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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) August 21, 1997
THERMO-MIZER ENVIRONMENTAL CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation)
33-87284-N4 22-2312917
(Commission File Number) (I.R.S. Employer Identification No.)
528 Oritan Avenue, Ridgefield, New Jersey 07657
(Address of principal executive offices) (Zip Code)
(201) 941-5805
(Registrant's telephone number, inluding area code)
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ITEM 9. Sales of Equity Securities Pursuant to Regulation S.
On August 21, 1997, the Registrant issued convertible debentures (the
"Debentures") to one investor, in the principal amount of $50,000. The
Registrant will pay interest to the holders of the Debenture at the rate of 5%
per annum. Interest on the Debentures is payable in cash or Common Stock of the
Registrant, at the Registrant's discretion. The Registrant's obligations under
the Debentures are secured by a lien on the Registrant's accounts receivable,
which lien will terminate on November 20, 1997, whether or not the Debentures
have been converted or repaid at such date. The Debentures are convertible into
shares of the Registrant's Common Stock at any time beginning forty-one (41)
days after the date of issuance, at a price per share (the "Conversion Price")
equal to the lesser of 70% of the average closing bid price for the five trading
days preceding: (i) the date of conversion or, (ii) the date of closing, August
21, 1997. In the event that the Debentures are not converted prior to the
maturity date of the Debentures, the Registrant has the option to satisfy its
obligations under the Debentures on such maturity date by the payment of cash or
the issuance of Common Stock at the Conversion Price.
The Registrant received net proceeds of $44,000 from the sale of the
Debentures, after deduction of expenses, including placement agent's commission
of $5,000. The placement agent for the transaction is Monetary Advancement
International, Ltd. The Registrant is seeking to raise, through a best efforts
offering, a maximum of $3.5 million in convertible debt or convertible preferred
stock.
The Registrant intends to use the proceeds of the offering for working
capital and for the purchase of substantially all of the assets of the Laminaire
Corporation, a privately-held company based in Rahway, New Jersey ("Laminaire"),
pursuant to the terms of a letter of intent with Laminaire. No assurance can be
given that such acquisition will be consummated.
The Debentures have been issued to two investors, who have warranted
that they are not related or affiliated, and that they are (i) not a "U.S.
Person", (as that term is defined in Rule 902(o) of Regulation S), and (ii) an
"accredited investor" as defined in Rule 501 of Regulation D. The Debentures
cannot be transferred, offered or sold in the "U.S.", or to "U.S. persons," as
such term is defined in Rule 902(o) of Regulation S, until after forty-one (41)
days from issuance.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Form of Convertible Debenture
10.2 Form of Regulation S Securities
Subscription Agreement
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10.3 Form of Escrow Agreement
10.4 Form of Registration Rights Agreement
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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 hereunto duly authorized.
THERMO-MIZER ENVIRONMENTAL CORP.
(Registrant)
By: /s/Jon Darcy
Jon Darcy, President
DATED: September 3, 1997
schuster/thermo/8kaug.97
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EXHIBIT 10.1 Form of Convertible Debenture
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EXHIBIT 10.1
DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
$50,000 U.S.
Thermo-Mizer Environmental, Corp.
5% CONVERTIBLE DEBENTURE DUE
THIS DEBENTURE, issued this day of 1997, is one of duly authorized
issue of Debentures of Thermo-Mizer Environmental, Corp., a corporation duly
organized and existing under the law of the State of Delaware (the "Company"),
designated as its 5% Convertible Debentures Due , in an aggregate principal
amount not exceeding $500,000 U.S. (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ., as
representative, the registered holder hereof (the "Holder"), the principal sum
of $50,000, on or prior to , (the "Maturity Date"), and to pay interest on the
principal sum outstanding time to time on the last day of each September,
December, March and June (each an "Interest Payment Date"), commencing , up to
and including the Maturity Date, at the rate of 5% per annum. Accrual of
interest on this Debenture shall commence on the date of this Debenture and
shall continue to accrue until the next Interest Payment Date. The interest so
payable will be paid on each Interest Payment Date to the person in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register") on the first business day prior to such Interest
Payment Date. All accrued and unpaid interest shall
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bear interest at the same rate of 5% per annum from the date hereof until the
date of payment. The principal of this Debenture is payable in coin or currency
of the United States of America as at the time of payment is legal tender for
public and private debts or, at the option of the Company, in shares of Common
Stock under the same conversion formula as stated in the within Debenture at the
address of the Holder last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Debenture Register
shall represent the record of ownership and right to receive principal and
interest on this Debenture. Interest and principal shall be payable only to the
registered Holder as reflected in the Debenture Register. At the Company's
option, interest on the within Debenture will be payable in cash or shares of
Common Stock under the same conversion formula as stated in the within
Debenture. The right to receive principal and interest under this Debenture
shall be transferable only through an appropriate entry in the Debenture
Register as provided herein. The forwarding of such payment shall constitute a
payment of interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum represented by
such payment. The Holder shall have the exclusive right to demand payments of
the principal (other than any amount converted) in cash upon the due date, in
the event of a default as provided for herein prior to the due date.
This Debenture is subject to the following additional provisions:
1. Debentures. First issuance will be a $50,000 Debenture, and thereafter at the
Holder's request the Debentures are issuable in denominations of $25,000 for an
aggregate of $50,000. The Debentures are exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holders surrendering the same, but shall not be issuable in
denominations less than integral multiples of Twenty-Five Thousand Dollars
($25,000 U.S.). No service charge will be made for such registration of transfer
or exchange. The Company agrees to collateralize the within Debenture by a
pledge of its accounts receivable, and fixed assets including all tangible and
intangible property to secure the repayment of the within Debenture. The Company
agrees to provide a UCC 1 (Uniform Commercial Code) financing statement on its
accounts receivable simultaneously with the execution of the Regulation S
Agreement, and to pay all expenses and fees in filing said UCC1 Financing
Statements which will be filed by the Company simultaneously but in no event
less than 48 hours from execution of the within debenture, which lien and pledge
shall terminate ninety (90) days after the date hereof, and to provide proof of
filing to the Debenture holders counsel. The Debenture holder has delivered a
UCC-3 termination statement to the Escrow Agent (the "Escrow Agent") which UCC-3
shall be filed ninety (90) days from the date hereof or upon conversion of the
debenture by the Escrow Agent unless an event of default has occurred and is
continuing under Section 11.
2. Withholding. The Company shall be entitled to withhold if applicable from all
payments of interest on this Debenture, any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments if applicable. The Holder shall pay
all taxes, charges, or levies in connection with the
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issuance or transfer thereof other than amounts so withheld.
3. Transfer. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), including Regulation S promulgated under the Act. Any Holder of this
Debenture, by acceptance hereof, agrees to the representations, warranties and
covenants herein. Prior to due presentment to the Company for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. Conversion. The record Holders of this Debenture shall have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. The record Holder of this Debenture shall be
entitled, at the option of the Holder, to convert any or all of the aggregate
principal amount of Debentures held by such Holder, at any time beginning forty
one (41) days after the date of issuance of this Debenture, at the office of the
Company or any transfer agent for the Debentures, into that number of fully-paid
and non-assessable shares of Common Stock of the Company calculated in
accordance with the following formula: Number of shares issued upon conversion =
Principal/Conversion Price, where
o Principal = The principal amount of the Debenture(s) to be converted,
o *Conversion Price = the product of (1) .70 times (2) either the last
trading price average or Closing Bid Price, as that term is defined below, of
the Company's Common Stock for the five (5) trading days immediately preceding
the Date of Conversion, as defined below provided, however, that if the Date of
Conversion is after July ___,2000 (3 years), the Conversion Price will equal
what the Conversion Price would have been had the Date of Conversion been the
lower of a 30% discount from market at time of signing or time of conversion as
provided herein, (the "Fixed Conversion Price"). For purposes hereof, the term
"Closing Bid Price" shall mean the closing bid price of the Company's Common
Stock as reported by NASDAQ (or, if not reported by NASDAQ, as reported by such
other exchange or market where traded). For purposes hereof, there is no minimum
conversion price.
* 30% discount to market exercise price five (5) day trading average
closing bid price either at time of signing of Subscription Agreement or time or
exercise (lesser of exercise price).
The Company warrants and represents that there are no other existing
options, warrants, or convertible securities of any kind that are convertible
into shares of Common Stock of the Company, (except as stated in the disclosure
documents
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provided to the subscriber, attached to the Subscription Agreement as
Exhibit F) which shares are registered and or exempt from registration within 90
days from the date hereof.
(b) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of this Debenture. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall pay cash to such
Holder in an amount equal to such fraction multiplied by the Conversion Price
then in effect. In order to convert Debentures into full shares of Common Stock,
the Holder shall surrender the certificate or certificates therefor, duly
endorsed, by either overnight courier or 2-day courier, to the office of the
Company or of any transfer agent for the Debentures, and shall give written
notice to the Company at such office with a copy to the Escrow Agents by
facsimile, that he elects to convert the same, the number of Debentures so
converted and a calculation of the number of shares of Common Stock to be issued
upon conversion (with an advance copy of the certificate(s) and the notice by
facsimile); provided, however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless either the certificates evidencing such Debentures are delivered to the
Company or its transfer agent as provided above, or the Holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates.
Notwithstanding the foregoing, the conversion right of the Holder set forth
herein shall be limited, solely to the extent required, from time to time, such
that in no instance shall the maximum number of shares of Common Stock into
which the Holder may convert this Debenture exceed, at any one time, an amount
equal to the remainder of (i) 4.99% of the then issued and outstanding shares of
Common Stock of the Company following such conversion, minus (ii) the number of
shares of Common Stock of the Company then held by the Holder.
The Company shall use its best efforts to issue and deliver to Holder
or to Holder's Counsel ("Holder's Counsel") within seven (7) business days after
delivery to the Company of such certificates, or after such agreement and
indemnification, to such Holder of Debentures at the address of the Holder on
the books of the Company, a certificate or certificates for the number of shares
of Common Stock to which the Holder shall be entitled as aforesaid. The date on
which notice of conversion is given (the "Date of Conversion") shall be deemed
to be the date in such notice of conversion is received by the Company, provided
that the original Debentures to be converted are received by the transfer agent
or the Company within five business days thereafter and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. If the original Debentures to be converted are not
received by the transfer agent or the Company within five business days after
the Date of Conversion, the notice of conversion shall become null and void. In
addition, if the shares of Common Stock issuable upon such conversion are not
received by the Holder without restrictive legend within five (5) business days
after the Date of Conversion, the notice of
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conversion shall become, at the option of the Holder, null and void. In the
event of all said shares are not delivered as provided for herein, holder may at
its own option declare the within Debenture in default and demand immediate
payment of all principal and accrued interest, and to take all appropriate legal
action to foreclose on the pledge collateral in accordance with the provisions
of the Uniform Commercial Code if payment by the Company is not made. In the
further event that legal action is required, the Company will be responsible to
pay all reasonable attorney's fees, and waives any right to require the Holder
to post a bond or other security which may be required to enforce Holder's
rights against the pledge collateral. The Company further represents and
warrants that the senior lenders, if any are aware of and have consented to the
issuance of the within Debenture, and the terms contained herein.
Following conversion of a Debenture, or a portion thereof, the
principal and, upon payment thereof of the interest owed on that Debenture or
portion of the Debenture so converted will be deemed paid in full and satisfied,
and such Debenture or portion thereof will no longer be outstanding.
(c) Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Debentures, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all then outstanding Debentures; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
Debentures, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) Mandatory Payment or Conversion on Maturity Date. Each Holder of a
Debenture outstanding on , shall have the right to payment of all principal on
this Debenture paid to such Holder in cash or in immediately available funds or
at the option of the Company, in shares of Common Stock computed in accordance
with Section 4 above on
.
(e) Adjustment to Conversion Price.
(i) If prior to the conversion of all of the Debentures, (x)
the number of outstanding shares of Common Stock is increased by a stock split,
stock dividend or other similar event, or, (y) if the Company issues shares of
Common Stock (or securities convertible into or exchangeable or exercisable for,
shares of Common Stock) at a conversion, exchange or exercise price below the
Fixed Conversion Price then in effect, then the Fixed Conversion Price shall be
appropriately reduced. If, prior to conversion of all the Debentures, the number
of outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed Conversion Price
shall be appropriately increased.
