PLACEMENT AGENT AGREEMENT
Offering of 8% Senior Convertible Notes Due 1999
February 15, 1996
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Inc. and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Limited
c/o ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Limited
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Dear Sirs:
1. INTRODUCTION
FiberChem, Inc., a Delaware corporation (the "Company"), has
duly authorized the issuance and sale of up to $4,000,000 of its 8% Senior
Convertible Notes Due 1999 (the "Notes").
The Company has prepared and delivered a preliminary offering
memorandum dated December 6, 1996 (the "Preliminary Offering Memorandum"),
describing, among other things, the Notes, and providing material information
about the Company and the terms of the offering (the "Offering"). The Company
has prepared and delivered to you a final offering memorandum dated February 2,
1996 (together with any amendments or supplements thereto, the "Final Offering
Memorandum").
The Company intends to offer and sell the Notes to Purchasers
who are not "U.S. persons" as defined in Regulation S ("Regulation S") under the
United States Securities Act of 1933, as amended (the "Securities Act"),
pursuant to subscription agreements (the "Subscription Agreements") to be
entered into by the Company and each purchaser (each a "Purchaser," and
together the "Purchasers"), in reliance upon and in conformity with an exemption
from the registration requirements of the Securities Act pursuant to Regulation
S.
The Company has requested you to assist the Company as
placement agent in the placement of the Notes, and you have indicated your
willingness to do so, subject to the satisfactory completion of such
investigation and inquiry into the Company's business as you deem appropriate
under the circumstances and subject to the conditions set forth below.
2. APPOINTMENT OF PLACEMENT AGENT;
PLACEMENT OF NOTES
(a) The Company hereby appoints ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Inc. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Limited (together, the "Placement Agent") as
placement agent in connection with the placement of all of the Notes for the
period (the "Offering Period") terminating at the close of business on February
20, 1996, unless you and the Company agree in writing that the Offering Period
shall be further extended (the "Offering Termination Date"). Subject to the
performance in all material respects by the Company of its obligations to be
performed, and to the completeness and accuracy in all material respects of all
of the representations and warranties of the Company, you hereby accept such
agency and agree on the terms and conditions set forth in this Agreement to use
your best efforts during the Offering Period to find qualified Purchasers for
all of the Notes. Your agency hereunder, which is coupled with an interest and
therefore is not terminable by the Company without your permission, shall
continue until the Offering Termination Date, except that, in any event, your
agency shall terminate on the date of the initial issuance of the Notes (the
"Closing Date").
(b) In the event the Offering is commenced and no Notes
shall have been subscribed for prior to the Offering Termination Date, your
agency and this Agreement shall terminate without obligation on your part or on
the part of the Company except as provided in SECTION 5 and except that the
indemnification and contribution provided for in SECTION 8 shall continue after
termination of this Agreement.
(c) The Placement Agent shall not, in fulfilling its
obligations, act as underwriter for the Notes, and is in no way obligated,
directly or indirectly, to advance its own funds to purchase any Notes.
(d) Notwithstanding anything herein to the contrary, the
Company shall not be obligated to sell any of the Notes unless the Placement
Agent shall have found qualified subscribers for such Notes.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with, the
Placement Agent that:
(a) The Final Offering Memorandum, as of its date and at
the Closing Date did not and will not as of such dates, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated or necessary to make the statements, in light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
relating to matters of foreign law or made in reliance upon and in conformity
with information furnished in writing to the Company by the Placement Agent
expressly for use in the Final Offering Memorandum.
(b) Neither the Company or any affiliate of the Company
nor anyone acting on the behalf of the Company or any such affiliate, other than
the Placement Agent, has, directly or indirectly, offered, sold or attempted to
offer, sell or dispose of any of the Notes, or solicited any offer to buy any
Notes from, or otherwise approached or negotiated with respect to the Notes
with, any person, except to or through ▇▇▇▇▇▇ ▇▇▇▇▇▇.
(c) The execution, delivery and performance of this
Agreement and the Placement Agent Warrants (as defined in SECTION 5(c)) by the
Company (i) has been duly authorized by all requisite corporate action of the
Company, and (ii) will not violate (A) the Certificate of Incorporation or By-
laws of the Company or (B) any law applicable to the Company or any of its
subsidiaries or any rule, regulation or order of any court or governmental
agency or body having jurisdiction over the Company or any of its subsidiaries
or (C) any provision of any indenture, mortgage, agreement, contract or other
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its subsidiaries are subject, or
be in conflict with, or result in a breach of or constitute (upon notice or
lapse of time or both) a default under any such indenture, mortgage, agreement,
contract or other instrument or result in the creation or imposition of any
claim, lien, security interest, mortgage, pledge, charge or other encumbrance of
any nature whatsoever upon any of the properties or assets of the Company or any
of its subsidiaries (except for such violation or conflict described in this
Section which would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole). Upon execution and delivery by the Company,
this Agreement will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law and except as rights to indemnity or contribution may be
limited under applicable law.
(d) Upon delivery to the Placement Agent, the Placement
Agent Warrants (as defined in SECTION 5(c)) will be duly issued and will
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or affecting the enforcement of creditors'
rights generally and by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law. The shares of
common Stock of the Company (the "Common Stock") issuable upon exercise of any
of the Placement Agent Warrants (the "Warrant Shares") have been duly and
validly authorized and reserved for issuance. The Warrant Shares, as and when
issued and delivered in accordance with the terms of the Placement Agent
Warrants, and upon receipt by the Company of the exercise price, will be duly
and validly issued and outstanding, fully paid and non-assessable, and will not
be subject to any pre-emptive or similar rights.
4. CERTAIN AGREEMENTS OF THE COMPANY
The Company hereby agrees with the Placement Agent that:
(a) During the Offering Period, neither the Company or
any affiliate of the Company nor anyone acting on behalf of the Company or any
such affiliate, other than the Placement Agent and any agents which the
Placement Agent may appoint with reasonable care, shall, directly or indirectly,
offer or sell, or attempt to offer, sell or dispose of, any of the Notes, or
solicit any offer to buy, or otherwise approach or negotiate in respect of, any
of the Notes.
(b) If any event shall occur as a result of which it is
necessary, in the opinion of the Placement Agent, to amend or supplement the
Final Offering Memorandum in order to correct any untrue statement of a material
fact or to state a material fact required to be stated or necessary to make the
statements in the Final Offering Memorandum, in the light of the circumstances
under which they were made, not misleading, the Company shall forthwith prepare
and furnish to the Placement Agent a reasonable number of copies of such
amendment of or supplement to the Final Offering Memorandum (in form and
substance satisfactory to the Placement Agent), so that, as so amended or
supplemented, the Final Offering Memorandum will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated or
necessary to make the statements, in the light of the circumstances under which
they were made, not misleading. The Company will not at any time amend or
supplement the Final Offering Memorandum (i) prior to having furnished the
Placement Agent and its counsel with a copy of the proposed form of the
amendment or supplement and giving the Placement Agent and its counsel a
reasonable opportunity to review and comment upon the same or (ii) in a manner
to which the Placement Agent or its counsel shall reasonably object.
(c) The Company shall furnish such information, execute
such instruments and take such action, if any, as may be required to effect the
placement of the Notes under the securities laws of each jurisdiction in which
the Notes are offered for sale or sold; PROVIDED, HOWEVER, that the Company
shall not be required to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to general or
unlimited service of process in any jurisdiction where it is not now so subject.
