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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): November 15, 1996
-----------------
ROM TECH, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania 0-27102 23-2694937
- ----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employee
of incorporation) Identification No.)
</TABLE>
2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 750-6606
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(Former name or former address, if changed since last report)
8-K.WPD 1735 11/20/96
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Item 5. Other Events
Rom Tech, Inc. (the "Company") has to date sold in a private
offering to accredited investors 1,143,000 shares of Class Two Convertible
Preferred Stock (the "Convertible Preferred Stock"), without par value, and
320,040 Common Stock Purchase Warrants (the "Warrants") to purchase 320,040
shares of the Company's Common Stock, without par value (the "Common Stock"),
for an aggregate purchase price of $1,143,000. The Company intends to continue
the private offering, which is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"). Neither the Convertible
Preferred Stock nor the Warrants have been registered under the Act and may not
be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Act and applicable state
securities laws.
The Convertible Preferred Stock is convertible at the option of the
holder beginning six months following the date of issuance into the number of
shares of Common Stock equal to the number of shares of Convertible Preferred
Stock surrendered for conversion divided by the conversion price, which will be
the lower of (i) $5.00 or (ii) ninety percent (90%) of the average of the
closing bid price of the Company's Common Stock on the Nasdaq SmallCap Market,
or the primary securities exchange on which the Common Stock is then quoted, for
the 10 business days immediately preceding the date on which the Securities and
Exchange Commission declares effective the registration statement filed by the
Company under Section 5 of the Securities Act of 1933, as amended, pursuant to
the Registration Rights Agreement between the Company and the purchasers of the
Convertible Preferred Stock.
Each Warrant entitles the holder to purchase one share of Common Stock,
at any time during the period beginning six (6) months after the date of
issuance of the Warrant until November 15, 2001 at a price equal to the lesser
of (i) $6.25 or (ii) the average of the the closing bid price of the Company's
Common Stock on the Nasdaq SmallCap Market, or the primary securities exchange
on which the Common Stock is then quoted, plus $1.25, for the 10 business days
immediately preceding the date on which the Securities and Exchange Commission
declares effective the registration statement filed by the Company under Section
5 of the Securities Act of 1933, as amended, pursuant to the Registration Rights
Agreement between the Company and the purchasers of the Convertible Preferred
Stock.
The holders of the Convertible Preferred Stock and the Warrants are
entitled to certain registration rights pursuant to a Registration Rights
Agreement, which provides that within 120 days after the date of issuance of the
Convertible Preferred Stock, the Company will file with the Commission a shelf
registration statement (the "Registration Statement") covering resales by
holders of the Common Stock issuable upon conversion of the Convertible
Preferred Stock and upon exercise of the Warrants. The Company will use its best
efforts to cause the registration statement to become effective as promptly as
is practicable and to keep the registration statement effective for two (2)
years from the date of issuance of the Convertible Preferred Stock. The Company
will pay all expenses of the registration statement.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Statements.
(i) Consolidated Unaudited Pro Forma Balance
Sheet and Statement of Operations.
(c) Exhibits.
4.1 Certificate of Designation, Preferences,
Powers, Rights and Number of Shares of Class
Two Convertible Preferred Stock.
4.2 Form of Purchase Agreement dated as of
November 15, 1996
4.3 Form of Warrant Agreement dated as of
November 15, 1996
4.4 Form of Registration Rights Agreement dated
as of November 15, 1996
4.5 Form of Agreement dated as of November 15,
1996
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.
ROM TECH, INC.
Date: November 26, 1996 By: /s/ Gerald W. Klein
----------------------
Gerald W. Klein, Vice President and
Chief Financal Officer
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ROMTECH, INC.
Consolidated Pro Forma Statement of Operations
(Unaudited)
Four months ended
October 31,
1996
-----------------
Net revenues $ 1,504,350
Cost of revenues 451,305
------------
Gross profit 1,053,045
Operating expenses:
Product development 182,873
Selling, general and administrative 1,245,683
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Total operating expenses 1,428,556
Operating loss (375,511)
Interest expense, net 18,001
------------
Loss before taxes (393,512)
Provision for income tax --
Net loss $ (393,512)
============
Net loss per common share $ (0.06)
Weighted average common
shares outstanding 6,285,128
<PAGE>
ROMTECH, INC.
Consolidated Pro Forma Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
October 31, October 31,
1996 1996
Unadjusted Adjustments As Adjusted
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<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 84,288 $ 1,100,000 $ 1,184,288
Restricted cash 14,788 14,788
Accounts receivable, net of allowance for doubtful
accounts of $111,470 687,014 687,014
Inventory 281,914 281,914
Prepaid expenses 369,185 369,185
----------- ----------- -----------
Total current assets 1,437,189 1,100,000 2,537,189
Furniture and equipment, net 165,458 165,458
Intangibles and other assets 137,584 137,584
----------- ----------- -----------
Total assets $ 1,740,231 $ 1,100,000 $ 2,840,231
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 333,973 $ -- $ 333,973
Accounts payable 545,815 545,815
Accrued expenses 441,812 441,812
----------- ----------- -----------
Total current liabilities 1,321,600 -- 1,321,600
Capital lease obligations net of current portion 35,373 35,373
Notes payable-long term portion 316,519 316,519
Convertible subordinated debt 150,000 150,000
----------- ----------- -----------
Total liabilities 1,823,492 -- 1,823,492
Stockholders' equity:
Convertible preferred stock 1,000,000 1,143,000 2,143,000
Common stock, no par value (40,000,000 shares authorized;
6,285,128 issued and outstanding) 4,217,517 4,217,517
Additional paid in capital 747,738 (43,000) 704,738
Accumulated deficit (6,048,516) (6,048,516)
----------- ----------- -----------
Total stockholders' equity (83,261) 1,100,000 1,016,739
----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,740,231 $ 1,100,000 $ 2,840,231
=========== =========== ===========
</TABLE>
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES, POWERS,
RIGHTS AND NUMBER OF SHARES OF CLASS TWO
CONVERTIBLE PREFERRED STOCK
Rom Tech, Inc. (the "Corporation"), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania, does hereby certify
that pursuant to the authority conferred upon and in accordance with the
provisions of the Pennsylvania Business Corporation Law, as amended, (the
"BCL"), the Board of Directors of the Corporation, by action taken on October
29, 1996, adopted the following resolutions, which resolutions remain in full
force and effect as of the date hereof;
BE IT RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Corporation's Articles of Incorporation, the
Corporation is authorized to issue, out of the 10,000,000 shares of Preferred
Stock of the Corporation authorized in its Certificate of Incorporation, a
series of Preferred Stock to be designated as "Class Two Convertible Preferred
Stock," without par value, with the following powers, designations, preferences
and special rights:
1. Designation, Amount and Conversion Price.
(a) There shall be designated One Million Five Hundred
Thousand (1,500,000) shares of preferred stock, without par value (referred to
herein as the "Class Two Convertible Preferred Stock"). Beginning six (6) months
after the date of issuance of the Class Two Convertible Preferred Stock, the
Class Two Convertible Preferred Stock shall be convertible, at the option of the
holders thereof, at any time, into the number of shares of common stock, without
par value, of the Corporation (the "Common Stock") resulting from dividing
1,500,000 by the Conversion Price (as hereinafter defined).The initial
conversion price per share (and subject to adjustment pursuant to Sections 1(b)
and 1(c) below, the "Conversion Price") shall be equal to the lower of $5.00 or
ninety percent (90%) of the Average Quoted Price (as defined in Section
1(b)(vii) below) for the 10 business days immediately preceding the date on
which the Securities and Exchange Commission declares effective (the "Effective
Date") the registration statement (the "Registration Statement") filed by the
Corporation under Section 5 of the Securities Act of 1933, as amended, pursuant
to that certain Registration Rights Agreement of even date herewith by and among
the Corporation and the purchasers of the Class Two Convertible Preferred Stock.
For purposes of any adjustment to the Conversion Price as set forth in Sections
1(b) and 1(c) below prior to the Effective Date, or in the event that the
Registration Statement does not become effective, the Conversion Price shall be
equal to $5.00.
(b) The number and kind of securities to be acquired upon the
conversion of the Class Two Convertible Preferred Stock and the Conversion Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(i) Adjustment for Change in Capital Stock. If at any
time after the date hereof, the Corporation:
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(A) pays a dividend or makes a
distribution on its Common Stock in
shares of its Common Stock;
(B) subdivides its outstanding shares of
Common Stock into a greater number
of shares;
(C) combines its outstanding shares of
Common Stock into a smaller number
of shares; or
(D) makes a distribution on its Common
Stock in shares of its capital stock
other than Common Stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holders of the Class Two Convertible Preferred Stock (the
"Holders") may receive upon conversion of the Class Two Convertible Preferred
Stock the number of shares of capital stock of the Corporation which the
Holder(s) would have owned immediately following such action if the Holders had
converted the Class Two Convertible Preferred Stock immediately prior to such
action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the six-month
period following the original date of issuance of the Class Two Convertible
Preferred Stock in the case of a subdivision, combination or reclassification.
(ii) Adjustment for Other Distributions. If at any
time after the date hereof, the Corporation distributes to all holders of its
Common Stock any of its assets or any right to purchase its assets, the
Conversion Price following the record date shall be adjusted in accordance with
the following formula:
[M-F]
ACP = CP [ M ]
where: ACP = the Adjusted Conversion Price.
CP = the Conversion Price immediately prior to
the adjustment.
M = the Current Market Price (as defined in
(iv) below) per share of Common Stock on the
record date of the distribution.
F = the aggregate fair market value (as
conclusively determined by the Board of
Directors of the Corporation) on the record
date of the assets being distributed divided
by the number of outstanding shares of
Common Stock.
2
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The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution.
In the event that such distribution is not actually made, the Conversion Price
shall again be adjusted to the Conversion Price as determined without giving
effect to the calculation provided hereby.
This subsection does not apply to cash dividends or cash distributions
paid out of consolidated current or retained earnings as shown on the books of
the Corporation and paid in the ordinary course of business.
(iv) Current Market Price. The Current Market Price
per share of Common Stock on any date is the Average Quoted Price of a share of
the Common Stock for the thirty (30) consecutive trading days commencing
forty-five (45) trading days before the date in question.
(v) Adjustment of Number of Shares. Upon each
adjustment in the Conversion Price pursuant to any provision of this Section
1(b), the number of shares of Common Stock convertible hereunder at that
Conversion Price shall be adjusted to the product obtained by multiplying such
number of shares purchasable immediately prior to such adjustment in the
Conversion Price by a fraction, the numerator of which shall be the Conversion
Price immediately prior to such adjustment and the denominator of which shall be
the Conversion Price immediately thereafter.
(vi) When No Adjustment Required. No adjustment need
be made for a change in the par value of the Common Stock. Additionally, the
Corporation shall be permitted to issue Common Stock and options to purchase
Common Stock to employees and directors without giving rise to an adjustment
under this Section 1(b).
(vii) The "Quoted Price" of the Common Stock is the
closing bid price of the Common Stock as reported on the Nasdaq SmallCap Market,
or the primary securities exchange on which the Common Stock is then quoted;
provided, however, that if the Common Stock is neither traded on the Nasdaq
SmallCap Market nor on any other securities exchange, the price referred to
above shall be the closing bid price reflected in the over-the-counter market as
reported by the National Quotation Bureau, Inc. or any organization performing a
similar function. The "Average Quoted Price" of a share of Common Stock is the
average of the Quoted Price for the period in question.
(c) Adjustment for Sale of Shares Below Conversion Price.