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(ii) If, prior to the conversion of all Debentures, there
shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Company shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity, then the Holders of Debentures shall thereafter have
the right to purchase and receive upon conversion of Debentures, upon the basis
and upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such shares of
stock and/or securities which may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of Debentures held by such
Holders had such merger, consolidation, exchange of shares, recapitalization or
reorganization not taken place, and in such case appropriate provisions shall be
made with respect to the rights and interests of the Holders of the Debentures
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Fixed Conversion Price and of the number of shares
issuable upon conversion of the Debentures) shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The Company shall not effect
any transaction described in this subsection 4(e) unless the resulting successor
or acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Holders of the Debentures such shares of stock
and/or securities as, in accordance with the foregoing provisions, the Holders
of the Debentures may be entitled to purchase.
(iv) No adjustment need be made if it would result in a change
of less than 1% of the Conversion Price (whether the Fixed Conversion Price or
the Floating Conversion Price). Any adjustments required to be made by this
subsection shall be rounded up to the right to acquire the nearest whole number
of shares of Common Stock.
5. Redemption.
(a) Right to Redeem on Conversion. The Company shall not have the
right, after receipt of a notice of conversion pursuant to Section 4, to redeem
in whole or in part any Debentures submitted for conversion, immediately prior
to conversion. If the Company wishes to redeem some, but not all, of the
Debentures submitted for conversion, the Company shall notify the Holder on 30
days written notice, and it will be the option of the Holder to elect to have
the Debenture redeemed.
(b) Mechanics of Redemption on Conversion. The Company shall effect
each such redemption by giving notice of its election to redeem, by facsimile to
Holder or to Holder's Counsel within 1 business day following receipt of a
notice of conversion from a Holder, with a copy by 2-day courier, to the Holder
of Debentures submitted for conversion at the address and facsimile number of
such Holder appearing in the Company's register for the Debentures. Such
redemption notice shall indicate whether the Company will redeem all or part of
the Debentures submitted for conversion. The Company shall not be entitled to
send any notice
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of redemption and begin the redemption procedure unless it has the full amount
of the redemption price, in cash, available in a demand or other immediately
available account in a bank or similar financial institution on the date the
redemption notice is sent to shareholders.
The redemption price per Debenture shall equal the greater of (i) one
hundred and fifty percent (150%) multiplied by the then outstanding principal
amount plus unpaid interest to the date of redemption; or
(ii) [Principal + Interest] x Closing Bid Price on the Date of Conversion
Conversion Price
For the purposes of the above formula, "Principal", "Interest",
"Closing Bid Price" and "Conversion Price" shall have the meanings set forth in
Section 4(a).
The redemption price shall be paid in cash to the Holder of Debentures
redeemed within 5 business days of the delivery of the notice of such redemption
to such Holder; provided, however, that the Company shall not be obligated to
deliver any portion of such redemption price unless either the certificates
evidencing the Debentures redeemed are delivered to the Company or its transfer
agent as provided in Section 4(b), or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
The Redemption Price will not be lower than an amount which is 50%
greater than the conversion price as provided for in Section 4(a) herein.
(c) No Other Redemption. The Company shall have no right to
redeem the Debentures except as provided in Section 5 hereof.
6. No Prepayment. The Company shall have no right to prepay this Debenture, in
whole or in part, prior to the Maturity Date; provided, however, that this
Section 6 shall not prevent the Company from exercising the redemption rights
set forth in Section 5.
7. No Impairment. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now and hereafter issued of similar terms are
direct obligations of the Company.
8. Termination. After this Debenture shall have been surrendered for conversion
as herein provided or notice of conversion shall have been given by the Company
pursuant to Section 4(d) herein, this Debenture shall no longer be deemed to be
outstanding and all rights with respect to this Debenture, including, without
limitation, the right to receive interest hereon
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and the principal hereof, shall forthwith terminate as of the Date of
Conversion, except only the right of the Holder hereof to receive shares of
Common Stock in exchange therefor.
9. Protective Provisions. This Debenture may not be amended without the prior
written consent of the Holder hereof.
10. Costs and Expenses. The Company agrees to pay all costs and expenses,
including reasonable attorney's fees, which may be incurred by the Holder in
collecting any amount due under this Debenture.
11. Events of Default; Remedies. If one or more of the following described
"Events of Default" shall occur:
(a) The Company shall default in the payment of principal or interest on
these Debentures: or
(b) Any of the representatives or warranties made by the Company
herein, in the Regulations S Securities Subscription Agreement, dated as of the
date hereof relating to these Debentures (the "Subscription Agreement") or in
any certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Debenture or the Subscription Agreement shall be false or
misleading in a any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other convenient term, provision, condition, agreement or
obligation of the Company under this Debenture and such failure shall continue
uncured for a period of fifteen (15) days after notice from Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an assignment for
the benefit of creditors or commence proceedings for its dissolution; or (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30 days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company and
shall not be dismissed within thirty (30) days thereafter; or
(g) Any money judgement, writ or warrant of attachment, or similar process
in
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excess of One Hundred Thousand Dollars ($100,000) in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen
(15) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency 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 Company and, if
instituted against the Company shall not be dismissed within thirty (30) days
after such instruction or if the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any proceeding; or
(i) The Common Stock shall not be traded on an exchange or over the
counter market.
Then, or at any time thereafter, and in each and every such case,
unless such Event or Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment, demand
protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and with expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
12. Mergers Consolidations, etc. The Company shall not consolidate or merge
into, or transfer all or substantially all of its assets to, any person, unless
such person assumes the obligations of the Company under this Debenture and
immediately after such transaction no Event of Default exists. Any reference of
the Company shall refer to such surviving or transferee corporation, and the
obligations of the Company shall terminate upon such assumption. If the Company
merges or consolidates with another corporation or sells or transfers all or
substantially all of its assets to another person, and the holders of the Common
Shares are entitled to receive stock, securities or property in respect of or in
exchange for Common Shares, then as a condition of such merger, consolidation,
sale or transfer, either (i) the Company and any such successor, purchaser or
transferee shall amend this Debenture to provide that it may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, or (ii) if the Company is not the
surviving entity in such merger, consolidation, sale or transfer, the Company
shall give the Holder at least thirty (30) days prior written notice of the
expected closing date of such transaction, and if any portion of this Debenture
has not been
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converted into Common Stock at the election of the Holder prior to such closing,
then the remaining principal amount of this Debenture may, at the option of the
Purchaser, be converted into shares of Common Stock at the closing of such
transaction. The Conversion Price shall be the same as the applicable Conversion
Price defined in Section 4 above.
13. No Dividends. For so long as the Debentures remain outstanding, the Company
will not, without the prior consent of a majority of the Holders, make any
distribution, either in stock or cash, to its holders of Common Stock.
14. Lost or Destroyed Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership thereof, and indemnity and bond, if
requested, all reasonably satisfactory to the Company.
15. Sales in Compliance with Applicable Law. Any Holder of this Debenture, by
acceptance hereof, agrees that such Holder will not offer, sell or otherwise
dispose of this Debenture of the shares of Common Stock issuable upon exercise
thereof except under circumstances which will not result in a violation of the
Act, including Regulation S promulgated under the Act, or any applicable state
Blue Sky law or similar laws relating to the sale of securities and the Holder
agrees to provide the Company with the documentation required by Section 3 of
the Subscription Agreement executed by the original Holder hereof to demonstrate
that such offer, sale or disposition complies with applicable securities laws.
16. Governing Law. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws.
17. Business Day Definition. For purposes hereof, the term "business day" shall
mean any day on which banks are generally open for business in the State of New
York, USA and excluding any Saturday and Sunday.
18. Notices. Any notice, demand or request required or permitted to be given by
either the Company or the Holder pursuant to the terms of this Agreement shall
be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by two day courier), addressed to the
Company at ________________________ with a copy to __________________________,
tel. ______________ facsimile _____________, or the Holder at
_________________________________, or such other addresses as a party may
request by notifying the other in writing.
19. Waiver. Any waiver by the Company or the Holder hereof of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any breach
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of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder hereof to insist upon strict adherence to
any term of this Debenture on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture. Any waiver must be
in writing.
20. Unenforceable Provisions. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
21. Change of Control. The Company warrants and represents that in the event of
any change in the control of the Board of Directors as currently constituted,
written notification will be provided to Holder or Holders of the within
Debentures, and that Holders may consider the within Debentures in default, and
demand payment of principal and all accrued interest in the form of a cash
payment.
In the event of any insolvency proceedings, and any receivership,
liquidation or other similar proceedings in connection therewith, relative to
the Company, and in the event of any proceedings for voluntary or involuntary
liquidation, dissolution or other winding-up of the Company, whether or not
involving insolvency, then the holders of Senior Debt shall be entitled to
receive payment in full of all principal, premiums, interest fees and charges,
including without limitation post-petition interest, on all Senior Debt before
the Holders of the Debentures are entitled to receive any payment on account of
principal or interest upon the Debentures an no claim or proof of claim shall be
filed with the Company by or non behalf of the Holders that shall assert any
right to receive any payments in respect to the Debentures, except subject to
the payment in full of the principal and interest on all of the Senior Debt then
outstanding.
If funds or assets which would otherwise be available to make payments
in respect of the Debentures are instead paid or distributed to the holders of
Senior Debt on account of the subordination provisions of this Section 22, the
Holders of the Debentures shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of the Company
applicable to the Senior Debt.
No action which the holders of the Senior Debt, or the Company with the
consent of the holders of the Senior Debt, may take or refrain from taking with
respect to any Senior Debt, or any bond, debenture, note or other similar
instrument or agreement representing the same, or any collateral therefor,
including a waiver or release thereof, or any agreement or agreements in
connection therewith, shall affect the subordination of the Debentures to the
Senior Debt. The subordination of the Debentures to the Senior Debt shall be
unconditional, notwithstanding any defect in the genuineness, validity,
regularity, or enforceability of the bonds, debentures, notes, or other similar
instruments or agreements evidencing the Senior
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Debt or any other circumstances, whether or not referred to herein, which might
otherwise constitute a legal or equitable discharge or a defense of the Holder.
By it acceptance of the Debentures, the Holders agree to execute and deliver
such documents as may be reasonably requested from time to time by the Company
or the holder of any Senior Debt in order to implement this Section 22.
22. Enforcement Actions. Each of the Holders of the Debentures agrees not to
commence any enforcement action as to the Debentures and the security interest
securing such indebtedness unless and until it has notified the Agent (as
defined in the Security Agreement) in writing of its intention to do so and a
period after the giving of such notice shall have elapsed, ending on the earlier
of the thirtieth (30th) day after the giving of such notice or the date of the
commencement of an insolvency proceeding as to the Company. During such period,
the Agent, acting on behalf of the Lenders (as defined in the Security
Agreement) shall have the right, but not the obligation, to cure any defaults
giving rise to such enforcement action.
23. Amendment. The above Sections 21 and 22 may not be amended, or any of their
provisions waived, without the prior written consent of the Agent or each of the
holders of Senior Debt.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer thereof duly authorized.
Thermo-Mizer Environmental, Corp.
By:
Name:
Title:
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
into shares of Common Stock, $.01 par value (the "Common Stock"), of
Thermo-Mizer Environmental, Corp. (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates,
opinions, and signature guarantees as reasonably requested by the Company or its
Transfer Agent. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. The undersigned represents as follows:
1. The undersigned is not a "distributor", as such term is defined
under Rule 902 of Regulation S, or a person acting on behalf of the issuer or
distributor or an affiliate of a distributor or the issuer.
2. The undersigned is not a "dealer", as such term is defined in
Section 2(12) of the Act, or a person receiving a selling concession, fee or
otherwise remuneration in respect of the Shares.
3. The undersigned is not a "U.S. Person", as such term is defined in Rule
902 of Regulation S.
4. The undersigned acquired the Shares directly from the issuer or
distributor and has neither offered nor sold any of the Shares prior to the
expiration of the 40-day restricted period describe in Rule 903(c)(2) and Rule
902(m) (the "Restricted Period") and the undersigned has not undertaken any
action to precondition the U.S. market for resale of the Shares.
