<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):
April 9, 1997
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ROMTECH, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-27102 23-2694937
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2000 Cabot Boulevard, Suite 110, Langhorne, Pennsylvania 19047
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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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N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
RomTech, Inc. (the "Company") has to date sold in a private offering to
three accredited investors 1,000,000 shares of Class Three Convertible Preferred
Stock (the "Convertible Preferred Stock"), without par value, and 50,000 Common
Stock Purchase Warrants (the "Warrants") to purchase 50,000 shares of the
Company's Common Stock, without par value (the "Common Stock"), for an aggregate
purchase price of $1,000,000. The Company intends to continue the private
offering, which is exempt from the registration requirements of the Securities
Act of 1933 (the "Act"), as amended, pursuant to Section 4(2) of the Act and
Rule 506 promulgated thereunder. Neither the Convertible Preferred Stock nor the
Warrants have been registered under the Act and may not be offered or sold by
the purchasers in the United States absent registration or an applicable
exemption from the registration requirements of the Act and applicable state
securities laws.
The Company has agreed to file a registration statement with the
Securities and Exchange Commission within twenty days of the closing of the
private placement registering for sale by the holders the Common Stock
underlying the Convertible Preferred Stock and the Common Stock issuable upon
exercise of the Warrants. One-half of the Convertible Preferred Stock is
convertible at the option of the holder beginning five days following the date
that the registration statement for the Common Stock underlying the Convertible
Preferred Stock has been declared effective by the Securities and Exchange
Commission ("First Conversion Date"). The remaining one-half of the Convertible
Preferred Stock will become convertible thirty days after the First Conversion
Date. In the event that the registration statement does not become effective on
or before six months following the closing date, all of the outstanding shares
of the Convertible Preferred Stock will become convertible at any time beginning
six months from the closing date. The conversion price per share ("Conversion
Price"), will be determined as follows:
(A) Beginning on the First Conversion Date and ending on the thirtieth
day thereafter, the Conversion Price will equal 80% percent of the Average
Quoted Price (as defined in the Certificate of Designation for the Convertible
Preferred Stock) for the five (5) trading days immediately preceding the
conversion date;
(B) Beginning on the thirty-first day after the First Conversion Date
and ending on the sixtieth day after the First Conversion Date, the Conversion
Price will equal 78% percent of the Average Quoted Price for the five (5)
trading days immediately preceding the conversion date;
(C) Beginning on the sixty-first day after the First Conversion Date
and ending on the ninetieth day after the First Conversion Date, the Conversion
Price will equal 76% percent of the Average Quoted Price for the five (5)
trading days immediately preceding the conversion date;
(D) Beginning on the ninety-first day after the First Conversion Date
and ending on the one hundred twentieth day after the First Conversion Date, the
Conversion Price will equal 74% percent of the Average Quoted Price for the five
(5) trading days immediately preceding the conversion date;
<PAGE>
(E) Beginning on the one hundred twenty-first day after the First
Conversion Date and ending on the one hundred fiftieth day after the First
Conversion Date, the Conversion Price will equal 72% percent of the Average
Quoted Price for the five (5) trading days immediately preceding the Conversion
Date; and
(F) Beginning on the one hundred fifty-first day after the First
Conversion Date and ending on the one hundred eightieth day after the First
Conversion Date, the Conversion Price will equal 70% percent of the Average
Quoted Price for the five (5) trading days immediately preceding the Conversion
Date. In no event will the Conversion Price exceed $5.95 or be less than $.66.
Each Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $3.94, subject to the condition that the Warrants will
not be exercisable until the closing bid price of the Company's Common Stock has
reached $5.66. The exercise price and the number of shares of Common Stock (or
any other securities) to be obtained upon exercise of the Warrants are subject
to adjustment upon the occurrence of certain events, including a stock dividend
on, or a split of, Common Stock, a reorganization or recapitalization of the
Company or the merger or consolidation of the Company, or in the event of
distributions to the holders of Common 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 20 days after the date of issuance of the
Convertible Preferred Stock, the Company will file with the Securities and
Exchange 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 (but in any event, no later than
90 days after the date of issuance of the Convertible Preferred Stock and
Warrants) 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. If the Registration Statement
has not been declared effective on or within 90 days after the date of issuance
of the Convertible Preferred Stock and the Warrants (the "Registration
Deadline"), the Company will be subject to a penalty equal to one percent of the
aggregate purchase price paid for the Convertible Preferred Stock and the
Warrants for the first 30 days after the Registration Deadline. A penalty equal
to two percent of the aggregate purchase price paid for the Convertible
Preferred Stock and the Warrants will be incurred for each 30 day period
thereafter, but in no event will the penalties be greater than the aggregate
purchase price paid for the Convertible Preferred Stock and the Warrants.
The Company has agreed to pay H.J. Meyers & Co., Inc. ("H.J. Meyers"),
as placement agent of the Convertible Preferred Stock and the Warrants, a
commission equal to six percent (6%) of the aggregate sale price of the
Convertible Preferred Stock and the Warrants, as well as 7,000 shares of Common
Stock (the "Agent Shares") upon completion of the placement of 1,000,000 shares
of Convertible Preferred Stock. The Company has agreed to register for resale
the Agent Shares. In addition, H.J. Meyers will be paid an amount equal to 2% of
the aggregate sale price of the Convertible Preferred Stock for payment of
expenses incurred in connection with the performance of its services.
<PAGE>
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.
Exhibit No. Description of Exhibit Page Number
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4.9 Certificate of Designation, Preferences, Powers, Rights and
Number of Shares of Class Three Convertible Preferred Stock
(Exhibit 4.9)
4.10 Form of Securities Purchase Agreement (Exhibit 4.10)
4.11 Form of Warrant Agreement (Exhibit 4.11)
4.12 Form of Registration Rights Agreement (Exhibit 4.12)
<PAGE>
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.
(Registrant)
Date: April 9, 1997 /s/ Joseph A. Falsetti
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Joseph A. Falsetti
Chief Executive Officer
Principal Financial Officer
/s/ Gerald W. Klein
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Gerald W. Klein
Vice President and
Chief Financial Officer
<PAGE>
RomTech, Inc.
Consolidated Pro Forma Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
February 28, February 28,
1997 1997
Unadjusted Adjustments As Adjusted
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 344,639 $ 800,000 $ 1,144,639
Restricted cash 14,788 14,788
Accounts receivable, net of allowance 803,084 803,084
for doubtful accounts of $97,521
Inventory 395,566 395,566
Prepaid expenses 284,869 284,869
----------- ----------- -----------
Total current assets 1,842,946 800,000 2,642,946
Furniture and equipment, net 179,606 179,606
Other assets 176,767 176,767
----------- ----------- -----------
Total assets $ 2,199,319 $ 800,000 $ 2,999,319
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 131,903 $ 131,903
Accounts payable 803,971 803,971
Accrued expenses 527,041 527,041
----------- ----------- -----------
Total current liabilities 1,462,915 1,462,915
Capital lease obligations net of current portion 60,226 60,226
Notes payable-long term portion 305,992 305,992
Convertible subordinated debt 150,000 150,000
----------- ----------- -----------
Total liabilities 1,979,133 1,979,133
Stockholders' equity:
Convertible preferred stock 2,271,340 1,000,000 3,271,340
Common stock, no par value (40,000,000
shares authorized; 6,483,815 issued and
outstanding) 4,316,861 4,316,861
Additional paid in capital 685,355 (200,000) 485,355
Accumulated deficit (7,053,370) (7,053,370)
----------- ----------- -----------
Total stockholders' equity 220,186 800,000 1,020,186
----------- ----------- -----------
Total liabilities and stockholders' equity $ 2,199,319 $ 800,000 $ 2,999,319
=========== =========== ===========
</TABLE>
<PAGE>
RomTech, Inc.
Consolidated Pro Forma Statement of Operations
(Unaudited)
Eight months ended
February 28,
1997
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Net revenues $2,843,194
Cost of revenues 917,630
---------
Gross profit 1,925,564
Operating expenses:
Product development 377,479
Selling, general and administrative 2,904,367
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Total operating expenses 3,281,846
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Operating loss (1,356,282)
Interest expense, net (42,084)
---------
Net loss ($1,398,366)
===========
Net loss per common share ($0.22)
Weighted average common
shares outstanding 6,309,964
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES, POWERS,
RIGHTS AND NUMBER OF SHARES OF CLASS THREE
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 the Board of Directors by the
Corporation's Articles of Incorporation, and in accordance with the provisions
of the Pennsylvania Business Corporation Law, as amended, (the "BCL"), the Board
of Directors of the Corporation, by unanimous consent as of April 7, 1997,
adopted the following resolutions, which resolutions remain in full force and
effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Corporation's Articles of Incorporation,
there is hereby created, 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 Three Convertible Preferred Stock,"
without par value, and having the following powers, designations, preferences
and special rights:
1. Definitions.
"Affiliate" shall mean any person, firm, corporation, partnership or
association controlling, controlled by, or under common control with another
person, firm, corporation, partnership or association.