(i) If at any time or from time to time after the
date of issuance of the Class Two Convertible Preferred Stock, the Corporation
shall issue or sell Additional Shares of Common Stock (as hereinafter defined),
other than as a dividend or other distribution on any class of stock, and other
than upon a subdivision or combination of shares of Common Stock (all as
provided in Section 1(b) above) for a consideration per share less than the
existing Conversion Price
3
<PAGE>
for the Class Two Convertible Preferred Stock (or, if an adjusted Conversion
Price shall be in effect by reason of a previous adjustment, then less than such
adjusted Conversion Price), then and in each such case the Conversion Price for
the Class Two Convertible Preferred Stock shall be reduced, as of the opening of
business on the date of such issue or sale, to a price determined in accordance
with the following formula:
NS x NSP
--------
NCP = OCP x OB + OCP
---------------
OA
where
NCP = the New Conversion Price
OCP = the existing Conversion Price immediately
before the new issue ("Old Conversion Price")
OB = the total outstanding shares of Common Stock
immediately before the new issue
NS = number of shares sold pursuant to new issue
NSP = price per share of new issue
OA = the total outstanding shares of Common Stock
immediately after the new issue
(ii) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable on conversion
of the Class Two Convertible Preferred Stock as provided above, the
consideration received by the Company for any issue or sale of securities shall,
(A) to the extent it consists of cash, be
computed at the net amount of cash received by the Corporation after deduction
of any underwriting or similar commissions, concessions, or compensation paid or
allowed by the Corporation in connection with such issue or sale,
(B) to the extent it consists of property
other than cash, be computed at the fair market value of that property as
determined in good faith by the Board; and
(C) if Additional Shares of Common Stock,
Convertible Securities (as hereinafter defined), or rights or options to
purchase other Additional Shares of Common Stock or Convertible Securities are
issued or sold together with other stock or securities or other assets of the
Corporation for a consideration that covers both, be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the Board to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
4
<PAGE>
(iii) For the purpose of the adjustment provided for
in subsection (i) of this Section 1(c), if at any time or from time to time
after the date of issuance of the Class Two Convertible Preferred Stock, the
Corporation shall issue any rights or options for the purchase of, or stock or
other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being hereinafter referred to as "Convertible
Securities"), then, in each case, if the Effective Price (as hereinafter
defined) of such rights, options, or Convertible Securities shall be less than
the then existing Conversion Price for the Class Two Convertible Preferred
Stock, the Corporation shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities,
plus, in the case of such options or rights, the minimum amounts of
consideration, if any, payable to the Corporation upon exercise or conversion of
such options or rights. "Effective Price" shall mean the quotient determined by
dividing the total of all of such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of the Conversion Price
adjusted upon the issuance of such rights, options, or Convertible Securities
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Conversion Price adjusted upon the issuance of such rights, options, or
Convertible Securities shall be readjusted to the Conversion Price that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such rights
or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Corporation on the conversion of
such Convertible Securities.
(iv) For the purpose of the adjustment provided for
in subsection (i) of this Section 1(c), if at any time or from time to time
after the date of issuance of the Class Two Convertible Preferred Stock the
Corporation shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then current Conversion Price, the Corporation shall be deemed to have
issued at the time of the issuance of such rights or options the maximum number
of Additional Shares of Common Stock issuable upon conversion of the total
amount of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Shares of Common
Stock an amount equal to the amount of consideration, if any, received by the
Corporation for the issuance of such rights or options, plus the minimum amounts
of consideration, if any, payable to the Corporation
5
<PAGE>
upon the exercise of such rights or options plus the minimum amount of
consideration, if any, payable to the Corporation upon the conversion of such
Convertible Securities. "Effective Price" shall mean the quotient determined by
dividing the total amount of such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of such Conversion
Price adjusted upon the issuance of such rights or options shall be made as a
result of the actual issuance of the Convertible Securities upon the exercise of
such rights or options or upon the actual issuance of Additional Shares of
Common Stock upon the conversion of such Convertible Securities.
The provisions of subsection (iii) of Section 1(c) for the readjustment
of such Conversion Price upon the expiration of rights or options or the rights
of conversion of Convertible Securities, shall also apply to the rights, options
and Convertible Securities referred to in this Section 1(c)(iv).
(v) Definition. The term "Additional Shares of
Common Stock" as used herein shall mean all shares of Common Stock issued or
deemed issued by the Corporation after the date of issuance of the Class Two
Convertible Preferred Stock, whether or not subsequently reacquired or retired
by the Corporation, other than (A) shares of Common Stock issued upon conversion
of the Class Two Convertible Preferred Stock and (B) shares issued to employees,
officers, directors, consultants or other persons performing services for the
Corporation pursuant to any stock offering, plan, or arrangement approved by the
Board of Directors of the Corporation.
(d) With respect to rights on liquidation, winding up and
dissolution, for so long as any shares of Class Two Convertible Preferred Stock
shall remain outstanding, the Corporation shall not create any other class of
capital stock or series of preferred stock hereafter which is senior to the
Class Two Convertible Preferred Stock with respect to liquidation preferences.
(e) Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Corporation will forthwith cause a notice stating the adjustment
and the newly adjusted Conversion Price to be mailed to the respective holders
of record of Class Two Convertible Preferred Stock, showing in detail the facts
upon which such adjustment is based.
(f) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available, out of its authorized and unissued or treasury
Common Stock, solely for the purpose of effecting the conversion of the Class
Two Convertible Preferred Stock, such number of shares as shall from time to
time be sufficient to effect the conversion of all shares of Series Preferred
Stock from time to time outstanding. The Corporation shall from time to time, in
accordance with the laws of the Commonwealth of Pennsylvania, increase the
authorized amount of its Common Stock if at any time the number of Common Stock
shall not be sufficient to permit the conversion of all of the then outstanding
Class Two Convertible Preferred Stock.
2. Rights Upon Liquidation, Dissolution or Winding-Up. (a) Subject to
the limitations set forth in Section 2(b) hereof, in the event of any
liquidation, dissolution or winding-up of the Corporation (including, without
limitation, a liquidation or reorganization under Chapter 7 or 11 of Title 11 of
the United States Code, as amended), the holders of shares of the Class Two
Convertible
6
<PAGE>
Preferred Stock then issued and outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution of its stockholders,
before any payment shall be made to the holders of Common Stock and any other
series or class of stock of the Corporation which is junior to the Class Two
Convertible Preferred Stock with respect to liquidation preferences, an amount
equal to the Stated Value per share (as hereinafter defined).
(b) The holders of the Class Two Convertible Preferred Stock
and the holders of the Corporation's then-outstanding Class One Convertible
Preferred Stock shall be entitled to be paid proportionately out of the assets
of the Corporation available for distribution to its shareholders, based on the
respective amounts to which each holder of such preferred stock is entitled upon
liquidation, dissolution and winding-up.
(c) The term "Stated Value" per share means five dollars
($1.00).
3. Voting Rights. Except as herein provided or otherwise provided by
law, the entire voting power of the election of directors and for all other
purposes shall be vested exclusively in the holders of the outstanding Common
Stock, and the holders of the Class Two Convertible Preferred Stock shall not be
entitled to vote except as specifically required by Pennsylvania Law and except
upon any corporate action which would alter or change the rights and preferences
so as to adversely affect the holders of Class Two Convertible Preferred Stock.
If the Holders are adversely affected as a series by any action to which they
have the right to vote pursuant to this Section 4, the vote of a majority of the
holders of Class Two Convertible Preferred Stock, voting as a series, shall be
required to approve such action. The holders of the Class Two Convertible
Preferred Stock shall be entitled to notice of and to attend all meetings of
shareholders.
4. Corporation's Call Option. If at any time prior to the one-year
period following the original date of issuance, the Average Quoted Price of the
Common Stock exceeds $7.00 per share for any five-day period, then the
Corporation shall have the right to call (the "Call") the Class Two Convertible
Preferred Stock and deliver to the Holders thereof, within thirty (30) days
following the Call, such number of shares of Common Stock to which the Holders
would be entitled based on the applicable Conversion Price, which shares shall
have been registered for resale under the Securities Act of 1933, as amended.
5. Mechanics of Conversion.
(a) If a Holder of shares of Class Two Convertible Preferred
Stock desires to exercise his or her right of conversion pursuant to Section 1
above, such Holder shall give written notice to the Corporation of his or her
election to convert a stated number of shares of Class Two Convertible Preferred
Stocks into shares of Common Stock, at the Conversion Price then in effect,
which notice shall be accompanied by the certificate or certificates
representing such shares of Class Two Convertible Preferred Stock which shall be
converted into Common Stock. The notice also shall contain a statement of the
name or names in which the certificate or certificates for Common Stock shall be
issued. Promptly after the receipt of the aforesaid notice and certificate or
certificates
7
<PAGE>
representing the Class Two Convertible Preferred Stock surrendered for
conversion, the Corporation shall cause to be issued and delivered to the Holder
of the Class Two Convertible Preferred Stock surrendered for conversion or to
his or her nominee or nominees, a certificate or certificates for the number of
shares of Common Stock issuable upon conversion of Class Two Convertible
Preferred Stock and, if the certificates representing shares of Class Two
Convertible Preferred Stock surrendered for conversion shall exceed the number
of shares to be converted, the Corporation shall issue and deliver to the person
entitled thereto a certificate representing the balance of any unconverted
shares of Class Two Convertible Preferred Stock.
(b) No Fractional Shares. Notwithstanding anything herein to
the contrary, no fractional shares shall be issued to any Holder of Class Two
Convertible Preferred Stock on conversion of such Holder's Class Two Convertible
Preferred Stock, and the number of shares of Common Stock issued in the event of
any conversion of Class Two Convertible Preferred Stock shall be rounded to the
nearest whole share.
(c) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon conversion of shares of the Class Two
Convertible Preferred Stock as provided in this Section, such number of shares
of Common Stock as shall be issuable from time to time upon the conversion of
all of the shares of the Class Two Convertible Preferred Stock at that time
issued and outstanding.
6. Redemption Rights.
The holders of the Class Two Convertible Preferred Stock shall
have no redemption rights.
7. Notices of Corporate Action.
In the event of:
(a) Any taking by the Corporation of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to received any dividend (other than dividends payable with
respect to the Class Two Convertible Preferred Stock) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right, or
(b) Any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation or
any consolidation or merger involving the Corporation and any other person
(other than a consolidation or merger in which the Corporation is the surviving
entity) or transfer of all or substantially all of the assets of the Corporation
to any other person, or
8
<PAGE>
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, the Corporation will mail to each Holder of
shares of Class Two Convertible Preferred Stock a notice specifying (i) the date
or expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities of the Corporation) shall be entitled to exchange
their shares of Common Stock (or other securities of the Corporation) for the
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up.
8. Retirement of Converted Shares.
No share or shares of Class Two Convertible Preferred Stock
acquired by the Corporation by reasons of conversion or otherwise shall be
re-issued and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue. The Corporation may
from time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of Class Two Convertible Preferred Stock
accordingly.
9. No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all of the provisions of this Preferred
Stock Designation and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Class Two Convertible Preferred Stock against impairment.
FURTHER RESOLVED, that, before the Corporation shall issue any shares
of Class Two Convertible Preferred Stock, a certificate pursuant to Section 1522
of the BCL shall be made, executed, acknowledged, filed, and recorded in
accordance with the provisions of Section 1522 of the BCL, substantially in the
form set forth above as presented to and reviewed by the Board of Directors, but
with such changes, additions and modifications as shall be approved by any
Authorized Officer (as hereinafter defined), and the Authorized Officers of the
Corporation be, and they hereby are, authorized and directed to do all acts and
things which may be necessary or proper in their opinion to carry into effect
the purposes and intent of this and the foregoing resolutions.