5. The undersigned did not acquire the Shares with the intent to evade
the
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<PAGE>
registration provisions of the Act or any Rule or Regulation of the Untied
States securities laws and will not offer or sell the Shares except in
compliance with the provisions of the Act. If this Debenture is being converted
during the Restricted Period (as that term is defined in the subscription
agreement executed by the original purchaser of this Debenture), the undersigned
represents that it is not a U.S. Person as defined in Regulation S promulgated
under the United States Securities Act of 1933, as amended (the "Act") and is
not converting the Debenture on behalf of any U.S. Person. The undersigned also
represents and warrants that all offers and sales by the undersigned of the
shares of Common Stock issuable to the undersigned upon conversion of the
Debenture shall be made in compliance with Regulation S, pursuant to
registration of the Common Stock under the Act or pursuant to an exemption from
registration under the Act.
Conversion calculations:
Date of Conversion
Applicable Conversion Price
Signature
Name
Address:
* The original Debenture and Notice of Conversion must be received by the
Company's Transfer Agent before any shares of Common Stock will be issued. If
the original of this Debenture is not received by the Transfer Agent (or such
other person as the Company may specify) within five business days after the
date of conversion specified above, this notice of conversion shall become null
and void.
Signature Guaranteed:
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EXHIBIT 10.2 Form of Regulation S Securities Subscription Agreement
20
<PAGE>
EXHIBIT 10.2
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED
STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY BY OR TO
ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the "Agreement" or
the "Subscription Agreement") is executed by . (the " Subscriber") in connection
with the subscription by the Subscriber for 5% Convertible Debentures (the
"Convertible Debentures") of Thermo-Mizer Environmental, Corp., (the "Company").
The Company is offering an aggregate face amount of $500,000 (U.S.) of
Convertible Debentures. The terms of the Convertible Debentures, including the
terms on which the Convertible Debentures may be converted into Common Stock,
$0.01 par value per share of the Company ("Shares"), are set forth in the form
of Convertible Debentures attached hereto as Exhibit A. The solicitation of this
Subscription and, if accepted by the Company, the offer and sale of Convertible
Debentures, are being made in reliance upon the provisions of Regulation S
(Regulation "S") promulgated under the United States Securities Act of 1933, as
amended (the "Act"). The Convertible Debentures and the Shares issuable upon
conversion thereof are
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<PAGE>
sometimes referred to herein as the "Securities". The Subscriber wish to
subscribe for the principal amount of the Convertible Debentures set forth in
Section 12 in accordance with the terms and conditions of this Agreement. It is
agreed as follows:
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offer to purchase and subscribe for the principal
amount of Convertible Debentures, and at the price, set out in Section 12 of
this Agreement. The Closing shall be deemed to occur when this Agreement has
been executed by both of the Subscriber and the Company (the "Closing") and
payment shall have been made by the Subscriber, by wire transfer, as directed in
writing by the Company on the day so directed, to an escrow agent, against the
Company's delivery of Convertible Debentures subscribed for. If the Closing does
not occur, the funds of ,the Subscriber shall be returned from escrow. The terms
and conditions of the escrow are set forth in an Escrow Agreement, the form of
which is attached hereto as Exhibit B hereto. The payment shall be made by
delivering same day funds in United States Dollars as designated above.
2. Subscriber Representations; Access to Information Independent
Investigation
Each Subscriber represents and warrants to and covenants with the
Company, on its own behalf and on behalf of each person or entity for which the
Subscriber is acting as a fiduciary,
as follows:
2.1 Offshore Transaction. The Subscriber represent and warrant to the
Company that (i) neither the Subscriber nor, to the best knowledge of Subscriber
after due inquiry, any of the investors on whose behalf the Subscriber may
purchase and hold Convertible Debentures or Shares (the "Investors") is a "U.S.
person" as that term is defined in Rule 902(o) of Regulation S (a copy of which
definition is attached as Exhibit C), and neither the Subscriber nor, to the
best knowledge of Subscriber, any Investor is an entity organized or
incorporated under the laws of any foreign jurisdiction by any "U.S. person"
principally for the purpose of investing in securities not registered under the
Act, unless the Subscriber is or was organized or incorporated by "U.S. persons"
who are accredited investors (as defined in Rule 501(a) under the Act) and who
are not natural persons, estates or trusts ("Institutional Investors"), and all
owners of interests in such entity who are "U.S. persons" are Institutional
Investors, and not natural persons, estates or trusts; (ii) the Convertible
Debentures were not offered to the Subscriber or to any Investor in the United
States and at the time of execution of this Subscription Agreement and of any
offer to the Subscriber or to the Investors to purchase the Convertible
Debentures hereunder, the Subscriber and each such Investor was outside the
United States; (iii) each Subscriber is purchasing the Securities for its own
account and not on behalf of or for the benefit of any U.S. person and the
resale of the Securities have not been prearranged with any buyer in the United
States; (iv) the Subscriber and to the best knowledge
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<PAGE>
of the Subscriber each distributor, if any, participating in the offering of the
Securities, has agreed and the Subscriber hereby agrees that all offers and
sales of the Securities prior to the expiration of a period commencing on the
Closing and ending forty (40) days thereafter (the "Restricted Period") shall
not be made to U.S. persons or for the account or benefit of U.S. persons and
shall otherwise be made in compliance with the provisions of Regulation S.
Subscriber has not been engaged or acted as or on behalf of a distributor or
dealer (and is not an affiliate of a distributor or dealer) with respect to this
transaction.
2.2 Independent Investigation. The Subscriber, in offering to subscribe
for the Securities hereunder, has relied upon an independent investigation made
by it and has, prior to the date hereof, been given access to and the
opportunity to examine all books and records of the Company, and all material
contracts and documents of the Company; provided, that such investigation shall
not affect Subscriber's ability to rely on the accuracy of the representations
and warranties of the Company set forth herein. The Subscriber will keep
confidential all non-public information regarding the Company that the
Subscriber receives from the Company unless disclosure of such information is
compelled by a court or other administrative body or otherwise in the opinion of
Subscriber's counsel, to comply with applicable law. In making the investment
decision to purchase the Convertible Debentures, the Subscriber is not relying
on any oral or written representations or assurances from the Company or any
other person or any representation of the Company or any other person other than
as set forth in this Agreement, public filings of the Company or in a document
executed by a duly authorized representative of the Company making reference to
this Agreement. The Subscriber has such experience in business and financial
matters that it is capable of evaluating the risk of its investment and
determining the suitability of its investment. The Subscriber is a sophisticated
investor, as defined in Rule 506(b)(2)(ii) of Regulation D, and an accredited
investor as defined in Rule 501 of Regulation D, a copy of which definition is
attached hereto as Exhibit D. The Subscriber has not been furnished with any
offering materials or literature relating to the offer and sale of the
securities. The Subscriber have obtained and reviewed the copies of the
Company's Form 10-KSB Annual Report for the most recent year ended June 30,
1996, and Form 10-Q for the most recent fiscal quarter ended and copies of all
Form 8-K Reports from the beginning of the past fiscal year to the date hereof
and are aware that the Company has continued to sustain losses.
2.3 Economic Risk. The Subscriber understands and acknowledges that an
investment in the Convertible Debentures involves a high degree of risk,
including a possible total loss of investment. The Subscriber represents that it
is able to bear the economic risk of an investment in the Convertible
Debentures. In making this statement the Subscriber hereby represents and
warrants that the Subscriber has adequate means of providing for the
Subscriber's current needs and contingencies; the Subscriber is able to afford
to hold the Convertible Debentures for an indefinite period and the Subscriber
further represents that the
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<PAGE>
Subscriber has such knowledge and experience in financial and business matters
that the Subscriber is capable of evaluating the merits and risks of the
investment in the Convertible Debentures to be received by the Subscriber.
Further, the Subscriber represents that it has no present need for liquidity in
such Convertible Debentures.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of the Securities.
2.5 No Directed Selling Efforts in Regard to this Transaction. The
Subscriber has not conducted any "directed selling effort" as that term is
defined in Rule 902 of Regulation S. Such activity includes, without limitation,
the mailing of printed material to investors residing in the United States, the
holding of promotional seminars in the United States, the placement of
advertisements with radio or television stations broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of Shares.
2.6 No Registration. Subscriber understands that the Convertible
Debentures and the Shares issuable upon conversion of the Convertible Debentures
have not been registered under the Act and are being offered and sold pursuant
to an exemption from registration contained in the Act based in part upon the
representations of Subscriber contained herein. The Common Stock does, however,
carry certain registration rights as set forth in the Registration Rights
Agreement executed by the parties hereto in the form attached hereto as Exhibit
E (the "Registration Rights Agreement").
2.7 No Public Solicitation. Without conducting any independent
investigation, Subscriber knows of no public solicitation or advertisement of an
offer in connection with the proposed issuance and sale of the Convertible
Debentures.
2.8 Investment Intent. Subscriber is acquiring the Convertible
Debentures to be issued and sold hereunder (and the Shares issuable upon
conversion of the Convertible Debentures) for the Subscriber' own account (or
for beneficiaries' accounts over which the Subscriber has investment discretion
but no discretionary voting or dispositive authority). Subscriber and each other
party acquiring Convertible Debentures and the Shares issuable upon conversion
of the Convertible Debentures pursuant to this Agreement are acquiring the
Securities for investment and not with a view to the distribution thereof.
Subscriber understands that except as set forth in the Registration Rights
Agreement, the Company has no present intention of registering any such sale of
the Convertible Debentures or such Shares. Subscriber represents and warrants to
the Company that it has no present plan or intention of selling the Convertible
Debentures or the Shares in the United States, has made no predetermined
arrangements to sell the Convertible Debentures or the Shares other than as
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<PAGE>
provided in the Registration Rights Agreement and that the offering by the
Company of the Securities to the Subscriber, as contemplated in this
Subscription Agreement (the "Offering"), together with any subsequent resale by
Subscriber of the Convertible Debentures or the Shares, is not part of a plan or
scheme to evade the registration provisions of the Act. Subscriber currently has
no short position in the Shares, including any short call position or any long
put position or any contract or arrangement that has the effect of eliminating
or substantially diminishing the risk of ownership of the Convertible Debentures
or the Shares, nor has Subscriber engaged in any hedging transaction with
respect to the Convertible Debentures or the Shares. Subscriber covenants that
neither Subscriber nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter during the Restricted
Period, into any put option, short position or any hedging transaction or other
similar instrument or position with respect to the Shares or securities of the
same class as the Shares and neither Subscriber nor any of its affiliates nor
any person acting on its or their behalf will use at any time Shares to settle
any put option, short position or other similar instrument or position that may
have been entered into prior to the execution of this Agreement.
2.9 No Sale in Violation of the Act. Subscriber further covenants that
Subscriber will not make any sale, transfer or other disposition of the
Convertible Debentures or the Shares in violation of the Act (including
Regulation S) any state securities laws or the rules and regulations of the
Securities and Exchange Commission (the "Commission") promulgated thereunder.
2.10 Incorporation and Authority. Subscriber has the full power and
authority to execute, deliver and perform this Agreement and to perform its
obligations hereunder. This Agreement has been duly approved by all necessary
action of Subscriber, including any necessary shareholder approval, has been
executed by persons duly authorized by Subscriber, and constitutes a valid and
legally binding obligation of Subscriber, enforceable in accordance with its
terms.
2.11 No Reliance on Tax Advice. Subscriber has reviewed with his, her
or its own tax advisors the foreign, federal, state and local tax consequences
of this investment, where applicable, and the transactions contemplated by this
Agreement. Subscriber is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents and
understands that Subscriber (and not the Company) shall be responsible for
Subscriber own income tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
2.12 Independent Legal Advice.. Subscriber and the Company acknowledge
that each has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement and has consulted with its own legal counsel ,
and other advisors prior to execution of the within Agreement, and that the
Company will pay the fees and expenses with respect to the within transaction,
including all filing fees with respect to the UCC 1 liens as provided for
herein, and agrees that the UCC 1 filings will be made within five (5) days of
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<PAGE>
closing in addition to payment of 10% of the gross amount of each Debenture
purchased by Subscriber to Monetary Advancement International Inc. on closing.
2.13 Compliance. If Subscriber becomes subject to Section 13(d) of the
Exchange Act, Subscriber will duly file the required Schedule thereunder.
2.14 Not an Affiliate. Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Act) of the Company.
2.15 No Pledges. Subscriber has not pledged the Securities, and will not
pledge the Securities during the Restricted Period (as defined below), as
collateral in a margin account or otherwise with a U.S. person.
2.16 No Inquiries. Subscriber has not been the subject of a regulatory
inquiry by the Commission.