"Automatic Conversion Price" shall mean 70% of the Average Quoted Price
for the five (5) trading days immediately preceding the Mandatory Conversion
Price.
"Average Quoted Price" shall mean the average Quoted Price of a share
of Common Stock for the period in question.
"Class Three Convertible Preferred Stock" shall have the meaning
given to such term in Section 2(a) hereof.
"Common Stock" shall mean the common stock, without par value, of the
Corporation.
"Conversion Date" shall mean the date on which the Corporation receives
notice of a Holder's election to convert a stated number of shares of Class
Three Convertible Preferred Stock into Common Stock, which notice is accompanied
by the certificate or certificates representing the shares of Class Three
Convertible Preferred Stock to be converted into Common Stock.
"Conversion Price" shall have the meaning given to such term in Section
2(b)(iii) hereof.
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"Effective Date" shall mean the date on which the Securities and
Exchange Commission declares effective the Registration Statement.
"First Conversion Date" shall mean the date that is five (5) business
days after the Effective Date.
"Holders" shall mean the holders of the Class Three Convertible
Preferred Stock.
"Mandatory Conversion Date" shall have the meaning given to such term
in Section 2(b)(iv) hereof.
"Original Issuance Date" shall mean the date on which the first share
of Class Three Convertible Preferred Stock is issued.
"Quoted Price" shall mean the closing bid price of the Common Stock
as reported on the Nasdaq SmallCap Market, or the primary securities market or
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 market or 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.
"Registration Statement" shall mean the registration statement to be
filed by the Corporation under Section 5 of the Securities Act of 1933, as
amended (the "Securities Act"), to register the shares of Common Stock issuable
upon conversion of the Class Three Convertible Preferred Stock.
"Stated Dividend" shall have the meaning given to such term in
Section 6(a).
"Stated Value" per share shall mean one dollar ($1.00).
2. Designation, Amount and Conversion Rights.
(a) Designation. There shall be designated Two Million (2,000,000)
shares of preferred stock, without par value (referred to herein as the "Class
Three Convertible Preferred Stock").
(b) Conversion into Common Shares.
(i) Each Holder shall have the right, at such Holder's option, at the
times set forth in Section 2(b)(ii) below, to convert the shares of Class Three
Convertible Preferred Stock held by such Holder into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Class Three Convertible Preferred Stock to be
2
<PAGE>
converted by a fraction, the numerator of which is the Stated Value, and the
denominator of which is the Conversion Price.
(ii) One-half of each Holder's shares of Class Three
Convertible Preferred Stock which are held as of the First Conversion Date shall
be convertible into Common Stock beginning on the First Conversion Date. The
remaining one-half of each Holder's shares of Class Three Convertible Preferred
Stock shall become convertible into Common Stock beginning on the date that is
30 days after the First Conversion Date.
In the event that the Registration Statement does not become effective
on or before six months following the Original Issuance Date, all of the
outstanding shares of Class Three Convertible Preferred Stock shall become
convertible at any time beginning on the date that is six months from the
Original Issuance Date.
(iii) The conversion price per share (the "Conversion Price"),
shall be equal to the following:
(A) Beginning on the First Conversion Date and ending on the
30th day thereafter, the Conversion Price shall be equal to eighty (80%) percent
of the Average Quoted Price for the five (5) trading days immediately preceding
the Conversion Date;
(B) Beginning on the 31st day after the First Conversion Date
and ending on the 60th day after the First Conversion Date, the Conversion Price
shall be equal to 78% of the Average Quoted Price for the five (5) trading days
immediately preceding the Conversion Date;
(C) Beginning on the 61st day after the First Conversion Date
and ending on the 90th day after the First Conversion Date, the Conversion Price
shall be equal to 76% of the Average Quoted Price for the five (5) trading days
immediately preceding the Conversion Date;
(D) Beginning on the 91st day after the First Conversion Date
and ending on the 120th day after the First Conversion Date, the Conversion
Price shall be equal to 74% of the Average Quoted Price for the five (5) trading
days immediately preceding the Conversion Date;
(E) Beginning on the 121st day after the First Conversion Date
and ending on the 150th day after the First Conversion Date, the Conversion
Price shall be equal to 72% of the Average Quoted Price for the five (5) trading
days immediately preceding the Conversion Date; and
(F) Beginning on the 151st day after the First Conversion Date
and ending on the second anniversary of the Original Issuance Date, the
Conversion Price shall be equal to 70% of the Average Quoted Price for the five
(5) trading days immediately preceding the Conversion Date;
provided, however, that in no event shall the Conversion Price under this
Section 2(b)(iii) exceed $5.95 or be less than $.66.
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<PAGE>
(iv) On the date that is two years from the Original Issuance
Date (the "Mandatory Conversion Date"), all shares of the Class Three
Convertible Preferred Stock then outstanding shall automatically, and without
any action on the part of the Holder thereof, be automatically converted into
such number of fully paid and nonassessable Common Shares as shall be determined
by multiplying the number of shares of Class Three Convertible Preferred Stock
then outstanding by a fraction, the numerator of which is the Stated Value, and
the denominator of which is the Automatic Conversion Price.
(v) Additionally, notwithstanding anything set forth in this
Section 2 to the contrary, in no event shall any Holder, prior to the Mandatory
Conversion Date, be entitled to convert Class Three Convertible Preferred Stock
into shares of Common Stock to the extent that (xx) the number of shares of the
Corporation's Common Stock beneficially owned by such Holder and its Affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the shares of Class Three
Convertible Preferred Stock held by such Holder) plus (yy) the number of shares
of Common Stock issuable upon such conversion would result in beneficial
ownership by the Holder and its Affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of this Section 2(b)(v), beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D and 13G promulgated
thereunder, except as otherwise provided in clause (yy) of this Section 2(b)(v).
The Holder shall, upon delivering to the Company a notice of election to convert
shares of Class Three Convertible Preferred Stock in accordance with Section
5(a) hereof, be required to provide the Company with a certification in form and
substance reasonably satisfactory to the Company, that the conversion of the
Class Three Convertible Preferred Stock being converted will not result in the
Holder and its Affiliates beneficially holding more than 4.9% of the outstanding
shares of Common Stock on such Conversion Date. If the Holder cannot make such
certification, the shares of Class Three Convertible Preferred Stock to be
converted shall not be convertible. Notwithstanding the foregoing, upon the
Mandatory Conversion Date, all such shares of Class Three Convertible Preferred
Stock then outstanding shall be converted into Common Stock in accordance with
Section 2(b)(iv) hereof.
3. Rights Upon Liquidation, Dissolution or Winding-Up.
(a) Subject to the limitations set forth in Section 3(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 shall be
entitled to be paid out of the assets of the Corporation available for
distribution to 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 Three Convertible Preferred Stock with
respect to liquidation preferences, an amount equal to the Stated Value per
share.
(b) The Holders shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders upon liquidation,
dissolution and winding-up only after the holders of the then outstanding Class
One Preferred Stock and the holders of the then outstanding Class Two
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<PAGE>
Preferred Stock have been paid such amounts to which each is entitled upon
liquidation, dissolution and winding-up.
4. Voting Rights. Except as herein provided or otherwise provided by
law, the entire voting power for the election of directors and for all other
purposes shall be vested exclusively in the holders of the outstanding Common
Stock, and the Holders 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 of the Class Three Convertible Preferred Stock
so as to adversely affect the Holders. If the Holders as a class are adversely
affected by any action to which they have the right to vote pursuant to this
Section 4, the vote of a majority of the Holders, voting as a class, shall be
required to approve such action.
5. Mechanics of Conversion.
(a) If a Holder desires to exercise its right of conversion pursuant to
Section 2 above, such Holder shall give written notice to the Corporation of its
election to convert a stated number of shares of Class Three Convertible
Preferred Stocks into shares of Common Stock, at the Conversion Price then in
effect, which notice shall be accompanied by (i) the certificate or certificates
representing such shares of Class Three Convertible Preferred Stock which shall
be converted into Common Stock, duly endorsed for transfer or accompanied by a
duly endorsed stock power, (ii) the certification to the Company required by
Section 2(b) (v) hereof, and which notice shall be delivered in accordance with
the terms of Section 16 of the Securities Purchase Agreement between the Company
and the Holder. 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 representing the Class Three Convertible Preferred Stock
surrendered for conversion, the Corporation shall cause to be issued and
delivered to the Holder of the Class Three Convertible Preferred Stock
surrendered for conversion or to its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock issuable upon conversion
of Class Three Convertible Preferred Stock and, if the certificates representing
shares of Class Three Convertible Preferred Stock surrendered for conversion
shall exceed the number of shares to be converted, the Corporation shall issue
and deliver to the person or entity entitled thereto a certificate representing
the balance of any unconverted shares of Class Three Convertible Preferred
Stock.
