the other signatories
thereto (the "Purchase Agreement") or the Registration Rights Agreement, or
fails to fulfill its material obligations pursuant to Sections 4(c), 4(e), 4(h),
4(i), 4(j), 4(o) or 5 of the Purchase Agreement (or makes any announcement,
statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any
announcement, statement or threat not to honor its obligations shall not be
rescinded in writing) for ten (10) business days following written notice of
such alleged failure (but, in the case of failure to deliver Common Stock
without legend, not more than thirteen (13) business days following the
Conversion Date);
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC") of the Registration
Statement (as defined in the Registration Rights Agreement) prior to December
15, 1998 or such Registration Statement lapses in effect (or sales otherwise
cannot be made thereunder, whether by reason of the Company's failure to amend
or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise) for more than forty-five (45)
consecutive days or seventy-five (75) days in any twelve (12) month period after
such Registration Statement becomes effective;
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(iii) The Corporation shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Corporation or any material subsidiary of the Corporation and such proceeding
shall be unstayed and in effect for a period of thirty (30) consecutive days;
(v) The Corporation shall fail to maintain the
listing of the Common Stock on the Nasdaq National Market ("Nasdaq"), the Nasdaq
SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX") and such failure shall remain uncured for at
least ten (10) business days; or
(vi) Jack Aronowitz breaches any provision of that
certain letter agreement dated May 18, 1998 between Jack Aronowitz and the Buyer
of Series A Preferred Stock under the Purchase Agreement; or an aggregate of
1,000,000 (to be adjusted in the event of a stock split, dividend or other
similar transaction) or more shares of Common Stock owned, directly or
indirectly, by Jack Aronowitz which are subject to any pledge agreement, placed
in a margin account or subject to any similar arrangement, are sold by the
pledgee or such pledgee's assignee or other person with an interest in such
pledged or margined shares,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii), (v) or (vi) at the option
of the holders of a majority in interest of the then outstanding shares of
Series A Preferred Stock by written notice (the "Mandatory Redemption Notice")
to the Corporation of such Mandatory Redemption Event, or upon the occurrence of
any Mandatory Redemption Event specified in subparagraphs (iii) or (iv), the
Corporation shall purchase each holder's shares of Series A Preferred Stock for
an amount per share equal to the greater of (1) 120% multiplied by the sum of
(a) the Stated Value of the shares to be redeemed plus (b) an amount equal to
six percent (6%) per annum of such Stated Value for the period beginning on the
Issue Date and ending on the date of payment of the Mandatory Redemption Amount
(the "Mandatory Redemption Date"), and (2) the "parity value" of the shares to
be redeemed, where parity value means the product of (a) the number of shares of
Common Stock issuable upon conversion of such shares in accordance with Article
VI below (without giving any effect to any limitations or conversions of shares
set forth in Article VI.A(b) below, and treating the Trading Day (as defined in
Article VI.B.) immediately preceding the Mandatory Redemption Date as the
"Conversion Date" (as defined in Article VI.B(a)) unless the Mandatory
Redemption Event arises as a result of a breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the Conversion
Date), multiplied by (b) the Closing Price (as defined in Article VI.A(b)) for
the Common Stock on such "Conversion Date" (the greater of such amounts being
referred to as the "Mandatory Redemption Amount").
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In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
five (5) business days of written notice that such amount is due and payable,
then (assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series A Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, to require the
Corporation, upon written notice, to immediately issue (in accordance with and
subject to the terms of Article VI below), in lieu of the Mandatory Redemption
Amount, with respect to each outstanding share of Series A Preferred Stock held
by such holder, the number of shares of Common Stock of the Corporation equal to
the Mandatory Redemption Amount divided by the Conversion Price then in effect.
B. If the Series A Preferred Stock ceases to be convertible as
a result of the limitations described in the second paragraph of Article VI.A
below (a "19.99% Redemption Event"), and the Corporation has not prior to, or
within thirty (30) days of, the date that such 19.99% Redemption Event arises,
(i) obtained approval of the issuance of the additional shares of Common Stock
by the requisite vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
A Preferred Stock that were issued upon conversion of Series A Preferred Stock)
or (ii) received other permission pursuant to the Nasdaq National Market Rule
4460(i) allowing the Corporation to resume issuances of shares of Common Stock
upon conversion of Series A Preferred Stock, then the Corporation shall be
obligated to redeem immediately all of the then outstanding Series A Preferred
Stock, in accordance with this Article V.B. An irrevocable Redemption Notice
shall be delivered promptly to the holders of Series A Preferred Stock at their
registered address appearing on the records of the Corporation and shall state
(1) that 19.99% of the Outstanding Common Amount (as defined in Article VI.A)
has been issued upon exercise of the Series A Preferred Stock, (2) that the
Corporation is obligated to redeem all of the outstanding Series A Preferred
Stock and (3) the Mandatory Redemption Date, which shall be a date within five
(5) business days of the date of the Redemption Notice. On the Mandatory
Redemption Date, the Corporation shall make payment of the Mandatory Redemption
Amount (as defined in Article V.A. above) in cash.
C. Notwithstanding anything to the contrary contained in this
Article V, beginning on the one year anniversary date of the effectiveness with
the SEC of the Registration Statement (as defined in the Registration Rights
Agreement), so long as (i) no Mandatory Redemption Event shall have occurred and
be continuing, (ii) the Registration Statement is then in effect and has been in
effect and sales can be made thereunder for at least twenty (20) days prior to
the Optional Redemption Date (as defined below) and (iii) the Closing Price (as
defined in Article VI.A(b) below) for Common Stock is greater than 150% of the
Fixed Conversion Price (as defined in Article VI.A.(b) below) for a period of at
least ten (10) consecutive Trading Days, then the Corporation shall have the
right, exercisable on not less than five (5) Trading Days prior written notice
to the holders of Series A Preferred Stock (which notice may not be sent to the
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holders of the Series A Preferred Stock until the Corporation is permitted to
redeem the Series A Preferred Stock pursuant to this Article V.C.), to redeem
all of the outstanding shares of Series A Preferred Stock in accordance with
this Article V. Any notice of redemption hereunder (an "Optional Redemption")
shall be delivered to the holders of Series A Preferred Stock at their
registered addresses appearing on the books and records of the Corporation and
shall state (1) that the Corporation is exercising its right to redeem all of
the outstanding shares of Series A Preferred Stock issued on the Issue Date and
(2) the date of redemption (the "Optional Redemption Notice"). On the date fixed
for redemption (the "Optional Redemption Date"), the Corporation shall make
payment of the Optional Redemption Amount (as defined below) to or upon the
order of the holders as specified by the holders in writing to the Corporation
at least one (1) business day prior to the Optional Redemption Date. If the
Corporation exercises its right to redeem the Series A Preferred Stock, the
Corporation shall make payment to the holders of an amount in cash (the
"Optional Redemption Amount") equal to 115% multiplied by the sum of (i) the
Stated Value of the shares of Series A Preferred Stock to be redeemed and (ii)
an amount equal to six percent (6%) per annum of such Stated Value for the
period beginning on the Issue Date and ending on the Optional Redemption Date,
for each share of Series A Preferred Stock then held. Notwithstanding notice of
an Optional Redemption, the holders shall at all times prior to the Optional
Redemption Date maintain the right to convert all or any shares of Series A
Preferred Stock in accordance with Article VI and any shares of Series A
Preferred Stock so converted after receipt of an Optional Redemption Notice and
prior to the Optional Redemption Date set forth in such notice and payment of
the aggregate Optional Redemption Amount shall be deducted from the shares of
Series A Preferred Stock which are otherwise subject to redemption pursuant to
such notice.
From time to time following the Issue Date, the holders may
request advance notice as to whether the Corporation intends to redeem the
shares of Series A Preferred Stock. Such request shall be made in writing and
the Corporation shall respond in writing as promptly as practicable but prior to
5:00 p.m. Eastern Standard Time one (1) business day after receipt of the
request. The Corporation will be bound by such response for a period of twenty
(20) Trading Days (the "Term") from the date of its response. A failure to
respond within one (1) business day shall be deemed to be an election not to
redeem the Series A Preferred Stock during the Term. The holders may not request
such notice in the event that the Corporation files a registration statement
where the use of proceeds set forth in such registration statement are
identified for purposes of redemption of the outstanding Series A Preferred
Stock.