(d) The Company shall furnish or make available to the
Placement Agent or its counsel such additional documents and information
regarding the Company and its affairs as the Placement Agent may from time to
time reasonably request, including any and all documentation reasonably
requested in connection with its due diligence efforts regarding information in
the Final Offering Memorandum and in order to evidence the accuracy or
completeness of any of the conditions contained in this Agreement; and all
actions taken by the Company to authorize the issuance and sale of the Notes and
to reserve for issuance the Warrant Shares and the shares of Common Stock
issuable upon conversion of the Notes shall be reasonably satisfactory in form
and substance to the Placement Agent.
(e) The Company shall, at all times upon reasonable
request from the date hereof through the Closing Date and prior to the
acceptance of each subscription, (i) make available to each Purchaser or its
advisers, or both, such information (in addition to that contained in the Final
Offering Memorandum) concerning the Offering, the Company and any other relevant
matters as it possesses or can acquire without unreasonable effort or expense,
and (ii) provide each Purchaser or its
advisers, or both, the opportunity to ask questions of, and receive answers
from, the Company with respect to such matters.
(f) The Company shall not offer or sell any securities
of the same class as the Notes until a period of six (6) months has elapsed from
the Closing Date of the Offering, unless the Company shall have provided the
Placement Agent with a satisfactory opinion from the Company's legal counsel to
the effect that the proposed offer or sale will not result in any violation of
the Securities Act, any state securities or blue sky laws, and any rules or
regulations promulgated thereunder.
(g) The Company will not at any time issue a press
release to announce the Offering of the Notes (i) without the prior consent of
the Placement Agent, (ii) prior to having furnished the Placement Agent with a
copy of the proposed form of the press release and giving the Placement Agent a
reasonable opportunity to review and comment upon the same or (iii) in a manner
to which the Placement Agent or its counsel shall reasonably object, unless the
Company is required to do so by applicable law.
5. COMPENSATION; PAYMENT OF EXPENSES
(a) In consideration of the Placement Agent's services
in acting as exclusive placement agent for the Notes, the Company hereby agrees
to pay to the Placement Agent a fee (the "Placement Agent Fee") in an amount
equal to seven percent (7%) of the aggregate gross cash proceeds of the sale of
the Notes, on the Closing Date by wire transfer of immediately available funds
to an account to be designated by the Placement Agent at least two (2) business
days prior to the Closing Date.
(b) In exchange for the Placement Agent's services in
connection with the Offering, the Company shall reimburse the Placement Agent
for all of the reasonable out-of-pocket expenses incurred by the Placement Agent
in connection with the Offering, including the reasonable fees, disbursements
and expenses of the Placement Agent's legal counsel. Such expense reimbursement
is not contingent upon the successful completion of the Offering, and shall be
payable as billed by the Placement Agent from time to time prior to the Closing
Date. Any outstanding sum due for out-of-pocket expenses shall be payable on
the Closing Date by wire transfer of immediately available funds to an account
to be designated by the Placement Agent at least two (2) business days prior to
the Closing Date. The Company and the Placement Agent acknowledge that the
Company has paid the Placement Agent an aggregate of $14,113.17 with respect to
out-of-pocket expenses billed to the Company by the Placement Agent prior to the
Closing Date.
(c) For a price of one hundred United States dollars
($100.00), the Company hereby agrees to issue to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Limited
("RPC Ltd."), concurrently with the successful completion and closing of the
Offering, warrants to purchase Common Stock (the "Placement Agent Warrants")
covering a number of shares of Common Stock equal to ten percent (10%) of the
number of shares into which the Notes sold in the Offering are convertible,
exercisable at $0.80 per share; PROVIDED, HOWEVER, that both the number of
shares and the exercise price shall be
subject to adjustment on the first anniversary of the Closing Date in the event
that the average closing bid price during the thirty business days immediately
prior to the first anniversary of the Closing Date is less than the Conversion
Price (as defined in the Note Agreement of even date herewith between the
Company and the registered holders of the Notes). In such event, the exercise
price of the Placement Agent Warrants shall be adjusted to a price equal to a
price ten percent (10%) less than the average closing bid price for such thirty
day period, and the number of shares shall be adjusted based on the number of
shares of Common Stock into which the Notes are then convertible based on the
adjusted Conversion Price; PROVIDED, HOWEVER, that in no event shall the number
of shares issuable upon exercise of the Placement Agent Warrants be decreased
and in no event shall the exercise price of the Placement Agent Warrants be
increased as a result of such adjustment. All shares of Common Stock issuable
upon the exercise of the Placement Agent Warrants (the "Warrant Shares") will be
issuable out of the authorised Common Stock. In the event that the holder of
the Placement Agent Warrants provides notice of election to exercise and the
Company does not have sufficient authorized but unissued Common Stock on that
date to allow for exercise of all of the Placement Agent Warrants then
exercised, the Company shall (i) issue such shares of Common Stock as it has
available to the holder of the Placement Agent Warrants so exercised, and (ii)
with respect to any remaining Placement Agent Warrants then exercised and for
which shares of Common Stock are not available for issuance, make a cash payment
to the holder of the Placement Agent Warrants in an amount equal to the middle
price between closing bid and offer prices of the Common Stock on the National
Association of Securities Dealers Automated Quotation System - The SmallCap
Market ("Nasdaq") or any other national securities exchange or other securities
listing service on which the shares of Common Stock of the Company are then
listed (a "Securities Exchange") on the trading day immediately prior to the
date on which the notice of election to exercise was given, or if the Common
Stock is not then listed on Nasdaq or a Securities Exchange the fair market
value as determined by the Board of Directors of the Company on such date, less
the aggregate exercise price of the Placement Agent Warrants exercised, in lieu
of issuing such shares of Common Stock. The Placement Agent Warrants will have
a term of five (5) years, will provide for piggy-back registration rights and
may be exercised as to all or any lesser number of shares of Common Stock
covered thereby commencing six months after the Closing Date. The Placement
Agent Warrants shall be non-transferable except to (i) RPC Inc. or RPC Ltd.;
(ii) successors to RPC Inc.; (iii) purchasers of substantially all of the assets
of RPC Inc. or RPC Ltd.; (iv) officers, directors, employees, or agents of RPC
Inc. or RPC Ltd.; (v) shareholders of RPC Inc. or RPC Ltd. or the shareholders
or partners of their respective transferees in the event of a dissolution or
liquidation of RPC Inc. or RPC Ltd.; or (vi) the respective nominees of any of
the foregoing parties. The Placement Agent Warrants and the Warrant Shares
shall be issued pursuant to the exemption from registration under the Securities
Act provided by Regulation S. RPC Ltd. and any and all transferees of the
Placement Agent Warrants and the Warrant Shares pursuant to clauses (i) through
(vi) of this Section shall comply, and any and all such permitted transfers of
Placement Agent Warrants and Warrant Shares shall be made in compliance with the
terms and provisions of the Securities Act, including Regulation S, and all
other applicable securities laws of all other jurisdictions in which the
Placement Agent Warrants and the Warrant Shares are issued and transferred, and
any transfer not in such compliance shall be null and void and shall be given no
effect.
(d) The Company and the Placement Agent acknowledge
that the Company shall pay Fladgate ▇▇▇▇▇▇▇ a one percent (1%) fee relating to
the Offering.
(e) Whether or not the transactions contemplated hereby
and by the Subscription Agreements shall be consummated, the Company shall pay
all costs and expenses in connection with (i) the preparation and reproduction
of the Preliminary Offering Memorandum and the Final Offering Memorandum, the
certificates representing the Warrant Shares, the Notes and the shares of Common
Stock issuable upon conversion of the Notes, (ii) the reproduction of the
Subscription Agreements, (iii) the Company's performance of and compliance with
all agreements and conditions contained herein and in the Placement Agent
Warrants, the Subscription Agreements, the Note Agreement, the certificates
representing the Warrant Shares and shares of Common Stock issuable upon
conversion of the Notes on its part to be performed or complied with, (iv) all
expenses incident to the issuance and delivery of the Warrant Shares, the Notes
and the shares of Common Stock issuable upon conversion of the Notes, (v) the
fees, disbursements and expenses of the Company's legal counsel and accountants
and the (vi) the fees, disbursements and expenses of Interallianz Bank AG's
legal counsel.