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ROM TECH, INC.
Purchase Agreement
Dated as of November 15, 1996
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. Purchase and Sale of Stock......................................................................1
1.1 Sale and Issuance of Class Two Convertible Preferred Stock....................1
1.2 Registration Rights Agreement.................................................1
1.3 Issuance of Warrants..........................................................1
1.4 Closing.......................................................................1
2. Representations and Warranties of the Company...................................................2
2.1 Organization and Standing.....................................................2
2.2 Capitalization................................................................2
2.3 Subsidiaries..................................................................3
2.4 Authorization.................................................................3
2.5 Validity of Stock.............................................................3
2.6 Offering Materials............................................................3
2.7 Changes.......................................................................3
2.8 Title to Property and Assets; Liabilities.....................................3
2.9 Governmental Consents.........................................................3
2.10 Compliance with Other Instruments.............................................4
2.11 Misleading Statements.........................................................4
2.12 Litigation....................................................................4
2.13 Patents; Trademarks...........................................................4
2.14 Taxes.........................................................................4
3. Representations and Warranties of the Investors...............................................5-7
4. Indemnity.......................................................................................7
5. Conditions to Investors' Obligations at Closing.................................................8
5.1 Representations and Warranties True on the Closing............................8
5.2 Performance...................................................................8
5.3 Other Agreements..............................................................8
5.4 Qualifications................................................................8
5.5 Proceedings and Documents.....................................................8
6. Conditions to the Company's Obligations at Closing..............................................8
6.1 Representations and Warranties True on the Closing............................8
6.2 Qualifications................................................................8
7. Negative Covenants..............................................................................9
8. Miscellaneous...................................................................................9
8.1 Entire Agreement..............................................................9
8.2 Governing Law.................................................................9
8.3 Counterparts.................................................................10
8.4 Titles and Subtitles.........................................................10
8.5 Notices......................................................................10
8.6 Finders' Fees................................................................10
8.7 Expenses.....................................................................10
8.8 Amendments and Waivers.......................................................10
</TABLE>
<PAGE>
Exhibits
Exhibit 1.1(A) - Certificate of Designation
Exhibit 1.1(B) - List of Investors
Exhibit 1.2 - Registration Rights Agreement
Exhibit 1.3(A) - Warrant Agreement
Exhibit 1.3(B) - Warrant Certificate
Exhibit 2.6 - Offering Materials
<PAGE>
ROM TECH, INC.
Purchase Agreement
This Stock Purchase Agreement is entered into as of the 15th day of
November, 1996, by and among ROM TECH, INC., a Pennsylvania corporation (the
"Company") and the investors listed on Exhibit 1.1(B) hereto (collectively, the
"Investors").
In consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth in this Agreement, and intending to be
legally bound hereby, the parties to this Agreement mutually agree as follows:
1. Purchase and Sale of Stock and Warrants.
1.1 Sale and Issuance of Class Two Convertible Preferred
Stock.
(a) The Company has adopted and filed with the
Secretary of State of the Commonwealth of Pennsylvania the Certificate of
Designation attached to this Agreement as Exhibit "1.1(A)" hereto (the
"Certificate of Designation").
(b) Subject to the terms and conditions of this
Agreement, each of the Investors agrees to purchase at the Closing (as
hereinafter defined), and the Company agrees to sell and issue to the Investors
at the Closing, the number of shares of the Company's Class Two Convertible
Preferred Stock, having the rights and preferences set forth in the Certificate
of Designation (the "Stock") set forth opposite such Investor's name on Exhibit
"1.1(B)" hereto, for a price of five dollars ($5.00) per share.
1.2 Registration Rights Agreement. At Closing, the Company and
the Investors shall enter into a Registration Rights Agreement, substantially in
the form of Exhibit "1.2" hereto (the "Registration Rights Agreement").
1.3 Issuance of Warrants. At Closing, the Company shall enter
into a Warrant Agreement with each Investor and issue to each of the Investors
warrant certificates for the purchase of Common Stock representing the number of
warrants set forth on Exhibit "1.1(B)" hereto, which Warrant Agreements shall be
substantially in the form of Exhibit "1.3(A)" hereto (the Warrant Agreements")
and warrant certificates shall be substantially in the form of Exhibit "1.3(B)"
hereto (the "Warrants").
1.4 Closing. The purchase and sale of the Stock and the
Warrants shall take place via facsimile, with all signature pages of the
Investors sent via facsimile to the offices of McCausland, Keen & Buckman at
610-341-1099, and all signature pages of the Company sent to the offices of Baer
Marks & Upham at 212-702-5941 on or within five business days of November 15,
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1996, or at such other time, date, or place as the Company and the Investors
shall mutually agree (which time, date, and place are referred to in this
Agreement as the "Closing"). At or promptly after the Closing, the Company shall
deliver to the Investors certificates representing the shares of the Stock and
the Warrants that each Investor is purchasing against delivery to the Company by
the Investors of wire transfers or other immediately-available funds in the
amount of the purchase price of such shares and warrants.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Investors that:
2.1 Organization and Standing. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Pennsylvania, has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted, and is
duly qualified as a foreign corporation and is in good standing in all other
jurisdictions in which such qualification is required; provided, however, that
the Company need not be qualified in a jurisdiction in which its failure to
qualify would not have a material adverse effect on its operations or financial
condition.
2.2 Capitalization. The authorized capital of the Company
consists of:
(a) Preferred Stock: 10,000,000 shares of Preferred
Stock, of which 1,000,000 shares have been designated Class One Convertible
Preferred Stock and 1,000,000 have been designated Class Two Convertible
Preferred Stock. The 1,000,000 shares of Class One Convertible Preferred Stock
are validly issued and outstanding, fully paid, and nonassessable, and were
issued in compliance with all applicable federal and state securities laws. The
rights, privileges, and preferences of the Class One Convertible and Class Two
Convertible Preferred Stock will be as stated in the Company's Articles of
Incorporation, the Certificate of Designation with respect to the Class One
Convertible Preferred Stock and the Certificate of Designation with respect to
the Class Two Convertible Preferred Stock.
(b) Common Stock: 40,000,000 shares of Common Stock,
of which 6,234,043 shares are validly issued and outstanding, fully paid, and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.
The Company has reserved 482,000 shares of Common Stock for
issuance pursuant to its 1994 Stock Option Plan and its Amended and Restated
1995 Employee Stock Option Plan; 580,000 shares for issuance pursuant to
outstanding warrants; 303,030 shares for issuance pursuant to conversion
privileges associated with the outstanding Class One Convertible Preferred Stock
; 300,000 shares for issuance pursuant to conversion privileges associated with
the Class Two Convertible Preferred Stock; 420,000 shares for issuance pursuant
to the Warrants issued herein; and 210,000 shares for issuance pursuant to
warrants issued to PJM Trading Company, Inc. There are
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no other options, warrants, conversion privileges, preemptive rights, or other
rights presently outstanding to purchase any of the authorized but unissued
stock of the Company.
2.3 Subsidiaries. Except for Virtual Reality Laboratories,
Inc., a Pennsylvania corporation which is a wholly-owned subsidiary of the
Company, the Company does not presently own or control, directly or indirectly,
any other corporation, association, joint venture, partnership, or other
business entity.
2.4 Authorization. All corporate action on the part of the
Company and its officers, directors, and shareholders necessary for the
authorization, execution, delivery and performance of all obligations of the
Company under this Agreement, the Registration Rights Agreement and the Warrant
Agreements, and for the authorization, issuance, and delivery of the Stock and
the Warrants being sold under this Agreement and the Warrant Agreements and of
the Common Stock issuable upon conversion of the Stock and upon exercise of the
Warrants has been (or will be) taken prior to the Closing. This Agreement, the
Registration Rights Agreement and the Warrant Agreements, when executed and
delivered, shall constitute valid and legally binding obligations of the
Company.
2.5 Validity of Stock. The Stock, when issued, sold, and
delivered in accordance with the terms of the Agreement, shall be duly and
validly issued, fully paid, and nonassessable. The Common Stock issuable upon
conversion of the Stock and upon exercise of the Warrants has been (or, prior to
the Closing, will be) duly and validly reserved and, upon issuance in accordance
with the conversion provisions of the Stock and the exercise provisions of the
Warrants shall be duly and validly issued, fully paid, and non-assessable.
2.6 Offering Materials. The Company has furnished each of the
Investors with the Offering Materials attached hereto as Exhibit "2.6" (the
"Offering Materials").
2.7 Changes. To the best of the Company's knowledge, since the
date of the Offering Materials, there has not been any event or condition of any
type that has materially and adversely affected the Company's business,
prospects, condition, affairs, operations, properties, or assets.
2.8 Title to Property and Assets; Liabilities. Except (a) as
reflected in the Offering Materials, (b) for liens for current taxes not yet
delinquent, (c) for liens imposed by law and incurred in the ordinary course of
business for obligations not yet due, (d) for liens in respect of pledges or
deposits under workers' compensation laws or similar legislation, or (e) for
minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use of such property, the Company owns its
property free and clear of all mortgages, liens, loans, and encumbrances.
2.9 Governmental Consents. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state
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governmental authority on the part of the Company required in connection with
the consummation of the transactions contemplated by this Agreement shall have
been obtained prior to, and be effective as of, the Closing, except that any
notices of sale required to be filed with the Securities and Exchange Commission
pursuant to Regulation D promulgated under the Securities Act of 1933 or any
state securities law authority pursuant to applicable blue sky laws may be filed
within the applicable periods therefor.
2.10 Compliance with Other Instruments. The Company is not in
violation of any provisions of its Articles of Incorporation or By-Laws as
amended and in effect on and as of the Closing, or, in any material respect, of
any provision of any material mortgage, indenture, agreement, instrument or
contract to which it is a party, or, to the best of its knowledge, of any
provision of any federal or state judgment, writ, decree, order, statute, rule,
or governmental regulation applicable to the Company. The execution, delivery,
and performance of this Agreement will not result in any such violation or be in
conflict with or constitute a default under any such provision.
2.11 Misleading Statements. No representation or warranty by
the Company in this Agreement or in the Offering Materials contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements made not misleading.
2.12 Litigation. There is no action, proceeding, or, to the
Company's knowledge, investigation pending or, to the Company's knowledge,
threatened against the Company or any of its employees before any court or
administrative agency (or any basis therefore known to the Company), that may
result, either individually or in the aggregate, in any material adverse change
in the business, prospects, condition, affairs, operations, properties, or
assets of the Company or in any material liability on the part of the Company.
2.13 Patents; Trademarks. The Company owns or possesses, has
access to, or can become licensed on reasonable terms under, all patents,
inventions, trademarks, trade names, copyrights, licenses, information,
proprietary rights, and processes necessary for the lawful conduct of its
business as now conducted and as proposed to be conducted, without any
infringement of or conflict with the rights of others. The Company has not
received any notice of infringement of or conflict with the asserted rights of
others.
2.14 Taxes. The Company has accurately prepared and timely
filed all United States income tax returns and all state and municipal tax
returns that are required to be filed by it and has paid or made provision for
the payment of all taxes that have become due pursuant to such returns. The
United States income tax returns of the Company have not been audited by the
Internal Revenue Service. No deficiency assessment or proposed adjustment of the
Company's United States income tax or state or municipal taxes is pending and
the Company has no knowledge of any proposed liability for any tax to be imposed
upon its properties or assets for which there is not an adequate reserve
reflected in the Financial Statements.