VI. Conversion at the Option of the Holder
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A. (a) Each holder of shares of Series A Preferred Stock may,
at its option at any time and from time to time, upon surrender of the
certificates therefor, convert any or all of its shares of Series A Preferred
Stock into Common Stock as follows (an "Optional Conversion"). Each share of
Series A Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (1) the sum
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of (a) the Stated Value thereof plus (b) the Premium Amount (as defined below),
by (2) the then effective Conversion Price (as defined in Article VI.B.(a)
below); provided, however, that no holder of shares of Series A Preferred Stock
may convert any or all or of its shares of Series A Preferred Stock into Common
Stock prior to October 18, 1998, except for conversions (i) at the Fixed
Conversion Price (as defined in Article VI.B.(a) below), (ii) on a Conversion
Date (as defined in Article VI.B.(a) below) occurring on or after the date of a
public announcement by the Corporation that the Corporation intends to
consolidate or merge with any other corporation (other than a merger in which
the Corporation is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of the
Corporation or other similar transaction, (iii) on a Conversion Date (as defined
in Article VI.B.(a) below) occurring on or after a date on which any person,
group or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the Corporation's Board of
Directors by waging a proxy battle or otherwise, or (iv) on a Conversion Date
(as defined in Article VI.B.(a) below) occurring on or after the date of a
material adverse change in the Corporation's business or financial condition,
taken as a whole, provided, further, however, that, unless the holder delivers a
waiver in accordance with the immediately following sentence, in no event (other
than pursuant to the Automatic Conversion (as defined herein)) shall a holder of
shares of Series A Preferred Stock be entitled to convert any such shares in
excess of that number of shares upon conversion of which the sum of (x) the
number of shares of Common Stock beneficially owned by the holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the shares of Series A
Preferred Stock) and (y) the number of shares of Common Stock issuable upon the
conversion of the shares of Series A Preferred Stock with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by a holder and such holder's affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, (i) beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(x) of such proviso and (ii) a holder may waive the limitations set forth
therein by written notice to the Corporation upon not less than sixty-one (61)
days prior written notice (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period). The "Premium Amount" means
the product of the Stated Value, multiplied by .06, multiplied by (N/365), where
"N" equals the number of days elapsed from the Issue Date to and including the
Conversion Date.
(b) If on the Conversion Date, the Closing Price (as
defined below) is below 70% of the average Closing Bid Prices (as defined in
Article VI.B.(a) below) for the five (5) consecutive Trading Days ending one day
prior to the Issue Date, then the Corporation may, at its option (i) redeem in
cash (a "Cash Redemption") the Series A Preferred Stock submitted for conversion
for an amount equal to the number of shares of Common Stock that the Corporation
would have issued had it not opted for the Cash Redemption multiplied by the
Redemption Market Price (as defined below), or (ii) redeem shares of Series A
Preferred Stock by issuing a
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Convertible Note, in the principal amount equal to 115% of the amount payable in
a Cash Redemption, bearing interest at the rate of 10% per annum and otherwise
in the form attached as Exhibit E to the Purchase Agreement (the "Redemption
Note"), provided that the Corporation has sufficient shares of Common Stock
authorized and reserved to cover the full conversion thereof and the
Registration Statement covering the shares of Common Stock issuable pursuant to
the Redemption Note is effective. At any time, and from time to time, each
holder of Series A Preferred Stock shall have the right to receive, upon such
holder's written request, notice from the Corporation (a "Requested Notice") as
to whether the Corporation will redeem a specified number of shares of the
Series A Preferred Stock by issuing Common Stock, making a Cash Redemption or
issuing a Redemption Note. The Corporation shall be obligated to comply with the
method of redemption set forth in the Requested Notice for such number of shares
of Series A Preferred Stock as set forth in such Requested Notice for a period
of thirty (30) Trading Days (as defined below). The Requested Notice shall be
issued within two (2) business days of receipt of the holder's written request.
A failure to timely issue a Requested Notice shall be deemed to be an election
to issue Common Stock. The "Redemption Market Price" equals the Closing Price on
the Conversion Date. "Closing Price," as of any date, means the last sale price
of the Common Stock on the Nasdaq National Market as reported by Bloomberg
Financial Markets or an equivalent reliable reporting service mutually
acceptable to and hereafter designated by the holders of a majority in interest
of the shares of Series A Preferred Stock and the Corporation ("Bloomberg") or,
if the Nasdaq National Market is not the principal trading market for such
security, the last sale price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last sale price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no last sale price of such
security or in the over-the-counter market on the electronic bulletin board for
such security in any of the foregoing manners the average of the bid prices of
any market makers for such or security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Price cannot be calculated for
such security on such date in the manner provided above, the Closing Price shall
be the fair market value as mutually determined by the Corporation and the
holders of a majority in interest of shares of Series A Preferred Stock being
converted for which the calculation of the Closing Price is required in order to
determine the Conversion Price of such Series A Preferred Stock.
(c) So long as the Common Stock is listed for trading
on the Nasdaq National Market or an exchange or quotation system with a rule
substantially similar to Rule 4460(i) then, notwithstanding anything to the
contrary contained herein if, at any time, the aggregate number of shares of
Common Stock then issued upon conversion of the Series A Preferred Stock
(including any shares of capital stock or rights to acquire shares of capital
stock issued by the Corporation which are aggregated or integrated with the
Common Stock issued or issuable upon conversion of the Series A Preferred Stock
for purposes of such rule) equals 19.99% of the "Outstanding Common Amount" (as
hereinafter defined), the Series A Preferred Stock shall, from that time
forward, cease to be convertible into Common Stock in accordance with the terms
of this Article VI and Article VII below, unless the Corporation (i) has
obtained
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approval of the issuance of the Common Stock upon conversion of the Series A
Preferred Stock by a majority of the total votes cast on such proposal, in
person or by proxy, by the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
A Preferred Stock that were issued upon conversion of Series A Preferred Stock),
or (ii) shall have otherwise obtained permission to allow such issuances from
the Nasdaq National Market in accordance with the Nasdaq National Market Rule
4460(i). If the Corporation's Common Stock is not then listed on the Nasdaq
National Market or an exchange or quotation system that has a rule substantially
similar to Rule 4460(i), the limitations set forth herein shall be inapplicable
and of no force and effect. For purposes of this paragraph, "Outstanding Common
Amount" means (i) the number of shares of the Common Stock outstanding on the
date of issuance of the Series A Preferred Stock pursuant to the Purchase
Agreement plus (ii) any additional shares of Common Stock issued thereafter in
respect of such shares pursuant to a stock dividend, stock split or similar
event. The maximum number of shares of Common Stock issuable as a result of the
19.99% limitation set forth herein is hereinafter referred to as the "Maximum
Share Amount." With respect to each holder of Series A Preferred Stock, the
Maximum Share Amount shall refer to such holder's pro rata share thereof
determined in accordance with Article X below. In the event that the Corporation
obtains Stockholder Approval or the approval of the Nasdaq National Market, by
reason of the inapplicability of the rules of the Nasdaq National Market or
otherwise and concludes that it is able to increase the number of shares to be
issued above the Maximum Share Amount (such increased number being the "New
Maximum Share Amount"), the references to Maximum Share Amount, above, shall be
deemed to be, instead, references to the greater New Maximum Share Amount. In
the event that Stockholder Approval is not obtained, there are insufficient
reserved or authorized shares or a registration statement covering the
additional shares of Common Stock which constitute the New Maximum Share Amount
is not effective prior to the Maximum Share Amount being issued (if such
registration statement is necessary to allow for the public resale of such
securities), the Maximum Share Amount shall remain unchanged; provided, however,
that the Holder may grant an extension to obtain a sufficient reserved or
authorized amount of shares or of the effective date of such registration
statement. In the event that (a) the aggregate number of shares of Common Stock
issued pursuant to the outstanding Series A Preferred Stock represents at least
twenty percent (20%) of the Maximum Share Amount and (b) the sum of (x) the
aggregate number of shares of Common Stock then issued upon conversion of Series
A Preferred Stock plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of Series A Preferred Stock, represents at least
one hundred percent (100%) of the Maximum Share Amount (the "Triggering Event"),
the Corporation will use its best efforts to seek and obtain Stockholder
Approval (or obtain such other relief as will allow conversions hereunder in
excess of the Maximum Share Amount) as soon as practicable following the
Triggering Event and before the Mandatory Redemption Date.