6. CONDITIONS OF THE PLACEMENT AGENT'S OBLIGATION
The Placement Agent's obligation to place the Notes is
subject to the accuracy of the representations and warranties of the Company in
this Agreement, the Subscription Agreements and the Note Agreement, to the
performance by the Company of its obligations under each of those agreements,
and to the following further conditions:
(a) After the expiration of the applicable Restricted
Period, the Warrant Shares shall be tradeable as part of the Company's Common
Stock on the National Association of Securities Dealers Automated Quotation
System - The SmallCap Market or any other national securities exchange, share
quotation system or listing service on which the shares of Common Stock of the
Company are listed or admitted to trading at any time subsequent to the Closing
Date.
(b) The conditions to the Purchasers' obligations as
set forth in the Subscription Agreements shall have been satisfied in all
material respects.
(c) All documents incident to this Agreement, the Note
Agreement and the Subscription Agreements shall be reasonably satisfactory in
form and substance to the Placement Agent and its counsel, and the Placement
Agent and its counsel shall have received such information, certificates and
documents as they may reasonably request.
7. MANNER OF OFFERS AND SALES OF THE NOTES
(a) The offers and sales of the Notes are to be
effected pursuant to Regulation S. The Company and the Placement Agent have
established the following procedures in connection with the offer, sale and
resale of the Notes:
(i) each offer and sale of the Notes shall be made only
in an "offshore transaction" (as defined in Regulation S) and to
Purchasers who are not "U.S. persons" (as defined in Regulation
S);
(ii) no offer or sale of any of the Notes shall be made
in the United States or to, or for the account or benefit of, any
"U.S. person";
(iii) no "directed selling efforts" (as defined in
Regulation S) in respect of the Notes shall be made in or directed
toward the United States;
(iv) "offering restrictions" (as defined in Regulation
S) in respect of the Notes shall be implemented;
(v) each Purchaser of the Notes shall be furnished with
the Final Offering Memorandum prepared by the Company, which
describes, among other things, (A) the Notes, (B) such summary
financial and business information concerning the Company as is
considered appropriate, and (C) the restrictions on resale of the
Notes;
(vi) no Preliminary Offering Memorandum or Final
Offering Memorandum shall be delivered to any "U.S. person"; and
(vii) each Purchaser of the Notes shall be required to
execute and deliver a Subscription Agreement which shall contain
restrictions on resale of the Notes otherwise than in compliance
with the Securities Act and the rules and regulations promulgated
by the Securities and Exchange Commission thereunder.
(b) The Placement Agent hereby represents, warrants and
covenants with the Company that the Placement Agent, its affiliates, and any
person acting on behalf of, or as agent of, any of the foregoing, shall, whether
as principal or agent, (i) comply with the procedures set forth in SECTION 7(a)
hereof, (ii) offer and sell the Notes to the Purchasers only in an "off-shore
transaction", (iii) not engage with respect to the Notes in any "directed
selling efforts" in or directed toward the United States, (iv) comply with all
"offering restrictions" in respect of the Notes, (v) not deliver any Preliminary
Offering Memorandum or Final Offering Memorandum to any "U.S. person", (vi) not
make any offers or sales of any of the Notes or any interest therein in the
United States or to, or for the account or benefit of, any "U.S. person", (vii)
comply with all laws and regulations of those jurisdictions in which the Notes
are offered or sold which are applicable to the offer and sale of the Notes, and
(viii) on or prior to the Closing Date, send a written confirmation or other
notice to each person who is acting on behalf of the Placement Agent to the
effect that such person is subject to the same restrictions on offers and sales
that apply to the Placement Agent.
(c) The Company hereby represents, warrants and
covenants with the Placement Agent that the Company, its affiliates, and any
person acting on behalf of, or as agent of, any of the foregoing, shall, whether
as principal or agent, (i) comply with the procedures set forth in
SECTION 7(a) hereof, (ii) offer and sell the Notes to the Purchasers only in an
"offshore transaction" (as defined in Regulation S), (iii) not engage with
respect to the Notes in any "directed selling efforts" (as defined in Regulation
S) in or directed toward the United States, (iv) comply with all "offering
restrictions" in respect of the Notes, (v) not deliver any Preliminary Offering
Memorandum or the Final Offering Memorandum to any "U.S. person", (vi) not make
any offers or sales of any of the Notes or any interest therein in the United
States or to, or for the account or benefit of, any "U.S. person", and (vii) not
make any sales of any of the Notes or any interest therein to any person other
than the Purchasers; PROVIDED, HOWEVER, that insofar as this representation and
warranty involves any broker-dealer participating in the Offering as placement
agent, any affiliate of such broker-dealer or any officer, director, employee or
agent of such broker-dealer, such representation is made by the Company solely
on the basis of and in reliance upon the representations and warranties of such
broker-dealer.
8. INDEMNIFICATION AND CONTRIBUTION
(a) The Company agrees to defend, indemnify, and hold
the RPC Inc., RPC Ltd. and their respective officers, directors, agents,
employees, and controlling persons (each in the context of this Section an
"Indemnified Party") harmless from and against any losses, claim, damages, or
liabilities (including, without limitation, court costs and reasonable
attorneys' fees and expenses) to which any Indemnified Party may become subject
insofar as the same arises from an action which alleges or is based upon (i) any
alleged untrue statement of a material fact in, or omission of a material fact
necessary to make, communications by the Company made in connection with the
Offering (other than with respect to any written information furnished by the
Placement Agent for express inclusion in any such communications), in light of
the circumstances in which they were made, not misleading; or (ii) any other
violation of applicable securities or other laws, rules and regulations, by the
Company or its officers, directors, agents, employees, and controlling persons,
irrespective of the role or concurrent negligence of such Indemnified Party
(except as set forth in the proviso below); or (iii) any claim asserted by
Fladgate ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or any other person or company
affiliated or associated with any of the foregoing parties; or (vi) any person
or company claiming that such party is entitled to a broker's fee, introduction
fee, finder's fee or any other commission or payment of any nature whatsoever in
connection with the Note offering. The Company agrees to reimburse each
Indemnified Party for any legal or other expenses reasonably incurred by them in
connection with investigating, settling, or defending any action or claim in
connection therewith (including, without limitation, court costs and reasonable
attorneys' fees); PROVIDED, HOWEVER, that the Company shall not be liable to so
indemnify any Indemnified Party in any such case to the extent that any such
loss, claim, damage, or liability is found in a final judgment of a court of
competent jurisdiction to have resulted from an Indemnified Party's gross
negligence or bad faith or breach of the terms of this Agreement.
(b) The Placement Agent agrees to defend, indemnify and
hold harmless the Company and its officers, directors, agents, employees and
controlling persons (each in the context of this Section an "Indemnified Party")
from and against any losses, claims, damages or liabilities (including, without
limitation, court costs and reasonable attorneys' fees and expenses) to which
any Indemnified Party may become subject insofar as the same arises from an
action which alleges or is based upon, related to or arises in connection with
(i) any alleged untrue statement of a material fact in, or omission of a
material fact necessary to make, any written information furnished by the
Placement Agent
for express inclusion in any communications by the Company, in light of the
circumstances, not misleading and (ii) any breach by the Placement Agent or any
Associated Person and to reimburse each Indemnified Party for any legal or other
expenses reasonably incurred by them in connection with investigating, settling
or defending any action or claim in connection therewith (including without
limitation, court costs and reasonable attorneys' fees); PROVIDED, HOWEVER, that
the Placement Agent shall not be liable to so indemnify an Indemnified Party in
any such case to the extent that any such loss, claim, damage or liability is
found in a final judgment of a court of competent jurisdiction to have resulted
from an Indemnified Party's gross negligence, bad faith or breach of the terms
of this Agreement.