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2.15 Compliance with Laws. The Company has complied with all
of the registration, filing, reporting and record keeping requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") during the
period in which the Company has been subject to the requirements of the Exchange
Act, except where such non-compliance, individually or collectively, has not had
and will not have a material adverse affect on the Company. The Company has
complied in all material respects with all Legal Requirements (as hereinafter
defined), including without limitation, any Legal Requirements in connection
with the sale by the Company of the Stock and the Warrants, except where such
non-compliance, individually or collectively, has not had and will not have a
material adverse affect on the Company. "Legal Requirements" shall mean all
federal, state and local statutes, rules and regulations.
3. Representations and Warranties of the Investors.
By executing this Agreement, each of the Investors severally
makes the following representations and warranties to the Company as to such
Investor, with the intent and understanding that the Company will rely thereon:
3.1 THE INVESTOR ACKNOWLEDGES THAT THE STOCK AND WARRANTS
ISSUED HEREUNDER, AND ANY COMMON STOCK ACQUIRED UPON CONVERSION OF THE STOCK OR
EXERCISE OF THE WARRANTS, HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ("SEC").
3.1 The Investor acknowledges that the Stock and the Warrants
are being issued hereunder in reliance on an exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended (the "Act").
The exemption under the Act depends, in part, on the investment experience and
qualifications of the prospective investors. The Stock and the Warrants will be
acquired for investment and not with a view to distribution or resale. The Stock
and the Warrants must, in fact, be held indefinitely unless the Stock, the
Warrants and any Common Stock issuable upon conversion of the Stock or exercise
of the Warrants is registered under the Act or any applicable state securities
laws or there is an applicable exemption from registration (in which case the
undersigned will be required to provide the Corporation with an opinion of
counsel that registration is not required).
3.2 Each of the Investors is an Accredited Investor (as that
term is defined in Rule 501(a) promulgated under the Act.) Each of the Investors
has received and carefully read the Offering Materials attached hereto as
Exhibit "2.6".
3.3 Each of the Investors have each based the decision to
purchase the Stock and the Warrants on the information contained in this
Agreement and the Offering Materials and no Investor has been furnished with any
other offering literature or prospectus.
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3.4 Each of the Investors acknowledges that he or she has
read, understood and is familiar with the Risk Factors contained in the Offering
Materials, is familiar with the nature of risks attending investments of this
type, and has determined that the purchase of the Stock and the Warrants is
consistent with Investor's investment objectives.
3.5 Each of the Investors acknowledges that he or she has been
given the opportunity to ask questions of, and receive answers from,
representatives of the Company regarding the business and current plans of the
Company, and to inspect such documents and obtain any additional information as
each of the Investors has required so as more fully to understand the nature of
the investment and to verify the accuracy of the information supplied to such
Investor. Each of the Investors acknowledges that, except as set forth herein,
no representations or warranties have been made to the Investors, or to
Investors' advisors or representatives, by the Company or others with respect to
the business of the Company and its respective financial condition.
3.6 Each of the Investors is at least 21 years of age. Each of
the Investors maintains his or her domicile at the address shown on Exhibit
1.1(B) of this Agreement.
3.7 Each of the Investors can bear the economic risks of this
investment and can afford the loss of his or her entire investment in the Stock
and the Warrants. Each of the Investors has adequate means of providing for such
Investor's current needs and possible personal contingencies, and has no present
or anticipated need for liquidity of the Stock and/or Warrants to be issued
hereunder. The purchase of the Stock and the Warrants by the Investors is
reasonable in relation to such Investor's net worth and financial needs.
3.8 Each of the Investors understands that the purchase price
of the Stock and the Warrants have been determined by the Company and not by an
independent accountant or auditor; and that no assurances have been given about
any increase in value, if any, of the Stock and/or Warrants.
3.9 Each of the Investors has in his or her own right, or
together with his or her Purchaser Representative (as that term is defined in
Rule 501 promulgated under the Act), such knowledge and experience in financial,
tax and business matters that will enable him or her to evaluate the merits and
risks of the purchase of the Stock and the Warrants and make an informed
decision with respect thereto.
3.10 Each of the Investors understands that the purchase of
the Stock and the Warrants has not been passed upon, nor have the merits of this
exchange been endorsed or approved by, any state or federal authorities.
3.11 Each of the Investors recognizes that the Company has
limited financial or operating history and that the purchase of the Stock and
the Warrants involves significant risks.
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3.12 Each of the Investors recognizes that the certificates
representing the Stock, the Warrants and any Common Stock issuable upon
conversion of the Stock or exercise of the Warrants will bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR, UNLESS, IN THE OPINION OF
COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER,
SALE, OR TRANSFER IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS.
The certificates for shares of the Stock, the
Warrants, and any Common Stock issued upon conversion of the Stock or upon
exercise of the Warrants shall also bear any legend required by any applicable
state securities law.
In addition, the Company shall make a notation
regarding the restrictions on transfer of the Stock (and any Common Stock issued
on conversion thereof) and the Warrants (and any Common Stock issued upon
exercise thereof) in its stockbooks, and shares of the Stock (and any Common
Stock issued on conversion thereof) shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective registration
statement under the 1933 Act covering such shares or an exemption therefrom if
available.
3.13 Each of the Investors understands that such Investor must
bear the economic risk of purchasing the Stock and the Warrants for an
indefinite period. Each of the Investors has been advised and is aware that
neither the Stock, the Warrants, nor any Common Stock issuable upon conversion
of the Stock or exercise of the Warrants have been registered under the Act or
the securities laws of any state or other jurisdiction, and, therefore, cannot
be sold -- AND EACH OF THE INVESTORS AGREES NOT TO SELL OR OTHERWISE DISPOSE OF
ANY SUCH SECURITIES ACQUIRED BY SUCH INVESTOR -- unless such securities are
subsequently registered under the Act and such state securities laws as are
applicable or unless there are available exemptions from such registration that
are supported by an opinion of counsel for such Investor, which opinion is
satisfactory to the Company.
3.14 Each of the Investors understands the meaning and legal
consequences of the foregoing representations and warranties. Each of the
Investor certifies that each of the representations and warranties set forth in
this Section 3 is true and correct as of the date hereof and shall survive such
date.
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4. Indemnity.
(a) The representations and warranties made by the Investors
herein shall survive the Closing Date. Each of the Investors hereby agrees to
indemnify and hold harmless the Company from and against any and all loss,
liability, claim, damage and expense (including, without limitation, reasonable
attorneys' fees and disbursements) suffered or incurred as a result of a
misrepresentation or breach of any warranty made by such Investor in this
Agreement or in any other document furnished by such Investor in connection with
this transaction.
(b) The representations and warranties made by the Company
herein shall survive the Closing Date. The Company hereby agrees to indemnify
and hold harmless the Investors from and against any and all loss, liability,
claim, damage and expense (including, without limitation, reasonable attorney's
fees and disbursements) suffered or incurred as a result of a misrepresentation
or breach of warranty made by the Company in this Agreement.
5. Conditions to Investors' Obligations at Closing.
The obligations of the Investors under Section 1.1 of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions:
5.1 Representations and Warranties True on the Closing. The
representations and warranties of the Company contained in Section 2 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing.
5.2 Performance. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by it on or before the Closing.
5.3 Other Agreements. All agreements between the Company and
the Investors shall have been fully executed and delivered. Company shall have
executed and delivered the Registration Rights Agreement, the Warrant Agreement
and other instruments provided for herein, and such other documents, reasonably
satisfactory to Investors' counsel, as shall be necessary or appropriate to
effectuate the issuance of the Stock and the Warrants to the Investors.
5.4 Qualifications. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Stock and the Warrants pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be in form and
substance satisfactory to the Investors, and the Investors shall have received
all such counterpart originals or certified or other copies of such documents as
the Investors may reasonably request.
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6. Conditions to the Company's Obligations at Closing.
The obligations of the Company to the Investors under Section
1.1 of this Agreement are subject to the fulfillment on or before the Closing of
each of the following conditions:
6.1 Representations and Warranties True on the Closing. The
representations and warranties of the Investors contained in Section 3 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing.
6.2 Qualifications. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Stock pursuant to this Agreement shall have been duly obtained and shall
be effective on and as of the Closing.
7. Negative Covenants.
So long as not less than twenty-five percent (25%) of the
Stock is still outstanding, the Company shall not, without the prior written
consent of the holders of not less than sixty percent (60%) of the Stock then
outstanding, (which consent shall not be unreasonably conditioned, withheld or
delayed):
(a) Designate or issue any additional shares of preferred
stock, unless such preferred stock is junior to the Stock in all respects,
including without limitation as to preference or priority in liquidation,
dividends or otherwise;
(b) Incur directly or indirectly, or permit any Subsidiary to
incur directly or indirectly, any indebtedness except for indebtedness which is
subordinate to the liquidation, dividend and other preferences of the Stock and
except for trade payable financing incurred in the ordinary course of business;
(c) Create, incur or assume after the date hereof any lien
upon the Company's existing or future, tangible or intangible, real, personal or
mixed property, except:
(i) Pledges or deposits under workmen's compensation
laws, unemployment compensation laws or other similar laws;
(ii) Good faith deposits in connection with bids,
tenders, contracts (other than for the purpose of borrowing money or obtaining
credit) and leases to which the Company is a party, including rent security
deposits;
(iii) Deposits to secure public or statutory
obligations of the Company surety or appeal bonds to which the Company is a
party, payment of contested taxes of the Company, or payment of import duties of
the Company;
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(iv) Any lien which is imposed by law, e.g., those of
carriers, materialmen, mechanics and warehousemen, if payment secured by that
lien is not yet due, or if the validity or the amount of payment is being
contested in good faith by appropriate proceedings for which adequate reserves
have been established;
(v) Any lien arising from a judgment or award against
the Company with regard to which the Company is prosecuting an appeal or
proceedings for review, and has obtained a stay of execution pending such appeal
or proceedings for review;
(vi) Any lien for taxes, assessments or other
governmental charges or levies not yet subject to penalties for nonpayment, or
the validity or amount of which is being contested by appropriate legal
proceedings, and with regard to which adequate reserves have been established;
and
(vii) Any lien imposed or arising in connection with
the Company's trade payables in the ordinary course of business;
(viii) Any lien that is junior to the Stock in all
respects, including without limitation as to preference or priority in
liquidation, dividends or otherwise; and
(ix) Any lien created for the sole purpose of
extending, renewing or refunding any lien permitted under subparagraphs (i)
through (viii), if such lien is limited to all or part of the same property
covered by the original lien, and if the amount of the debt secured by the lien
does not exceed the amount of debt secured by the lien at the time of extension,
renewal or refunding;
(d) Make any substantial change in the nature of the business
of the Company; or
(e) Become liable, directly or indirectly, in connection with
the obligations, stock or dividends of any person, firm, corporation or other
entity, whether by guarantee, endorsement, agreement to supply or advance funds,
agreement to maintain working capital or net worth, agreement to purchase or
repurchase goods or services whether or not such goods or services are actually
acquired, or otherwise (collectively, "Contingent Liabilities"), which
Contingent Liabilities exceed $300,000 in the aggregate, except that the Company
may endorse negotiable instruments for collection in the ordinary course of its
business and in connection with the acquisition of the capital stock or assets
of an unaffiliated entity in an arms'-length transaction ("Acquisition
Transactions"). Notwithstanding the foregoing, nothing contained herein shall
limit the Company's ability to become liable for indemnity obligations in
connection with Acquisition Transactions.