2.17 Each distributor participating in the offering of the Securities,
if any, has agreed in writing that all offers and sales of the Securities prior
the expiration of a period commencing on date of the transaction and ending
forty (40) days thereafter shall be made in compliance with the Issuer Safe
Harbour, pursuant to registration of Securities under Securities Act of 1933 or
pursuant to an exemption.
Subscriber understands that the Purchased Shares are being offered and
sold to it in reliance of specific exemptions from the registration requirements
of Federal and State Securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Subscriber set forth herein in order to
determine the applicability of such exemptions and the suitability of Subscriber
to acquire the Securities.
Subscriber agrees to indemnify and hold the Company or its agents and
their respective officers, directors and shareholders or any other person who
may be deemed to control the Company or its agents harmless from any loss,
liability, claim, damage or expense, arising out of the inaccuracy of any of
Subscriber's representations, warranties or statements or the breach or any of
the agreements contained herein.
3. Resales
Subscriber acknowledges and agrees that the Securities may and will
only be resold (a) in compliance with Regulation S; (b) pursuant to a
Registration Statement under the Act; or (c) pursuant to an exemption from
registration under the Act.
4. Legends; Subsequent Transfer of Securities
4.1 Legends. The certificate(s) representing the Convertible Debentures
shall bear the legend set forth below and any other legend, if such legend or
legends are reasonably
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required to comply with state, federal or foreign law. Assuming that there are
no changes in the material facts set forth in Section 2 of this Agreement or
applicable law from the date hereof until the date of conversion, and subject to
the Company's transfer agent's receipt of a legal opinion from legal counsel to
the Company, all certificates representing the Shares into which the Convertible
Debentures are converted after the Restricted Period shall not bear a legend.
"The Convertible Debentures of Thermo-Mizer Environmental, Corp. (the
"Issuer") represented by this certificate have been issued pursuant to
Regulation S, promulgated under the Securities Act of 1933, as amended
(the "Act"), and have not been registered under the Act or any
applicable state securities laws. These shares may not be offered or
sold within the United States or to or for the account of a "U.S.
Person" (as that term is defined in Regulation S) during the period
commencing on the sale of these securities and ending on the fortieth
(40th) day following completion of the Regulation S offering of the
Issuer pursuant to which these shares have been issued, which day is
1997 (the "Restricted Period"). The Convertible Debentures
represented by this certificate may first be converted into common
stock of the issuer on [41 days from the date of issue]. The Issuer
will notify the transfer agent of the date of completion of such
offering and of the expiration of such Restricted Period."
4.2 Transfers. Subject to receipt of a legal opinion from legal counsel
to the Company, the Company agrees, and shall instruct its agents, that the
Securities may be transferred to any person or entity who is not an affiliate of
the Company if such transfer occurs after the Restricted Period, without (a) any
further restriction on transfer (provided the transfer is made in compliance
with the Act) or (b) the entry of a "stop transfer" order against such
Securities, and the Securities delivered to the transferee shall not bear a
legend. The Company may place a stop transfer order on any Common Stock issued
upon conversion of the Convertible Debentures during the Restricted Period for
the duration of the Restricted Period. Upon election by the Subscriber to
convert the Convertible Debentures into Shares, the Subscriber shall deliver to
the Company a duly completed Notice of Conversion (a "Notice of Conversion") in
the form attached to this Agreement.
5. Issuance of Further Securities
5.1 Right of First Offer. If at any time within one hundred twenty
(120) days of the date hereof the Company wishes to effect any financing through
a private placement of debt or equity securities (or securities convertible into
equity securities), the Company will first offer Subscriber the right to
participate in such financing on the same terms offered by such other party.
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6. Representations, Warranties and Covenants of Company The Company
represents and warrants to and covenants with the Subscriber as follows: 6.1
Organization, Good Standing, and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as now conducted and as proposed to be conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
business or properties of the Company and its subsidiaries taken as a whole. The
Company is not the subject of any pending or, to its knowledge, threatened
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which have not been disclosed in the reports
referred to in Section 6.5 below.
6.2 Corporate Condition. None of the Company's filings made pursuant to
the Exchange Act, including, but not limited to, those reports referenced in
Section 6.5 below, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading. There have been
no material adverse changes in the Company's business, properties, results of
operations, condition (financial or otherwise) or prospects since the date of
those reports which have not been disclosed to Subscriber in writing, provided
that Subscriber are aware that the Company has continued to sustain losses since
the date of the most recent Report on Form 10-QSB.
6.3 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the Convertible Debentures, and the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance) and delivery of the Common
Stock issuable upon conversion of the Convertible Debentures have been taken,
and each of this Agreement and the Convertible Debentures constitutes valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms.
6.4 Valid Issuance of Convertible Debenture and Common Stock. When
executed and delivered in accordance with the terms hereof for the consideration
expressed herein, the Debenture will have been issued in compliance with all
applicable U.S. federal and state securities laws. The Common Stock issuable
upon conversion of the Convertible Debentures when issued in accordance with the
terms thereof, shall be duly and validly issued and outstanding, fully paid and
non-assessable, free and clear of any claims or pre-emptive rights, and will
have been issued in compliance with all applicable U.S. federal and state
securities laws.
6.5 Current Public Information. The Company represents and warrants to the
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Subscriber that the Company is a "reporting issuer" as defined in Rule 902(1) of
Regulation S and it has a class of securities registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and has
filed all the materials required to be filed as reports pursuant to the Exchange
Act for a period of at least twelve months preceding the date hereof (or for
such shorter period as the Company was required by law to file such material).
All such reports complied in all material respects with all applicable
requirements of Federal Securities laws and the rules and regulations
promulgated thereunder. The Subscriber have obtained copies of the Company's
Form 10-KSB Annual Report for the most recent year ended June 30, 1996 and Form
10-Q for the most recent fiscal quarter ended and copies of all Form 8-K Reports
from the beginning of the Company's past fiscal year to the date of execution of
the within Agreement. Additionally, the Company warrants and represents that it
is qualified under Regulation S as said Regulation is made and provided, and
that it will file all disclosure reports with the SEC and NASDAQ as prescribed
in a timely manner.
6.6 No Directed Selling Efforts in Regard to this Transaction. The
Company has not, and to the best of the Company's knowledge neither the
Subscriber nor any distributor, if any, participating in the offering of the
Securities nor any person acting for the Company or any such distributor has
conducted any "directed selling efforts" as that term is defined in Rule 902 of
Regulation S. Such activity includes, without limitation, the making of printed
material to investors residing in the United States, the holding of promotional
seminars in the United States, the placement of advertisements with radio or
television stations broadcasting in the United States or in publications with a
general circulation in the United States, which discuss the offering of Shares.
The Company represents and warrants that the Offering is not part of a plan or
scheme to evade the registration provisions of the Act.
6.7 No - Conflicts. The execution and delivery of this Agreement and
the consummation of the issuance of the Securities and the transactions
contemplated by this Agreement do not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or constitute a
default under, the Certificate of Incorporation or bylaws of the Company, or any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable decree, judgment or order of any court, Federal or
State regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets.
6.8 Issuance of Securities. The Company will issue one or more
certificates representing the Convertible Debentures in the name of Subscriber
in such denominations to be specified by the Subscriber prior to closing. Upon
conversion of the Convertible Debentures in accordance with their terms, the
Company will issue one or more certificates representing Shares in the name of
Subscriber and in such denominations to be specified by Subscriber prior to
conversion (if shares are converted during the restrictive period the
appropriate legend will be endorsed on said certificate). The Shares to be
issued upon conversion of the Convertible Debentures shall not bear any
restrictive legends and shall be freely tradeable, subject to compliance with
federal and state securities laws and the terms of the Convertible Debentures.
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The Company further warrants that no instructions other than these instructions,
and instructions for a "stop transfer" until the end of the Restricted Period,
have been or will be given to the transfer agent and also warrants that the
Shares shall otherwise be freely transferable by Subscriber on the books and
records of the Company subject to compliance with federal and state securities
laws, the receipt of a legal opinion from legal counsel to the Company and the
terms of the Convertible Debentures. The Company will notify the transfer agent
of the date of completion of the Offering and of the date of expiration of the
Restricted Period. Nothing in this section shall affect in any way Subscriber'
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities.
6.9 No Action. The Company has not taken and will not take any action
that will affect in any way the running of the Restricted Period or the ability
of Subscriber to resell freely the Securities in accordance with applicable
securities laws and the Agreement.
6.10 Compliance with Laws. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all material
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any alleged violation
of any statute, law, regulations, ordinance, rule, judgement, order or decree
from any governmental authority. The Company shall comply with all applicable
securities laws with respect to the sale of the Securities, including but not
limited to the filing of all reports required to be filed in connection
therewith with the Securities and Exchange Commission or any stock exchange or
the NASDAQ Stock Market or any other regulatory authority.
6.11 Litigation. Except as disclosed in the Company's Annual Report on
Form 10-KSB, its Form 8-K Reports, or any Quarterly Reports on Form 10-QSB filed
since the date of such Form 10-KSB, there is no action, suit or proceeding
before or by any court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or affecting
the Company, or any of its properties, which could reasonably be expected to
materially and adversely affect the properties or assets of the Company.
6.12 No U.S. Offering. The Company represents that it has not offered the
Securities to the Subscriber or any Investor in the U.S. or to any person in the
United States or any U.S. person. See II(i) of Debenture.
6.13 Disclosures. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Subscriber that (a) could reasonably be expected to
have a material adverse effect on the business, properties, condition (financial
or otherwise) or results of operations or prospects of the Company, or which
could reasonably be expected to materially and adversely affect the properties
or assets of the Company or (b) could reasonably be expected to materially and
adversely affect the ability of the Company to perform its obligations pursuant
to this
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Subscription Agreement and the issuance of the Convertible Debentures hereunder.
6.14 Commissions. Except for a fee which is payable by the Company by
separate agreement, no other person, firm or corporation will be entitled to
receive any brokerage fee, commission or other similar payment from the Company
in connection with the consummation of the transaction contemplated hereby and
the Company shall not make any such payment to any person, firm or corporation
other than as stated herein.
6.15 Capitalization. The Company, as of the date of the Closing, will
have outstanding the number of shares of Common Stock, Convertible Debentures
and Warrants as set forth on
Exhibit F.
7..
Additional Covenants of Company
7.1 Accountants. For as long as any Convertible Debentures remain
outstanding, the Company shall, until at least the second anniversary of the
date of the Closing (the "Closing Date"), maintain as its independent auditors
an accounting firm that is authorized to practice before the SEC.
7.2 Corporate Existence and Taxes. For as long as any Convertible
Debentures remain outstanding, the Company shall, until at least the second
anniversary of the Closing Date, maintain its corporate existence in good
standing, and shall pay all its taxes when due except for taxes which the
Company disputes in good faith and for which adequate reserves are established
on the Company's books and records.
7.3 Reserved Shares and Listings. For so long as any Convertible Debentures
remain outstanding:
(a) the Company will reserve from its authorized but unissued shares
of Common Stock ("Common Stock") a sufficient number of Shares to
permit the conversion in full of the outstanding principal amount
of Convertible Debentures; and
(b) the Company will maintain the listing of its Shares on the NASDAQ
or NASDAQ Small Cap Market; and
(c) until such time as Subscriber has converted 100% of the
Convertible Debentures into Shares, the Company will not
repurchase its Common Stock or otherwise enter into any
transaction (including stock split, recapitalization or other
transaction) which would cause a decrease in the number of its
shares of Common Stock issued and outstanding (other than
transactions that similarly decrease the number of shares of
Common Stock into which the Debentures are Convertible).
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7.4 Liquidated Damages for Late Conversion. As set forth in the
Convertible Debenture, the Company shall use its best efforts to issue and
deliver, within seven (7) business days after the Subscriber has fulfilled all
conditions and submitted to the Company or its counsel all necessary documents
duly executed and in proper form required for conversion (the "Deadline"), to
the Subscriber or any party receiving the Convertible Debentures by transfer
from the Subscriber (together with the Subscriber, a "Holder"), at the address
of the Holder on the books of the Company, a certificate or certificates for the
number of Shares of Common Stock to which the Holder shall be entitled. The
Company understands that a delay in the issuance of the Shares of Common Stock
beyond the Deadline could result in economic loss to the Holder. As compensation
to the Holder for such loss, and not as a penalty, the Company agrees to pay
liquidated damages to the Holder for late issuance of Shares upon conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond seven business days from the date
of receipt by the Company of a Notice of Conversion duly executed and in proper
form required for conversion, including the original Convertible Debentures to
be converted, all in accordance with this Agreement, the Convertible Debenture
and the requirements of the transfer agent):
No. Business Days Late Liquidated Damages
(per one hundred thousand
dollars of Convertible Debenture
outstanding)
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
> 10 $1,000 + an additional
$200 for each Business
Day Late beyond 10 days
The Company shall pay the Holder any liquidated damages incurred under
this Section by wire transfer of immediately available funds to an account
designated by Holder upon the earlier to occur of (i) issuance of the Shares to
the Holder or (ii) each monthly anniversary of the receipt by the Company of
such Holder's Notice of Conversion. Nothing herein shall waive the Company's
obligations to delivery Shares upon a conversion of the Convertible Debentures
or limit the Subscriber's right to pursue actual damages for the Company's
failure to issue and deliver shares of Common Stock to the Subscriber in
accordance with the terms of the Convertible Debenture.