(c) With respect to SECTION 8(a) AND (b) above, the
parties agree that an Indemnified Party shall not be deemed to have been grossly
negligent for reasonably relying upon any written untrue statement or alleged
omission of a material fact necessary to make the statements, in light of the
circumstances in which made, not misleading, contained in or omitted from any
information provided by or on behalf of the Indemnitor (as defined in SECTION
8(d)) (including, without limitation of the generality of the foregoing, any
accountant or attorney employed or retained by the Indemnitor). The
indemnification provided in SECTION 8(a) AND (b) above shall extend upon the
same terms and conditions to each person, if any, who may be deemed to control
any Indemnified Party. If for any reason the foregoing indemnification is
unavailable to any Indemnified Party or insufficient to hold such Indemnified
Party harmless, then the Indemnitor shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage, or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnitor on the one hand and the Indemnified Party on
the other hand but also the relative fault of the Indemnitor and the Indemnified
Party, as well as any other relevant equitable considerations. The Indemnitor
agrees to reimburse the Indemnified Party within ten days after presentation of
any statement by the Indemnified Party of all reasonable expenses (including
without limitation of the generality of the foregoing reasonable fees and
expenses of attorneys selected by the Indemnified Party) incurred in connection
with any testimony they or their employees are required to give (in court,
before a regulatory agency, by deposition, or otherwise) in any regulatory or
court proceeding (including depositions), whether or not the Indemnified Party
is a party, and which related directly or indirectly to the proposed Offering.
(d) In the event any action (with respect to which
indemnity or reimbursement (i) from the Company pursuant to the provisions of
SECTION 8(a) or (ii) from the Placement Agent pursuant to the provisions of
SECTION 8(b) (each such party hereinafter referred to as the "Indemnitor"), may
be sought by any indemnified party pursuant to the provisions of SECTION 8(d) OR
(b) (each such party in the context of this SECTION 8(d), an "Indemnified
Party"), shall be brought or threatened against an Indemnified Party, prompt
notice of such action shall be given by such Indemnified Party to the Indemnitor
in writing, together with a copy of all papers served on, or received by, the
Indemnified Party in connection with such action; PROVIDED, HOWEVER, that
failure to give such notice shall not affect the Indemnified Party's rights
under the indemnification provisions of this Section, unless, and only to the
extent that, such failure results in the Indemnitor's forfeiture of substantive
rights or defenses. If such an event occurs, the Indemnitor shall assume the
defense of such action, including the employment of counsel and the payment of
all expenses. Each Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Party unless (a) the employment
thereof has been specifically authorized by the Indemnitor in writing; (b) the
Indemnitor has failed to assume the defense and employ counsel; or (c) the named
parties, or parties threatened to be named, to any such action (including any
impleaded parties or parties threatened to be impleaded) include both the
Indemnified Party and the Indemnitor, and the Indemnified Party has been advised
by such counsel that there may be one or more legal defenses available to them
which are different from or additional to those available to the Indemnitor (in
which cases such Indemnified Party shall have the right to employ their own
counsel and in such cases any reasonable fees and expenses of such counsel shall
be paid by the Indemnitor).
9. TERMINATION OF THIS AGREEMENT
(a) In the event the Company does not perform any
obligation under this Agreement on its part to be performed or any
representation and warranty of the Company hereunder is incomplete or
inaccurate, this Agreement, including all of the Placement Agent's obligations
under this Agreement, may be immediately cancelled by the Placement Agent by
notice to the Company. Any such cancellation shall be without liability of any
party to any other party except that the provisions of SECTIONS 5 AND 8 hereof
shall survive any such cancellation.
(b) In the event that the Placement Agent does not
perform any obligation under this Agreement on its part to be performed or any
representation or warranty of the Placement Agent hereunder is incomplete or
inaccurate in any material respect, this Agreement and all of the Company's
obligations hereunder may be immediately cancelled by the Company by notice to
the Placement Agent. Any such cancellation shall be without liability of any
party to any other party except that the provisions of SECTIONS 5 AND 8 shall
survive any such cancellation.
10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY
All representations, warranties, covenants and agreements
contained in this Agreement, or contained in certificates of officers of the
Company and the Placement Agent, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the Placement
Agent or the Company or any controlling person, director or officer of the
Placement Agent or the Company, and shall survive delivery of the Notes to the
Purchasers, and delivery of the Warrant Shares and the shares of Common Stock
upon conversion of any of the Notes.
11. NOTICES
All communications provided for or permitted in this
Agreement shall be in writing and shall be deemed to have been duly given if
personally delivered, sent by courier or mailed by registered or certified mail,
postage prepaid and return receipt requested, or transmitted by telefax, telex
or telegraph and confirmed by a similar mailed writing, if to the Placement
Agent, addressed to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Limited, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Managing Director, or to such other
address as the Placement Agent may designate in writing to the Company, and, if
to the Company, addressed to the Company, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇▇,
Nevada 89119, United States of America, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or to
such other address as the Company may designate in writing to the Placement
Agent.
12. PARTIES
This Agreement shall inure to the benefit of and be binding
upon the Placement Agent, the Company and their respective successors. Nothing
expressed herein is intended or shall be construed to give any person other than
the persons referred to in the preceding sentence any legal or equitable right,
remedy or claim under or in respect of this Agreement. This Agreement is
intended to be for the sole and exclusive benefit of the parties and their
respective successors and for the benefit of no other person except as otherwise
expressly set forth herein. No Purchaser of Notes from the Company shall be
deemed to be a successor by reason merely of such purchase.
13. MISCELLANEOUS
This Agreement constitutes the entire agreement and
understanding of the parties with respect to the matters and transactions
contemplated in this Agreement and supersedes all prior agreements and
understandings whatsoever relating to such matters and transactions. Neither
this Agreement nor any term may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which shall
together constitute one instrument.
14. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the conflict
of laws provisions of Delaware law.
Very truly yours,
FIBERCHEM, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Title: President & CEO
--------------------
-16-
This Placement Agent
Agreement is confirmed
and accepted as of the date
first above written:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
------------------
Title: Vice President
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ LIMITED
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
-------------------
Title: Director
-17-
SCHEDULE 1
TO THE
PLACEMENT AGENT AGREEMENT
The form of the Placement Agent Warrants is set out on the following pages.
-18-
No.
--------------
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY OTHER FEDERAL OR STATE SECURITIES LAWS. THIS NOTE HAS BEEN ISSUED IN A
MANNER INTENDED TO COMPLY WITH THE CONDITIONS CONTAINED IN REGULATION S
PROMULAGATED UNDER THE ACT. PRIOR TO MARCH 27, 1996, NO OFFER, SALE, TRANSFER,
CONVERSION, PLEDGE OR OTHER DISPOSITION (COLLECTIVELY, A "DISPOSAL") OF THIS
NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE MADE (A)
IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY "U.S. PERSON"
(AS DEFINED IN REGULATION S) UNLESS (i) REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (ii) FIBERCHEM, INC. ("THE ISSUER") RECEIVES
A WRITTEN OPINION OF UNITED STATES LEGAL COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO IT TO THE EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH
REGISTRATION REQUIREMENTS OR (B) OUTSIDE THE UNITED STATES TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY PERSON WHO IS NOT A "U.S. PERSON" UNLESS PRIOR TO
SUCH DISPOSAL (i) THE BENEFICIAL OWNER OF SUCH SHARES AND THE PROPOSED
TRANSFEREE SUBMIT CERTAIN CERTIFICATIONS TO THE ISSUER (FORMS OF WHICH ARE
AVAILABLE FROM THE ISSUER AT ITS PRINCIPAL EXECUTIVE OFFICES AND (ii) THE ISSUER
RECEIVES THE LEGAL OPINION DESCRIBED IN (A)(ii) ABOVE.