B. The "Conversion Price" shall be the lesser of (i) the
Applicable Percentage (as defined herein) of the Market Price (as defined
herein) and (ii) the Fixed Conversion Price (as defined herein), subject to
adjustments pursuant to the provisions of Article VI.C below. The
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Applicable Percentage means 92%, unless on the Conversion Date the Closing Bid
Price is below 70% of the Average Closing Bid Prices for the five (5)
consecutive Trading Days ending one day prior to the Issue Date, in which case
the Applicable Percentage shall be one hundred fifteen percent (115%) of the
Market Price. "Market Price" shall mean the average Closing Bid Prices for any
five (5) consecutive Trading Days (the "Market Price Days"), during the thirty
(30) Trading Day period ending one (1) Trading Day prior to the date (the
"Conversion Date") the Conversion Notice is sent by a holder to the Corporation
via facsimile (the "Pricing Period"). On the Conversion Date, the converting
holder shall select the Market Price Days from the Trading Days comprising the
Pricing Period, and such selection shall be indicated in the Notice of
Conversion. "Fixed Conversion Price" shall mean $11.89. "Closing Bid Price"
means, for any security as of any date, the closing bid price on the Nasdaq
National Market as reported by Bloomberg or, if the Nasdaq National Market is
not the principal trading market for such security, the closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the closing bid price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price of such security in the over-the-counter market on the
electronic bulletin board for such security or in any of the foregoing manners,
the average of the bid prices of any market makers for such security or as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date in the
manner provided above, the Closing Bid Price shall be the fair market value as
mutually determined by the Corporation and the holders of a majority in interest
of shares of Series A Preferred Stock being converted for which the calculation
of the Closing Bid Price is required in order to determine the Conversion Price
of such Series A Preferred Stock. "Trading Day" shall mean any day on which the
Common Stock is traded for any period on the Nasdaq National Market, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
C. The Conversion Price shall be subject to adjustment
from time to time as follows:
(a) Adjustment to Conversion Price Due to Stock
Split, Stock Dividend, Etc. If at any time when Series A Preferred Stock is
issued and outstanding, the number of outstanding shares of Common Stock is
increased or decreased by a stock split, stock dividend, combination,
reclassification, rights offering below the Trading Price (as defined below) to
all holders of Common Stock or other similar event, which event shall have taken
place during the reference period for determination of the Conversion Price for
any Optional Conversion or Automatic Conversion of the Series A Preferred Stock,
then the Conversion Price shall be calculated giving appropriate effect to the
stock split, stock dividend, combination, reclassification or other similar
event. In such event, the Corporation shall notify the Transfer Agent of such
change on or before the effective date thereof.
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(b) Adjustment Due to Merger, Consolidation, Etc. If,
at any time when Series A Preferred Stock is issued and outstanding and prior to
the conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation, then the holders of Series A Preferred Stock shall thereafter have
the right to receive upon conversion of the Series A Preferred Stock, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the holders of Series A Preferred Stock would
have been entitled to receive in such transaction had the Series A Preferred
Stock been converted in full (without regard to any limitations on conversion
contained herein) immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares of Common Stock issuable upon conversion of
the Series A Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities or assets thereafter deliverable
upon the conversion of Series A Preferred Stock. The Corporation shall not
effect any transaction described in this subsection (b) unless (a) it first
gives prior written notice to the holders of Series A Preferred Stock, at the
same time and in the same form that the Corporation gives such notice to its
holders of Common Stock then outstanding, of such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the holders of Series A Preferred Stock shall
be entitled to convert the Series A Preferred Stock) and (b) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of this subsection (b). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.
(c) Adjustment Due to Distribution. Subject to
Article III, if the Corporation shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Corporation's shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the holders of Series A Preferred Stock
shall be entitled, upon any conversion of shares of Series A Preferred Stock
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to the holder with respect to the shares of Common Stock issuable upon such
conversion had such holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.
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(d) Purchase Rights. Subject to Article III, if at
any time when any Series A Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the holders of Series A
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series A Preferred Stock (without regard to any
limitations on conversion contained herein) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e) Adjustment for Restricted Periods. In the event
that (1) the Corporation fails to obtain effectiveness with the Securities and
Exchange Commission of the Registration Statement (as defined in the
Registration Rights Agreement) prior to one hundred twenty (120) days following
the Issue Date, or (2) such Registration Statement lapses in effect, or sales
otherwise cannot be made thereunder, whether by reason of the Corporation's
failure or inability to amend or supplement the prospectus (the "Prospectus")
included therein in accordance with the Registration Rights Agreement or
otherwise, after such Registration Statement becomes effective (including,
without limitation, during an Allowed Delay (as defined in Section 3(f) of the
Registration Rights Agreement), then the Pricing Period shall be comprised of,
(i) in the case of an event described in clause (1), the thirty (30) Trading
Days preceding the 120th day following the Issue Date plus all Trading Days
through and including the third Trading Day following the date of effectiveness
of the Registration Statement; and (ii) in the case of an event described in
clause (2), the number of Trading Days preceding the date on which the holder of
the Series A Preferred Stock is first notified (or otherwise reasonably
determines) that sales may not be made under the Prospectus that would otherwise
then be included in the Pricing Period in accordance with the definition thereof
set forth in Article VI.B(a), plus all Trading Days through and including the
third Trading Day following the date on which the Holder is first notified that
such sales may again be made under the Prospectus. If a holder of Series A
Preferred Stock determines that sales may not be made pursuant to the Prospectus
(whether by reason of the Corporation's failure or inability to amend or
supplement the Prospectus) it shall so notify the Corporation in writing and,
unless the Corporation provides such holder with a written opinion of the
Corporation's counsel to the contrary, such determination shall be binding for
purposes of this paragraph.
(f) Notice of Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this Article
VI.C, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series A Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any,
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of other securities or property which at the time would be received upon
conversion of a share of Series A Preferred Stock.
D. For purposes of Article VI.C(a) above, "Trading Price,"
which shall be measured as of the record date in respect of the rights offering
means (i) the average of the last reported sale prices for the shares of Common
Stock on the Nasdaq National Market as reported by Bloomberg, as applicable, for
the five (5) Trading Days immediately preceding such date, or (ii) if the Nasdaq
National Market is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Trading Price shall be the fair market value as reasonably
determined in good faith by (a) the Board of Directors of the Corporation or,
(b) at the option of a majority-in-interest of the holders of the outstanding
Series A Preferred Stock by an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the Corporation.
E. In order to convert Series A Preferred Stock into full
shares of Common Stock, a holder of Series A Preferred Stock shall: (i) submit a
copy of the fully executed notice of conversion in the form attached hereto as
Exhibit A ("Notice of Conversion") to the Corporation by facsimile dispatched on
the Conversion Date (or by other means resulting in notice to the Corporation on
the Conversion Date) at the office of the Corporation or its designated Transfer
Agent for the Series A Preferred Stock that the holder elects to convert the
same, which notice shall specify the number of shares of Series A Preferred
Stock to be converted, the applicable Conversion Price and a calculation of the
number of shares of Common Stock issuable upon such conversion (together with a
copy of the first page of each certificate to be converted) prior to Midnight,
New York City time (the "Conversion Notice Deadline") on the date of conversion
specified on the Notice of Conversion; and (ii) surrender the original
certificates representing the Series A Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice
of Conversion to the office of the Corporation or the Transfer Agent for the
Series A Preferred Stock as soon as practicable thereafter. The Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
Certificates are delivered to the Company or its Transfer Agent as provided
above, or the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within two (2) business days of receipt of the Notice of
Conversion. The accountant shall audit the calculations and notify the
Corporation and the holder of the results no later than 48 hours from the time
it receives the disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
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(a) Lost or Stolen Certificates. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series A Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion. Upon
the surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (a) above)
(the "Delivery Period"), deliver (or cause its Transfer Agent to so issue and
deliver) to or upon the order of the holder (i) that number of shares of Common
Stock for the portion of the shares of Series A Preferred Stock converted as
shall be determined in accordance herewith and (ii) a certificate representing
the balance of the shares of Series A Preferred Stock not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Corporation shall pay to a holder $1,000 per day in
cash for each day beyond a three (3) day grace period following the Delivery
Period that the Corporation fails to deliver Common Stock (a "Conversion
Default") issuable upon surrender of shares of Series A Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock (the "Conversion Default Payments"). Such cash amount shall be paid
to such holder by the fifth day of the month following the month in which it has
accrued or, at the option of the holder (by written notice to the Corporation by
the first day of the month following the month in which it has accrued), shall
be convertible into Common Stock in accordance with the terms of this Article
VI.
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer Agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A. and in this Article
VI.E., the Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of Series
A Preferred Stock would result in a fractional share of Common Stock or the
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon Conversion
of the Series A Preferred Stock shall be the next higher number of shares.
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(d) Conversion Date. The "Conversion Date" shall be
the date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in notice) to
the Corporation or its Transfer Agent before Midnight, New York City time, on
the Conversion Date. The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion Date and all
rights with respect to the shares of Series A Preferred Stock surrendered shall
forthwith terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion and except that the
holders preferential rights as a holder of Series A Preferred Stock shall
survive to the extent the corporation fails to deliver such securities.
F. A number of shares of the authorized but unissued Common
Stock sufficient to provide for the conversion of the Series A Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series A Preferred Stock, 3,406,045
authorized and unissued shares of Common Stock have been duly reserved for
issuance upon conversion of the Series A Preferred Stock (the "Reserved
Amount"). The Reserved Amount shall be increased from time to time in accordance
with the Company's obligations pursuant to Section 4(h) of the Purchase
Agreement. In addition, if the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Series A Preferred Stock shall be
convertible at the then current Conversion Price, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series A Preferred Stock.