8. Affirmative Covenants. On and after the date of this Agreement and
so long as not less than twenty-five percent (25%) of the Stock is still
outstanding, the Company will observe the following covenants unless the holders
of not less than sixty percent (60%) of the Stock then outstanding shall
otherwise consent in writing (which consent shall not be unreasonably
conditioned, withheld or delayed):
(a) The Company will maintain its corporate existence, its
qualification to do business and its good standing in each jurisdiction in which
qualification is necessary for the proper conduct of its business;
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(b) The Company will comply with all laws and regulations
applicable to it in the operation of its business;
(c) The Company will reserve and keep available that maximum
number of its authorized but unissued shares of Common Stock, which are issuable
upon conversion of the Stock and upon exercise of the Warrants outstanding from
time to time, and
(d) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense,
shall furnish to each of the Investors; (i) an annual report (including
financial statements audited by its independent public accountants); (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
the Company's security holders; and (iii) as soon as they are available, a copy
of all nonconfidential reports and financial statements furnished to or filed
with the Securities and Exchange Commission.
9. Miscellaneous.
9.1 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein. The terms and conditions of this Agreement and such other
documents shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties, except to the extent
assignability is limited herein and therein.
9.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.
9.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.5 Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery or upon deposit with the United States Postal Service, by
registered or certified mail, postage prepaid, addressed to the Company at 2000
Cabot Boulevard West, Suite 110, Langhorne, Pennsylvania 19047, and to the
Investor at the address set forth on the signature page of this Agreement or at
such other address as any party may designate by ten (10) days' advance written
notice to the other party.
9.6 Finders' Fees. Each party represents that it neither is,
nor will be, obligated for any finders' fee or commission in connection with
this transaction.
Each Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of
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defending against such liability or asserted liability) for which such Investor
or any of its partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each of the
Investors from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees,
or representatives is responsible.
9.7 Expenses. The Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery, and
performance of this Agreement, and each of the Investors shall pay all costs and
expenses that he or she incurs with respect to the negotiation, execution,
delivery, and performance of this Agreement.
9.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least sixty percent (60%) of the outstanding shares of the Stock (including, for
such purposes, on a proportional basis, any shares of Common Stock into which
any shares of the Stock have been converted that have not been sold to the
public). Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities, and
the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ROM TECH, INC.
By:______________________________
Joseph A. Falsetti, Chief Executive Officer
INVESTORS:
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Signatures, Continued:
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WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of this 15th day of November 1996,
between ROM TECH, INC., a Pennsylvania corporation (the "Company"), and
______________________________ (the "Holder").
W I T N E S S E T H:
WHEREAS, the Company desires to provide for the
issuance of a Warrant to the Holder upon the terms and conditions provided
herein.
NOW, THEREFORE, in consideration of the premises and
the mutual agreements hereinafter set forth, the parties hereto agree as
follows:
SECTION 1. Definitions. As used herein, the following
terms shall have the following meanings, unless the context shall otherwise
require:
(a) "Affiliate" shall mean any person or
entity who controls, is controlled by or is under common control with, the
Company. For purposes of this definition, "control" means the power to direct
the management and policies of any person or entity, directly or indirectly,
whether through the ownership of securities, by contract or otherwise.
(b) "Average Quoted Price" of a share of
Common Stock is the average of the closing bid price for the period in question
of the Common Stock as reported on the Nasdaq SmallCap Market, or the primary
securities exchange on which the Common Stock is then quoted; provided, however,
that if the Common Stock is neither traded on the Nasdaq SmallCap Market nor on
any other securities exchange, the price referred to above shall be the closing
bid price reflected in the over-the-counter market as reported by the National
Quotation Bureau, Inc. or any organization performing a similar function.
(c) "Common Stock" shall mean the common
stock of the Company, without par value.
(d) "Exercise Date" shall mean the date on
which the Company shall have received both (i) the Warrant Certificate
representing this Warrant, with the exercise form thereon duly executed by the
Holder hereof or his attorney duly authorized in writing, and (ii) payment in
cash or by check made payable to the Company, of the amount in lawful money of
the United States of America equal to the applicable Purchase Price or payment
as provided in Section 4 hereof.
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(e) "Initial Warrant Exercise Date" shall
mean May 15, 1997.
(f) "Market Price" per share of Common Stock
on any date means the Average Quoted Price of a share of Common Stock for the
thirty consecutive trading days commencing forty-five (45) trading days before
the date in question . In the absence of one or more such quotations, the
Company shall determine the Market Price in good faith, based on the best
information available to it.
(g) "Purchase Price" shall mean, subject to
modification and adjustment as provided in Section 8, $6.25 and further subject
to the Company's right, in its sole discretion, to decrease the Purchase Price
for a period of not less than 30 days on not less than 30 days' prior written
notice to the Registered Holder.
(h) "Registered Holder" shall mean the
person in whose name any certificate representing the Warrants shall be
registered on the books maintained by the Company pursuant to Section 6.
(i) "Subsidiary" or Subsidiaries" shall mean
any corporation or corporations, as the case may be, of which stock having
ordinary power to elect a majority of the Board of Directors of such corporation
(regardless of whether or not at the time stock of any other class or classes of
such corporation shall have or may have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned by the Company
or by one or more Subsidiaries, or by the Company and one or more Subsidiaries.
(j) "Warrant Certificate" shall mean a
certificate representing each of the Warrants substantially in the form annexed
hereto as Exhibit A.
(k) "Warrant Expiration Date" shall mean,
5:00 p.m. (Eastern Standard Time) on November 15, 2001 or, if such date shown in
the Commonwealth of Pennsylvania be a holiday or a day on which banks are
authorized to close, then 5:00 p.m. (Eastern Standard Time) on the next
following day which in the Commonwealth of Pennsylvania is not a holiday or a
day on which banks are authorized to close, subject to the Company's right,
prior to the Warrant Expiration Date, in its sole discretion, to extend such
Warrant Expiration Date on five business days prior written notice to the
Registered Holders.
SECTION 2. Warrants and Issuance of Warrant
Certificates.
(a) One Warrant shall initially entitle the
Registered Holder of the Warrant Certificate representing such Warrant to
purchase at the Purchase Price therefor, beginning on the Initial Warrant
Exercise Date until the Warrant Expiration Date, one share of Common Stock upon
the exercise thereof, subject to modification and adjustment as provided in
Section 8.
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(b) Upon execution of this Agreement,
Warrant Certificates representing ____________ Warrants to purchase up to an
aggregate of _____________ shares of Common Stock (subject to modification and
adjustment as provided in Section 8) shall be executed by the Company and
delivered to the Holder. This Warrant is one of a series of warrants authorized
and issued or to be issued by the Company entitling the holders thereof to
purchase up to 420,000 shares of the Company's Common Stock.
(c) From time to time, up to the Warrant
Expiration Date, as the case may be, the Company shall countersign and deliver
Warrant Certificates in required denominations of one or whole number multiples
thereof to the person entitled thereto in connection with any transfer or
exchange permitted under this Agreement. Except as provided in Section 7 hereof,
no Warrant Certificates shall be issued except (i) Warrant Certificates
initially issued pursuant to Section 2(b) hereof, (ii) Warrant Certificates
issued upon any transfer or exchange of Warrants, (iii) Warrant Certificates
issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7, and (iv) at the option of the Company,
Warrant Certificates in such form as may be approved by its Board of Directors,
to reflect any adjustment or change in the Purchase Price, the number of shares
of Common Stock purchasable upon exercise of the Warrants therefor made pursuant
to Section 8 hereof.
SECTION 3. Form and Execution of Warrant
Certificates.
(a) The Warrant Certificates shall be
substantially in the form annexed hereto as Exhibit A (the provisions of which
are hereby incorporated herein) and may have such letters, numbers or other
marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or to conform to usage. The Warrant Certificates shall be dated
the date of issuance thereof (whether upon initial issuance, transfer, exchange
or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed
on behalf of the Company by its Chairman of the Board, President or any Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary or an
Assistant Secretary, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a manual or a facsimile of the
Company's seal.
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SECTION 4. Exercise.
(a) (1) Warrants in denominations of one or
whole number multiples thereof may be exercised commencing at any time on or
after the Initial Warrant Exercise Date, but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein (including
the provisions set forth in Section 5 hereof) and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the Exercise Date, provided that the Warrant
Certificate representing such Warrant, with the exercise form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, together with payment in cash or by check made payable to the Company,
of an amount in lawful money of the United States of America equal to the
applicable Purchase Price has been received in good funds by the Company. The
person entitled to receive the securities deliverable upon such exercise shall
be treated for all purposes as the holder of such securities as of the close of
business on the Exercise Date. If more than one Warrant Certificate shall be
exercised at one time by the same Registered Holder, the number of full shares
of Common Stock which shall be issuable upon exercise thereof shall be computed
on the basis of the aggregate number of full shares of Common Stock issuable
upon such exercise. As soon as practicable on or after the Exercise Date and in
any event with ten business days after such date, the Company shall cause to be
issued to the person or persons entitled to receive the same a Common Stock
certificate or certificates for the shares of Common Stock deliverable upon such
exercise, and the Company shall deliver the same to the person or persons
entitled thereto.
(b) The Company shall be not obligated to
issue any fractional share interests or fractional Warrant interests upon the
exercise of any Warrant or Warrants, nor shall it be obligated to issue scrip or
pay cash in lieu of fractional interests. Any fraction equal to or greater than
one-half shall be rounded up to the next full share or Warrant, as the case may
be, any fraction less than one-half shall be eliminated.
SECTION 5. Reservation of Shares: Listing of Taxes;
etc.
(a) The Company covenants that it will at
all times reserve and keep available out of its authorized Common Stock, solely
for the purpose of issue upon exercise of Warrants, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants. The Company covenants that all shares of Common Stock which shall be
issuable upon exercise of the Warrants shall, at the time of delivery thereof
and upon payment of the Purchase Price with respect thereto, be duly and validly
issued and fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue, thereof except for
taxes and other charges payable by the holder as provided in Section 5(b), and
that upon issuance such shares shall be listed on each securities exchange, if
any, on which the other shares of outstanding Common Stock of the Company are
then listed.
(b) The Company shall pay all documentary,
stamp or similar taxes and other governmental charges that may be imposed with
respect to the issuance of Warrants, or the issuance or delivery of any shares
of Common Stock upon exercise of the Warrants; provided, however, that if shares
of Common Stock are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate representing any Warrant being
exercised, (provided that such issuance is permitted under any applicable
federal or state securities laws) then no such delivery shall be made unless the
person requesting the same has paid to the Company the amount of transfer taxes
or charges incident thereto, if any.
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SECTION 6. Exchange and Registration of Transfer
(a) Warrant Certificates may be exchanged
for other Warrant Certificates representing an equal aggregate number of
Warrants, or, subject to the limitations set forth in Section 6 (g) hereof, may
be transferred in whole or in part. Warrant Certificates to be so exchanged
shall be surrendered to the Company at 2000 Cabot Boulevard West, Suite 110,
Langhorne, Pennsylvania 19047, to the attention of Gerald W. Klein, and the
Company shall execute, issue and deliver in exchange therefor to the Registered
Holder a new Warrant Certificate or Certificates representing an equal aggregate
number of Warrants.
(b) The Company shall keep, at such office,
books in which, subject to such reasonable regulations as it may prescribe, it
shall register Warrant Certificates, and the transfer thereof. Upon due
presentment for registration of transfer of any Warrant Certificate at such
office, the Company shall execute and shall issue and deliver to the Registered
Holder a new Warrant Certificate or Certificates representing an equal aggregate
number of Warrants.