U.S. $25,000
FIBERCHEM, INC.
U.S. $4,000,000
8% SENIOR CONVERTIBLE NOTES DUE 1999
FIBERCHEM, INC., a corporation duly organized under the laws of
Delaware (herein called the "Issuer"), for value received hereby promises to pay
to the order of [.] ("Payee") upon surrender hereof the principal sum of
Twenty-Five Thousand United States Dollars (U.S.$25,000)
on February 15, 1999 and to pay interest thereon from the date hereof semi-
annually in arrears on August 15 and February 15 each year, commencing August
15, 1996, (each an "Interest Payment Date"), at the rate of eight percent (8%)
per annum, until the principal hereof is paid or payment thereof is duly
provided for.
-19-
1. This Note is one of a duly authorized issue of securities of the
Issuer designated as its 8% Senior Convertible Notes Due 1999 (herein called the
"Notes") in the aggregate principal amount of up to U.S. $4,000,000, issued in
accordance with that certain Note Agreement dated as of February 15, 1996
(herein called the "Note Agreement) between the Issuer and the purchasers of the
Notes, a copy of which Note Agreement is on file and available for inspection at
the offices of Interallianz Bank AG, the paying and conversion agent (herein
called the "Paying Agent," which term includes any successor paying or
conversion agent under the Note Agreement), at the address set forth in
paragraph 12 below. The Notes are direct, general and unconditional obligations
of the Issuer and will be senior to all Subordinated Obligations (as such term
is defined in the Note Agreement) of the Issuer and will be junior and
subordinated to all Senior Obligations of the Issuer, consisting of all bank
indebtedness. This Note will rank PARI PASSU with all other evidences of
indebtedness issued in accordance with the Note Agreement pursuant to which the
Notes are issued, without any discrimination, preference or priority of payment
among them whatsoever. Interest on the Notes shall be computed on the basis of
a 360-day year consisting of twelve 30-day months.
The Notes are convertible into shares (the "Shares") of common stock (the
"Common Stock") of the Issuer at the option of the holder (as described in
paragraph 3 below) and in certain circumstances at the option of the Issuer (as
described in paragraph 4 below), and do not carry any voting rights. The terms
of the Notes include and are subject to the terms of the Note Agreement.
Reference is hereby made to the Note Agreement and any supplements or amendments
thereto for a statement of the respective rights thereunder and hereunder of the
Issuer, the Paying Agent and the Note holders. Any term used and not otherwise
defined herein shall have the same meaning as in the Note Agreement.
2. The Notes are issuable only in registered form in the denominations of
U.S. $25,000 each and integral multiples thereof. Subject to applicable laws
and regulations and any prior conversion of the Note, the principal amount of
this Note shall be payable against presentation and surrender of this Note at
the offices of the Paying Agent and at such other offices or agencies as the
Issuer shall have appointed for the purpose pursuant to the Note Agreement, or
by check or wire transfer to the registered holders of the Notes at their
respective addresses as they appear upon the Note register maintained by the
Paying Agent. Interest on this Note due on or before maturity or conversion
shall be payable on each Interest Payment Date by check or wire transfer to the
registered holder of the Note at the addresses of the registered holder
appearing upon the Note register maintained by the Paying Agent or upon the
instructions provided by the registered holder to the Paying Agent in writing
from time to time. Interest on this Note due on or before maturity shall be
payable, by check or wire transfer to the Note holders in the amount and at the
time set forth above. Such payments shall be made in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public or private debts, subject to applicable laws and
regulations. No payment of principal or interest in respect of this Note shall
be made at an office or agency of the Issuer in the United States and no check
in payment thereof which is mailed shall be mailed to an address in the United
States, nor shall any transfer made in lieu of payment by check be made to an
account maintained by the payee with a bank in
-20-
the United States. Notwithstanding the foregoing, such payments shall be made
at the office of a paying agent in the Borough of Manhattan or the City of New
York to be appointed by the Issuer, if, and only if (i) payment of the full
amount thereof in U.S. dollars at all offices or agencies outside the United
States is illegal or effectively precluded by exchange controls or other similar
restrictions and (ii) such paying agent in the Borough of Manhattan or the City
of New York, would be able to make such payment under applicable laws and
regulations.
3. (a) Subject to the provisions of the Note Agreement and the
conditions set forth in the next succeeding paragraph, the registered holder of
the Note may convert it into Common Stock of the Issuer at any time after forty
days following the date of issuance and before the close of business on February
14, 1999. The initial conversion price shall $.80 per share of Common Stock,
subject to adjustment in certain events set forth in subparagraph 3(d) below and
in the Note Agreement (the "Conversion Price"). To determine the number of
shares issuable upon conversion of a Note, divide the principal amount to be
converted by the Conversion Price and round the result down to the next lower
full share. On conversion, a payment for any interest accrued but not paid
since the Interest Payment Date immediately preceding the Conversion Date will
be made to the registered holder.
(b) The Issuer shall maintain in Europe an office or agency where
Notes may be surrendered for conversion. The Issuer has initially appointed the
offices of the Paying Agent as its agent in Zurich, Switzerland for such
purpose. The Issuer reserves the right to vary or terminate the appointment of
any Paying Agent or to appoint additional or other Paying Agents or to approve
any change in the office through which any Paying Agent acts, provided that
there will at all times be a Paying Agent in a European city.
(c) To convert a Note, the registered holder must deliver the Note
and the election to convert in the form affixed hereto duly executed, subject to
the right of the Issuer to terminate the appointment of any such Paying Agent,
to the offices of the Paying Agent, or at such other offices or agencies outside
the United States as the Issuer may designate. Such form of election shall
state the name or names (with address) in which the certificate or certificates
for the shares of Common Stock issuable or deliverable on such Conversion shall
be registered. In no event may a registered holder convert less than the full
principal amount of a Note. After the date of delivery for Conversion, no
payment or adjustment shall be made on account of any dividends on the Common
Stock issued or delivered upon such Conversion which have accrued or are
declared prior to the date of such Conversion.
(d) (i) The Conversion Price will be adjusted as provided in the
Note Agreement for dividends or distributions on Common Stock, distributions to
all holders of Common Stock of certain rights to purchase Common Stock at less
than the current Market Price, and distributions to holders of Common Stock of
assets or debt securities of the Issuer or certain rights to purchase securities
of the Issuer (excluding cash dividends or distributions from current or
retained earnings). However, no adjustment need be made in certain cases as
provided in the Note Agreement. If the Issuer is or becomes a party in a
consolidation or merger or a transfer or lease of all or substantially all of
its assets, the right to convert a Note into Common Stock may automatically and
without the registered holder's
-21-
consent be changed into a right to convert a Note into the kind and amount of
securities, cash or other assets which the registered holder would have owned
immediately after such consolidation, merger, transfer or lease if the
registered holder had converted the Note immediately before the effective date
of the the transaction.
(ii) In addition, the Conversion Price will be adjusted after one
(1) year from the Closing Date if the average closing bid price during the
thirty (30) business days immediately prior to the first anniversary date of the
Note issuance is less than the Conversion Price then in effect. In that event,
the Conversion Price will be adjusted to a price that represents a 10% discount
off the thirty day average closing bid price of the Common Stock for that
period.