If at any time a holder of shares of Series A Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series A
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series A Preferred
Stock included in the Notice of Conversion which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof until (and at
the holder's option at any time after) the date additional shares of Common
Stock are authorized by the Corporation to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date elected by the holder in respect
thereof. The Corporation shall use its best efforts to effect an
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increase in the authorized number of shares of Common Stock as soon as possible
following a Conversion Default. In addition, the Corporation shall pay to the
holder payments ("Conversion Default Payments") for a Conversion Default in the
amount of (a) (N/365), multiplied by (b) the sum of the Stated Value plus the
Premium Amount per share of Series A Preferred Stock through the Authorization
Date (as defined below), multiplied by (c) the Excess Amount on the day the
holder submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date"), multiplied by (d) .24, where (i) N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Corporation authorizes a sufficient number of shares of Common Stock to
effect conversion of the full number of shares of Series A Preferred Stock. The
Corporation shall send notice to the holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of holder's
accrued Conversion Default Payments. The accrued Conversion Default Payment for
each calendar month shall be paid in cash or shall be convertible into Common
Stock at the Conversion Price, at the holder's option, as follows:
(a) In the event the holder elects to take such
payment in cash, cash payment shall be made to holder by the fifth day of the
month following the month in which it has accrued; and
(b) In the event the holder elects to take such
payment in Common Stock, the holder may convert such payment amount into Common
Stock at the Conversion Price (as in effect at the time of Conversion) at any
time after the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article VI (so long as there is
then a sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Article VI, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series A Preferred Stock.
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H. Upon submission of a Notice of Conversion by a holder of
Series A Preferred Stock, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such holder's
allocated portion of the Reserved Amount) shall be deemed converted into shares
of Common Stock and (ii) the holder's rights as a holder of such converted
shares of Series A Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of these
Articles of Amendment. Notwithstanding the foregoing, if a holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of shares of Series A Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series A Preferred Stock with respect to such unconverted shares
of Series A Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series A Preferred Stock to the holder or, if
such shares of Series A Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Series A Preferred Stock have not been
converted. In all cases, the holder shall retain all of its rights and remedies
(including, without limitation, the right to receive Conversion Default Payments
pursuant to Article IV.E. to the extent required thereby for such Conversion
Default and any subsequent Conversion Default).
VII. Automatic Conversion
--------------------
So long as the Registration Statement is effective and there
is not then a continuing Mandatory Redemption Event, each share of Series A
Preferred Stock issued and outstanding on May 18, 2003 (the "Automatic
Conversion Date"), automatically shall be converted into shares of Common Stock
on such date at the then effective Conversion Price in accordance with, and
subject to, the provisions of Article VI hereof (the "Automatic Conversion").
The Automatic Conversion Date shall be delayed by one (1) Trading Day each for
each Trading Day occurring prior thereto and prior to the full conversion of the
Series A Preferred Stock that (i) sales cannot be made pursuant to the
Registration Statement (whether by reason of the Company's failure to properly
supplement or amend the prospectus included therein in accordance with the terms
of the Registration Rights Agreement or otherwise including any Allowed Delays
(as defined in Section 2(f) of the Registration Rights Agreement) but not due
solely to the fault of the holder) or (ii) any Default Event (as defined in
Article V.A.) exists, without regard to whether any cure periods shall have run.
The Automatic Conversion Date shall be the Conversion Date for purposes of
determining the Conversion Price and the time within which certificates
representing the Common Stock must be delivered to the holder.
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VIII. Voting Rights
-------------
The holders of the Series A Preferred Stock have no voting
power whatsoever, except as otherwise provided by the FBCA, in this Article
VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each
holder of Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the FBCA the vote of the holders of
the Series A Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series A Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series A
Preferred Stock (except as otherwise may be required under the FBCA) shall
constitute the approval of such action by the class. To the extent that under
the FBCA holders of the Series A Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series A Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series A Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the FBCA.
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IX. Protective Provisions
---------------------
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the FBCA) of the holders of at least a majority
of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the Series A Preferred Stock or any Senior Securities so as to
affect adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock
having a preference over the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Senior Securities");
(c) create any new class or series of capital stock
ranking pari passu with the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Pari Passu Securities");
(d) increase the authorized number of shares of
Series A Preferred Stock; or
(e) intentionally do any act or thing not authorized
or contemplated by these Articles of Amendment which would result in taxation of
the holders of shares of the Series A Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least a majority of the then
outstanding shares of Series A Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series A
Preferred Stock, pursuant to subsection (a) above, so as to affect the Series A
Preferred Stock, then the Corporation will deliver notice of such approved
change to the holders of the Series A Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to the terms
of these Articles of Amendment as they exist prior to such alteration or change
or continue to hold their shares of Series A Preferred Stock.
X. Pro Rata Allocations
--------------------
The Maximum Share Amount and the Reserved Amount (including
any increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series A Preferred Stock based on the number of shares of Series A
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series A Preferred Stock then outstanding.
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IN WITNESS WHEREOF, these Articles of Amendment is executed on
behalf of the Corporation this 18th day of May, 1998.
TECHNICAL CHEMICALS AND
PRODUCTS, INC.
By:_______________________
Name:
Title:
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series A Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of _______________________ (the "Corporation") according to the
conditions of the Articles of Amendment of Series A Preferred Stock, as of the
date written below. If securities are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any. A
copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series A Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an exemption from registration under the Act.
Date of Conversion:___________________________
Market Price Days:_____________________________
Applicable Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be
<PAGE>
converted, and shall make payments pursuant to the Articles of Amendment for the
number of business days such issuance and delivery is late.
EXHIBIT 4.1
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS
OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF MAY
18, 1998, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. ANY
SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
Right to
Purchase
150,000
Shares of
Common
Stock, par
value $.001 per
share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC International Investors,
LDC or its registered assigns, is entitled to purchase from Technical Chemicals
and Products, Inc., a Florida corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2 hereof, One Hundred
Fifty Thousand (150,000) fully paid and nonassessable shares of the Company's
Common Stock, par value $.001 per share (the "Common Stock"), at an exercise
price of $11.89 per share (the "Exercise Price"). The term "Warrant Shares," as
used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The term Warrants means this Warrant and the other warrants
issued pursuant to that certain Securities Purchase Agreement, dated May 18,
1998, by and among the Company and the Buyers listed on the execution page
thereof (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto
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<PAGE>
(the "Exercise Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or such other office
or agency of the Company as it may designate by notice to the holder hereof),
and upon (i) payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise Price for the
Warrant Shares as determined hereunder and specified in the Exercise Agreement
or (ii) if the resale of the Warrant Shares by the holder is not then registered
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), delivery to the Company of a written
notice of an election to effect a "Cashless Exercise" (as defined in Section
11(c) below) for the Warrant Shares specified in the Exercise Agreement. The
Warrant Shares so purchased shall be deemed to be issued to the holder hereof or
such holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
Notwithstanding anything in this Warrant to the contrary, in
no event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted shares of Series A Preferred Stock (as
defined in the Securities Purchase Agreement)) and (ii) the number of shares of
Common Stock issuable upon exercise of the Warrants (or portions thereof) with
respect to which the determination described herein is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, (a) beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13D-G thereunder, except as otherwise provided in clause (i) hereof
and (b) the holder of this Warrant may waive the limitations set forth therein
by written notice to the Company upon not less than sixty-one (61) days prior
notice (with such waiver taking effect only upon the expiration of such 61-day
notice period).
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 5:00 p.m.,
New York City time on the fifth anniversary of the date of issuance (the
"Exercise Period").
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<PAGE>
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a suf ficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter 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 by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
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<PAGE>
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock (other than shares
issued or sold pursuant to the Company's employee benefit plans, in an
underwritten public offering or in connection with a business acquisition) for
no consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Market Price (as hereinafter defined) on the
date of issuance (a "Dilutive Issuance"), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon
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<PAGE>
the actual issuance of such Common Stock upon the exercise of such Options or
upon the conversion or exchange of Convertible Securities issuable upon exercise
of such Options.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
the purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such conversion or exchange" is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect will be readjusted to the
Exercise Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before
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<PAGE>
deduction of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Company in connection with
such issuance, grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall be
other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are issued
in connection with any acquisition, merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good faith by
the Board of Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance,
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<PAGE>
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(f) Distribution of Assets. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
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(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) Certain Events. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
maximum total
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number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock on the
Nasdaq National Market ("Nasdaq") for the five (5) trading days immediately
preceding such date as reported by Bloomberg, L.P. ("Bloomberg"), or (ii) if
Nasdaq is not the principal trading market for the shares of Common Stock, the
average of the last reported sale prices on the principal trading market for the
Common Stock during the same period as reported by Bloomberg, or (iii) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Market Price shall be the fair market value as reasonably determined in good
faith by (a) the Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph
4, includes the Common Stock, par value $.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only shares of Common Stock, par value $.001 per
share, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or other securities or
property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred
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to in Paragraph 7(e) below, provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 7(f) hereof and to the
applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
May 18, 1998, by and among the Company and the other signatories thereto (the
"Registration Rights Agreement") and the Securities Purchase Agreement.