(c) With respect to any Warrant Certificates
presented for registration or transfer, or for exchange or exercise, the
subscription or assignment form accompanying the Warrant Certificate(s), as the
case may be, attached thereto shall be duly endorsed or be accompanied by a
written instrument or instruments of transfer or subscription, in form
satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any
exchange of registration or transfer of Warrant Certificates. However, the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for
exercise or for exchange shall be promptly canceled by the Company.
(f) Prior to due presentment for
registration or transfer thereof, the Company may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company) for all purposes and shall be
affected by any notice to the contrary.
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<PAGE>
(g) The Warrants represented by the Warrant
Certificates may not be exercised nor may any interest in the Warrants
represented by the Warrant Certificates be sold, assigned, pledged,
hypothecated, encumbered or in any other manner transferred or disposed of, in
whole or in part, except in compliance with applicable United States federal and
state securities or Blue Sky laws and the terms and conditions hereof. Each
Warrant Certificate shall bear the legend set forth in Section 14 hereof. Each
share of Common Stock issued upon exercise of the Warrants shall bear a legend
substantially in the form set forth in Section 14 hereof. Any Warrant
Certificate issued at any time in exchange or substitution for any Warrant
Certificate bearing such legend shall also bear such legend unless, in the
opinion of legal counsel for the Company, the Warrants represented thereby need
no longer be subject to the restriction contained herein. The provisions of this
Section 6 (g) shall be binding upon all subsequent holders of Warrant
Certificates.
SECTION 7. Loss or Mutilation. Upon receipt by the
Company of evidence satisfactory to it to the ownership of the loss, theft,
destruction or mutilation of any Warrant Certificate and (in the case of loss,
theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and deliver in lieu thereof a new Warrant Certificate to the Registered Holder
thereof representing an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other charges as the Company may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of
Shares of Common Stock Deliverable.
(a) (i) Except as hereinafter provided, in
the event the Company shall, at any time or from time to time after the date
hereof, sell any shares of Common Stock for a consideration per share less than
the Purchase Price or issue any shares of Common Stock as a stock dividend to
the holders of Common Stock, or subdivide or combine the outstanding shares of
Common Stock into a greater or lesser number of shares (any such sale, issuance,
subdivision or combination being herein called a "Change of Shares"), then, and
thereafter upon each further Change of Shares, the Purchase Price for the
Warrants (whether or not the same shall be issued and outstanding) in effect
immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent to the nearest cent) equal to the
following:
NPP = (OB x OPP) + (NS x NSP)
-------------------------------
OA
where:
NPP = the New Purchase Price
OPP = the existing Purchase Price immediately
before the new issue
OB = the total outstanding shares of Common Stock
immediately before Change of Shares
NS = number of shares sold or issued pursuant to
the Change of Shares
NSP = price per share of new issue
OA = the total outstanding shares of Common Stock
immediately after the Change of Shares
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<PAGE>
provided, however, that in no event shall the Purchase Price be adjusted
pursuant to this computation to an amount in excess of the Purchase Price in
effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in
accordance with this Section 8 (a) the following provisions shall be applicable:
(A) In case of the issuance
or sale of shares of Common Stock (or of other securities deemed hereunder to
involve the issuance or sale of shares of Common Stock) for a consideration part
or all of which shall be cash, the amount of the cash portion of the
consideration therefor deemed to have been received by the Company shall be (i)
the subscription price, if shares of Common Stock are offered by the Company for
subscription, or (ii) the public offering price (before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar services), if
such securities are sold to underwriters or dealers for public offering without
a subscription offering, or (iii) the gross amount of cash actually received by
the Company for such securities in any other case, in each case, without
deduction for any expenses incurred by the Company in connection with such
transaction.
(B) In case of the issuance
or sale (otherwise than as a dividend or other distribution on any stock of the
Company) of shares of Common Stock (or of other securities deemed hereunder to
involve the issuance or sale of shares of Common Stock) for a consideration part
or all of which shall be other than cash, the amount of the consideration
therefor other than cash deemed to have been received by the Company shall be
the value of such consideration as determined in good faith by the Board of
Directors of the Company.
(C) Shares of Common Stock
issuable by way of dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the opening of business on
the day following the record date for the determination of shareholders entitled
to receive such dividend or other distribution and shall be deemed to have been
issued without consideration.
(D) The reclassification of
securities of the Company other than shares of Common Stock into securities
including shares of Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash immediately prior to
the close of business on the date fixed for the determination of security
holders entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided in
subsection (B) of this Section 8(a).
(E) The number of shares of
Common Stock at any one time outstanding shall be deemed to include the
aggregate maximum number of shares issuable (subject to readjustment upon the
actual issuance thereof) upon the exercise of options, rights or warrants and
upon the conversion or exchange of convertible or exchangeable securities.
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(ii) Upon each adjustment of the
Purchase Price pursuant to this Section 8, the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be the number derived by
multiplying the number of shares of Common Stock purchasable immediately prior
to such adjustment by the Purchase Price in effect prior to such adjustment and
dividing the product so obtained by the applicable adjusted Purchase Price.
(b) Except as hereinafter provided, in case
the Company shall at any time after the date hereof issue options, rights or
warrants to subscribe for shares of Common Stock (whether as part of a package
of securities such as units, or otherwise, herein "Units"), or issue any
securities convertible into or exchangeable for shares of Common Stock, for a
consideration per share (determined as provided in Section 8(a) and as provided
below) less than the Purchase Price in effect immediately prior to the earlier
of the issuance of such options, rights or warrants, or such convertible or
exchangeable securities or the record date therefor, or without consideration
(including the issuance of any such securities by way of dividend or other
distribution), the Purchase Price for the Warrants (whether or not the same
shall be issued and outstanding) in effect immediately prior to the issuance of
such options, Units, rights or warrants, or other such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making the computation in accordance with the provisions of
Section 8(a) hereof, provided that:
(A) The aggregate maximum number of
shares of Common Stock, as the case may be, issuable or that may become issuable
under such options, rights, Units or warrants (assuming exercise in full even if
not then currently exercisable or currently exercisable to full) shall be deemed
to be issued and outstanding at the time such options, rights, Units, or
warrants were issued, for a consideration equal to the minimum purchase or
exercise price per share provided for in such options, rights or warrants at the
time of issuance, plus the consideration, if any, received by the Company upon
the issuance of such options, rights, Units or warrants (without deduction for
expenses incurred or amounts paid to any underwriter by the Company in
connection with such issuance); provided, however, that upon the expiration or
other termination of such options, rights or warrants, if any thereof shall not
have been exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this subsection (A) (and for the purposes of
subsection (E) of Section 8(a) hereof) shall be reduced by the number of shares
as to which options, warrants and/or rights outstanding, and the Purchase Price
then in effect shall forthwith be readjusted and thereafter be the price that it
would have been had adjustment been made on the basis of the issuance only of
the shares actually issued plus the shares remaining issuable upon the exercise
of those options, rights or warrants as to which the exercise rights shall not
have expired or terminated unexercised.
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<PAGE>
(B) The aggregate maximum number of
shares of Common Stock issuable or that may become issuable upon conversion or
exchange of any convertible or exchangeable securities (assuming conversion or
exchange in full even if not then currently convertible or exchangeable in full)
shall be deemed to be issued and outstanding at the time of issuance of such
securities, for a consideration equal to the consideration received by the
Company upon the issuance of such securities (without deduction for expenses
incurred or amounts paid to any underwriter in connection with such issuance),
plus the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof; provided, however, that upon the termination of
the right to convert to or exchange such convertible or exchangeable securities
(whether by reason or redemption or otherwise), the number of shares of Common
Stock deemed to be issued and outstanding pursuant to this subsection (B) (and
for the purposes of subsection (E) of Section 8(a) hereof) shall be reduced by
the number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued only of the shares actually issued plus the shares remaining
issuable upon conversion or exchange rights shall not have expired or terminated
unexercised.
(C) If any change shall occur in the
price per share provided for in any of the options, rights or warrants referred
to in subsection (A) of this Section 8(b), or in the price per share or ratio at
which the securities referred to in subsection (A) of this Section 8(b) are
convertible or exchangeable (in either case, other than changes in such prices
or ratios arising pursuant to antidilution adjustments in such options, rights,
Units, warrants or convertible or exchangeable securities or the instruments
pursuant to which they were issued, provided that such options, rights,
warrants, convertible or exchangeable securities or instruments pursuant to
which they were issued do not contain antidilution provisions any more favorable
to the holder thereof than those contained herein) such options, rights, Units,
or warrants or conversion or exchange rights, as the case may be, to the extent
not theretofore exercised, shall be deemed to have expired or terminated on the
date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights, Units or warrants or convertible or exchangeable securities.
(c) In case of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrants (other than a change in par value, or from par value to no par value,
or from no par value to par value or as a result of subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants (other than a change in par value or from par value or
to no par value, or from no par value to par value or as a result of subdivision
or combination)) or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company, or such successor or purchasing corporation, as
the case may be, shall make lawful and adequate provision whereby the Registered
Holder of each Warrant shall have the right thereafter to receive on exercise of
such Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Sections 8(a) and (b). The above provisions of this Section 8(c) shall similarly
apply to successive reclassification and changes of shares of Common Stock and
to successive consolidations, mergers, sales or conveyances.
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(d) Irrespective of any adjustments or
changes in the Purchase Price or the number of shares of Common Stock
purchasable upon exercise of the Warrants, the Warrant Certificates theretofore
and thereafter issued shall, unless the Company shall exercise its option to
issue new Warrant Certificates pursuant to Section 2(e) hereof, continue to
express the Purchase Price per share and the number of shares purchasable
thereunder as the Purchase Price per share and the number of shares purchasable
thereunder were expressed in the Warrant Certificates when the same were
originally issued.
(e) After each adjustment of the Purchase
Price pursuant to this Section 8, the Company will promptly prepare a
certificate signed by the Chairman or President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the Purchase price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant, after such
adjustment, and (ii) a brief statement of the facts accounting for such
adjustment. The Company will cause a brief summary thereof to be sent by
ordinary first class mail to each Registered Holder at his last address as it
shall appear on the books of the Company. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity thereof
except as to the holder to whom the Company failed to mail such notice, or
except as to the holder whose notice was defective. The affidavit of the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(f) No adjustment of the Purchase Price or
in the number of shares of Common Stock issuable upon exercise of the Warrants
shall be made as a result of or in connection with (A) the issuance or sale of
shares of Common Stock pursuant to options, warrants and convertible or
exchangeable securities outstanding or in effect or provided for on the date
hereof, (B) the issuance or sale of shares of Common Stock upon the exercise of
options referred to in clause (A) above, (C) the issuance or sale of shares of
Common Stock if the amount of said adjustment shall be less than $.05, provided,
however, that in such case, any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment that shall amount, together with
any adjustment so carried forward, to at least $.05. In addition, Registered
Holders shall not be entitled to cash dividends paid by the Company prior to the
exercise of any Warrant or Warrants held by them.
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SECTION 9. Modification of Agreement. This Agreement
may not be modified, supplemented or altered in any respect except with the
consent in writing of the Registered Holders representing not less than 51% of
the Warrants of which this Warrant is a part and the Company; provided, further,
that no change in the number or nature of the securities purchasable upon the
exercise of any Warrant, or the Purchase Price therefor shall be made without
the consent in writing of the Registered Holder of affected Warrant, other than
such changes as are specifically prescribed by this Agreement as originally
executed.