4. At any time after February 14, 1997 in the event that the Market Price
of the Common Stock shall have remained for any period of thirty (30)
consecutive days above two hundred percent (200%) of the Conversion Price, the
Issuer may require the registered holders of the Notes to convert all but not
part of the Notes into Common Stock. If the Issuer elects to require Conversion
of the Notes, the Issuer shall deliver to the Paying Agent an officer's
certificate of the Issuer, within ten (10) days after any such thirty-day
period, stating that the Issuer is entitled to effect such Conversion and
setting forth in reasonable detail a statement of facts showing that all of the
conditions precedent to the right of the Issuer to require Conversion of the
Notes have occurred. The Issuer shall notify the Paying Agent thereof in
writing as soon as practicable stating in the notice the effective date of such
required Conversion, and the Paying Agent shall give prompt written notice of
the Issuer's intention to require Conversion of the Notes to the holders of the
Notes at the address registered in the records maintained by the Paying Agent.
If the Notes are to be converted by the Issuer, notice will be given to each
registered holder at least thirty (30) days but not more than sixty (60) days
prior to the date fixed for Conversion. A partial interest payment shall be
made on the Notes for any interest accrued but unpaid in the event that the
Conversion Date is not an Interest Payment Date.
5. Title to Notes shall be reflected upon the register of the Notes
maintained by the Paying Agent and shall pass only upon notation of any change
in the name of the registered holder on such register. The Issuer, the Paying
Agent and any agent of the Issuer or the Paying Agent may deem and treat the
registered holder of a Note as the owner thereof for all purposes, whether or
not such Note is overdue.
6. (a) The Issuer shall pay to the Paying Agent at its principal office
in Zurich, Switzerland, on or prior to the Business Day immediately preceding
each Interest Payment Date and the Maturity Date of the Notes, such amounts as
shall be sufficient (with any amounts then held by the Paying Agent and
available for the purpose) for payment of the interest on and the principal of
the Notes due and payable on such Interest Payment Date or Maturity Date and the
Paying Agent's commission relating to that payment of interest or principal, as
the case may be. The Paying Agent shall apply the amounts paid to it to the
payments of such interest and principal in accordance with the terms of the
Notes. Any monies paid by the Issuer to the Paying Agent for the payment of the
principal of or interest on any Notes and remaining unclaimed at the end of two
years after the principal shall have become due and
-22-
payable (whether at maturity or otherwise) shall then be repaid to the Issuer
upon its written request and upon such repayment all liability of the Paying
Agent with respect thereto shall cease, without,
however, in any way affecting any obligation the Issuer may have to pay the
principal of and interest on this Note as the same shall become due.
(b) In any case where the due date for the payment of the principal
of or interest on any Note shall be at any place of payment a day on which
banking institutions are authorized or obligated by law to close or are not
carrying out transactions in United States dollars, then payment of principal or
interest need not be made on such due date at such place but may be made on the
next succeeding day at such place which is not a day on which banking
institutions are authorized or obligated by law to close with the same force and
effect as if made on the due date for such payment and no interest shall accrue
for the period after such due date.
7. (a) (i) The Issuer will pay to the registered holder of this Note
who is a United States Alien (as defined below) such additional amounts as may
be necessary in order that every net payment of the principal of and interest on
this Note after deduction or withholding for or on account of any present or
future tax assessment or governmental charge imposed by the United States or any
political subdivision or taxing authority thereof or therein upon or as a result
of such payment will not be less than the amount provided for in this Note to be
then due and payable; PROVIDED, HOWEVER, that the foregoing obligation to pay
additional amounts shall not apply to any one or more of the following:
(1) any tax assessment or other governmental charge which would
not have been imposed but for (A) the existence of any present or former
connection between such registered holder (or between a fiduciary, settlor,
beneficiary, members, shareholder of or possessor of a power over such
registered holder if such registered holder is an estate, a trust, a partnership
or a corporation) and the United States, including without limitation such
registered holder (or such fiduciary, settlor, beneficiary, member, shareholder
or possessor) being or having been a citizen or resident of the United States or
treated as a resident thereof or being or having been engaged in trade or
business or present therein or having or having had a permanent establishment
therein or (B) such registered holder's present or former status as a personal
holding Issuer, a foreign personal holding Issuer with respect to the United
States, a controlled foreign corporation or a passive foreign investment Issuer
for United States tax purposes or a corporation which accumulates earnings to
avoid United States federal income tax;
(2) any tax assessment or other governmental charge which would
not have been so imposed but for the presentations by the registered holder of
such Note for payment on a date more than 30 days after the date on which such
payment became due and payable or the date on which payment thereof is duly
provided for and notice thereof is given to registered holders, whichever occurs
later, except to the extent that the registered holder would have been entitled
to such additional amounts on presenting such Note on any date during such 30-
day period;
(3) any estate, inheritance, gift, sales, transfer, personal
property or similar tax assessment or governmental charge;
-23-
(4) any tax assessment or other governmental charge which would
not have been imposed but for the failure to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the registered
holder or beneficial owner of such Note, if compliance is required by statute or
by regulation of the United States Treasury Department as a precondition to
exemption from such tax assessment or other governmental charge;
(5) any tax assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of principal of
or interest on such Note;
(6) any tax assessment or other governmental charge required to
be withheld by any Paying Agent from any payment of the principal of or interest
on any Note if such payment can be made without such withholding by any other
Paying Agent in Europe; or
(7) any combination of items (1) through (6),
nor shall such additional amounts be paid with respect to a payment on a Note to
a registered holder that is a fiduciary or partnership or other than the sole
beneficial owner of such payments to the extent a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a beneficial owner
would not have been entitled to additional amounts had such beneficiary,
settlor, member or beneficial owner been the registered holder of such Note.
"United States Alien" means any person who for United States federal income
tax purposes is a foreign corporation, a nonresident alien individual, a
nonresident alien fiduciary or a foreign estate or trust, or a foreign
partnership one or more of the members of which is for United States federal
income tax purposes a foreign corporation, a nonresident alien individual or a
nonresident alien fiduciary of a foreign estate or trust and the term United
States means the United States (including the States and the District of
Columbia) and its possessions (including Puerto Rico, the U.S. Virgin Islands,
Guam, American Samoa, Wake Island and Northern Mariana Islands).
(ii) Notwithstanding any provision of Section 7(a)(i), if and for so
long as a certification, documentation, information or other reporting
requirement would be fully satisfied by payment of a backup withholding tax or
similar such event, the Issuer will pay as additional amounts such amounts as
may be necessary so that every net payment made following the effective date of
such requirement outside the United States by the Issuer or any Paying Agent of
principal or interest due in respect of any Note of which the beneficial owner
is a United States Alien (but without any requirement that the residence or
identity of such beneficial owner be disclosed to the Issuer, any Paying Agent
or any governmental authority) after deduction or withholding for or on account
of such backup withholding tax of similar charge other than a backup withholding
tax or similar charge which (1) is the result of a certification, documentation,
information or other reporting requirement or (2) is imposed as a result of
presentation of such Note for payment more than 30 days after the date on which
such payment becomes due and payable or the date on which payment thereof is
duly provided for and notice thereof is
-24-
given to registered holders, whichever occurs later, will not be less than the
amount provided for in such Note to be then due and payable.
(b) The Issuer shall pay all stamp and other duties, if any, which may
be imposed by the United States to any political subdivision thereof or taxing
authority of or in the foregoing with respect to the Note Agreement or the
issuance of this Note.