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company,
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<PAGE>
to the effect that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act and (iv) an appropriate legend, if
required, being placed on the Warrant Shares. The first holder of this Warrant,
by taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the distribution
thereof.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 3341 S.W. 15th Street,
Pompano Beach, Florida 33069 Attention: Chief Executive Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
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<PAGE>
(b) Descriptive Headings. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) Cashless Exercise. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act at a time when such registration is required to be in
effect pursuant to the Registration Rights Agreement, this Warrant may be
exercised by presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder's intention to
effect a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms hereof
(a "Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying
the Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
TECHNICAL CHEMICALS AND PRODUCTS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Dated as of May 18, 1998
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<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To: Technical Chemicals and Products, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name: ___________________________________
Signature: ___________________________________
Address: ___________________________________
___________________________________
Note: The above signature should correspond exactly
with the name on the face of the within
Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints _____________________________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name: ___________________________________
Signature: ___________________________________
Title of Signing Officer or Agent (if any):
___________________________________
Address: ___________________________________
___________________________________
Note: The above signature should correspond exactly
with the name on the face of the within
Warrant.
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May 18,
1998, by and among Technical Chemicals and Products, Inc., a Florida
corporation, with headquarters located at 3341 S.W. 15th Street, Pompano Beach,
Florida 33069 ("Company"), and each of the purchasers set forth on the signature
pages hereto (the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Company has authorized a new series of preferred stock,
designated as Series A Convertible Preferred Stock (the "Preferred Stock"),
having the rights, preferences and privileges set forth in the Articles of
Amendment attached hereto as Exhibit "A" (the "Articles of Amendment");
C. The Preferred Stock is convertible into shares of common stock,
$.001 par value per share, of the Company (the "Common Stock"), upon the terms
and subject to the limitations and conditions set forth in the Articles of
Amendment;
D. The Company has authorized the issuance to the Buyers of warrants,
in the form attached hereto as Exhibit "B", to purchase one hundred fifty
thousand (150,000) shares of Common Stock (the "Warrants");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Fifteen Thousand (15,000) shares of Preferred Stock, and (ii)
Warrants to purchase One Hundred Fifty Thousand (150,000) shares of Common
Stock, for an aggregate purchase price of Fifteen Million Dollars ($15,000,000).
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of shares of Preferred Stock and number of
Warrants as is set forth immediately below its name on the signature pages
hereto;
<PAGE>
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit "C" (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws; and
NOW THEREFORE, the Company and each of the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
--------------------------------------------------
a. Purchase of Preferred Shares and Warrants. The
Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such number of shares of Series A Preferred Stock
(collectively, together with any Preferred Stock issued in replacement thereof
or as a dividend thereon or otherwise with respect thereto in accordance with
the terms thereof, the "Preferred Shares") and number of Warrants for the
aggregate purchase price (the "Purchase Price") as is set forth immediately
below such Buyer's name on the signature pages hereto. The aggregate number of
Preferred Shares to be issued at the Closing (as defined below) is Fifteen
Thousand (15,000) and the aggregate number of Warrants to be issued at the
Closing is One Hundred Fifty Thousand (150,000), for an aggregate purchase price
of Fifteen Million Dollars ($15,000,000).
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares and
the Warrants to be issued and sold to it at the Closing (as defined below) by
wire transfer of immediately available funds to the Company, in accordance with
the Company's written wiring instructions, against delivery of duly executed
certificates representing such number of Preferred Shares and Warrants which
such Buyer is purchasing and (ii) the Company shall deliver such certificates
and Warrants duly executed on behalf of the Company, to the Buyer, against
delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares and the
Warrants pursuant to this Agreement (the "Closing Date") shall be 12:00 noon
Eastern Standard Time on May 18, 1998 or such other mutually agreed upon time.
The closing of the transactions contemplated by this Agreement (the "Closing")
shall occur on the Closing Date at such location as may be agreed to by the
parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company solely as to
such Buyer that:
a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Preferred Shares and the shares of Common Stock issuable
upon conversion thereof (the
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<PAGE>
"Conversion Shares") and the Warrants and the shares of Common Stock issuable
upon exercise thereof (the "Warrant Shares" and, collectively with the Preferred
Shares, Warrants and Conversion Shares, the "Securities") for its own account
for investment only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement thereunder, (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, (c) sold or transferred to an "affiliate" (as defined in Rule
144 promulgated under the 1933 Act (or a successor rule) ("Rule 144")) or (d)
sold pursuant to Rule 144; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not
3
<PAGE>
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or
an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act and such sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 under the 1933
Act (or a successor rule thereto) without any restriction as to the number of
Securities acquired as of a particular date that can then be immediately sold.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with the
prospectus delivery requirements, if any, as well as the other provisions of
this Agreement and the other agreements contemplated hereby. In addition, the
Buyer agrees that in the event that Buyer transfers any such Security issued
without a legend (electronically or otherwise) other than pursuant to a
registered public sale or Rule 144, the Buyer
4
<PAGE>
will, prior to such transfer and as a condition thereto, redeliver such Security
for appropriate certification and legending.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and
each of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on the business,
operations, assets or financial condition of the Company or its Subsidiaries, if
any, taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, 5% equity
or other ownership interest.
b. Authorization; Enforcement. (i) The Company has
all requisite corporate power and authority to file and perform its obligations
under the Articles of Amendment and to enter into and perform this Agreement,
the Registration Rights Agreement and the Warrants and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise
5
<PAGE>
thereof) have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly executed and
delivered and the Articles of Amendment has been duly filed by the Company, and
(iv) each of this Agreement and the Articles of Amendment constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement and
the Warrants, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 100,000,000 shares of
Common Stock of which 10,015,036 shares are issued and outstanding, 800,000
shares are reserved for issuance pursuant to the Company's stock option plans,
no shares are reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 3,406,045 shares are reserved for
issuance upon conversion of the Preferred Shares and exercise of the Warrants
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(h) below); and (ii) 25,000,000 shares of preferred stock, par value $.001 per
share, none of which shares are issued and outstanding. All of such outstanding
shares of capital stock are, or upon issuance will be, duly authorized, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in Schedule 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of its or their securities under the 1933 Act (except the
Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares, the Warrants, the Conversion Shares or Warrant
Shares. The Company has furnished to the Buyer true and correct copies of the
Company's Articles of Incorporation as in effect on the date hereof ("Articles
of Incorporation"), the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock of the Company and the material rights of the holders thereof in
respect thereto. The Company shall provide the Buyer with a written update of
this representation signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.
6
<PAGE>
d. Issuance of Shares. The Preferred Shares,
Conversion Shares and Warrant Shares are duly authorized and, upon issuance in
accordance with the terms of this Agreement (including the issuance of the
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Articles of Amendment and the Warrant Shares upon exercise of the Warrants in
accordance with the terms thereof) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company. The term Conversion Shares and Warrant
Shares includes the shares of Common Stock issuable upon conversion of the
Preferred Shares or exercise of the Warrants, including without limitation, such
additional shares, if any, as are issuable as a result of the events described
in Article VI.E(b) or Article VI.F of the Articles of Amendment, shares issuable
upon conversion of any Redemption Note(s) (as defined in Article VI.A.(b) of the
Articles of Amendment) and shares issuable pursuant to Section 2(c) of the
Registration Rights Agreement. A form of Redemption Note is attached hereto as
Exhibit "E". The Company understands and acknowledges the potentially dilutive
effect to the Common Stock upon the issuance of the Conversion Shares and
Warrant Shares upon conversion or exercise of the Preferred Shares or Warrants.