SECTION 10. Notices. All notices, requests, consents
and other communications hereunder shall be in writing and shall be deemed to
have been made when delivered or mailed first-class postage pre-paid, or
delivered to a telegraph office for transmission if the Registered Holder of a
Warrant Certificate, at the address of such holder as shown on the registry
books maintained by the Company; if to the Company at 2000 Cabot Boulevard West,
Suite 110, Langhorne, Pennsylvania 19047, Attention: Gerald W. Klein, or at such
other address as may have been furnished to the Registered Holder in writing by
the Company.
SECTION 11. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to conflicts of laws.
SECTION 12. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the holders from time
to time of Warrant Certificates or any of them. Except as hereinafter stated,
nothing in this Agreement is intended or shall be construed to confer upon any
other person any right, remedy or claim or to impose upon any other person any
duty, liability or obligation.
SECTION 13. Counterparts. This Agreement may be
executed in one or more counterparts, which taken together shall constitute a
single document.
SECTION 14. Legend. The Warrants and the shares of
Common Stock issuable upon exercise of the Warrants have not been registered
under the Act. Upon exercise, in part or in whole, of the Warrants, certificates
representing the shares of Common Stock underlying the Warrants and any of the
other securities issuable upon exercise of the Warrants (collectively, the
"Warrant Securities") shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED ("THE ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR, UNLESS, IN THE OPINION OF
COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER, SUCH OFFER, SALE, OR TRANSFER IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE
ACT AND SUCH LAWS.
11
<PAGE>
SECTION 15. Registration Rights. The Company and the
Registered Holder and its permitted transferees acknowledge and agree that this
Warrant and the shares of Common Stock underlying this Warrant are subject to a
Registration Rights Agreement between the Registered Holder and the Company
dated the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the first date above written.
ROM TECH, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
---------------------------------------
Signature
---------------------------------------
Name
13
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS,
WHICH, IN THE OPINION OF COUNSEL, I N FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, IS AVAILABLE.
NO. _____ VOID AFTER November 15, 2001
WARRANT CERTIFICATE TO PURCHASE _______ SHARES OF COMMON STOCK
of
ROM TECH, INC.
THIS CERTIFIES THAT, FOR VALUE RECEIVED
_______________________________ or registered assigns (the "Registered Holder")
are the owners of the number of Common Stock Purchase Warrants (the "Warrants")
specified above. Each Warrant initially entitles the Registered Holder to
purchase, subject to the terms and conditions set forth in this Certificate and
the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable
share of Common Stock, without par value, of Rom Tech, Inc., a Pennsylvania
corporation (the "Company"), at any time beginning on May 15, 1997, and prior to
the Expiration Date (as hereinafter defined) upon the presentation and surrender
of this Warrant Certificate with the Subscription Form on the reverse hereof
duly executed, at the corporate office of the Company, accompanied by payment of
$6.25, subject to adjustment (the "Purchase Price"), in lawful money of the
United States of America in cash or by check made payable to the Company.
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<PAGE>
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
as of November 15, 1996, by and between the Company and the holder thereof.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional interests will be issued. In the
case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (Eastern
Standard Time) on November 15, 2001. If each such date shall in the Commonwealth
of Pennsylvania be a holiday or a day on which the banks are authorized to
close, then the Expiration Date shall mean 5:00 p.m. (Eastern Standard Time) the
next following day which in the Commonwealth of Pennsylvania is not a holiday or
a day on which banks are authorized to close.
This Warrant shall not be exercisable by a Registered Holder
in any state where such exercise would be unlawful.
The Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Company, for a
new Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of any
tax or other charge imposed in connection therewith or incident thereto, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate representing an equal aggregate number of Warrants will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
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<PAGE>
Prior to due presentment for registration of transfer hereof,
the Company may deem and treat the Registered Holder as the absolute owner
hereof and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized officer
of the Company) for all purposes and shall not be affected by any notice to the
contrary, except as provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the date hereof.
Dated: November 15, 1996
ROM TECH, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
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<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably
elects to exercise Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(please print or type name and address)
and be delivered to
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Warrants be registered in the name of, and delivered to, the
Registered Holder at the address stated below.
Dated:
------------------- ------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Address
--------------------------------
Social Security or Taxpayer
Identification Number
--------------------------------
Signature Guaranteed
ASSIGNMENT
17
<PAGE>
To Be Executed by the Registered Holder
In Order to Assign Warrants
FOR VALUE RECEIVED, , hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(please print or type name and address)
________________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: x
---------------------- -----------------------------
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST
CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR
TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK
STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, MIDWEST STOCK EXCHANGE OR
BOSTON STOCK EXCHANGE.
18
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of this 15th day of November, 1996, among ROM TECH, INC., a Pennsylvania
corporation with an address of 2000 Cabot Boulevard, Suite 110, Langhorne,
Pennsylvania 19047 (the "Company"), and the investors listed on Schedule "A"
(collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, the Investors have agreed to purchase from the Company (i) an
aggregate of 300,000 shares of Class Two Convertible Preferred Stock (the
"Preferred Stock"), which Preferred Stock is convertible into shares of Common
Stock, without par value, of the Company (the "Common Stock"), and (ii) an
aggregate of 420,000 warrants (the "Warrants") to purchase shares of the Common
Stock; and
WHEREAS, the Company has agreed to enter into this Registration Rights
Agreement with the Investors as a condition to the purchase of the Preferred
Stock and the Warrants.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound, the parties to this Agreement hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
(a) "Holder" shall mean any person holding Registrable
Securities or any permitted assignee in accordance with Section 8 hereof.
(b) "Registrable Securities" shall mean (i) the shares of the
Common Stock acquired by the Investors upon conversion of the Preferred Stock
and upon exercise of the Warrants, and (ii) any Common Stock of the Company
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, shares of the Common Stock described in clause (i) above.
2. Restricted Nature of the Common Stock. Each of the Investors hereby
acknowledges that the Common Stock issuable upon conversion of the Preferred
Stock and upon exercise of the Warrants is subject to the following:
(a) Each of the Investors may not, directly or indirectly,
offer, sell, transfer, assign or otherwise dispose of the Common Stock issuable
upon conversion of the Preferred Stock and upon exercise of the Warrants (or
solicit any offers to purchase or otherwise acquire or take a pledge of such
Common Stock), except pursuant to (i) an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder and (ii) an effective registration statement or
qualification under applicable "Blue Sky" state securities laws (the
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<PAGE>
"Blue Sky Laws"), or unless such Investor shall have delivered to the Company an
opinion of counsel, which opinion of counsel shall be satisfactory to the
Company, to the effect that no registration statement or qualification is
required because of the availability of exemptions from registration and/or
qualification under the Securities Act or Blue Sky Laws;
(b) Each of the Investors understands that, although the
Company will use its best efforts to cause the Registration Statement (as
defined in Section 3 below) to become effective in accordance with such
provisions, (i) the offer and sale of such Common Stock issuable upon conversion
of the Preferred Stock or upon exercise of the Warrants has not been registered
under the Securities Act or registered or qualified under any Blue Sky Laws as
of the date hereof and will not be registered or qualified under the Securities
Act or any Blue Sky Laws on the closing date of the purchase of the Preferred
Stock and Warrants (the "Effective Time"), (ii) each Investor must continue to
bear the economic risk of the investment in his or her shares of the Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrants until the offer and sale of such Common Stock is subsequently
registered and/or qualified under the Securities Act and any applicable Blue Sky
Laws pursuant to this Agreement or an exemption from such registration and/or
qualification is available, (iii) when and if such Common Stock issuable upon
conversion of the Preferred Stock or upon exercise of the Warrants may be
disposed of without registration in reliance upon Rule 144 under the Securities
Act ("Rule 144"), the offer and sale of such Common Stock may not qualify under
Rule 144 since dispositions under such Rule can be made only in limited amounts
in accordance with the terms and conditions of such Rule, (iv) if the exemption
afforded by Rule 144 is not available, public offer or sale of the Common Stock
issuable upon conversion of the Preferred Stock or upon exercise of the Warrants
without registration will require the availability of another exemption under
the Securities Act, (v) a restrictive legend in substantially the form
hereinafter set forth shall be placed upon such Common Stock, and (vi) a
notation shall be made in the appropriate records of the Company indicating that
such Common Stock is subject to restrictions on transfer and appropriate
stop-transfer instructions will be issued to the transfer agent of the Company
with respect to such Common Stock;
(c) If such Common Stock is disposed of in accordance with
Rule 144, such Investor shall deliver to the Company at or prior to the time of
such disposition an executed copy of Form 144 (if required by Rule 144) and such
other documentation as the Company may reasonably require in connection with
such disposition;
(d) Each of the Investors has been furnished with a copy of
the Company's Offering Materials, dated November 13, 1996, to which is attached,
among other things, the Company's Form 10-KSB for the year ended June 30, 1996
and Form 10-QSB for the fiscal quarter ended September 30, 1996, each as filed
with the Securities and Exchange Commission (the "SEC"); and
2
<PAGE>
(e) Each of the Investors understands that such Common Stock
shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR, UNLESS, IN THE OPINION OF COUNSEL , IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER,
SALE, OR OTHER TRANSFER IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS.
3. Registration.
(a) Within six months days after the Effective Time, the
Company shall file with the SEC under the Securities Act, on Form S-3 or other
appropriate or necessary form, a registration statement under Section 5 of the
Securities Act (together with the documents incorporated by reference therein,
the "Registration Statement") for an offering to be made on a continuous or
delayed basis covering the Registrable Securities held by the Holders; provided,
however, that the Company may defer making such filing for a reasonable period
after the Effective Time (but not in excess of 90 days) if in the good faith
judgment of the Company's Board of Directors such filing would, at such time,
(a) require the disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential, (b) require the providing
of information required by the SEC that at such time the Company would be unable
to provide, or (c) adversely affect active negotiations or planning for a
proposed or pending merger or acquisition.
(b) At such time as it shall file the Registration Statement,
the Company agrees to use its best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under the Blue Sky
Laws of such jurisdictions, not to exceed ten in number, as shall be reasonably
requested by the Holders in writing to permit such Holders to sell or otherwise
to dispose of any and all Registrable Securities in such states, provided that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it shall not then be
qualified.
(c) The Company agrees to use its best efforts to cause the
Registration Statement and all such state filings to become effective and to
remain effective until the earlier of (A) the date when all Registrable
Securities covered by the Registration Statement have been sold or (B) two years
after the Effective Time if the Registration Statement is filed pursuant to Rule
415 of the Act (or any similar rule that may be adopted by the SEC).
3
<PAGE>
(d) Each of the selling Holders undertakes to provide all such
information and materials and take all such actions as may be required in order
to permit the Company to comply with all applicable requirements of the
Securities Act and the SEC, to obtain any desired acceleration of the effective
date of such Registration Statement and to comply with all requirements of
applicable Blue Sky Laws or other administrative agency of any state of the
United States.
(e) The Company agrees to prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement effective during the period
referred to in Section 3(c) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement, and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed with the SEC.