(b) No Fractional Shares. Notwithstanding anything herein to the
contrary, no fractional shares shall be issued to any Holder upon conversion of
such Holder's Class Three Convertible Preferred Stock, and the number of shares
of Common Stock issued in the event of any conversion of Class Three Convertible
Preferred Stock shall be rounded to the nearest whole share.
(c) Reservation of Common Stock. (i) So long as the Quoted Price of the
Common Stock is greater than or equal to 90% of the Quoted Price of the Common
Stock on the Original Issuance Date , the Corporation shall at all times have
authorized and reserved for issuance, free from preemptive rights, a sufficient
number of shares of Common Stock to yield the number of shares of
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<PAGE>
Common Stock issuable upon the conversion of all of the shares of Class Three
Convertible Preferred Stock at that time issued and outstanding pursuant to the
terms and conditions hereof; and
(ii) At any time when the Quoted Price of the Common Stock is
less than 90% of the Quoted Price of the Common Stock on the Original Issuance
Date , the Corporation shall continue to reserve the number of shares of Common
Stock required by clause (i) above, and shall in addition thereto use its best
efforts (including, without limitation, recommending to its shareholders an
increase in the authorized number of shares of Common Stock) to have at all
times authorized and reserved for issuance, free from preemptive rights, a
sufficient number of shares of Common Stock to satisfy the Conversion Rights of
all of the shares of Class Three Convertible Preferred Stock at that time issued
and outstanding, pursuant to the terms and conditions hereof.
6. Dividends.
(a) Commencing on the Original Issuance Date, and continuing
thereafter, a dividend at the rate of seven percent (7%) of the Stated Value per
annum (the "Stated Dividend") will accrue quarterly in arrears with respect to
each issued share of Class Three Convertible Preferred Stock.
Stated Dividends shall be cumulative.
(b) On the date on which the Holder converts any of its Class Three
Convertible Preferred Stock into Common Stock, the accrued Stated Dividend with
respect to the shares so converted shall be paid to such Holder. All accrued
Stated Dividends also shall be payable upon the liquidation, dissolution or
winding up of the Corporation.
(c) The Corporation shall pay the Stated Dividends in the form of cash
or shares of Common Stock, at the Corporation's sole discretion. If the
Corporation elects to pay the Stated Dividend in Common Stock, the number of
shares of Common Stock which a Holder of Class Three Convertible Preferred Stock
shall receive shall be determined by multiplying Stated Dividend per share
accrued as of the Conversion Date by number of shares of Class Three Convertible
Preferred Stock being converted by such Holder, and dividing such amount by the
applicable Conversion Price.
(d) Notwithstanding anything herein to the contrary, no fractional
shares shall be issued pursuant to this Section 6, and the number of shares of
Common Stock issued upon the payment of the Stated Dividend shall be rounded to
the nearest whole share.
7. Redemption Rights.
The holders of the Class Three Convertible Preferred Stock shall have
no redemption rights.
8. 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 receive any dividend (other than
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<PAGE>
dividends payable with respect to the Class Three 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 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
(c) Any voluntary or involuntary dissolution, liquidation or winding-up
of the Corporation, the Corporation will mail to each Holder 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.
9. Retirement of Converted Shares. No share or shares of Class Three
Convertible Preferred Stock acquired by the Corporation by reasons of conversion
or otherwise shall be re-issued.
10. 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 Three Convertible Preferred Stock against impairment.
FURTHER RESOLVED, that, before the Corporation shall issue any shares
of Class Three 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, 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.
7
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement"), dated as of April _____,
1997, is entered into by and between _______________________________________
("Purchaser") and RomTech Inc., (the "Company"). This is the Agreement referred
to as the "Purchase Agreement" in the Registration Rights Agreement (as defined
in Section 6(b) hereof).
The parties hereto agree as follows:
1. Purchase and Sale of Preferred Shares and Warrant. Upon the basis of the
representations and warranties, and subject to the terms and conditions set
forth in this Agreement, the Company covenants and agrees to sell to the
Purchaser on the Closing Date (as hereinafter defined) (i) _________ shares (the
"Preferred Shares") of its Class Three Convertible Preferred Stock (the
"Preferred Stock"), each such Preferred Share convertible in accordance with the
terms and conditions of the Company's Certificate of Designation for the
Preferred Stock in the form of Exhibit A annexed hereto (the "Certificate of
Designation") on the dates set forth in the Certificate of Designation, (any
such date of conversion, the "Conversion Date") into shares of the Company (the
"Conversion Shares") and a warrant in substantially the form of Exhibit B hereto
(the "Warrant") to purchase ____ shares of the Company's Common Stock (the
"Warrant Shares"). The Conversion Shares, (together with the Warrant Shares and
the Preferred Shares, the "Shares"), shall be purchased at a purchase price of
$_______ (the "Purchase Price").
2. Closing. The closing of the purchase and sale of the
Preferred Stock and the Warrant pursuant to Section 1 hereof shall take place on
April , 1997 at the offices of Morse, Zelnick, Rose & Lander LLP, located at 450
Park Avenue, Suite 902, New York, New York 10022 or at such other date, time and
place as the Purchaser and the Company may agree upon in writing, or at such
other time at which the Escrow Agent (as hereinafter defined) shall have
received all documents and instructions as it shall in its sole judgment deem
necessary and appropriate to consummate the transactions contemplated hereby
(such time and date for the closing, the "Closing Date"). The certificates
representing the Preferred Stock and the executed Warrant to be purchased by the
Purchaser shall be delivered by, or on behalf of, the Company at the closing
against payment of the Purchase Price therefor in immediately available funds
by, or on behalf of,
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the Purchaser to the attorney trust account of Morse, Zelnick, Rose & Lander,
LLP, (the "Escrow Agent") (Chase Manhattan Bank, Account No. 967086639, ABA
Routing Number 021000021). The Escrow Agent shall receive from the Purchaser and
the Company written instructions of the Purchaser and the Company in
substantially the form of Exhibit C hereto (the "Closing Instructions"),
instructing the Escrow Agent with respect to the closing and settlement
procedures, subject, however, to the terms and conditions of this Agreement on
the date the Purchaser delivers the Purchase Price to the Escrow Agent.
Commencing on the second business day after delivery to the Escrow Agent of the
Purchase Price, the Purchaser, if the purchase and sale transaction contemplated
hereby has not been consummated in accordance with the terms of this Agreement,
may terminate the proposed transaction by notice to the Company and the Escrow
Agent, whereupon the Escrow Agent shall redeliver the Purchase Price to the
Purchaser as soon as practicable in accordance with the written instructions of
the Purchaser.
3. Representations. Warranties and Covenants of the Purchaser.
The Purchaser understands, and represents and warrants to, and agrees with, the
Company, that:
(a) The Preferred Stock (including the Conversion
Shares) and the Warrant (including the Warrant Shares) have not been and, unless
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in accordance with the Registration Rights Agreement (as defined in Section
6(b)), will not be registered under the Securities Act, or any other applicable
securities law, and, accordingly, may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of ("Transferred") unless registered
under the Securities Act or Transferred in a transaction exempt from
registration under the Securities Act and any other applicable securities law
(in which event, the Purchaser shall be required to provide the Company with an
opinion of counsel that registration is not required, in form and substance
reasonably satisfactory to the Company and its counsel). The Purchaser
recognized that the certificates representing the Preferred Shares (including
the Conversion Shares), and the Warrants (including the Warrant Shares) 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
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<PAGE>
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.
(b) The Purchaser is an "accredited investor" within
the meaning of Rule 501(a) under the Securities Act (an "Accredited Investor"),
and is acquiring or will acquire the Preferred Stock and the Warrant for its own
account. The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Preferred Stock and the Warrant. The Purchaser is aware that
it may be required to bear the economic risk of an investment in the Preferred
Stock and the Warrant for an indefinite period, and it is able to bear such risk
for an indefinite period.
(c) The Purchaser is acquiring or will acquire the
Preferred Stock and the Warrants for its own account for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution
thereof, except in compliance with applicable securities laws (including
exemptions thereunder) or pursuant to an effective registration statement under
the Securities Act. The Purchaser agrees to offer, sell or otherwise transfer
the Preferred Stock and the Warrants (including the Warrant Shares) only (i) in
accordance with the terms of this Agreement and the Warrant, as applicable, and
(ii) pursuant to registration under the Securities Act or an exemption from
registration under the Securities Act and any other applicable securities law
(in which event, the Purchaser shall be required to provide the Company with an
opinion of counsel that registration is not required, in form and substance
reasonably satisfactory to the Company and its counsel).