The Company further acknowledges that its obligation to issue Conversion Shares
and Warrant Shares upon conversion of the Preferred Shares or exercise of the
Warrants in accordance with this Agreement, the Articles of Amendment and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
e. No Conflicts. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the filing of
the Articles of Amendment and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) conflict with or result in a
violation of any provision of the Articles of Incorporation or By-laws or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or, to
the knowledge of the Company, result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor
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<PAGE>
any of its Subsidiaries has taken any action or failed to take any action that
would give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. To the knowledge of the Company, the businesses of the Company and its
Subsidiaries, if any, are not being conducted, and shall not be conducted so
long as a Buyer owns any of the Securities, in violation of any law, ordinance
or regulation of any governmental entity except where such violation would not
reasonably be expected to have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Nasdaq National Market ("Nasdaq") and does not reasonably
anticipate that the Common Stock will be delisted by the Nasdaq in the
foreseeable future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
f. SEC Documents, Financial Statements. Since March
31, 1996, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated
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financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to March 27, 1998 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
g. Absence of Certain Changes. Since March 27, 1998,
there has been no material adverse change and no material adverse development in
the assets, liabilities, business, properties, operations, financial condition
or results of operations of the Company or any of its Subsidiaries other than as
disclosed in the SEC Documents.
h. Absence of Litigation. Except as set forth on
Schedule 3(h) or in the SEC Documents, there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect. Schedule 3(h) contains a complete
list and summary description of any pending or threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to whether it
would have a Material Adverse Effect.
i. Patents, Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks, service
marks, service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated (and, except as
set forth in Schedule 3(i) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, except as set forth in Schedule 3(i)
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future); to the best of the Company's knowledge, the Company's
or its Subsidiaries, current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person.
The Company and each of its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of their Intellectual
Property.
j. Tax Status. Except as set forth on Schedule 3(j),
the Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns,
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reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
k. Certain Transactions. Except as set forth on
Schedule 3(k) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
l. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purposes that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
m. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
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contemplated hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
n. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The issuance
of the Securities to the Buyers will not be integrated with any other issuance
of the Company's securities (past, current or future) which requires stockholder
approval under the rules of The Nasdaq National Market.
o. No Brokers. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with those entities listed on Schedule
3(o), whose commissions and fees will be paid for by the Company.
p. Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted, the failure of which to
possess would not have a Material Adverse Effect (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Since March 27,
1998, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
q. Environmental Matters. Except as set forth in
Schedule 3(q), there are, to the Company's knowledge, with respect to the
Company or any of its Subsidiaries or any predecessor of the Company, no past or
present violations of Environmental Laws (as defined below), releases of any
material into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of
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1980 or similar federal, state, local or foreign laws and neither the Company
nor any of its Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's knowledge, threatened
in connection with any of the foregoing which could reasonably be expected to
have a Material Adverse Effect. The term "Environmental Laws" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
r. Title to Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except such as are described in
Schedule 3(r) or such as would not have a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
s. Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Except with respect to liability insurance
relating to weather conditions, neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
t. Internal Accounting Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
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u. Foreign Corrupt Practices. To the knowledge of the
Company, neither the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
4. COVENANTS.
---------
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the
proceeds from the sale of the Preferred Shares and the Warrants for the design
and construction of a manufacturing facility, equipment and machinery, working
capital and/or general corporate purposes. The Company shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its currently existing direct or indirect Subsidiaries).
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<PAGE>
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company will not, without the
prior written consent of a majority-in-interest of the Buyers, negotiate or
contract with any party to obtain additional equity financing (including debt
financing with an equity component) that involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance, (B) the issuance of convertible securities that are convertible into
an indeterminate number of shares of Common Stock or (C) the issuance of
warrants, other than warrants issued to a financial institution pursuant to a
bona fide lending arrangement, during the period (the "Lockup Period") beginning
on the Closing Date and ending on the One Hundred Eighty (180) days from the
date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any days in which sales cannot be made
thereunder). The foregoing limitations shall not apply to any transaction
involving (i) issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under the 1933
Act), (ii) issuances of securities as consideration for a merger, consolidation
or sale of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or license
by the Company or (iii) the issuance of warrants to purchase Preferred Stock to
those entities listed on Schedule 3(o) hereof in connection herewith and the
exercise of such warrants. The foregoing limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved by
a majority of the Company's disinterested directors.
f. Financial Information. The Company agrees to send
the following reports to each Buyer until such Buyer transfers, assigns, or
sells all of the Securities promptly upon request of such Buyer: (i) within ten
(10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
and (ii) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders. In addition, each Buyer
will receive copies of all press releases issued by the Company or any its
Subsidiaries contemporaneous with the distribution of such press releases to the
other recipients thereof.
g. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion or exercise
of the outstanding Preferred Shares and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion Price
of the Preferred Shares or Exercise Price of the Warrants in effect from time to
time). The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Preferred Shares and exercise of the
Warrants without
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the consent of each Buyer. The Company shall use its best efforts at all times
to maintain the number of shares of Common Stock so reserved for issuance at no
less than two (2) times the number that is then actually issuable upon full
conversion of the Preferred Shares and exercise of the Warrants (based on the
Conversion Price of the Preferred Shares or Exercise Price of the Warrants in
effect from time to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Conversion Shares
and Warrant Shares issued and issuable upon conversion of the Preferred Shares
and exercise of the Warrants (based on the Conversion Price of the Preferred
Shares or Exercise price of the Warrants then in effect), the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of
authorized shares, and using its best efforts to obtain shareholder approval of
an increase in such authorized number of shares.
h. Listing. The Company shall promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Preferred Shares or exercise of the Warrants. The Company
will use its best efforts to obtain and maintain the listing and trading of its
Common Stock on Nasdaq, the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New
York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from Nasdaq and any
other exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
i. Corporate Existence. So long as a Buyer
beneficially owns any Preferred Shares or Warrants, the Company shall maintain
its corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets where the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common Stock is listed
for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX. Notwithstanding the
foregoing, in the event of a transaction described in the preceding sentence of
this Section 4(i) in which the consideration paid to the shareholders of the
Company consists solely of cash, the Buyer shall be required, at its option, to
either (i) receive the payment pursuant to Articles IV.B and IV.C of the
Articles of Amendment or (ii) convert its previously unconverted shares of
Preferred Stock.
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j. No Integration. The Company will not conduct any
future offering that will be integrated with the issuance of the Securities
solely for purposes of Rule 4460(i) of the Nasdaq Stock Market.
k. Solvency. Other than as set forth in the SEC
Documents, the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most recent fiscal year
end and does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
m. Volume Limitations. The Buyers may not sell shares
of Common Stock, in the aggregate, in excess of the greater of (i) twenty-five
percent (25%) of the average weekly volume (calculated based on the five (5)
consecutive Trading Day period immediately prior to the date of any sale) in the
four (4) weeks immediately prior to the date of any sale and (ii) on any given
Trading Day, twenty percent (20%) of the volume on such day (such limitations
shall be collectively referred to as the "Volume Limitations").
n. Trading Restrictions. Each Buyer and its
affiliates covenants and agrees that, during any period during which a
Conversion Price (as defined in the Articles of Amendment) is computed, it will
conduct all transactions in the Common Stock in compliance with applicable
securities laws, will not directly or indirectly manipulate the trading price of
the Common Stock and will not directly or indirectly be responsible for the low
trading price of the Common Stock. In addition, each Buyer represents that it
has not been responsible for the low trading price of the Company's Common Stock
at any time prior to the execution of this Agreement.
o. Shareholder Approval. The Company agrees to call a
special meeting of the shareholders of the Company, and to use its best efforts
to occur no later than August 30, 1998, for the purpose of having such
shareholders approve the transactions contemplated herein for purposes of Nasdaq
Rule 4460(i), including, but not limited to, the issuance of the Preferred
Shares in accordance with the terms of the Articles of Amendment. In no event
shall the special meeting described in the previous sentence be held later than
September 30, 1998. Furthermore, the Company agrees to comply with all federal
and state laws regarding such meeting, including the provision of notice.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Preferred Shares or
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exercise of the Warrants in accordance with the terms thereof (the "Irrevocable
Transfer Agent Instructions"). Prior to registration of the Conversion Shares
and Warrant Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act), will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with the prospectus delivery requirements, if any, upon resale of the
Securities, as well as the other provisions of this Agreement and the other
agreements contemplated hereby, including the Buyers' agreement to redeliver any
Security issued without a legend (electronically or otherwise) transferred by
the Buyer in a transaction other than pursuant to a registered public sale or
Rule 144 for appropriate certification and legending. If a Buyer provides the
Company with an opinion of counsel, reasonably satisfactory to the Company in
form, substance and scope, that registration of a resale by such Buyer of any of
the Securities is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by such Buyer. The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the
Buyers, by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Preferred Shares and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
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c. The Articles of Amendment shall have been accepted
for filing with the Secretary of State of the State of Florida.
d. The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares and Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and Warrants in accordance with Section 1(b)
above.
c. The Articles of Amendment shall have been accepted
for filing with the Secretary of Sate of the State of Florida, and a copy
thereof certified by such Secretary of State shall have been delivered to such
Buyer.
d. The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the
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covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. The
Buyer shall have received a certificate executed by the chief executive officer
of the Company, dated as of the Closing Date, to the foregoing effect, and a
certificate executed by the secretary of the Company, dated as of the Closing
Date, certifying with respect to the Company's Articles of Incorporation,
By-laws and Board of Directors' resolutions relating to the transactions
contemplated hereby.
f. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
g. The Conversion Shares and the Warrant Shares shall
have been authorized for quotation on Nasdaq and trading in the Common Stock on
Nasdaq shall not have been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
Exhibit "D" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Florida without
regard to the principles of conflict of laws. The parties hereto hereby submit
to the exclusive jurisdiction of the United States Federal Courts located in
Florida with respect to any dispute arising under this Agreement, the agreements
entered into in connection herewith or the transactions contemplated hereby or
thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
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c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Technical Chemicals and Products, Inc.