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7.5 Conversion Notice. The Company agrees that, in addition to any
other remedies which may be available to the Subscriber, including, but not
limited to, remedies available under Section 7.4 of this Agreement, in the event
the Company fails for any reason to effect delivery to the Subscriber or counsel
to Subscriber of certificates representing Shares within seven business days
following receipt by the Company of a Notice of Conversion, Subscriber will be
entitled to revoke the Notice of Conversion by delivering a notice to such
effect to the Company whereupon the Company and the Subscriber shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion.
7.6 Opinion of Counsel. Subscriber shall, prior to the purchase of the
shares of Convertible Debentures, receive an opinion letter from counsel to the
Company, to the effect that (i) the Company is duly incorporated and validly
existing; (ii) this Agreement, the issuance of the Convertible Debentures, and
the issuance of the Common Stock upon conversion of the Convertible Debentures
have been duly approved by all required corporate action, and that the Shares,
upon due issuance, shall be validly issued and outstanding, fully paid and
non-assessable; (iii) this Agreement, the Convertible Debentures when executed,
delivered and paid for in accordance with the terms hereof and the Registration
Rights Agreement are valid and binding obligations of the Company, enforceable
in accordance with their terms, except as enforceability of any indemnification
provisions may be limited by principles of public policy, and subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of laws governing specific performance and other equitable remedies;
and (iv) based upon the representations and warranties of the Company and each
Subscriber in the Offering, the offer and sale of the Convertible Debentures to
the Subscriber is exempt from the registration requirements of the Securities
Act; except that with respect to the foregoing opinions counsel may add such
qualifications as are consistent with firm practice, including an assumption
that the transaction does not constitute a plan or scheme to evade the
registration provisions of the Act.
7.7 Consultation with Legal Counsel. The Company shall consult with its
legal counsel regarding its Exchange Act filing requirements including, but not
limited to, the possible obligation of the Company to file Form 8-K and all
other applicable reporting forms as required. The Company agrees that it will
maintain its trading listing on NASDAQ system during the terms of the Debenture
or Debentures, but such covenant is subject to any effect that the issuance or
conversion of the Debentures may have on such listing subject to Registration
Rights.
7.8 Changes in Regulation S.
(a) During the twenty-four month period following issuance of the
Debentures, if there is any change in Regulation S that would restrict the
conversion of the Debentures into Common Stock according to the terms and
conditions set forth in this Agreement then in such event Subscriber may notify
the Company in writing that Purchaser holds at least 10% of the Debentures
remaining to be converted and demands that the Company file a registration
statement under the 1933 Act covering the registration of all the Purchaser's
Common Stock
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<PAGE>
issuable upon conversion ("Registrable Securities"). Upon receipt of such
notice, the Company shall use its best efforts to, effect as soon as
practicable, and in any event within 90 days of the receipt of such request, the
registration under the 1933 Act of all Registrable Securities which the
Purchaser requests (a "Demand Registration"). All such action required by the
Company to complete the registration shall be done as soon as possible at the
Company's sole cost and expense.
(b) If the Purchaser initiating the registration request hereunder
("Initiating Purchaser") intends to distribute the Registrable Securities
covered by their request by means of an underwriting, he shall so advise the
Company as a part of their request made pursuant to this Section 7 and the
Company shall include such information in the written notice referred to in
subsection 7(a). In such event, the right of any Purchaser to include his
Registrable Securities in such registration shall be conditioned upon such
Purchase's participation in such underwriting and the inclusion of such
Purchaser's Registrable Securities in the underwriting. All Purchasers proposing
to distribute their Common Stock through such underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Purchasers, and
reasonably acceptable to the Company; provided that no Purchaser shall be
required to make any representations other than with respect to its ownership of
Registered Securities and its intended method of distribution. The Company shall
only be obligated to take such action if the owners of at least 50% of the
outstanding dollar amount of the Debentures requests such registration.
(c) The Company is not obligated to effect a demand registration under
this Section 7 if in the written opinion of counsel to the Company reasonably
acceptable to the person or persons from whom written request for registration
has been received (and satisfactory to the Company's transfer agent to permit
the transfer) that registration under the 1933 Act is not required for the
immediate public transfer of the Registrable Securities pursuant to Rule 144 or
other applicable provisions.
(d) The Company represents that it is eligible to effect the
registration contemplated hereof on Form S-3, S-1 or SB-2 and will continue to
take such actions as are necessary to maintain such eligibility.
(e) If the Company is not eligible to effect a Registration under form
S-3, SB-2, S-1 or comparable form at the time of a Demand Registration under the
terms of Section 7(A) of this Agreement, then the Company shall pay to all
Purchasers of outstanding Debentures a penalty equal to 2% payable in cash or
stock at the Company's option, for each 30 day period beyond 60 days of the
receipt of a request for a Demand Registration until such registration is
complete. If, on the date (the "Conversion Eligibility Date") that the Debenture
become eligible for conversion into Common Stock, the Common Stock is not listed
on the National Market System or National Stock Exchange, then the Company shall
pay to all Purchasers of outstanding Debentures that are eligible for immediate
conversion a penalty equal to the amount of the Conversion Default Penalty for
each day beyond the Conversion Eligibility Date until such listing is complete.
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<PAGE>
(f) If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the company for
shareholders other than the Purchaser) any of its Common Stock under the 1933
Act in connection with the public offering of such securities (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan or a registration of Form S-4, promulgated under the 1933 Act
or any successor or similar form registering stock issuable upon a
reclassification , upon a business combination involving an exchange of
securities or upon an exchange offer for securities of the issuer or another
entity), the Company shall, at such time, promptly give each Purchaser written
notice of such registration. Upon the written request of each Purchaser given by
fax within ten (10) days after mailing of such notice by the Company, which
request shall state the intended method of disposition of such shares by such
Purchaser, the Company shall cause to be registered under the 1933 Act of all
the Registrable Securities that each such Purchaser has requested to be
registered (a "Piggyback Registration").
7.9 Registration Rights. The Company will grant the Subscriber the
registration rights covering the Shares issuable on conversion of the
Convertible Debentures on substantially the terms of the Registration Rights
Agreement and the terms of Section 7.8 are subject to the terms of such
Registration Rights Agreement.
8. Conditions to Closing; Deliveries at Closing.
(a) Conditions to Subscriber's obligations to close. The
obligations of the Subscriber to purchase the Convertible
Debentures offered hereunder are conditioned on the
fulfillment or waiver of the following:
(i) the execution and delivery of this Agreement, the
Registration Rights Agreement, the Escrow Agreement and an
Irrevocable Instruction to the Transfer Agent in the form of
Exhibit G attached hereto by the Company;
(ii) all the representations and warranties of the Company in
this Agreement as of the date hereof shall be true and correct
at the Closing as if made on such date, and the Company shall
have performed all actions required hereunder;
(iii) Subscriber shall have received the opinion of legal
counsel to the Company to the effect set forth in Section 7.6;
and
(iv) the Company shall not have defaulted on any long-term
debt (including but not limited to any other series of
convertible debentures or the Convertible Debentures).
(b) Conditions to the Company's obligations to close. The
obligations of the Company to purchase Convertible Debentures
offered hereunder are conditioned on the fulfillment or waiver
of the following:
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<PAGE>
(i) the execution and delivery of this Agreement, the
Registration Rights Agreement and the Escrow Agreement by the
Subscriber; and
(ii) all representations and warranties of the Subscriber made
in this Agreement as of the date hereof shall be true and
correct at the Closing as if made on such date, and the
Subscriber shall have performed all actions required
hereunder.
(iii) The execution of all Officer Certificates and special
representations required by Subscriber.
9. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, U.S.A. applicable to agreements made in and
wholly to be performed in that jurisdiction with regards to the choice of law
rules of such state, except for matters arising under the Act or the Exchange
Act which matters shall be construed and interpreted in accordance with such
laws. Any action brought to enforce, or otherwise arising out of, this Agreement
shall be heard and determined in either a Federal or state court sitting in the
County of New York, State of New York, and the parties consent to jurisdiction
in the State of New York.
10. Entire Agreement; Amendment
This Agreement, the Convertible Debentures, the Registration Rights
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be able or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
11. Notices, Etc.
Any notice, demand or request required or permitted to be given by either
the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
by facsimile, with a hard copy to follow by two day
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<PAGE>
courier addressed to the parties at the addresses of the parties set forth
at the end of this Agreement or such other address as a party may request
by notifying the other in writing.
12. Amount
The undersigned Subscriber hereby subscribes for a Convertible
Debenture with an in the principal amount of One Hundred Twenty Five Thousand
Dollars ($125,000)(U.S.), and has the irrevocable right to assign or transfer
without consent all or any part of the debentures to investors that are
qualified under Regulation S of the Securities Act at any time during the term
of the debentures. The Subscriber agrees to notify the Company of any assignment
or transfer within ten (10) days of said transfer or assignment.
The undersigned Subscriber acknowledges that this subscription shall
not be effective unless accepted by the Company as indicated below.
This Subscription Is Accepted by the Company on the day of July, 1997.
Thermo-Mizer Environmental, Corp.
By:
Print Name:
Title:
Signature
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<PAGE>
EXHIBIT 10.3 Form of Escrow Agreement
38
<PAGE>
EXHIBIT 10.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated the day of , 1997 ("Escrow
Agreement") is by and among THERMO-MIZER ENVIRONMENTAL, CORP., a Delaware
corporation ("Issuer"), the subscribers listed on Exhibit A attached hereto
(each a "Subscriber" and collectively the "Subscribers"); and , as Escrow Agent
hereunder ("Escrow Agent" ) and , as Consultant.
BACKGROUND
A. Issuer has engaged Consultant to assist it in locating offshore persons
to purchase of $500,000 aggregate principal amount of 5% Convertible Debentures
(the "Debentures") convertible into shares of common stock of the Issuer (the
"Shares"), pursuant to the Regulation S Securities Subscription Agreements
attached hereto as Exhibit A (collectively the "Subscription Agreements" and
individually a "Subscription Agreement").
B. In accordance with the Subscription Agreements, Subscribers for the
Debentures will be required to submit full payment for their respective
investment at the time they execute the Subscription Agreements.
C. All payments received by Consultant in connection with subscriptions
for Debentures shall be promptly forwarded to Escrow Agent, and Escrow Agent has
agreed to accept, hold, and disburse such funds deposited with it and the
earnings thereon in accordance with the terms of this Escrow Agreement.
D. In order to establish the escrow of funds and to effect the
consummation of the transaction contemplated by the Subscription Agreements, the
parties hereto have entered into this Escrow Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1 . Definitions. The following terms shall have the following meanings when
used herein:
"Cash Investment" shall mean the number and amount of Debentures
to be purchased by any Subscriber as set forth in the Subscription Agreements.
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<PAGE>
"Cash Investment Instrument" shall mean a wire transfer or other
immediately available funds paid to the " ," in full payment for the Shares to
be purchased by any Subscriber.
"Debentures" shall have the meaning set forth in the section of this Escrow
Agreement titled "Background."
"Escrow Funds" shall mean the funds deposited with the Escrow
Agent pursuant to this Agreement, together with any interest and other income
thereon.
"Entire Offering" shall mean the sale of an aggregate of $500,000 in
Debentures.
"Offering Notice" shall mean a written notification, signed by
Consultant, which shall specify that subscriptions for the Entire Offering have
been received; that, to the best of Consultant's knowledge after due inquiry and
review of its records, Cash Investment Instruments in full payment for that
number of Debentures equal to the Entire Offering have been received, deposited
with and collected by Escrow Agent; and that such subscriptions have not been
withdrawn, rejected or otherwise terminated. The within is subject to the
notification provisions contained in the Debentures.