(d) The Company has furnished or made available to
the Purchaser all material information relating to the business, finances and
operations of the Company and material information relating to the offer and
sale of the Securities and which have been requested by the Purchaser, including
the "Risk Factors" set forth on Schedule 3(d) hereof. The Purchaser and/or its
advisors, if any, in each case, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the
Purchaser has had the opportunity to obtain and to review the Company's (1)
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996 as filed
with the Securities and Exchange Commission (the "SEC"), (2) Quarterly Reports
on Form 10-QSB for the fiscal quarters ended September 30, 1996 and December
30, 1996 (3) Current Reports on Form 8-K, dated November 15, 1996 and January
30, 1997, and (4) definitive Proxy Statement of the Company dated November 4,
1996 for its 1996 Annual
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<PAGE>
Meeting of Stockholders (collectively, the "SEC Documents"), which the Company
has filed pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(e) Purchaser, in electing to subscribe for the
Securities hereunder, has relied upon an independent investigation made by it
and its representative, if any. Purchaser has been given no oral or written
representations or assurances from the Company or any representation of the
Company other than as set forth in this Agreement or in a document executed by a
duly authorized representative of the Company making reference to this
Agreement.
(f) The Purchaser has no existing short position with
respect to the Common Stock and agrees not to, for a period of 90 days from the
Closing Date, enter into any short sales or other hedging transactions directly
involving the Common Stock. Purchaser further agrees that, at all times after
the execution of this Agreement by the Purchaser and prior to conversion of all
shares of Preferred Stock acquired by Purchaser, it will keep its purchase of
the Preferred Stock and Warrant confidential, except as required by law and
except as necessary in the ordinary course of Purchaser's business.
(g) The Purchaser acknowledges that, except for the
historical material contained herein or in the SEC Documents, the matters
disclosed herein and therein are forward-looking statements under the federal
securities laws that involve risks and uncertainties, including, but not limited
to, product demand and market acceptance risks, the effect of economic
conditions, the impact of competitive products and pricing, product development,
commercialization and technological difficulties, capacity and supply
constraints or difficulties, the results of financing efforts, actual purchases
under agreements, the effect of the Company's accounting policies, and other
risks detailed in the Company's SEC Documents. Actual results could differ
materially from those estimated or anticipated in these forward-looking
statements.
(h) The Purchaser is a resident of the state set
forth on the signature page hereto.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser that:
(a) The Company and each of its Subsidiaries have
been duly incorporated and are validly existing as a corporations under the laws
of Pennsylvania or other appropriate jurisdiction and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted.
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<PAGE>
(b) This Agreement, the Warrant and the Registration
Rights Agreement (as defined in Section 6(b)) have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements, enforceable in accordance with their respective terms (except to the
extent that enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally), and the Company has
full corporate power and authority necessary to enter into such agreements and
to perform its obligations thereunder.
(c) Except as set forth on Schedule 4(c), no consent,
approval, authorization or order of any court, governmental agency or body or
arbitrator having jurisdiction over the Company or any of its affiliates or of
any third party or of the stockholders of the Company is required for execution
of this Agreement, the Warrant or the Registration Rights Agreement (as defined
in Section 6(b)) or the performance of its obligations under such agreements,
including, without limitation, the issuance and sale of the Preferred Stock, the
Conversion Shares, the Warrant and the Warrant Shares (except for the
registration of the Conversion Shares and Warrant Shares under the Securities
Act pursuant to the Registration Rights Agreement as defined in Section 6(b)
and, 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).
(d) Neither the sale of the Preferred Stock and
Warrant pursuant to this Agreement, nor the performance of its obligations under
this Agreement, the Warrant (including the issuance of the Warrant Shares) or
the Registration Rights Agreement by the Company will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the articles of incorporation or by-laws of the Company, (B) any
decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company, the violation, conflict, breach or default of which would have a
material adverse effect on the Company and its subsidiaries considered as a
whole, (C) the terms of any bond, debenture, or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company is a
party, by which the Company is bound, or to which any of the properties of the
Company is subject, the violation, conflict, breach or default of which would
have a material adverse effect on the Company and its subsidiaries
-5-
<PAGE>
considered as a whole, or (D) the terms of any "lockup" or similar provision of
any underwriting or similar agreement to which the Company is a party; or
(ii) result in the creation or imposition of
any lien, claim or other encumbrance upon any of the assets of the Company.
(e) The Preferred Stock has been duly and validly authorized
and is (i) free and clear of any security interests, liens, claims or other
encumbrances, (ii) is duly and validly issued, (iii) fully paid and
nonassessable, (iv) not issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company, and (v) does not
subject the holders thereof to personal liability by reason of being such
holders. The Warrant has been duly and validly authorized and when issued and
delivered pursuant to this Agreement will have been duly executed, issued and
delivered and will constitute a legal, valid, binding and enforceable obligation
of the Company (except to the extent that enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws affecting creditors' rights
generally).
(f) The Conversion Shares and Warrant Shares have been duly
and validly authorized and when issued (i) will be free and clear of any
security interests, liens, claims or other encumbrances, (ii) will be duly and
validly issued, (iii) will be fully paid and nonassessable, (iv) will not have
been issued or sold in violation of any preemptive or other similar rights of
the holders of any securities of the Company, and (v) will not subject the
holders thereof to personal liability solely by reason of being such holders.
(g) Except as set forth in the SEC Documents, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates that
would materially affect the results of operations of the Company or adversely
affect the execution by the Company of, or adversely affect the performance by
the Company of its obligations under, this Agreement, the Warrant or the
Registration Rights Agreement, or the transactions contemplated hereby or
thereby.
(h) Neither the Company, nor any authorized representative of
the Company, has made, at any time, any written or oral communication in
connection with the offer or sale of the securities offered hereby which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
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<PAGE>
(i) Assuming the accuracy of, and compliance with,
the representations, warranties and covenants of the Purchaser in this
Agreement, the sale of the securities offered hereby pursuant to this Agreement
and the Warrant have been made in accordance with the provisions and
requirements of Section 4(2) ("Section 4(2)") under the Securities Act and any
applicable state law.
(j) None of the Company, any affiliate of the
Company, or any person acting on behalf of the Company or any such affiliate has
engaged, or will engage, in any general solicitation or general advertising with
respect to the Preferred Stock or the Warrant.
(k) Except as set forth on Schedule 4(k) hereto, the
Company is duly organized, validly existing and in good standing under the laws
of the state of Pennsylvania and is duly qualified as a foreign corporation in
all jurisdictions in which the failure to so qualify would have a material
adverse effect on the Company and its subsidiaries taken as a whole. The Company
has registered its Common Stock pursuant to the Exchange Act of 1934, as amended
(the "Exchange Act"), and the Common Stock is listed and trades on the NASDAQ
Small CapMarket. The Company has filed all materials required to be filed
pursuant to all reporting obligations under either Section 13(a) or 15(d) of the
Exchange Act for at least twelve (12) months immediately preceding the date
hereof, and has received no notice, either oral or written, with respect to the
continued eligibility for such listing. The Company has timely made all filings
required under the Exchange Act during the twelve month period preceding the
date hereof and is eligible to use Form S-3 to register the Conversion Shares
and Warrant Shares. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Prior to the
date hereof, the Company has corrected all statements in the SEC Documents which
have required correction and has filed all necessary amendments to the SEC
Documents, in each case as required by applicable law.
(l) As of the date hereof, the authorized capital
stock of the Company consists of (i) 40,000,000 shares of Common Stock without
par value, of which 6,326,012 shares were issued and outstanding, and (ii)
10,00,000 shares of preferred
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<PAGE>
stock, without par value, of which 2,271,340 shares were issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in Schedule 4(l), (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, and (ii) there are no outstanding debt securities of
the Company. The Company has made available to the Purchaser true and correct
copies of the Company's Certificate of Incorporation, as amended, as in effect
on the date hereof ("Certificate of Incorporation"), and the Company's By-laws,
as in effect on the date hereof (the "Bylaws").
(m) The Company undertakes and agrees to make all
necessary filings in connection with the sale of the securities offered hereby
as required by the United States laws and the regulations or any domestic
securities exchange or trading market.
(n) Except as set forth in the SEC Documents, since
July 1, 1996, there has been no material adverse development in the assets,
liabilities, business properties, operations, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, except as
disclosed in the filings of the Company with the SEC, other than continued
losses.
(o) None of the filings of the Company with the SEC
since July 1, 1996 contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has since
July 1, 1996 timely filed all requisite forms, reports and exhibits thereto with
the SEC. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
(p) Except as set forth in the SEC Documents, there
is no known fact to the Company or any subsidiary (other than general economic
conditions generally known to the public) that has not been disclosed in writing
to the Purchaser that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, business prospects, properties or assets of the Company or any
subsidiary, or (ii) could reasonably be expected to
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<PAGE>
adversely affect the ability of the Company or any subsidiary to perform its
obligations pursuant to this Agreement, the Registration Rights Agreement or the
Warrant.
(q) The Company acknowledges and agrees that
Purchaser is acting solely in the capacity of an arm's length purchaser with
respect to this Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby. The Company further acknowledges
that Purchaser is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the Registration
Rights Agreement and the transactions contemplated hereby and thereby and any
advice given by Purchaser or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby and thereby is
merely incidental to Purchaser's purchase of the Preferred Stock and the
Warrant. The Company further represents to Purchaser that the Company's decision
to enter into this Agreement, the Warrant and the Registration Rights Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
(r) Neither the Company, nor any of its affiliates,
has, directly or indirectly, made any offers or sales of any securities or
solicited any offers to buy any security, under circumstances that would require
registration of the Preferred Stock or the Warrant under the 1933 Act.