3341 S.W. 15th Street
Pompano Beach, FL
Attention: Chief Executive Officer
Facsimile: 954-979-0009
With copy to:
Teddy D. Klinghoffer, Esquire
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
Suite 2200, Museum Tower
150 West Flagler Street
Miami, Florida 33130
Facsimile: 305-789-3395
20
<PAGE>
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any
change in address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties of
the Buyers and the Company and the agreements and covenants set forth in
Sections 2, 3, 4, 5 and 8 shall survive the closing hereunder notwithstanding
any due diligence investigation conducted by or on behalf of the Buyers. Each of
the parties agrees to indemnify and hold harmless each of the other party and
all of its officers, directors, employees and agents for loss or damage arising
as a result of or related to any breach or alleged breach by such party of any
of its representations, warranties and covenants set forth in this Agreement or
any of its covenants and obligations under this Agreement or the Registration
Rights Agreement, including advancement of expenses as they are incurred.
j. Publicity. The Company and each of the Buyers
shall have the right to review a reasonable period of time before issuance of
any press releases, SEC, Nasdaq or NASD filings, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of each of the Buyers,
to make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
21
<PAGE>
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
<PAGE>
IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date first above
written.
TECHNICAL CHEMICALS AND PRODUCTS, INC.
By:_________________________________________
Name:
Title:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By:_________________________________________
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 15,000
Number of Warrants: 150,000
------------
Aggregate Purchase Price: $15,000,000
23
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 18,
1998, by and among TECHNICAL CHEMICALS AND PRODUCTS, INC., a Florida
corporation, with its headquarters located at 3341 S.W. 15th Street, Pompano
Beach, Florida 33069 (the "Company"), and each of the undersigned (together with
their respective affiliates and any assignee or transferee of all of their
respective rights hereunder, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series A
Convertible Preferred Stock (the "Preferred Stock") that are convertible into
shares (the "Conversion Shares") of the Company's common stock, par value $.001
per share (the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in the Articles of Amendment setting forth the rights,
preferences, privileges and restrictions of the Preferred Stock (the "Articles
of Amendment") and (ii) warrants (the "Warrants") to acquire 150,000 shares of
Common Stock (the "Warrant Shares"), upon the terms and conditions and subject
to the limitations and conditions set forth in the Warrants dated May 18, 1998;
and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
<PAGE>
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "Investors" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion
Shares (including any shares issued pursuant to Articles VI.E(b) and VI.F of the
Articles of Amendment and any shares issued upon conversion of any "Redemption
Note(s)" issued pursuant to Article VI.A.(b) of the Articles of Amendment) and
Warrant Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "Registration Statement" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, on
or prior to the date which is thirty (30) days after the date of the Closing
under the Securities Purchase Agreement (the "Closing Date"), file with the SEC
a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities underlying the Preferred Stock (including
shares of Common Stock underlying any Redemption Note(s) issued pursuant to
Article VI.A.(b) of the Articles of Amendment) and Warrants issued or issuable
pursuant to the Securities Purchase Agreement, which Registration Statement, to
the extent allowable under the 1933 Act and the Rules promulgated thereunder
(including Rule 416),
2
<PAGE>
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Preferred Stock and exercise of the Warrants (i) to prevent
dilution resulting from stock splits, stock dividends or similar transactions or
(ii) by reason of changes in the Conversion Price of the Preferred Stock in
accordance with the terms thereof or the exercise price of the Warrants in
accordance with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be no less than two (2)
times the sum of the number of Conversion Shares and Warrant Shares that are
then issuable upon conversion of the Preferred Stock and the exercise of the
Warrants, without regard to any limitation on the Investor's ability to convert
the Preferred Stock or exercise the Warrants. The Company acknowledges that the
number of shares initially included in the Registration Statement represents a
good faith estimate of the maximum number of shares issuable upon conversion of
the Preferred Stock and exercise of the Warrants.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of a
majority-in-interest of the Initial Investors, shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. The Investors who hold
the Registrable Securities to be included in such underwriting shall pay all
underwriting discounts and commission and other fees and expenses of such
investment banker or bankers and manager or managers so selected (other than
fees and expenses relating to registration of Registrable Securities under
federal or state securities laws, which are payable by the Company pursuant to
this Agreement) with respect to their Registrable Securities and the fees and
expenses of such legal counsel so selected by the Investors.
c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within one hundred twenty (120) days after
the Closing Date or if, after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement (except for Allowed Delays (as defined in Section 2(f)), or (ii) the
Common Stock is not listed or included for quotation on the Nasdaq National
Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York
Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") after
being so listed or included for quotation, then the Company will make payments
to the Investors in such amounts and at such times as shall be determined
pursuant to this Section 2(c) as partial relief for the damages to the Investors
by reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each holder of
the Preferred Stock or
3
<PAGE>
Registerable Securities an amount equal to the then outstanding principal amount
of the Preferred Stock (and, in the case of holders of Registerable Securities,
the principal amount of Preferred Stock from which such Registerable Securities
were converted) ("Aggregate Share Price") multiplied by 1.5% times the sum of:
(i) the number of months (prorated for partial months) after the end of such
120-day period and prior to the date the Registration Statement is declared
effective by the SEC, provided, however, that there shall be excluded from such
period any delays which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to
the Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months) that sales
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding Allowed Delays (as defined in Section 3(f)); and (iii)
the number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the Nasdaq, Nasdaq SmallCap, NYSE or AMEX or
that trading thereon is halted after the Registration Statement has been
declared effective. (For example, if the Registration Statement becomes
effective one (1) month after the end of such 120-day period, the Company would
pay $15,000 for each $1,000,000 of Aggregate Share Price. Such amounts shall be
paid in cash or, at each Investor's option, may be added to the principal amount
of the Preferred Stock and thereafter be convertible into Common Stock at the
"Conversion Price" (as defined in the Articles of Amendment) in accordance with
the terms of the Preferred Stock. Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities, it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth in the Articles of Amendment),
beginning on the last day upon which the cash amount would otherwise be due in
accordance with the following sentence. Payments of cash pursuant hereto shall
be made within ten (10) days after the end of each period that gives rise to
such obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day period.
d. Piggy-Back Registrations. Subject to the last sentence of
this Section 2(d), if at any time prior to the expiration of the Registration
Period (as hereinafter defined) the Company shall file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such
4
<PAGE>
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain effectiveness of the Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Initial Investors
and any other Investors of the Registrable Securities and the Company shall file
all reports required to be filed by the Company with the SEC in a timely manner
so as to maintain such eligibility for the use of Form S-3.
f. Allowed Delays. Notwithstanding anything to the contrary
contained herein, the Company shall have the right to prohibit the sale of
Registrable Securities pursuant to the Registration Statement, upon notice to
the Investors (A) if in the opinion of counsel for the
5
<PAGE>
Company, the Company would thereby be required to disclose information not
otherwise then required by law to be publicly disclosed (including but not
limited to information relating to a significant acquisition of assets or any
merger, consolidation, tender offer, financing or similar transaction, or such
other event causing the Registration Statement to contain an untrue statement of
a material fact or omit to state a material fact), provided that the Company
shall use its best efforts to minimize the period of time (in no event to exceed
twenty (20) consecutive trading days (or a total of not more than thirty (30)
trading days in any twelve (12) month period) in which it shall prohibit the
sale of any shares of Common Stock, and (B) during the period starting with the
date ten (10) days prior to the Company's anticipated date of filing of a
registration statement for an underwritten offering (the aggregate proceeds of
which are at least $20 million and the underwriter for which is reasonably
acceptable to the Investors) in which the Investors are entitled to participate
in accordance with Section 2(d) hereof, and ending on the last day of any
applicable lock-up period (not to exceed ninety (90) days) as may be reasonably
required by the underwriter or underwriters (in which case, the Company shall
within a reasonable period provide the Investors with revised or supplemental
prospectuses and the Investors shall promptly take action to cease making any
offers of the Registrable Securities until receipt and distribution of such
revised or supplemental prospectuses). For purposes hereof, (A) and (B) shall be
deemed an "Allowed Delay").