"Subscription Accounting" shall mean an accounting of all
subscriptions for Debentures received and accepted by Consultant as of the date
of such accounting, indicating for each subscription the Subscriber's name and
address, the number and total purchase price of subscribed Debentures, the date
of receipt by Consultant of the Cash Investment Instrument, and notations of any
nonpayment of the Cash Investment Instrument submitted with such subscription,
any withdrawal of such subscription by the Subscriber, any rejection of such
subscription by Consultant, or other termination, for whatever reason, of such
subscription.
2. Appointment of and Acceptance by Escrow Agent. Issuer, Consultant and
Subscribers hereby appoint Escrow Agent to serve as escrow agent hereunder, and
Escrow Agent hereby accepts such appointment in accordance with the terms of
this Escrow Agreement.
3. Deposits into Escrow. A. Upon receipt by Consultant of any Cash
Investment Instrument for the purchase of Debentures, Consultant shall forward
to Escrow Agent, by 12:00 noon of the next business day, the Cash Investment
Instrument for deposit into the following escrow account:
Credit to the Account of:
ABA Routing #
ACCT #
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Each such deposit shall be accompanied by the following documents:
(1) a report containing such Subscriber's name, taxpayer identification number
(if applicable), address and other information required for withholding
purposes; and
(2) a Subscription Accounting.
ALL FUNDS SO DEPOSITED SHALL REMAIN THE PROPERTY OF THE SUBSCRIBERS
ACCORDING TO THEIR RESPECTIVE INTERESTS AND SHALL NOT BE SUBJECT TO ANY
LIEN OR CHARGE BY ESCROW AGENT OR BY JUDGMENT OR CREDITORS' CLAIMS AGAINST
ISSUER UNTIL RELEASED TO ISSUER IN ACCORDANCE WITH SECTION 4(a) HEREOF.
b. Consultant and Issuer understand and agree that all checks and similar
instruments received by Escrow Agent hereunder are subject to collection
requirements of presentment and final payment, and that the funds represented
thereby cannot be drawn upon or disbursed until such time as final payment has
been made and is no longer subject to dishonor. Upon receipt, Escrow Agent shall
process each Cash Investment Instrument for collection, and the proceeds thereof
shall be held as part of the escrow Funds until disbursed in accordance with
Section 4 hereof. If, upon presentment for payment, any Cash Investment
Instrument is dishonored, Escrow Agent's sole obligation shall be to notify
Consultant of such dishonor and to return such Cash Investment Instrument to
Consultant to take whatever action it deems necessary. Notwithstanding the
foregoing, if for any reason any Cash Investment Instrument is uncollectible
after payment of the funds represented thereby has been made by Escrow Agent,
Issuer shall immediately reimburse Escrow Agent upon receipt from Escrow Agent
of written notice thereof.
Upon receipt of any Cash Investment Instrument that represents payment
less than or greater than the Cash Investment, Escrow Agent's sole obligation
shall be to notify Issuer and Consultant of such fact and to return such Cash
Investment Instrument to Consultant.
c. All Cash Investment Instruments shall be made payable to the order of, or
endorsed to the order of, or endorsed to the order of, " ", and Escrow Agent
shall not be obligated to accept, or present for payment any Cash Investment
Instrument that is not payable or endorsed in that manner.
4. Disbursements of Escrow Funds.
a. Completion of Closing . Subject to the provisions of Section 10 hereof,
Escrow Agent shall deliver the original Debentures to the Subscribers and shall
pay to Issuer the liquidated value of the Escrow Funds (amount deposited less
Consultant fees and commissions equal to ten (10%) percent of the Escrow Funds),
by wire transfer, no later than two (2) business days following receipt of the
following documents:
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<PAGE>
(1) An Offering Notice;
(2) Subscription Accounting, substantiating the sale of the Entire Offering;
(3) Subscription Agreement signed by all parties;
(4) Debenture Certificates for each Subscriber; and
(5) Such other certificates, notices or other documents as Escrow Agent, in
its discretion, shall reasonably require.
Notwithstanding the foregoing, Escrow Agent shall not be obligated to
disburse the Debentures to the Subscriber and the Escrow Funds to Issuer if
Escrow Agent has grounds to believe that (a) Cash Investment Instruments in full
payment for that number of Debentures equal to or greater than the Entire
Offering have not been received, deposited with and collected by the Escrow
Agent, subject to the right of Issuer and Consultant, as agent for the
Subscribers, to consummate the sale of some, but not all, of the Shares or (b)
any of the certifications and opinions set forth in the documents are incorrect
or incomplete. Prior to disbursing any Escrow Funds or debenture certificates,
Escrow Agent shall be entitled, in its reasonable discretion, to require any
additional written certificates or authorizations that it deems necessary or
desirable. The Subscribers hereby authorize and direct the Escrow Agent to
exchange the original Debentures issued by Issuer and delivered to Escrow Agent,
hereunder for a series of debentures in the original principal amount of a
minimum of $50,000 each prior to distribution of the Debentures to Subscribers
pursuant to this Escrow Agreement. Completion of such exchange shall not,
however, delay distribution to Issuer of the Escrow Funds.
b. Rejection of any Subscription or termination of the Offering. No later than
five (5) business days after receipt by Escrow Agent of written notice (i) from
Issuer or Consultant that Issuer intends to reject a Subscriber's subscription,
or (ii) from Issuer or Consultant that there will be no closing of the sale of
Debentures to Subscribers, Escrow Agent shall pay to the applicable Subscribers,
by certified or bank check and by first class mail, the amount of the Cash
Investment paid by each Subscriber, without interest or deduction.
c. Expiration of Offering Period. Notwithstanding anything to the contrary
contained herein, if Escrow Agent shall not have received an Offering Notice on
or before July 31, 1997, Escrow Agent shall, within five (5) business days after
such date and without any further instruction or direction from Consultant or
Issuer, return to each Subscriber, by certified or bank check and by first class
mail, the Cash Investment made by such Subscriber, without interest or
deduction.
5. Suspension of Performance or Disbursement Into Court. If, at any time, there
shall exist any dispute between Consultant, Issuer, Escrow Agent, any Subscriber
or any other person with respect to the holding or disposition of any portion of
the Escrow Funds or any
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other obligations of Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if Consultant and Issuer has not within 30 days
of the furnishing by Escrow Agent of a notice of resignation pursuant to Section
7 hereof appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following actions:
a. suspend the performance of any of its obligations under this Escrow Agreement
until such dispute or uncertainty shall be resolved to the sole satisfaction of
Escrow Agent or until a successor Escrow Agent shall have been appointed (as the
case may be); and/or
b. petition (by means of an interpleader action or any other appropriate method)
any court of competent jurisdiction in New York, New York, for instructions with
respect to such dispute or uncertainty, and pay into such court all funds held
by it for holding and disposition in accordance with the instructions of such
court.
Escrow Agent shall have no liability to Consultant, Issuer, any Subscriber or
any other person with respect to any such suspension of performance or
disbursement into court, specifically including any liability or claimed
liability that may arise, or be alleged to have arisen, out of or as a result of
any delay in the disbursement of funds held in the Escrow Funds or any delay in
or with respect to any other action required or requested of Escrow Agent.
6. Investment of Funds. Escrow Agent shall not invest or reinvest the Escrow
Funds. The parties to this Escrow Agreement acknowledge that no interest shall
accrue or be paid with respect to the Escrow Funds.
7. Resignation and Removal of Escrow Agent. Escrow Agent may resign from the
performance of its duties hereunder at any time by giving ten (10) days' prior
written notice to Consultant and Issuer or may be removed, with or without
cause, by Consultant and Issuer, acting jointly in writing, at any time by the
giving of ten (10) days' prior written notice to Escrow Agent. Such resignation
or removal shall take effect upon the appointment of a successor Escrow Agent as
provided herein below. Upon any such notice of resignation or removal,
Consultant and Issuer jointly shall appoint a successor Escrow Agent hereunder,
which shall be a commercial bank, trust company or other financial institution
with a combined capital and surplus in excess of $10,000,000. Upon the
acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Escrow Agreement, but shall not be
discharged from any liability for actions taken as escrow agent hereunder prior
to such succession. After any retiring Escrow Agent's resignation or removal,
the provisions of this Escrow Agreement shall inure to its benefit as
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to any actions taken or omitted to be taken by it while it was Escrow Agent
under this Escrow Agreement.
8. Liability of Escrow Agent.
a. Escrow Agent shall have no liability or obligation with respect to the
Escrow Funds except for Escrow Agent's willful misconduct or gross negligence.
Escrow Agent's sole responsibility shall be for the safekeeping and disbursement
of the Escrow Funds in accordance with the terms of this Escrow Agreement.
Escrow Agent shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not specifically
set forth herein. Escrow Agent may rely upon any instrument, whether bearing
original, conformed or facsimile signatures, not only as to its due execution,
validity and effectiveness, but also as to the truth and accuracy of any
information contained therein which Escrow Agent shall in good faith believe to
be genuine, to have been signed or presented by the person or parties purporting
to sign the same and to conform to the provisions of this Escrow Agreement. In
no event shall Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. Escrow Agent shall not be obligated to take
any legal action or commence any proceeding in connection with the Escrow Funds
or any account in which Escrow Funds are deposited or this Escrow Agreement, or
to appear in, prosecute or defend any such legal action or proceeding. Without
limiting the generality of the foregoing, Escrow Agent shall not be responsible
for or required to enforce any of the terms or conditions of any subscription
agreement with any Subscriber or any other agreement between Issuer, Consultant
and/or any Subscriber. Escrow Agent shall not be responsible or liable in any
manner for the performance by Issuer or any Subscriber of their respective
obligations under any subscription agreement nor shall Escrow Agent be
responsible or liable in any manner for the failure of Issuer, Consultant or any
third party (including any Subscriber) to honor any of the provisions of this
Escrow Agreement. Escrow Agent may consult legal counsel selected by it in the
event of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder. and shall incur no
liability and shall be fully indemnified from any liability whatsoever in acting
in accordance with the opinion or instruction of such counsel. Issuer shall
promptly pay, upon demand, the reasonable fees and expenses of any such counsel.
b. The Escrow Agent is authorized, in its sole discretion, to comply with
orders issued or process entered by any court with respect to the Escrow Funds,
without determination by the Escrow Agent of such court's jurisdiction in the
matter. If any portion of the Escrow Funds is at any time attached, garnished or
levied upon under any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any
court order, or in case any order, judgment or decree shalt be made or entered
by any court affecting such property or any part thereof, then and in any such
event, the Escrow Agent is authorized, in its sole discretion, to rely upon and
comply with any such order, writ, judgment or decree which it is advised by
legal counsel selected by it is binding upon it without the need for appeal or
other action; and if
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the Escrow Agent complies with any such order, writ, judgment or decree, it
shall not be liable to any of the parties hereto or to any other person or
entity by reason of such compliance even though such order, writ, judgment or
decree may be subsequently reversed, modified, annulled, set aside or vacated.
9. Indemnification of Escrow Agent. From and at all times after the date of this
Escrow Agreement, Issuer and each Subscriber (the "Indemnifying Party") shall,
severally and not jointly to the fullest extent permitted by law, indemnify and
hold harmless the Escrow Agent and each director, officer, employee, attorney,
agent and affiliate of Escrow Agent (collectively, the "Indemnified Parties")
against any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including
without limitation reasonable attorneys' fees, costs and expenses) incurred by
or asserted against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result of or arising
from or in any way relating to any claim, demand, suit, action or proceeding
(including any inquiry or investigation) by any person, including without
limitation Issuer or Consultant, whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or equitable cause or otherwise, arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of this Escrow Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation-, provided,
however, that no Indemnified Party shall have the right to be indemnified
hereunder for any liability finally determined by a court of competent
jurisdiction, subject to no further appeal, to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Party. If any such
action or claim shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Indemnifying Party in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by such Indemnified Party in its sole discretion) in any such
action and to participate in the defense thereof, and the fees and expenses of
such counsel shall be paid by such Indemnified Party, except that the
Indemnifying Party shall be required to pay such fees and expenses if (a) the
Indemnifying Party agrees to pay such fees and expenses, (b) the Indemnifying
Party shall fail to assume the defense of such action or proceeding or shall
fail, in the reasonable discretion of such Indemnified Party, to employ counsel
satisfactory to the Indemnified Party in any such action or proceeding, (c) the
Indemnifying Party is the plaintiff in any such action or proceeding, or (d) the
named parties to any such action or proceeding (including any impleaded parties)
include both Indemnified Party and the Indemnifying Party, and Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
Issuer. Issuer shall be liable to Pay fees and expenses of counsel pursuant to
the preceding sentence. All such fees and expenses payable by the Indemnifying
Party pursuant to the foregoing sentence shall be paid from time to time as
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incurred, both in advance of and after the final disposition of such action or
claim. The obligations of each Indemnifying Party under this Section 9 shall
survive any termination of this Escrow Agreement and the resignation or removal
of Escrow Agent.