(f) The Company agrees to furnish to the selling Holders such
numbers of copies of the Registration Statement, each amendment thereto, the
prospectus included in such Registration Statement (including each preliminary
prospectus), each supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(g) The Company shall promptly notify each selling Holder of
such Registrable Securities at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(h) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement that the selling
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them and the intended method of disposition of
such Registrable Securities and execute such documents regarding the sale of the
Registrable Securities as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
(i) Each selling Holder of Registrable Securities agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(g) hereof, such Holder will discontinue disposition
of Registrable Securities until such Holder's receipt of copies of a
supplemented or amended prospectus contemplated by Section 3(g) or 5 hereof, as
the case may be, or until it is advised in writing (the "Advice") by the Company
that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the expense of the Company) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of
4
<PAGE>
receipt of such notice. In the event the Company shall give any such notice, or
in the event of the suspension of the Company's obligations as described in
Section 5 hereof, the time periods mentioned in Section 3(c) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 3(g) or 5 hereof, as the case may
be, to and including the date when each selling Holder of Registrable Securities
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or 5 hereof, as the case may be, or the Advice.
4. Expenses. The Company shall pay all expenses incurred by the Company
in connection with the preparation, filing and execution of the Registration
Statement referred to in Section 3; provided, however, that the Company shall
not be obligated to pay any underwriting or brokerage commissions, discounts or
fees relating to any sale of the Registrable Securities or the fees and expenses
of any counsel to any of the selling Holders.
5. Notice of Proposed Sale. If the Registrable Securities have been
registered pursuant to Rule 415, then if any of the Holders desires to sell or
otherwise transfer any of such Holder's Registrable Securities pursuant to the
Registration Statement, such Holder shall notify the Company of such Holder's
intention to do so by written notice received by the Company at least two (2)
business days prior to such sale or transfer. Such Holder may effect a sale or
transfer within 20 days after the delivery of such notice unless the Company
shall have provided notice to such Holder pursuant to Section 3(g).
6. Reports. From and after the Effective Time and for so long as
necessary in order to permit the undersigned Investors to sell the Common Stock
pursuant to Rule 144 under the Securities Act, to the extent applicable, the
Company will file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange "Act"), referred to in paragraph (c) (1) of Rule 144 under the
Securities Act (or, if applicable, will use its best efforts to make publicly
available the information regarding itself referred to in paragraph (c) (2) of
Rule 144), in order to permit the undersigned Investors to sell, pursuant to the
applicable provisions of Rule 144, the Common Stock.
7. Eligibility for Form S-3. The Company represents and warrants that
as of the date hereof, the Company meets the conditions for use of Form S-3 for
the registration of the Registrable Securities to be offered for the account of
the Investors.
8. Transfer of Registration Rights. The rights to cause the Company to
use its best efforts to register the Registrable Securities hereunder may be
assigned by gift or inheritance to a relative of a Holder (or his/her spouse) or
to a trust established by a Holder or his/her spouse; provided, that the Company
shall be entitled to written notice within ten (10) days after any such
transfer.
9. Indemnification. In connection with any registration of securities
under this Agreement, the Company hereby agrees to indemnify the selling Holders
and each underwriter, if any, against all losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement
5
<PAGE>
of a material fact contained in any registration statement or prospectus (and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any omission, or
alleged omission, to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement or omission based upon information furnished in
writing to the Company by such selling Holder or, as the case may be, any
underwriter, expressly for use therein, and the Company, each officer, director
and controlling person of the Company and each underwriter, if any, for the
Company shall be indemnified by each selling Holder for all such losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement or
omission, or alleged omission, based upon information furnished in writing to
the Company or the underwriter by such selling Holder for any such use.
Promptly upon receipt by a party indemnified under this
Section 9 of notice of the commencement of any action against such indemnified
party in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may have to any indemnified party otherwise than under this
Section 9. In the case that notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be obligated to participate in and, jointly with any other indemnifying party
similarly notified, shall assume the defense of such action at its own expense,
with counsel chosen by it and reasonably satisfactory to such indemnified party.
The indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be paid by the indemnified party unless the indemnifying
party either agrees to pay the same or fails to assume the defense of such
action with counsel reasonably satisfactory to the indemnified party. No
indemnifying party shall be liable for any settlement entered into without its
consent, such consent not to be unreasonably withheld.
10. Contribution. If the indemnification provided for in section 9 is
for any reason, other than pursuant to the terms thereof, held to be unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof) referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the selling Holders from the registration of the Registrable
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the selling Holders in connection with the
statements or omission which resulted in such losses, claims, damages,
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company or
the selling Holders and the parties' relative intent,
6
<PAGE>
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the selling Holders agree that it would
not be just and equitable if contribution pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this paragraph shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
11. Amendment of Registration Rights. This Agreement may be amended
only with the written consent of the Company and of the Holders of the
Registrable Securities.
12. Notices. Any notice or other communication given under this
Agreement shall be sufficient if in writing and sent by first class, registered
or certified mail, return receipt requested, postage prepaid, or transmitted by
hand delivery, overnight express, telegram, telex or facsimile addressed (a) if
to a Investor, at Investor's address set forth on Exhibit A, or at such other
address as Investor shall have furnished to the Company in writing, or (b) if to
the Company, one copy should be sent to its address set forth the cover page of
this Agreement and addressed to the attention of the Corporate Secretary, or at
such other address as the Company shall have furnished to the Holders. Each
notice, demand, request, or communication that shall be mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a telex the answer back being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation unless if mailed, in which case on the third
business day after the mailing thereof.
13. Captions and Headings. The captions and headings used herein are
for convenience and ease of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the matters set forth herein and
supersedes all prior agreements and understandings between the parties relating
to the subject matter hereof.
15. Governing Law. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania.
16. Severability. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed to be severed from this Agreement. Every other
provision, and any portion of such an invalidated provision that is not
invalidated by such a determination, shall remain in full force and effect.
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<PAGE>
17. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
ROM TECH, INC.
By:
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Name:
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Title:
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Witness
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Signatures, Continued:
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AGREEMENT
This Agreement is entered into as of the 15th day of November, 1996, by
and among Rom Tech, Inc., a Pennsylvania corporation (the "Company") and the
investors listed on Exhibit "A" hereto (collectively, the "Investors").
WHEREAS, the Investors have agreed to purchase 1,500,000 shares of the
Company's Class Two Convertible Preferred Stock (the "Preferred Stock") and
warrants (the "Warrants") for the purchase of 420,000 shares of the Company's
common stock, without par value (the "Common Stock"), for an aggregate purchase
price of $1,500,000 pursuant to a Purchase Agreement of even date herewith by
and among the Company and the Investors (the "Purchase Agreement"); and
WHEREAS, the Company has agreed to certain amendments to the Warrants
and to the rights and preferences of the Preferred Stock that are currently set
forth in the Certificate of Designation for the Preferred Stock which is
attached to the Purchase Agreement as Exhibit 1.1(A) and has been filed with the
Commonwealth of Pennsylvania (the "Certificate of Designation"); and
WHEREAS, the Company has also agreed to certain amendments to the
Registration Rights Agreement of even date herewith by and among the Company and
the Investors (the "Investor Registration Rights Agreement"); and
NOW THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and intending to be legally bound hereby, the parties to this
Agreement mutually agree as follows:
1. Amendments to Certificate of Designation; Warrants.
(a) Paragraph 1(a) of the Certificate of Designation is hereby
amended and restated in its entirety as follows:
There shall be designated One Million Five Hundred Thousand
(1,500,000) shares of preferred stock, without par value (referred to herein as
the "Class Two Convertible Preferred Stock"). Beginning six (6) months after the
date of issuance of the Class Two Convertible Preferred Stock, the Class Two
Convertible Preferred Stock shall be convertible, at the option of the holders
thereof, at any time, into the number of shares of common stock, without par
value, of the Corporation (the "Common Stock") resulting from dividing 1,500,000
by the Conversion Price (as hereinafter defined).The initial conversion price
per share (and subject to adjustment pursuant to Sections 1(b) and 1(c) below,
the "Conversion Price") shall be equal to the lower of $5.00 or ninety percent
(90%) of the Average Quoted Price (as defined in Section 1(b)(vii) below) for
the 10 business days immediately preceding the date on which the Securities and
Exchange Commission declares effective (the "Effective Date") the registration
statement (the
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"Registration Statement") filed by the Corporation under Section 5 of the
Securities Act of 1933, as amended, pursuant to that certain Registration Rights
Agreement of even date herewith by and among the Corporation and the purchasers
of the Class Two Convertible Preferred Stock. For purposes of any adjustment to
the Conversion Price as set forth in Sections 1(b) and 1(c) below prior to the
Effective Date, or in the event that the Registration Statement does not become
effective, the Conversion Price shall be equal to $5.00.
(b) The definition of "Purchase Price" as set forth in Section
1(g) of the Warrant Agreements for the issuance of the Warrants is hereby
amended and restated in its entirety as follows:
"Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, the lower of (i) $6.25, or (ii) the Average
Quoted Price (as defined in Section 1(b)(vii) of the Certificate of
Designation), plus $1.25, for the 10 business days immediately preceding the
date on which the Securities and Exchange Commission declares effective the
registration statement filed by the Company under Section 5 of the Securities
Act of 1933, as amended, pursuant to that certain Registration Rights Agreement
of even date herewith by and among the Company and the purchasers of the Class
Two Convertible Preferred Stock, and further subject to the Company's right, in
its sole discretion, to decrease the Purchase Price for a period of not less
than 30 days on not less than 30 days' prior written notice to the Registered
Holder.
2. Amendment to Investors Registration Rights Agreement.
Paragraph 3(a) of the Investors Registration Rights Agreement
is hereby amended and restated in its entirety as follows:
Within 120 days after the Effective Time, the Company shall
file with the SEC under the Securities Act, on Form S-3 or other appropriate or
necessary form, a registration statement under Section 5 of the Securities Act
(together with the documents incorporated by reference therein, the
"Registration Statement") for an offering to be made on a continuous or delayed
basis covering the Registrable Securities held by the Holders; provided,
however, that the Company may defer making such filing for a reasonable period
after the Effective Time (but not in excess of 90 days) if in the good faith
judgment of the Company's Board of Directors such filing would, at such time,
(a) require the disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential, (b) require the providing
of information required by the SEC that at such time the Company would be unable
to provide, or (c) adversely affect active negotiations or planning for a
proposed or pending merger or acquisition. In the event that the Company fails
to file the Registration Statement on or prior to the date that is 120 days
after the Effective Time (the "Registration Deadline"), the Company shall pay to
each of the Investors, in proportion to the number of shares of Preferred Stock
held by each of them, an amount equal to ten percent (10%) of the Stated Value
(as hereinafter defined) of the Preferred Stock for each 30-day period after the
Registration Deadline that the Company fails to file the Registration Statement
(the "Filing Penalty"); provided, however, that Company shall be required to pay
such Filing Penalty for no more than one year following the Registration
Deadline, and
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provided further that if the Company files the Registration Statement prior to
the end of any such 30-day period, the Company shall only be required to pay a
portion of such Filing Penalty based on the number of days that have elapsed
during each such 30-day period. The term "Stated Value" per share of the
Preferred Stock means five dollars ($5.00). All Filing Penalty payments shall be
due and payable at end of each such 30-day period following the Registration
Deadline.
3. Amendment to Certificate of Designation, Warrant Certificates.
Promptly following the execution of this Agreement, the
Company shall cause (i) an amendment to the Certificate of Designation
reflecting the changes set forth in Paragraph 1(a) hereof to be duly filed with
the Commonwealth of Pennsylvania and a certified copy thereof to be delivered to
the Investors, and (ii) an amendment or supplement to be issued to the holder of
each Warrant Certificate evidencing the changes to the Warrant Agreements set
forth in Paragraph 1(b) hereof.
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
ROM TECH, INC.
By:
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Name:
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Title:
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Witness
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Signatures, Continued:
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EXHIBIT "A"
List of Investors