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than thirty (30) days after the Closing Date, a Registration Statement
with respect to the number of Registrable Securities provided in Section 2(a),
and thereafter use its best efforts to cause such Registration Statement
relating to Registrable Securities to become effective as soon as possible after
such filing, and keep the Registration Statement effective pursuant to Rule 415
at all times until such date as is the earlier of (i) the date on which all of
the Registrable Securities have been sold and (ii) the date on which the
Registrable Securities (in the opinion of counsel to the Initial Investors) may
be immediately sold without restriction (including without limitation as to
volume by each holder thereof) without registration under the 1933 Act (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the
6
<PAGE>
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable upon conversion of the
Preferred Stock and exercise of the Warrants, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) business days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section 2(c)
above shall be applicable with respect to such obligation, with the one hundred
twenty (120) days running from the day after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile of the effectiveness of the Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing any Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall promptly file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that the Registration Statement or
any amendment thereto will not be subject to review.
7
<PAGE>
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request, provided that the Company shall promptly (i) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such Investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under the Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is
8
<PAGE>
issued, to obtain the withdrawal of such order at the earliest possible moment
and to notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance of such order and the resolution thereof.
h. The Company shall permit, at the Investor's sole cost and
expense, a single firm of counsel designated by the Initial Investors to review
the Registration Statement and all amendments and supplements thereto (as well
as all requests for acceleration or effectiveness thereof) a reasonable period
of time prior to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects and will not request acceleration of
the Registration Statement without prior notice to such counsel. The sections of
the Registration Statement covering information with respect to the Investors,
the Investor's beneficial ownership of securities of the Company or the
Investors intended method of disposition of Registrable Securities shall conform
to the information provided to the Company by each of the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record
9
<PAGE>
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall use its best efforts to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the Nasdaq or, if not eligible for the
Nasdaq on the Nasdaq SmallCap and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities.
10
<PAGE>
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as Exhibit 1 and an opinion of such counsel in the form
attached hereto as Exhibit 2. Notwithstanding the foregoing, the Investors agree
that in the event that the Investors transfer any Conversion Shares or Warrant
Shares without a legend (electronically or otherwise) other than pursuant to a
registered public sale or pursuant to Rule 144, the Investors will, prior to
such transfer and as a condition thereto, redeliver such Conversion Shares or
Warrant Shares to be transferred for appropriate certification and legending.
p. At the request of the holders of a majority-in-interest of
the Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
r. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
11
<PAGE>
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information
regarding itself, the Registrable Securities held by it, any other shares of
Common stock held by it, and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least three (3) business days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information").
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement. If at least one (1)
business day prior to the anticipated filing date the Company has not received
the Requested Information from an Investor a ("Non-Responsive Investor"), then
the Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor but shall not be relieved of its
obligation to file a Registration Statement with the SEC relating to the
Registrable Securities of such Non-Responsive Investor promptly after such
Non-Responsive Investor provides the Requested Information. Notwithstanding
anything to the contrary contained herein the penalty payment provisions of
Section 2(c) shall not apply with respect to a Non-Responsive Investor for such
period of time as Requested Information is not provided.
c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
12
<PAGE>
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 2(f),
3(f) or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement.
5. EXPENSES OF REGISTRATION.
------------------------
Unless otherwise agreed to herein, all reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers, and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualification fees,
printers and accounting fees, and the fees and disbursements of counsel for the
Company shall be borne by the Company, provided, however, that the Investors
shall bear its legal counsel's fees and out-of-pocket expenses, including the
one legal counsel selected by the Investors pursuant to Section 2(b) hereof.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers,
13
<PAGE>
partners, employees, agents and each person who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), if any, (iii) any underwriter (as defined in the 1933 Act) for the
Investors, and (iv) the directors, officers, partners, employees and each person
who controls any such underwriter within the meaning of the 1933 Act or the 1934
Act, if any (each, an "Indemnified Person"), against any joint or several
losses, claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "Claims") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
14
<PAGE>
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Investor, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
15
<PAGE>
inappropriate due to actual or potential material differing interests between
such Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
16
<PAGE>
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
17
<PAGE>
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile and
shall be effective five days after being placed in the mail, if mailed by
regular U.S. mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
Technical Chemicals and Products, Inc.
3341 S.W. 15th Street
Popano Beach, FL 33069
Attention: Chief Executive Officer
Facsimile: 954-979-0009
With copy to:
Teddy D. Klinghoffer, Esquire
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
Suite 2200, Museum Tower
150 West Flagler Street
Miami, Florida 33130
Facsimile: 305-789-3395
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
18
<PAGE>
d. This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of Florida applicable to agreements
made and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Florida with respect
to any dispute arising under this Agreement or the transactions contemplated
hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and therein.
This Agreement and the Securities Purchase Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the shares of Preferred Stock then outstanding have been
converted into for Registrable Securities.
19
<PAGE>
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
20
<PAGE>
IN WITNESS WHEREOF, the Company and the undersigned Initial
Investors have caused this Agreement to be duly executed as of the date first
above written.
TECHNICAL CHEMICALS AND PRODUCTS, INC.
By:________________________________________
Name:
Title:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By:________________________________________
Wayne D. Bloch
Managing Director
21
NEWS
For Immediate Release Contact
- --------------------- -------------------------
May 20, 1998 Howard A. Goldman
Director/Investor Relations
and Corporate Communications
Phone: (954) 979-0400
E-mail: [email protected]
TECHNICAL CHEMICALS & PRODUCTS
COMPLETES $15 MILLION FINANCING
Funding for TD Glucose Monitoring System Manufacturing
POMPANO BEACH, Fla. - Technical Chemical & Products, Inc.
(Nasdaq:TCPI), a developer, manufacturer and marketer of point-of-care medical
diagnostic products, announced today that it has completed a $15 million
financing and issuance of a new series of preferred Class A stock to an
institutional investor.
The net proceeds of this financing will be used primarily to establish
manufacturing capabilities for certain electronic measurement devices related to
TCPI's non-invasive TD GlucoseTM Monitoring System, its Total and HDL (good)
cholesterol testing products, and other future applications; as well as purchase
equipment and secure a facility for the manufacture of the TD Glucose Patches,
and for working capital and general corporate purposes.
The preferred shares are convertible into common stock subject to
certain terms and conditions. With limited exceptions, the preferred shares may
not be converted into common stock until at least 150 days following the closing
of this transaction. The conversion price is fixed at $11.89, but is subject to
adjustments based on the future market price of the common stock. The shares
bear a 6% dividend. Under certain circumstances, the Company may redeemed the
preferred shares in cash or notes. TCPI has also granted warrants to the
institutional investor to purchase 150,000 shares of the Company's common stock.
Each warrant has a five-year term and exercise price of $11.89. In connection
with this transaction, the Company's placement agent, Preferred Capital Markets,
also has been granted a non-transferable option to purchase $1.2 million of
preferred Class A stock under the same terms and conditions as the institutional
investor. Such option expires on December 31, 1998.
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"The completion of this financing is an important step in funding
TCPI's continued growth and a show of confidence in our diagnostic technologies
related to non-invasive glucose monitoring and cholesterol testing which can now
advance into their respective manufacturing phases," said Jack L. Aronowitz,
President and CEO of Technical Chemicals & Products, Inc. "These funds will also
be put to use in our ongoing R&D efforts to bring new products through
development and onto the market, as well as for marketing programs and
additional personnel to achieve further expansion," he added.
Copies of this and other news releases may be obtained free of charge
by calling TCPI's automated fax service at (800) 464-9217. Additional
information on the Company can be obtained from TCPI's Web site at
http://www.techchem.com.
TCPI, with headquarters in Pompano Beach, Florida is primarily engaged
in the design, development, manufacture and marketing of a wide-range of
point-of-care medical diagnostic products for use at home, in physician offices,
and other locations. It also is engaged in the development and commercialization
of its TD Glucose Monitoring System - an innovative non-invasive glucose testing
process for diabetics. In addition, through its Pharmetrix Division, located in
Menlo Park, California, the Company is involved in the research, development and
the commercialization of transdermal drug delivery technology and skin
permeation enhancers.
Information in this news release relating to proposed business plans,
research and development of potential products, estimates of market sizes,
demand for the Company's products and other future events may contain or
constitute forward-looking statements subject to certain risks and uncertainties
that may cause actual results to differ materially from those anticipated in
such forward-looking statements. These matters are more fully presented in
periodic reports the Company files with the Securities and Exchange Commission,
including Forms 10-K and 10-Q, Annual and Quarterly Reports, its Prospectus
dated April 25, 1996, and other such filings. These forward-looking statements
speak only as of the date hereof. The Company disclaims any intent or obligation
to update these forward-looking statements.
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