10. Compensation to Escrow Agent.
a. Fees and Expenses. Issuer shall compensate Escrow Agent for its
services hereunder by making payment of the sum of $3,500, which will be payable
upon closing. The obligations of Issuer under this Section 10 shall survive any
termination of this Escrow Agreement and the resignation or removal of Escrow
Agent.
b. Disbursements from Escrow Funds to Pay Escrow Agent. The Escrow Agent
is authorized to and may disburse from time to time, to itself or to any
Indemnified Party from the Escrow Funds (to the extent of Issuer's rights
thereto), the amount of any compensation and (reimbursement of out-of-pocket
expenses due and payable hereunder) and any amount to which Escrow Agent is
entitled to seek indemnification pursuant to Section 9 hereof). Escrow Agent
shall notify Issuer of any disbursement from the Escrow Funds to itself or to
any Indemnified Party in respect of any compensation or reimbursement hereunder
and shall furnish to Issuer copies of all related invoices and other statements.
c. Security and Offset. Issuer hereby grants to Escrow Agent and the
Indemnified Parties a security interest in and lien upon the Escrow Funds (to
the extent of Issuer's rights thereto) to secure all obligations hereunder, and
Escrow Agent and the Indemnified Parties shall have the right to offset the
amount of any compensation or reimbursement due any of them hereunder (including
any claim for indemnification pursuant to Section 9 hereof) against the Escrow
Funds (to the extent of Issuer's rights thereto). If for any reason the Escrow
Funds available to Escrow Agent and the Indemnified Parties pursuant to such
security interest or right of offset are insufficient to cover such compensation
and reimbursement, Issuer shall promptly pay such amounts to Escrow Agent and
the Indemnified Parties upon receipt of an itemized invoice.
d. Payment of Monies. It is understood that Consultant is due a fee, of
10% calculated as a percentage of the Cash Investment (the "Fee"). The parties
hereto agree that, upon completion of the Offering, Escrow Agent shall remit via
wire transfer to the parties designated by Consultant the sums so designated by
Consultant after first retaining and disbursing to itself from the Fee.
11. Representations and Warranties: Legal Opinions.
a. Issuer makes the following representations and warranties to Escrow
Agent:
(1) Issuer is a corporation duly existing, and in good standing under the
laws
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of the State of Delaware and has full power and authority to execute and deliver
this Escrow Agreement and to perform its obligations hereunder.
(2) This Escrow Agreement has been duly approved by all necessary
corporate action of Issuer, including any necessary shareholder approval, has
been executed by duly authorized officers of Issuer, and constitutes a valid and
binding agreement of Issuer, enforceable in accordance with its terms.
(3) The execution, delivery, and performance by Issuer of this
Escrow Agreement will not violate, conflict with, or cause a default under the
certificate of incorporation or bylaws of Issuer, any applicable law or
regulation, any court order or administrative ruling or decree to which Issuer
is a party or any of its property is subject, or any agreement, contract,
indenture, or other binding arrangement to which Issuer is a party or any of its
property is subject.
(4) No party other than the parties hereto and the prospective
Subscribers have, or shall have, any lien, claim or security interest in the
Escrow Funds or any part thereof. No financing statement under the Uniform
Commercial Code is on file in any jurisdiction claiming a security interest in
or describing (whether specifically or generally) the Escrow Funds or any part
thereof.
(5) Issuer hereby acknowledges that the status of Escrow Agent is
that of agent only for the limited purposes set forth herein, and hereby
represents and covenants that no representation or implication shall be made
that the Escrow Agent has investigated the desirability or advisability of
investment in the Debentures or has approved, endorsed or passed upon the merits
of the investment therein and that the name of the Escrow Agent has not and
shall not be used in any manner in connection with the offer or sale of the
Debentures other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
(6) All of the representations and Warranties of Issuer contained
herein are true and complete as of the date hereof and will be true and complete
at the time of any deposit to or disbursement from the Escrow Funds.
b. Each Subscriber makes the following representations and warranties to Escrow
Agent:
(1) Subscriber has full power and authority to execute and
deliver this Escrow Agreement and to perform its obligations hereunder.
(2) This Escrow Agreement has been duly approved by all necessary
action of Subscriber, including any necessary shareholder approval, has been
executed by persons duly authorized by Subscriber, and constitutes a valid and
binding agreement of Subscriber, enforceable in accordance with its terms.
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(3) The execution, delivery, and performance by Subscriber of
this Escrow Agreement will not violate, conflict with, or cause a default under
the organizational or governing documents of Subscriber to each Subscriber's
knowledge any applicable law or regulation, any court order or administrative
ruling or decree to which Subscriber is a party or any of its property is
subject, or any material agreement, contract, indenture, or other binding
arrangement to which Subscriber is a party or any of its property is subject.
(4) Subscriber hereby acknowledges that the status of Escrow
Agent is that of agent only for the limited purposes set forth herein, and
hereby represents and covenants that no representation or implication shall be
made that the Escrow Agent has investigated the desirability or advisability of
investment in the Debentures or has approved, endorsed or passed upon the merits
of the investment therein and that the name of the Escrow Agent has not and
shall not be used in any manner in connection with the offer or sale of the
Debentures other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
(5) All of the representations and warranties of Subscriber
contained herein are true and complete as of the date hereof and will be true
and complete at the time of any deposit to or disbursement from the Escrow
Funds.
c. Consultant makes the following representations and warranties to Escrow
Agent:
(1) Consultant has full power and authority to execute and
deliver this Escrow Agreement and to perform its obligations hereunder;
(2) This Escrow Agreement has been duly approved by all necessary
action of Consultant, has been executed by Consultant, and constitutes a valid
and binding agreement of Consultant, enforceable in accordance with its terms.
(3) The execution, delivery, and performance by Consultant of
this Escrow Agreement will not violate, conflict with, or cause default under
the articles of incorporation or bylaws of Consultant, any applicable law,
regulation or license, any court order or administrative ruling or decree to
which Consultant is a party or any of its property, is subject, party or any of
its property is subject.
(4) The deposit with Escrow Agent by Consultant of Cash
Investment Instruments pursuant to Section 3 hereof shall be deemed a
representation and warranty by Consultant that such Cash Investment Instrument
represents a bona fide sale to the Subscriber described therein of the amount of
Debentures set forth therein, subject to and in accordance with the terms of the
Offering Document.
(5) Consultant hereby acknowledges that the status of Escrow
Agent hereunder is that of agent only for the limited purposes set forth herein,
and hereby represents and covenants that no representation or implication shall
be made that the
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Escrow Agent has investigated the desirability or advisability of investment in
the Debentures or has approved, endorsed or passed upon the merits of the
investment therein and that the name of the Escrow Agent has not and shall not
be used in any manner in connection with the offer or sale of the Debentures
other than to state that the Escrow Agent has agreed to serve as escrow agent
for the limited purposes set forth herein. Additionally, the Escrow Agents have
acted as counsel to Subscriber and that in the event of any dispute with respect
to the Escrow Fund, the Escrow Agent will not be precluded from acting as
counsel to Subscriber.
(6) All of the representations and warranties of Consultant
contained herein are true and complete as of the date hereof and will be true
and complete at the time of any deposit to or disbursement from the Escrow
Funds.
12. Consent to Jurisdiction and Venue. In the event any party hereto commences ,
a lawsuit or other proceeding relating to or arising from this Agreement, the
parties hereto agree that the United States District Court for the Southern
District of New York shall have the sole and exclusive jurisdiction over any
such proceeding. If all such courts lack federal subject matter jurisdiction,
the parties agree that the Supreme Court in the State of New York County of New
York shall have sole and exclusive jurisdiction. Any of these courts shall be
proper venue for any such lawsuit or judicial proceeding and the parties hereto
waive any objection to such venue. The parties hereto consent to and agree to
submit to the jurisdiction of any of the courts specified herein and agree to
accept service or process to vest personal jurisdiction over them in any of
these courts.
13. All notices and other communications hereunder shall be in writing and shall
be deemed to have been validly served, given or delivered five (5) days after
deposit in the United States mails, by certified mail with return receipt
requested and postage prepaid, when delivered personally, one (1) day after
delivery to any overnight courier, or when transmitted by facsimile transmission
facilities, and addressed to the party to be notified as follows:
If to Issuer at: Thermo-Mizer Environmental, Corp.
528 Oritan Avenue
Ridgefield, NJ 07657
CC: McLaughlin & Stern, LLP
260 Madison Avenue
New York, NY 10016
Attn: Steven Schuster, Esq.
If to Consultant at:
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If to the Escrow
Agent at:
or to such other address as each party may designate for itself by like notice.
14 Amendment or Waiver. This Escrow Agreement may be changed, waived, discharged
or terminated only by a writing signed by Consultant, Issuer, Subscribers and
Escrow Agent. No delay or omission by any party in exercising any right with
respect hereto shall operate as a waiver. A waiver on any one occasion shall not
be construed as a bar to, or waiver of, any right or remedy on any future
occasion.
15. Severability. To the extent any provision of this Escrow Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Escrow Agreement.
16. Governing Law. This Escrow Agreement shall be construed and interpreted in
accordance with the internal laws of the State of New York without giving effect
to the principles or rules governing conflict of laws.
17 Entire Agreement. This Escrow Agreement constitutes the entire agreement
among the parties relating to the acceptance, collection, holding, investment
and disbursement of the Escrow Funds and sets forth in their entirety the
obligations and duties of the Escrow Agent with respect to the Escrow Funds.
18. Binding Effect. All of the terms of this Escrow Agreement, as amended from
time to time, shall be binding upon, inure to the benefit of and be enforceable
by the respective successors and assigns of Consultant, Issuer, Subscribers and
Escrow Agent.
19. Execution in Counterparts. This Escrow Agreement may be executed in two or
more counterparts, which when so executed shall constitute one and the same
agreement.
20. Termination. Upon the first to occur of the disbursement of all amounts in
the Escrow funds or deposit of all amounts in the Escrow Funds into court
pursuant to Section 5 hereof, this Escrow Agreement shall terminate and Escrow
Agent shall have no further obligation or liability whatsoever with respect to
this Escrow Agreement or the Escrow Funds.
21. Dealings. The Escrow Agent and any stockholder, director, officer or
employee of the Escrow Agent may buy, sell, and deal in any of the securities of
the Issuer and become pecuniarily interested in any transaction in which the
Issuer may be interested, and contract and lend money to the Issuer and
otherwise act as fully and freely as though it were not Escrow Agent under this
Agreement. Nothing herein shall preclude the Escrow Agent from acting in any
other capacity for the Consultant or any other person or entity.
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22. The parties understand that the firm of B & G has acted as counsel to
Subscriber, and in the event of any dispute with respect to the Subscription
Agreement will not be prevented from acting as counsel for the Subscriber
herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be executed under seal as of the date first above written.
ISSUER: THERMO-MIZER ENVIRONMENTAL, CORP.
By:
Title:
CONSULTANT:
By:
Title:
ESCROW AGENT:
as Escrow Agent
By:
Title:
as Subscriber
By:
Title:
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EXHIBIT 10.4 Form of Registration Rights Agreement
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EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of __________________, 1997, by and among Thermo-Mizer Environmental, Corp., a
Delaware corporation (the "Company"), and the investors set forth in Exhibit A
(the "Investors").
RECITALS:
WHEREAS, pursuant to Subscription Agreements (the "Agreement"), by and
among the Company and the Investors, the Company has agreed to sell and the
Investors have agreed to purchase an aggregate of up to a maximum aggregate
of $500,000 of Convertible Debentures of the Company (the "Convertible
Debentures" or the "Shares") convertible into shares of the Company's Common
Stock; and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Agreements, the Company has agreed to
provide the Investors with certain registration rights with respect to the
shares of Common Stock issuable upon conversion of the Convertible Debentures:
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreements and this
Registration Rights Agreement, the Company and the Investors agree as follows:
AGREEMENT:
I. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share.