(s) Except as set forth within this Agreement or in
the SEC Documents, the Company and its subsidiaries own, have obtained or
possess rights to use the trademarks, trade names, service marks, service mark
registrations, patents, copyrights, licenses, approvals, governmental
authorizations, trade secrets and other rights necessary to conduct their
respective businesses as now conducted, the Company does not have any knowledge
of any material infringement by the Company or its subsidiaries of any
trademark, trade name rights, patent rights, copyrights, licenses, service
marks, service mark registrations, trade secrets or other similar rights of
others and there is no claim being made against the Company or its subsidiaries
regarding trademark, trade name, patent, copyright, license, service marks,
service mark registrations, trade secret or other infringement which could have
a material adverse effect on the Company. The Company and its subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.
(t) The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares and the Warrant Shares.
5. Covenants of the Company. The Company covenants and agrees
with the Purchaser:
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<PAGE>
(a) To comply with all requirements of Section 4(2)
and Section 3(a)(9), as applicable, and to the extent applicable Regulation D
under the Securities Act, with respect to the sale of the Preferred Stock, the
Conversion Shares, the Warrant and the Warrant Shares, respectively.
(b) To notify the Purchaser promptly if at any time
during the period beginning on the date of this Agreement and ending on the
Closing Date any event shall have occurred as a result of which any written or
oral communication made by the Company, any authorized person representing the
Company, would include an untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) To cause the Conversion Shares and Warrant Shares
to be, upon delivery, fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges, security interests or other encumbrances.
(d) Have at all times authorized and reserved for
issuance, free from preemptive rights, a sufficient number of shares of Common
Stock to satisfy the conversion rights of the Purchaser pursuant to the terms
and conditions of the Preferred Stock and the Warrant and to satisfy the
issuance of any other shares of Common Stock which are reserved for issuance or
which are issuable upon the exercise, conversion, exchange or satisfaction of
any outstanding securities or obligations or rights of the Company.
(e) Each party shall use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, including without limitation, timely to satisfy the conditions to be
satisfied as provided in Section 6 and 7 of this Agreement, to consummate the
transactions contemplated hereby.
(f) Until the earlier of (i) the date which is one
year after the date as of which the Holders (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (a) the Holders shall have sold all the
Conversion Shares and Warrant Shares and (b) none of the Preferred Stock or
Warrants are outstanding (the "Filing Period"), the Company shall use its best
efforts to file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not voluntarily terminate its status as an
Company required to file reports under the 1934 Act even if the Act or the rules
and regulations thereunder would permit such termination.
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<PAGE>
(g) The Company will use the proceeds from the sale
of the Securities substantially as set forth on Schedule 5(g) hereto.
(h) The Company shall use its best efforts to
promptly secure the listing of the Conversion Shares and Warrant Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed or quoted (subject to official
notice of issuance) and shall use its best efforts to maintain the listing of
all such shares from time to time issuable under the terms of this Agreement and
the Registration Rights Agreement. During the period that the Company is
required to maintain effective a registration statement covering the Conversion
Shares and Warrant Shares, the Company shall use its best efforts to maintain
the Common Stock's authorization for listing on the NASDAQ SmallCap Market and
any such other national securities exchange.
(i) The Company covenants and agrees that it will not, without
the prior written consent of the Purchaser, (a) enter into any subsequent or
further offer or sale of Common Stock or securities convertible into Common
Stock with any third party until the expiration of ninety (90) days after the
effective date of the Registration Statement. However, this restriction shall
not apply to (i) the issuance of securities (other than for cash) in connection
with a merger, consolidation, sale of assets, disposition of a business, product
or license by the Company, strategic alliance, bank loan or agreement, public
offering, securities issued at the then current market price (as determined in
good faith by the board of Directors), or the exercise of options, (ii) the
exchange of the capital stock for assets, stock or other joint venture
interests, or (iii) the sale of capital stock, at a sales price in excess of $20
per share and further provided, that any registration rights in connection
therewith, shall not require the filing of a Registration Statement under the
Registration Rights Agreement between the Company and the Purchaser. However,
nothing contained herein shall be deemed to preclude the Company from taking
such action as may be reasonably required to cure any alleged default under
agreements to which the company is or may become a party.
6. Conditions Precedent to the Purchaser's Obligations. The
obligations of the Purchaser hereunder are subject to the performance by the
Company of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
(a) The representations and warranties made by the
Company in this Agreement shall, unless waived by the Purchaser, be true and
correct in all material respects as of the date hereof and at the Closing Date,
with the same force and effect as if they had been made on and as of the Closing
Date. The Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and
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<PAGE>
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Company shall certify
to Purchaser and the Escrow Agent that the requirements of Section 6(a) have
been met.
(b) The Company and the Purchaser shall have entered
into a Registration Rights Agreement (the "Registration Rights Agreement") in
substantially the form annexed hereto as Exhibit D.
(c) The Company will provide to the Purchaser an
opinion or opinions of counsel c in substantially the form annexed hereto as
Exhibit E.
(d) None of the following shall have occurred: (i)
any general suspension of trading in, or limitation on prices listed for, the
Common Stock on the NASDAQ, (ii) a declaration of a banking moratorium or any
suspension of payments in respect to banks in the United States, (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) in the case of
the foregoing existing at the date of this Agreement, a material acceleration or
worsening thereof, or (v) any limitation by the federal or state authorities on
the extension of credit by lending institutions that materially and adversely
affects the Purchaser.
(e) The Company shall have executed and delivered to
the Escrow Agent the certificates representing the Preferred Stock and the
Warrant.
(f) No action, suit, investigation or proceeding
before or by any governmental authority shall have been commenced or threatened
against the Company or any of the officers, directors or affiliates of the
Company, which seeks to restrain, prevent or challenge the transactions
contemplated by this Agreement or the Registration Rights Agreement or which
seeks damages in connection with such transactions.
7. Conditions Precedent to the Company's Obligations.
(a) The obligations of the Company hereunder are
subject to the performance by the Purchaser of its obligations hereunder and to
the satisfaction of the condition precedent that the representations and
warranties made by the Purchaser in this Agreement shall, unless waived by the
Company, be true and correct in all material respects as of the date hereof and
at the Closing Date, with the same force and effect as if they had been made on
and as of the Closing Date.
(b) The Purchaser shall have delivered to the Escrow
Agent by wire transfer the Purchase Price for the Preferred Stock and Warrant.
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8. Transfer of Securities.
(a) Securities Act Legend. Each certificate
evidencing the Preferred Stock, the Conversion Shares, the Warrant and the
Warrant Shares, and any certificates issued upon transfer or exchange of the
foregoing shall be stamped or imprinted with a legend as follows:
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 legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Stock, the
Conversion Shares, the Warrant and the Warrant Shares as applicable upon which
it is stamped, if, unless otherwise required by state securities laws, (a) with
respect to the Conversion Shares and the Warrant Shares, the sale of the
Conversion Shares, and the Warrant Shares, as the case may be, is registered
under the 1933 Act, or (b) in connection with a Transfer, such holder provides
the Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a Transfer thereof may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Stock, the Conversion Shares, the
Warrant and the Warrant Shares as applicable can be sold pursuant to Rule 144
under the 1993 Act (or a successor rule thereto). Notwithstanding the removal of
any such legend, Purchaser agrees to Transfer the Preferred Stock, the
Conversion Shares, the Warrant and the Warrant Shares, including those
represented by certificate(s) from which the legend has been removed, in
compliance with all applicable securities laws and, if, in connection with any
Transfer, a legend would be appropriate under applicable securities laws,
Purchaser shall, in connection with any such Transfer ensure that the
certificates representing shares so Transferred shall bear the foregoing legend.