(c) Except as specifically provided in this Note, the Issuer shall not
be required to make any payment with respect to any tax assessment or other
governmental charge imposed by any government or any political subdivision or
taxing authority thereof or therein. Whenever in this Note there is a
reference, in a context to the payment of the principal of or interest on, or in
respect of any Note, such mention shall be deemed to include mention of the
payment of additional amounts to United States Aliens provided for in Section
7(a) to the extent that in such context additional amounts are, were or would be
payable in respect thereof pursuant to the provisions of such paragraph and
express mention of the payment of additional amounts (if applicable) in any
provision hereof shall not be construed as excluding additional amounts in those
provisions hereof where such express mention is not made.
8. The Paying Agent, in its individual or any other capacity may make
loans to, accept deposits from, and perform services for the Issuer and its
Affiliates, may be the holder of any Notes and may otherwise deal with the
Issuer or its Affiliates, or any registered holder, as if it were not the Paying
Agent.
9. (a) In case an Event of Default, as defined below and duplicated in
the Note Agreement, shall have occurred and be continuing, the registered holder
of this Note may exercise any right, power or remedy permitted to registered
holders of the Notes by law and shall have the right to declare the entire
principal and all interest accrued on the Notes held by that registered holder
then outstanding to be due and payable and in certain instances the Notes will
automatically become due and payable in the manner, with the effect and subject
to the conditions provided in the Note Agreement.
(b) An "Event of Default" shall exist if any of the following occurs:
(i) The Issuer fails to make any payment of principal on any
Note on the Business Day before the date such payment is due, whether at
maturity, upon repurchase or otherwise;
(ii) The Issuer fails to make any payment of interest on any
Note on the Business Day immediately preceding the date on which the same shall
have become due and such default shall continue for a period of ten (10)
Business Days;
(iii) The Issuer breaches any of its covenants or fails to
fulfill its obligations hereunder contained in Sections 7.3, 7.4, 7.5 or 7.6 or
in Section 10;
(iv) The Issuer fails to make any financial report required to
be made by it under Section 7.1 of this Agreement and such Default shall
continue for a period of thirty (30) Business Days;
-25-
(v) The Issuer or any of its Subsidiaries fails to comply with
any provision of this Agreement or the Notes, other than the covenants specified
in subparagraphs (a), (b), (c) and (d) above, and such failure continues for
more than 30 days after the earlier of (1) the receipt of notice thereof by the
Issuer from any holder of any Note or (2) the day on which such failure shall
first become known to any executive officer of the Issuer;
(vi) Any warranty, representation or other statement by or on
behalf of the Issuer contained in this Agreement, the Subscription Agreements,
the Notes or in any certificate or instrument furnished in compliance with this
Agreement, the Subscription Agreements or the Notes is false in any material
respect when made;
(vii) A custodian, receiver, liquidator or trustee of the
Issuer, or any of its Subsidiaries which holds a substantial part of the
Properties of the Issuer and its Subsidiaries (taken as a whole), or of any
substantial part of the Properties of the Issuer and its Subsidiaries (taken as
a whole), is appointed by court order and such order remains in effect for more
than 90 days; or the Issuer, or any of its Subsidiaries which holds a
substantial part of the Issuer and its Subsidiaries (taken as a whole), is
adjudicated bankrupt or insolvent; or any substantial part of the Properties of
the Issuer and its Subsidiaries (taken as a whole), is sequestered by court
order and such order remains in effect for more than 90 days; or petition is
filed against the Issuer or any of its Subsidiaries which holds a substantial
part of the Properties under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed or stayed
within 90 days after such filing;
(viii) The Issuer or any of its Subsidiaries files a petition in
voluntary bankruptcy or seeking relief under provisions of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law or regulation, whether now or hereafter in effect, or consents
to the filing of any petition against it under such law;
(ix) The Issuer or any of its Subsidiaries fails to pay its
debts as such debts become due except for debts which the Issuer or such
Subsidiary may contest in good faith, or becomes insolvent or bankrupt, consents
to the entry of an order for relief against it in an involuntary bankruptcy
case, or the Issuer or any of its Subsidiaries makes any assignment for the
benefit of its creditors, or consents to the appointment of a custodian
(including, without limitation, a receiver, liquidator or trustee) of the Issuer
or such Subsidiary;
(x) The Issuer or any Subsidiary (whether as primary obligor or
as guarantor or other surety) shall fail, after the expiration of any applicable
grace period, to make any payment due on, or to otherwise redeem, when due, any
Indebtedness of such Person;'
(xi) The Issuer or any Subsidiary shall fail to perform or
observe any agreement, term or condition contained in any agreement under which
an Indebtedness is created (or if any other event thereunder or under any other
agreement shall occur and be continuing) and the holders of such
-26-
Indebtedness shall have elected as a result thereof to cause such Indebtedness
to become due (or to be repurchased by the Issuer or such other Subsidiary)
prior to the stated maturity thereof; or
(xii) Any final judgment or judgments for the payment of money
is or are outstanding for more than sixty (60) days from the date of entry and
shall not have been discharged in full or stayed by appeal, bond or otherwise.
10. A director, officer, employee or stockholder as such of the Issuer
shall not have any liability for any obligations of the Issuer under the Notes
or the Note Agreement or for any claim based on, in respect to or by reason of
such obligations or their creation. Each registered holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
11. Notes shall not be valid unless and until authenticated by the manual
signature of the Paying Agent or another authenticating agent appointed by the
Issuer.
12. The Paying Agent, on behalf of the Issuer and at the Issuer's expense,
will furnish to any holder of the Notes upon written request a copy of the Note
Agreement. Requests may be made to:
Interallianz Bank AG
▇▇▇▇▇▇▇▇▇▇▇ ▇▇
P.O. Box 4823
8022 Zurich, Switzerland
13. The Note Agreement and the Notes will be governed by and construed in
accordance with the laws of the State of Delaware.
Unless the certificate of authentication hereon has been executed by the
Paying Agent by manual signature of one of its authorized signatories, this Note
shall not be entitled to any benefit under the Note Agreement or be valid or
obligatory for any purpose.
-27-
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed in
its corporate name by the manual or facsimile signature of a duly authorized
officer of the Issuer.
Dated: February 15, 1996
FIBERCHEM, INC.
By:
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Notes
referred to in the within-
mentioned Note Agreement
INTERALLIANZ BANK AG
as Paying Agent
By:
---------------------------------------------
Authorized Officer
---------------------------------------------
Print Name
By:
---------------------------------------------
Authorized Officer
---------------------------------------------
Print Name
-28-
NOTICE OF ELECTION TO CONVERT
The undersigned, being the registered holder of this Note, hereby
irrevocably requests the conversion of this Note into Common Stock of the
Issuer, in accordance with the terms of the Note Agreement referred to in this
Note and requests that the stock certificate issued upon conversion of this Note
be registered in the name and address of and delivered to the following person:
----------------------------------------
Name
----------------------------------------
Street Address
----------------------------------------
City, State, Post Code Country
----------------------------------------
Social Security or tax I.D. Number (if applicable)
If any shares issued upon conversion of this Note are to be registered in
the name of a person other than the undersigned, the undersigned hereby
represents that the undersigned has paid all transfer taxes payable with respect
thereto.
The undersigned hereby directs that a check or transfer of funds in payment
for fractional shares, if any (and if accrued interest is payable to the holder
pursuant to the Note Agreement, the amount of such interest payment) be issued
in the name of and delivered to the name and address indicated below.