"Initiating Holders" shall mean holders of the Company's Convertible
Debentures having an aggregate initial purchase price from the Company of
$50,000 or more.
"Other Registrable Securities" shall mean those shares of Common Stock
heretofore or hereafter issued pursuant to one or more agreements granting the
purchasers of such securities the right to have the Company register such
securities or include such securities in
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any other registration of the Company's equity securities.
"Registrable Shares" shall mean the Common Stock of the Company issued
or issuable in respect of the Shares or upon any stock split, stock dividend,
recapitalization or similar event provided, however, that Registrable Shares
or other securities shall no longer be treated
as Registrable Shares if (A) they have been sold or through a broker or dealer
or underwriter in a public distribution or a public securities transaction,
(B) they have been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon
consummation of such sale or (c) the Shares are available for sale under the
Securities Act (including Rule 144), in the opinion of counsel to the Company,
without compliance with the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive
legends with respect thereto may be removed upon the consummation of such
sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel of the Company, blue sky fees and expenses, reasonable fees and
disbursements (not to exceed $15,000) of one counsel for all the selling
holders of Registrable Shares for a limited "due diligence" examination of the
Company (in the event the holders of the Registrable Shares would be deemed to
be underwriters with respect to such registration), and the reasonable
expenses of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company, and excluding all
underwriting discounts and selling commissions applicable to the sale of the
Registrable Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and all fees and
disbursements of one counsel for the selling holders of Registrable Shares
(other than the fees disbursements of such counsel included in Registration
Expenses).
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"Shares" shall mean shares of Common Stock issued upon the conversion of
the Convertible Debentures, and share of Common Stock issuable in respect of
interest on the Convertible Debentures".
II. Requested Registration.
The following registration rights will apply if, and only if, at any time prior
to the termination of this Agreement, Regulation S promulgated under the
Securities Act is rescinded or modified so as to preclude Initiating Holders
from reselling in United States public securities markets Shares received from
the Company pursuant to the Agreements following expiration of the Restricted
Period (as defined in the Agreements), or if, for any other reason, the Company
refuses to issue Shares at the times required by the Agreements bearing no
restrictive legend to Initiating Holders after expiration of the Restricted
Period; provided, however, that no Investor shall be entitled to request
registration pursuant to this Agreement ( and such Investor shall not be
considered an Initiating Holder pursuant to this Agreement, and the securities
hold by such investor shall not be considered Registrable Shares pursuant to
this Agreement) if a representation or warranty of such Investor in the
Agreements between the Investor and the Company is inaccurate or was inaccurate
when made, or the Investor has failed to comply with the covenants and
agreements of the Investor set forth in the Agreements between the Investor and
the Company:
(a) Request for Registration. If the Company shall receive from Initiating
Holders, at any time after two (2) and prior to twenty-four (24) months
following the final closing of notice demanding registration with respect to
all, but not less than all, of the Registrable Shares held by such Initiating
Holders (which notice shall specify the intended method of disposition; notice
shall be written to the Company of the request for registration of the
Registrable Shares refer to the Subscription Agreement), the Company shall:
i) promptly give written notice of the proposed registration to all other
holders of Registrable Shares; and
ii) as soon as practicable use its best efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Shares as are specified in such request, together with all or such
portion of the Registrable Shares of any holders of Registrable Shares joining
in such request as are specified in a written request given within fifteen (15)
days after receipt of such written notice from the Company; provided that the
Company shall not be obligated
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to effect, or to take any action to effect, any such registration pursuant to
this Section II:
a) after the Company has effected one such registration pursuant to this
Section 2(a) and such registration has been declared or ordered effective by the
Commission; or
b) within the period starting with the date thirty (30) days
prior to the Company's good faith estimated date of filing of, and ending ninety
(90) days following the effective date of, any registered offering of the
Company's securities to the general public.
c) or similar notice provided under any other Registration Rights
Agreement.
Subject to the foregoing limitations in clauses II (a) (ii) (a) and (b)
above, the Company shall file a registration statement covering the Registrable
Shares so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders, but no later than forty-five (45)
days following receipt of such request or requests, except in the event audited
financial statements not previously prepared are required to be prepared prior
to the filing of such registration statement, in which case such registration
statement must be filed as soon as practicable, but in any event within ninety
(90) days following receipt of such request or requests.
The registration statement filed pursuant to the request of the initiating
holders may, subject to the provision of Section 2(b) below, include other
Registrable Securities, other securities of the Company which are held by
officers or directors of the Company or which are held by other holders of
registration rights, and may include securities of the Company being sold for
the account of the Company. The Initiating Holders shall have the right to make
one request for registration under this Section 2(a).
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Shares covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to Section
2 and the Company shall include such of Registrable Shares in to registration
pursuant to Section 2, and said Registrable Shares to be registered shall be
conditioned upon such holder's participation in such underwriting and the
inclusion of such holder's Registrable Shares in such underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such holder with respect to such participation and inclusion) to the extent
provided herein. A holder of Registration Shares may elect to include in such
underwriting all or a part of the Registrable Shares it holds.
I) If the Company shall request inclusion in any registration
pursuant to Section 2 of securities being sold for its own account, or if
officers or directors of the Company holding other securities of the Company or
other holders of registration rights, shall request inclusion in any
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registration pursuant to Section 2, the Initiating Holders shall, on behalf of
all holders of Registrable Shares, offer to include Other Registrable Securities
and the securities of the Company, such officers and directors and such other
holders of registration rights in the underwriting and may condition such offer
on their acceptance of the further applicable provisions of this Agreement. The
Company shall (together with all holders of Registrable Shares, officers and
directors, other holders of registration rights and holders of Other Registrable
Securities proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
representative of the underwriters selected for such underwriting by the
Company, which underwriter(s) shall be reasonably acceptable to a majority in
interest of the Initiating Holders.
ii) Notwithstanding any other provision of this Section 2, if
the representative of the underwriters advises the Company in writing that
marketing factors requires a limitation on the number of shares to be
underwritten, the Company shall so advise all holders of Registrable Shares and
other shareholders whose securities would otherwise be underwritten pursuant
hereto, and the number of Registrable Shares and other securities that may be
included in the registration and underwriting shall be allocated in the
following manner: the securities of the Company held by officers and directors
of the Company (other than Registrable Shares) shall be excluded from such
registration and underwriting to the extent required by such limitation, and, if
a I imitation on the number of shares is still required, the Other Registrable
Securities shall be excluded pro rata with Registrable Shares, unless another
method of determining such exclusion is specified in the agreements governing
the Other Registrable Securities, according to the relative number of Other
Registrable Securities requested to be included in such registration and
underwriting, from such registration and underwriting to the extent required by
such limitation, and, if a limitation on the number of shares is still required,
the number of Registration Shares that may be included in the registration and
underwriting shall be allocated among all holders of Registrable Shares n
proportion, as nearly as practicable, to the respective amounts of Registrable
Shares which they had requested to be included in such registration at the time
of filing the registration statement. No Registrable Shares or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall also be included in such registration.
iii) If the Company or any officer, director or holder of Registrable
Shares or Other Registrable Shares who has requested inclusion in such
registration and underwriting as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration.
III. Expenses of Registration. If the Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be bome by the holders of the securities so registered pro rata
on the basis of the number of their share so registered.
IV. Registration Procedures. Pursuant to this agreement, the Company will
keep each holder of Registrable Shares advised in writing as to the initiation
of a registration under this Agreement and as to the completion thereof at its
expense, the Company will:
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(a) Use reasonable efforts to keep such registration effective for a
period of one hundred eighty (180) days or until the holder or holders of
Registrable Shares have completed the distribution described in the registration
statement relating thereto or until the securities registered cease to be
Registrable Shares, whichever first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect tot the disposition of securities
covered by such registration statement; and
(c) Furnish such number of prospectuses and other documents
incidental thereto, including any amendment of or supplement to the prospectus,
as a holder of Registrable Shares from time to time may reasonably request.
V. Indemnification.
(a) The Company will indemnify each holder of Registrable Shares,
each of its officers, directors, and partners, and each person controlling such
holder of Registrable Shares, with respect to which registration has been
effected pursuant to this Agreement, and each underwriter, if any and each
person who controls any underwriter, and their respective counsel against all
claims, losses, damages and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of or any untrue statement (alleged untrue
statement) of a material fact contained in any prospectus, or other document
incident to any such registration, or based on any omission (or alleged
omission) to state therein a material fact required to be stated herein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company n connection with any such registration and will reimburse each such
holder of Registrable Shares, each of its officers, directors and partners, and
each person controlling such holders of Registrable Shares, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses as they ear reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided, however, that the indemnity contained in this Section 5(a) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such Settlement is effected without the consent of the Company; and
provided further that the Company shall not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such holder of Registrable Shares or underwriter and
stated to be specifically for use therein. The foregoing indemnity agreement is
further subject to the condition that insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity parties if copies of a final prospectus
correcting the misstatement, or alleged misstatement, omission or alleged
omission upon which such loss, liability, claim or damage is based is timely
delivered to such indemnified party and a copy thereof
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was not furnished to the person asserting the loss, liability, claim or damage.
(b) Each holder if Registrable Shares will, if Registrable Shares
held by it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such holder of Registrable Shares and each of its officers, directors and
partners, and each person controlling such holder of Registrable Shares, and
their respective counsel (collectively, the "Company, Underwriters and Counsel")
against all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged omission) to state therein a material fact required to be stated
therein relating to such holder or necessary to make the statements therein
relating to such holder not misleading or any violation by such holder of any
rule or regulation promulgated under the Securities Act applicable to such
holder and relating to action or inaction required of such holder in connection
with any such registration; and will reimburse the Company, such holders of
Registrable Shares, directors, officers, partners, persons, underwriter or
control persons for any legal or any other expense reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission ( or alleged
omission) relating to such holder is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such holder of
Registrable Shares and stated to be specifically for use therein; provided,
however, that such indemnification obligations shall not apply if the Company
modifies or changes to a material extent written information furnished by such
Holder. Each holder of Registrable Shares will, if Registrable Shares held by it
are included in the securities as to which such registration is being effected,
indemnify the Company, Underwriters and Counsel against all claims, losses,
damages and liabilities (or actions, proceedings or settlements in respect
thereof, arising out of or based on any sale of Registrable Shares made by such
holder following receipt by such holder of written notice from the Company,
Underwriters or Counsel that the registration statement filed with respect to
such Registrable Shares contains an untrue statement of material fact or omits
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Pray") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnify may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such Indemnified Party's expense. No Indemnifying Party, in
the defense of any such claim or litigation, shall except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to
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such claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
VI. Information by Holder of Registrable Shares. Each holder of
Registrable Shares shall furnish to the Company such information regarding such
holder of Registrable Shares and the distribution proposed by such holder of
Registrable Shares as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration referred to in this
Agreement.
VII. Miscellaneous.
A. Governing Law. This agreement shall be govemed by and construed in
accordance with the laws of the State of New York without giving effect to
conflict of laws.
B. Successors and Assigns. Except as otherwise provided
herein, the provision hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties
hereto.
C. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
D. Notices etc, All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to an Investor, at such Investor's address set forth
on exhibit A hereof, or at such other address as such Investor shall have
furnished to the Company in writing, or (b) if to the Company at or at such
other address as the Company shall have furnished to each Investor and each such
other holder in writing.
E. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder or any Registrable Shares, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence any single breach or default
be deemed a waiver of any other breach or default thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions of conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
F. Counterparts. This agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable
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against the parties actually executing such counterparts, and all of which
together shall constitute one instrument.
G. Severability. In the case any provision of this agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
H. Amendments. The provisions of this Agreement may be amended at any
time and from time to time, and particular of this Agreement may be waived, with
and only with an agreement or consent in writing signed by the Company and by
the Investors currently holding fifty percent (50%) of the Registrable Shares as
of the date of such amendment or waiver.
I. Termination of Registration Rights. This Agreement shall terminate
at such time as there ceases to be at least $50,000 in face amount of
outstanding Convertible Debentures which constitute Registrable Shares as
defined herein.
The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
COMPANY:
THERMO-MIZER ENVIRONMENTAL, CORP.
BY:
NAME:
TITLE:
BY:
NAME:
TITLE:
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