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(b) Securities Act Compliance. Each holder (a
"Holder") of a certificate evidencing the Preferred Stock, the Conversion
Shares, the Warrant and the Warrant Shares which bears the restrictive legend
set forth in Section 8(a) above (the "Restricted Securities"), and who proposes
to Transfer (as defined in Section 3(a) of this Agreement) any Restricted
Securities (other than pursuant to an effective Registration Statement or
pursuant to Rule 144), shall give written notice to the Company of such Holder's
intention to effect such Transfer. Each such notice shall describe the manner
and circumstances of the proposed sale or other disposition in sufficient detail
and may be accompanied by an opinion of legal counsel to the Holder. Promptly
upon receipt of such notice, the Company shall present a copy thereof (together
with any accompanying opinion of legal counsel to the Holder) to its legal
counsel, and the following provisions shall apply:
(i) If, in the opinion of legal counsel to
such Holder, reasonably satisfactory in form and substance to the Company and
its legal counsel, or if such notice was not accompanied by an opinion of legal
counsel to the Holder, then, if, in the opinion of legal counsel to the Company,
the proposed sale or other disposition may be effected without registering the
Restricted Securities involved under the Securities Act or under state
securities laws, such Holder shall be entitled to so Transfer such Restricted
Securities in accordance with the terms of such notice delivered to the Company
pursuant to this paragraph (b). The Company will advise the Holder, within five
(5) business days after submission of such notice, whether the Company believes
such Holder is entitled to so Transfer the Restricted Securities in accordance
with the foregoing. If the Holder is entitled to so Transfer, he shall submit
the stock certificate or certificates evidencing the Restricted Securities to be
Transferred to the Company in proper form for Transfer and accompanied by
appropriate instruments of Transfer and the Company shall promptly issue new
certificates giving effect to such Transfer. Certificates for Restricted
Securities thus Transferred (and each of the certificates evidencing any
untransferred balance of the Conversion Shares or the Warrant Shares not so
transferred) shall bear the restrictive legend set forth in Section 8(a),
unless, in the opinion of such Holder's legal counsel, which opinion shall be
reasonably satisfactory in form and substance to counsel for the Company (or
legal counsel to the Company if the Holder did not present an opinion of its
legal counsel), such legend is not required by the applicable provisions of the
Securities Act or state securities laws; and
(ii) If in the reasonable opinion of either
of such legal counsel (or legal counsel to the Company if the Holder did not
present an opinion of its legal counsel), the proposed Transfer cannot be
effected without registering the Conversion Shares or the Warrant Shares
involved under the Securities Act or state securities laws, such Holder shall
not offer to Transfer or Transfer such Restricted Securities unless and until
such Restricted Securities have been registered under the
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Securities Act or state securities laws for such purpose or an exemption from
such registration becomes available. Upon the consummation of the transactions
contemplated by this Agreement, the Company shall have agreed to register the
Conversion Shares and the Warrant Shares pursuant to the terms of the
Registration Rights Agreement.
(c) Subject to the restrictions set forth in Sections
8(a) and (b) above, upon the valid conversion of the Preferred Stock or exercise
of the Warrants, the Company shall instruct its transfer agent to issue
certificates, registered in the name of Purchaser or its nominee, for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by the respective Purchasers to the Company. The Company shall provide
instructions and opinions of counsel to its transfer agent in accordance with
Section 3(m) of the Registration Rights Agreement and this Section 8. The
Company warrants that no instruction other than such instructions referred to in
this Section 8 will be given by the Company to its transfer a agent. Nothing in
this Section shall affect in any way Purchaser's obligations and agreement to
comply with all applicable securities laws upon resale of the Conversion Shares
and the Warrant Shares.
9. Fees and Expenses. Each of the Purchaser and the Company
agrees to pay its respective expenses incident to the performance of its
obligations hereunder, including, but not limited to, the fees, expenses and
disbursements of such party's counsel.
10. Survival of the Representations, Warranties, etc. The
respective agreements, representations, warranties, indemnities and other
statements made by or on behalf of the Company and the Purchaser, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation made by or on behalf of the other party to this Agreement or
any officer, director or employee of, or person controlling or under common
control with, such party and will survive delivery of any payment for the
Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares.
11. Notices. All notices, requests and other communications
hereunder must be in writing and delivered to the parties at the following
addresses or facsimile numbers:
If to the Purchaser, to:
Telephone:
Telecopy:
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If to the Company, to:
Rom Tech, Inc.
2000 Cabot Blvd., Suite 110
Langhorne, PA 19047
Telephone: (215) 750-6606
Telecopy: (215) 750-3722
with a copy to:
McCausland, Keen & Buckman
Radnor Court, Suite 160
259 Radnor-Chester Road
Radnor, PA 19087
Attn.: Ellen Pulver Flatt, Esq.
Telephone: (610) 341-1000
Telecopy: (610) 341-1099
All such notices, requests and other communications will (i) if delivered
personally (including, without limitation, by reputable overnight courier
service) to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon telecopy generated confirmation
of receipt, and (iii) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
12. Third Party Beneficiary. Any permitted transferee of any
part of the principal amount of the Preferred Stock, the Conversion Shares, the
Warrant and the Warrant Shares shall be a third party beneficiary of the
Company's obligations under this Agreement, the Warrant and the Registration
Rights Agreement. Such person shall have all the rights of a third party
beneficiary with respect to the enforcement against the Company of any provision
of this Agreement, the Warrant and the Registration Rights Agreement.
13. Miscellaneous.
(a) This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same
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agreement. This Agreement, once executed by a party, may be delivered to the
other party by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(b) This Agreement shall inure to the benefit of and
be binding upon the parties hereto, their respective successors and permitted
assigns.
(c) This agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to conflicts of laws principles). With respect to any suit, action or
proceedings relating to this Agreement, each of the Company and the Purchaser
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of
Manhattan in the City of New York and hereby waives to the fullest extent
permitted by applicable law any claim that any such suit, action or proceeding
has been brought in an inconvenient forum. Subject to applicable law, the
Company agrees that final judgment against it in any legal action or proceeding
arising out of or relating to this Agreement or the Warrant, or any transaction
contemplated hereby or thereby, shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgment,
a certified copy of which judgment shall be conclusive evidence thereof and the
amount of its indebtedness, or by such other means provided by law.
(d) The headings of the sections of this document
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
(e) The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
(f) This Agreement, including the schedules and
exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof.
(g) Purchaser shall have the right to approve before
issuance any press releases or any other public statements with respect to the
transaction contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Purchaser, to make any press release
or other public disclosure with
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respect to such transactions as is required by applicable law, rules or
regulations, or the requirements imposed by the Nasdaq Stock Market (although
Purchaser shall be provided with a copy of any such press release or other
public disclosure upon its release).
(h) Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
(i) Notwithstanding any of the representations,
warranties, acknowledgments or agreements made herein by the Company and
Purchaser, the Company and Purchaser does not thereby or in any manner waive any
rights granted to it or him under U.S. Federal or state securities laws.
14. Time of Essence. Time shall be of the essence in this
Agreement.
15. Escrow Agent. The Escrow Agent shall not be liable for any
action taken or omitted by it in good faith and its liability hereunder shall be
limited to liability for gross negligence or willful misconduct on its part. The
Company and the Purchaser agree to save harmless, indemnify and defend the
Escrow Agent for, from and against their respective share of any loss, damage,
liability, judgment, cost and expense whatsoever, by reason of, or on account
of, any misrepresentation made to it or its status or activities as Escrow Agent
under this Agreement except for any loss, damage, liability, judgment, cost or
expense resulting from gross negligence or willful misconduct on the part of the
Escrow Agent.
The Escrow Agent shall not be responsible for any failure or inability
of any of the parties to perform or comply with the provisions of this
Agreement, or the agreements delivered in connection herewith.
In the performance of its duties hereunder, the Escrow Agent shall be
entitled to rely in good faith upon any document (including facsimile
transmitted copies of documents), instrument or signature believed by it in good
faith to be genuine and to be signed by any party hereto or an authorized
officer or agent thereof, and shall not be required to investigate the truth or
accuracy of any statement contained in any such document or instrument. The
Escrow Agent may assume in good faith that any person purporting to give any
notice in accordance with the provisions hereof has been duly authorized to do
so.
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Each party hereto acknowledges that (a) the Escrow Agent is not acting
as legal counsel to such party in any manner or respect in connection with the
transactions contemplated by this Agreement, and (b) the Escrow Agent is serving
as an accommodation to the parties hereto. Each party further acknowledges that
the Escrow Agent has acted, and acts, as legal counsel in certain matter to H.J.
Meyers & Co., Inc. ("Meyers").
It is understood and further agreed that the Escrow Agent shall:
(a) be under no duty to enforce payment of any subscription that is to
be paid to and held by it hereunder;
(b) promptly notify the Purchaser and the Company of any discrepancy
between the amounts set forth on any statement delivered by the Purchaser and/or
the Company and the sum or sums delivered to it therewith;
(c) be under no duty to accept funds, checks, drafts or instruments for
the payment of money from anyone other than the Company or the Purchaser, or to
give any receipt therefor except to the Company or the Purchaser, with a copy in
each case to the Company;
(d) be protected in acting upon any notice, request, certificate,
approval, consent or other paper reasonably believed by it to be genuine and to
be signed by the proper party or parties (including, but not limited to, copies
of documents transmitted by facsimile);
(e) be permitted to consult with counsel of its choice, and shall not
be liable for any action taken, suffered, or omitted by it in accordance with
the advice of such counsel; provided, however, that nothing in this subsection
(e), nor any action taken by the Escrow Agent, or suffered or omitted by it in
accordance with the advice of any counsel, shall relieve the Escrow Agent from
liability for any claims that are occasioned by its gross negligence or willful
misconduct;
(f) not be bound by any modification, amendment, termination,
cancellation, or recission of this Agreement, unless the same shall be in
writing and signed by it;
(g) be entitled to refrain from taking any action other than to keep
all property held in escrow if it (i) shall be uncertain concerning its duties
or rights hereunder, or (ii) shall have received claims or demands from any
party, or (iii) shall have received instructions from the Purchaser and/or the
Company that, in the Escrow Agent's opinion,
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are in conflict with any of the provisions of this Agreement, until it shall
have received a final judgment by a court of competent jurisdiction;
(h) have no liability for following the instructions herein or
expressly provided for herein, or the written instructions given jointly by the
Purchaser and/or the Company; and/or
(i) have the right, at any time, to resign hereunder by giving written
notice of its resignation to all other parties hereto at least three (3)
business days prior to the date specified for such resignation to take effect,
and upon the effective date of such resignation all cash and other payments and
all other property then held by the Escrow Agent hereunder shall be delivered by
it to such person as may be designated in writing by the other parties executing
this Agreement, whereupon the Escrow Agent's obligations hereunder shall cease
and terminate. If no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by the other parties executing this Agreement or in accordance with
the directions of a final order or judgment of a court of competent
jurisdiction.
16. Delivery of Stock. The Company will permit the Purchaser to
exercise its right to convert the Preferred Stock and exercise the Warrant by
telecopying a duly executed and completed Notice of Conversion or Notice of
Exercise, in the form annexed to the Certificate of Designation and Warrant,
respectively, to the Company and delivering within three business days
thereafter, the original Notice of Conversion and Preferred Stock certificate,
or Notice of Exercise and Warrant (the "Original Documentation"), by express
courier. Each date on which a Notice of Conversion or Notice of Exercise is
telecopied to and received by the Company (at the telecopy number provided for
in Paragraph 11 hereof) in accordance with the provisions hereof shall be deemed
a Conversion Date or Exercise Date. The Company will transmit the certificates
representing the Conversion Shares and the Warrant Shares and the newly issued
Preferred Stock certificate representing the number of shares of Preferred Stock
which remains unconverted or the newly issued Warrant representing the portion
of the warrant which remains unexercised to the Purchaser via express courier
within three business days after receipt by the Company of the Original
Documentation.
17. Liquidated Damages for Failure to Deliver. The Company understands
that a delay beyond the deadline for delivery, specified in Paragraph 16, could
result in economic loss to the Purchaser. As compensation to the Purchaser for
such loss, the Company agrees to pay late payments to the Purchaser for the late
issuance of shares issuable at conversion or exercise in accordance with the
following schedule (where "No.
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Business Days Late" is defined as the number of business days beyond three
business days after receipt by the Company of the original documentation):
No. Business Days Late Late Payment for Each $10,000 of
---------------------- original investment
Being Converted
---------------
3 $50.00
4 $100.00
5 $150.00
6 $200.00
7 $250.00
8 $300.00
9 $350.00
10 $400.00
(greater than) 10 $400.00 + $100.00 for each Business
Day Late Beyond 10 Days
The Company shall make any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit a
Purchaser's right to actual damages for the Company's failure to issue and
deliver the Conversion Shares and the Warrant Shares to the Purchaser.
Furthermore, in addition to any other remedy which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of Conversion Shares or Warrant Shares within seven business days after the date
on which the Company has received the Original Documentation, the Purchaser will
be entitled to elect to be deemed to be treated as not having exercised the
relevant Notice of Conversion or Notice of Exercise by delivering a notice to
such effect to the Company whereupon the Company and the Purchaser shall each be
restored to their respective positions immediately prior to such Notice of
Conversion or Notice of Exercise; provided that no such election shall
constitute waiver of any right or remedy Purchaser may have and the Company
shall still be obligated notwithstanding any such election to make penalty
payments hereunder and for any actual damages.
18. Non-delivery of the Shares. If, within ____ business days of the
date after receipt by the Company of the Original Documentation, the Company
shall fail to (i) issue the Conversion Shares or the Warrant Shares, and (ii)
deliver to the Purchaser the
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Conversion Shares or the Warrant Shares, for any reason other than failure by
the Purchaser to comply with its obligations hereunder, then the Company shall:
(a) hold the Purchaser harmless against any loss, claim or
damage arising from or as a result of such failure by the Company (including,
without limitation, any such loss, claim or damage resulting from an obligation
to resell the Conversion Shares or the Warrant Shares); and
(b) reimburse the Purchaser for all of its out-of-pocket
expenses reasonably incurred, including fees and disbursements of its counsel,
incurred by the Purchaser in connection with this Agreement and the transactions
contemplated herein; provided however, that the Company shall not have further
liability to the Purchaser except as provided for in this Section 18.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer(s) of each party hereto as of the date
first above written.
Purchaser:
-------------------------------
Name:
Title:
RomTech, Inc.
------------------------------------
Name:
Title: Chief Executive Officer
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EXHIBIT A
CERTIFICATE OF DESIGNATION
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EXHIBIT B
WARRANT AGREEMENT
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EXHIBIT C
CLOSING INSTRUCTIONS
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
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<PAGE>
EXHIBIT E
FORM OF LEGAL OPINION
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<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of this ____ day of April, 1997,
between ROMTECH, INC., a Pennsylvania corporation (the "Company"), and
_____________________________, a ___________________________( the "Holder").
W I T NE 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) "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 market or 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 market or 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.
(b) "Common Stock" shall mean the common
stock of the Company, without par value.
(c) "Effective Date" shall mean April ,
1997.
(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.
(e) "Initial Warrant Exercise Date" shall
mean, subject to the limitation set forth herein, the date that is six (6)
months after the Effective Date. Notwithstanding
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the forgoing, this Warrant shall not be exercisable until the Average Quoted
Price of the Common Stock has reached $5.66 at any time beginning on the Initial
Warrant Exercise Date and before the Warrant Expiration Date.
(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 $3.94,
subject to modification and adjustment as provided in Section 8, 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) "Warrant Certificate" shall mean a
certificate representing each of the Warrants substantially in the form annexed
hereto as Exhibit A.
(j) "Warrant Expiration Date" shall mean,
5:00 p.m. (Eastern Standard Time) on October , 2000 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) Each Warrant shall initially entitle the
Registered Holder of the Warrant Certificate representing such Warrants 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.
(b) Upon execution of this Agreement, a
Warrant Certificate 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.
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<PAGE>
(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.
SECTION 4. Exercise.
(a) (1) Warrants in denominations of one or
whole number multiples thereof may, subject to the limitations set forth in
Section 1(e), 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
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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.
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,
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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, 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.
(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 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.
5
<PAGE>
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
OB = before the new issue 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
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
6
<PAGE>
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.
(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
7
<PAGE>
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.
(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
8
<PAGE>
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.
(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
9
<PAGE>
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 Vice 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 of shares of Common
Stock pursuant to the exercise of options to purchase Common Stock granted to
employees of the Company pursuant to the Company's Amended and Restated 1995
Stock Option Plan (D) 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.
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 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,
10
<PAGE>
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.
Section 15. Registration Rights. The Company and the
Registered Holder and its permitted transferees acknowledge and agree that 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.
11
<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:_________________________________
HOLDER:
By:____________________________________
Name:__________________________________
Title:_________________________________
12
<PAGE>
EXHIBIT A
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, IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, IS AVAILABLE.
NO. _____ VOID AFTER October , 2000
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 October , 1997 and prior
to the Expiration Date (as such term is defined in the Warrant Agreement),
subject to the limitation that the Average Quoted Price (as such term is defined
in the Warrant Agreement) of Company's Common Stock shall at any time beginning
on October , 1997 and ending on Expiration Date have reached $5.66, 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 the Purchase Price (as such term is defined
in the Warrant Agreement), in lawful money of the United States of America in
cash or by check made payable to the Company.
13
<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 April , 1997, by and between the Company and _____________________.
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 October , 2000. 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.
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
14
<PAGE>
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: April __, 1997
ROM TECH, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
15
<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
16
<PAGE>
ASSIGNMENT
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.
17
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April __,
1997 by and among RomTech Inc., a Delaware corporation, with headquarters
located at 2000 Cabot Boulevard, Suite 110, Langhorne, Pennsylvania 19047(the
"Company"), and the undersigned parties (together with affiliates, the "Initial
Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors Class
Three Preferred Stock (the "Preferred Stock") that is convertible into shares
(collectively, the "Conversion Shares") of the Company's common stock (the
"Common Stock") and Warrants (the "Warrants") that are exercisable for shares of
Common Stock (the "Warrant Shares"),all upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designation with
respect to the Preferred Stock or the Warrants, as applicable; and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
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<PAGE>
(i) "Investors" means the Initial Investors and any
transferees or assignees who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means the Conversion Shares and
the Warrant Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "Registration Statement" means a registration statement
of the Company under the 1933 Act.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall, within 20 days
following the Closing Date (but in no event later than the date on which it
files a registration statement with respect to the shares of Common Stock
issuable upon conversion of the Company's Class Two Convertible Preferred Stock)
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not
then available, on such form of Registration Statement as is then available to
effect a registration of the Registrable Securities, subject to the consent of
the Initial Investors (as determined pursuant to Section l0 hereof), which
consent will not be unreasonably withheld) covering the resale of the
Registrable Securities, which Registration Statement, to the extent allowable
under the 1933 Act and the Rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Preferred Stock and/or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Company shall use its best efforts to cause such registration to become and
remain effective (including the taking of such steps as are necessary to obtain
the removal of any stop orders); provided, that the Investors shall furnish the
Company with such appropriate information in connection therewith as the Company
shall reasonably request in writing. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
-2-
<PAGE>
effectiveness thereof) shall be provided to (and subject to the approval of) the
Initial Investors and its counsel prior to its filing or other submission. The
number of shares of Common Stock initially included in such Registration
Statement shall be no less than __________ shares of Common Stock that may be
issuable upon the conversion of the Preferred Stock and/or exercise of the
Warrants issued on the Closing Date. The Company further undertakes to take all
steps necessary to ensure that a Registration Statement is, or Registration
Statements are, effective at all times during the Registration Period (as
defined below) with respect to all Registrable Securities and the resale
thereof.
(b) Certain Damages. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement within 90 days following the
Closing Date. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within 90 days following the Closing Date
(other than by reason of any act or failure to act in a timely manner by the
Investors or Investors' counsel, or if extended due to any review and revisions
contemplated under Section 3(a) and (g)), then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(b) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to Investor an
amount equal to the aggregate original principal amount of the investment by
such Investor (the "Aggregate Share Price") multiplied by .01 if the
Registration Statement is not declared effective by the 91st day after the
Closing Date; and the Aggregate Share Price shall be multipled by two hundredths
(.02) times the sum of the number of 30 day periods starting on the 121st day
after the Closing Date and prior to the date the Registration Statement is
declared effective by the SEC, provided, however, that there shall be excluded
from such period any delays which are solely attributable to changes required by
the Investors, or their counsel, in the Registration Statement with respect to
information relating to the Investors, or the form of the Registration
Statement, including, without limitation, changes to the plan of distribution,
or to the failure of the Investors to conduct their review of the Registration
Statement pursuant to Section 2(a) above in a reasonably prompt manner. Such
amounts shall be paid in cash or, at each Investor's option (but subject to the
limitations contained in Section 2(b)(v) of the Certificate of Designation), may
be convertible into Common Stock at the "Conversion Price" (as defined in the
Certificate of Designation). Any shares of Common Stock issued upon conversion
of such amounts shall be Registrable Securities. If the Investor desires to
convert the amounts due hereunder into Registrable Securities the Investor shall
so notify the Company in writing within two (2) business days of the date on
which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth in the Certificate of
Designation), beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within ten (10) days after the end of each
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period that gives rise to such obligation. Upon agreement of both the Purchaser
and the Company, any liquidated damages due under the provisions of this
subparagraph may be paid in shares of Common Stock, registered as if such stock
were Conversion Shares, and valued at the Conversion Price, as such term is
defined in Section 2(b)(iii) of the Certificate of Designation. Notwithstanding
the foregoing, in no event shall any penalties be payable hereunder exceed the
aggregate amount of the net proceeds to the Company from the sale of the
Preferred Stock and Warrants.
(c) Eligibility for Form S-3. The Company represents and
warrants that, as of the date hereof, it meets the requirements for the use of
Form S-3 for registration of the sale by the Initial Investors and any other
Investor of the Registrable Securities and the Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall within 20 days following the Closing
Date prepare and file promptly with SEC, a Registration Statement with respect
to the number of Registrable Securities provided in Section 2(a), and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective within 90 days following the Closing
Date, and keep the Registration Statement effective pursuant to Rule 415 at all
times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and no shares of Preferred Stock are
outstanding and (ii) the date on which all of the Registrable Securities (in the
opinion of counsel to the Initial Investors) may be immediately sold without
registration (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein and all documents incorporated by reference therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. The Company shall furnish to the Investor copies of reasonably
complete drafts of all such documents proposed to be filed (including exhibits,
if any), and any such Investor shall have the opportunity to object, within five
(5) business days, to any information pertaining solely to such Investor that is
contained therein and the company will make the corrections reasonably requested
by such Investor with respect to such information prior to filing any such
Registration Statement or amendment. Any period of review and revision resulting
from such review shall be added to the time in which the Registration Statement
is to be filed and no penalty shall be assessed with respect to such period.
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(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period. Without limiting any of
the Company's obligations under this Agreement, in the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Preferred Stock and/or exercise of the Warrants, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within thirty (30) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof.
(c) The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each material item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion thereof that contains information for which
the Company has sought confidential treatment), and (ii) such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this
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Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden, or (e)
make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders. The Company shall promptly notify each Investor
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
(f) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
(g) The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects. Any period of review and revision resulting from such review
shall be added to the time in which registration is required to be filed and
effective, as appropriate, and no penalty shall be assessed with respect to such
period.
(h) The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed
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necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is determined to be necessary by the Investors and the Company
to avoid or correct a misstatement or omission in any Registration Statement,
(b) the release of such Records is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(i). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(i) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(j) The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by the Registration Statement to be
listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of
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such exchange, or (ii) secure the designation and quotation, of all the
Registrable Securities covered by the Registration Statement on the NASDAQ-NMS
or, if not eligible for the NASDAQ-NMS on the NASDAQ Small Cap, if the listing
of such Registrable Securities is then permitted under the applicable NASDAQ
Market, and, without limiting the generality of the foregoing, to arrange for or
maintain at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
(k) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(l) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be sold pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and-registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request.
(m) The Company shall use its best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable each holder thereof to consummate disposition of Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company
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in connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(e),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(d) Without limiting an Investor's rights under Section 2(a),
no Investor may participate in any underwritten distribution hereunder unless
such Investor (i) agrees to sell such Investor's Registrable Securities on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions
and any expenses in excess of those payable by the Company pursuant to Section 5
below.
(e) Each Investor whose Registrable Securities are included in
a Registration Statement understands that the 1933 Act may require delivery of a
prospectus relating thereto in connection with any sale thereof pursuant to such
Registration Statement and each such Investor shall use its reasonable best
efforts to comply with the applicable prospectus delivery requirements of the
1933 Act in connection with any such sale.
(f) Each Investor agrees to notify the Company promptly, but
in any event within seventy-two (72) hours after the date on which all
Registrable Securities owned by such Investor have been sold by such Investor,
if such date is prior to the Termination Date, so that the Company may comply
with its obligation to terminate the Registration Statement in accordance with
Item 512 of Regulation SK or Regulation SB, as the case may be.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, shall be borne by the
Company.
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6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who is a seller of
Registrable Securities under the Registration Statement, and (ii) the directors,
officers, partners, employees, agents and each person who controls any such
Investor within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), if any, (each, an "Indemnified Person"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(c) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, preliminary prospectus or final prospectus, or any amendment thereof
or supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or
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supplemented, if such corrected prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder
within the meaning of the 1933 Act or the 1934 Act (collectively, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement, preliminary prospectus or final prospectus, or any
amendment or supplement thereto; and subject to Section 6(c) such Investor
will-reimburse any legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this
Agreement (including this Section 6(b) and Section 7) for only that amount as
does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in
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respect thereof is to made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by Investors holding a majority-in-interest of the Registrable
Securities included in the Registration Statement to which the Claim relates
(with the approval of the Initial Investor if it holds Registrable Securities
included in such Registration Statement), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 1 l(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the amount of proceeds
received by such seller from the sale of such Registrable Securities.
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8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the 1933
Act and the 1934 Act so long as the Company remains subject to such requirements
and the filing of such reports and other documents is required for the sale of
the Registrable Securities pursuant to Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of an Investor hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Preferred Stock and/or Warrants, or Registrable Securities if (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
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10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, and
Investors who hold at least seventy-five (75%) percent of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid,
(i) if to the Company:
Rom Tech Inc.
2000 Cabot Boulevard, Suite 110
Langhorne, PA 19047
Attention: Gerald W. Klein
Telephone: (215) 750-6606
Telecopy: (215) 750-3722
with copy to:
McCausland, Keen & Buckman
259 Radnor-Chester Road, Suite 160
Radnor, PA 19087
Attention: Ellen Pulver Flatt, Esquire
Telephone: (610) 341-1000
Telecopy: (610) 341-1099
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if to the Initial Investors as set forth below their signatures appended hereto,
or at such other address as each such party furnishes by notice given in
accordance with this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by certified mail, four days after
deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal Courts located
in New York County, New York with respect to any dispute arising under this
Agreement or the transactions contemplated hereby.
(e) This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
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(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(j) All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Investors holding a
majority of the Registrable Securities (determined as if all shares of Preferred
Stock and Warrants then outstanding had been converted or exercised,
respectively, into Registrable Securities).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
RomTech Inc.
By:_________________________
Name:
Its:
INITIAL INVESTORS:
By:_________________________
Name:_______________________
Its:_________________________
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