----------------------------------------
Name
----------------------------------------
Street Address
----------------------------------------
City, State, Post Code Country
-29-
Date:
----------------------------
------------------------------------------
Signature*
------------------------------------------
Second Signature (if required)*
----------------------------------------
Signature Guarantee
* Signatures must be exactly as the name appears on the first page of this
Note. If any shares are to be registered in the name of and delivered to a
person other than the registered holder or its nominee, the signature of the
registered holder must be guaranteed by The Securities and Futures Authority
Limited in the United Kingdom or The International Stock Exchange in London,
England or any participant in a recognized signature guarantee medallion
program.
UPON COMPLETION, THIS NOTICE SHOULD BE SENT TO THE PAYING AND CONVERSION
AGENT AND THE ADDRESS SET FORTH IN PARAGRAPH 12 OF THE NOTE.
-30-
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER FEDERAL
OR STATE SECURITIES OR BLUE SKY LAWS, AND HAVE BEEN ISSUED IN A MANNER INTENDED
TO COMPLY REGULATION S UNDER THE ACT. PRIOR TO MARCH 27, 1996, NO OFFER, SALE,
TRANSFER, PLEDGE OR OTHER DISPOSITION (COLLECTIVELY, A "DISPOSAL") OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE MAY BE MADE (A) IN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY "U.S. PERSON" (AS DEFINED IN
REGULATIONS) UNLESS (i) REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS OR (ii) FIBERCHEM, INC. (THE "COMPANY")
RECEIVES A WRITTEN OPINION OF UNITED STATES LEGAL COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO IT TO THE EFFECT THAT SUCH DISPOSAL IS EXEMPT FROM SUCH
REGISTRATION REQUIREMENTS OR (B) OUTSIDE THE UNITED STATES TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY PERSON WHO IS NOT A "U.S. PERSON" UNLESS PRIOR TO
SUCH DISPOSAL (i) THE BENEFICIAL OWNER OF SUCH SHARES AND THE PROPOSED
TRANSFEREE SUBMIT CERTIFICATIONS TO THE COMPANY (FORMS OF WHICH ARE AVAILABLE
FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES) AND (ii) THE COMPANY
RECEIVES THE LEGAL OPINION DESCRIBED IN (A)(ii) ABOVE
No. RP-1
WARRANTS TO PURCHASE
COMMON STOCK OF FIBERCHEM, INC.
Initial Issuance on February 15, 1996
Void after 5:00 p.m. New York Time, February 14, 2001
THIS CERTIFIES THAT, for value received, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
LIMITED ("RPC Ltd.") or registered assigns (the "Holder") is the registered
holder of warrants (the "Warrants") to purchase from FiberChem, Inc., a Delaware
corporation (the "Company"), at any time or from time to time beginning on
August 15, 1996 and until 5:00 p.m., New York time, on February 14, 2001 (the
"Expiration Date"), subject to the conditions set forth herein, at the initial
exercise price of $0.80 per share (the "Initial Exercise Price"), subject to
adjustment as set forth herein (the "Exercise Price"), up to an aggregate of
three hundred fifty-three thousand one hundred twenty-five (353,125) fully paid
and non-assessable common shares, par value $0.0001 per share (the "Common
Stock"), of the Company (the "Shares") upon surrender of this certificate (the
"Certificate") and payment of the
-31-
Exercise Price multiplied by the number of Shares being purchased at the
principal office of the Company presently located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇.
1. EXERCISE OF WARRANTS.
(a) The exercise of any Warrants represented by this
Certificate is subject to the conditions set forth below in PARAGRAPH 4,
"Compliance with U.S. Securities Laws."
(b) Subject to compliance with all of the conditions set
forth herein, the Holder shall have the right to purchase from the Company the
number of Shares which the Holder may at the time be entitled to purchase
pursuant hereto, upon surrender of this Certificate to the Company at its
principal office, together with the form of election to purchase attached hereto
duly completed and signed, and upon payment to the Company of the Exercise Price
multiplied by the number of Shares in respect of which Warrants are then
exercised.
(c) No Warrant may be exercised after 5:00 p.m., New York
time, on the Expiration Date, after which time all Warrants evidenced hereby
shall be void, unless exercised prior thereto.
(d) Payment of the Exercise Price multiplied by the number
of Shares in respect of which Warrants are exercised shall be made in cash, by
wire transfer of immediately available funds or by certified check or banker's
draft payable to the order of the Company, or any combination of the foregoing.
(e) The Warrants represented by this Certificate are
exercisable at the option of the Holder, in whole or in part, but not as to
fractional Shares. Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the Holder a new
certificate of like tenor representing the number of unexercised Warrants.
(f) Upon surrender of this Certificate to the Company at its
principal office and upon payment of the Exercise Price multiplied by the number
of Shares in respect of which Warrants are then exercised, the Company shall
cause to be delivered promptly to or upon the written order of the Holder and in
such name or names as the Holder may designate, a share certificate or share
certificates for the number of whole Shares purchased upon the exercise of the
Warrants. Such share certificate or share certificates representing the Shares
shall be free of any restrictive legend. The Company shall ensure that no "stop
transfer" or similar instruction or order with respect to the Shares purchased
upon exercise of the Warrants shall be in effect at Corporate Stock Transfer,
Inc. or any successor transfer agent for the Common Stock of the Company (the
"Transfer Agent").
-32-
(g) In the event that the Holder exercises part or all of
the Warrants and the Company does not have sufficient authorized but unissued
Common Stock on that date to allow for exercise of all of the Warrants then
exercised, the Company shall (i) issue such shares of Common Stock as it has
available to the Holder of the Warrants so exercised, and (ii) with respect to
any remaining Warrants then exercised and for which shares of Common Stock are
not available for issuance, make a cash payment to the Holder in an amount equal
to the middle closing price between the bid and offer closing prices of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System - The SmallCap Market ("Nasdaq") or any other national
securities exchange or other securities listing service on which the shares of
Common Stock of the Company are then listed (a "Securities Exchange") on the
trading day immediately prior to the date on which the notice of election to
exercise was given, or if the Common Stock is not then listed on Nasdaq or a
Securities Exchange the fair market value as determined by the Board of
Directors of the Company on such date, less the aggregate exercise price of the
Placement Agent Warrants exercised, in lieu of issuing such shares of Common
Stock.
2. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not
be required to issue share certificates representing fractions of Shares and
shall not be required to issue scrip or pay cash in lieu of fractional
interests. All fractional interests shall be eliminated by rounding any
fraction to the nearest whole number of Shares.
3. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance and delivery of the Shares upon the
exercise of the Warrants; PROVIDED, HOWEVER, that the Company shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrant or any Shares in any name
other than that of the Holder, which transfer taxes shall be paid by the Holder.
4. COMPLIANCE WITH U.S. SECURITIES LAWS. The Warrants and the
Shares issuable upon the exercise of the Warrants have not been registered under
the United States Securities Act of 1933, as amended (the "Securities Act"), or
any other federal or state securities or blue sky laws, and the Warrants may not
be exercised within the United States or by, or on behalf of, any "U.S. person"
(as defined in Regulation S under the Securities Act) unless the Warrants and
the Shares have been registered under the Securities Act and any applicable
state securities or blue sky laws or exemptions from the registration
requirements under the Securities Act and any applicable state securities or
blue sky laws are available. Accordingly, (i) the Warrants may not be exercised
within the United States and any Shares issuable upon the exercise thereof may
not be delivered within the United States except in circumstances constituting
an "offshore transaction" (as defined in Regulation S under the Securities Act)
and otherwise complying with Regulation S, or unless such Shares have been
registered under the Securities Act and any applicable state securities or blue
sky laws or exemptions from the registration requirements under the Securities
Act and any applicable state securities or blue sky laws are available, and (ii)
it is a condition to the exercise of the Warrants that the exercising Holder
must deliver to the Company (A) a written certification that such Holder is not
a "U.S. person" and that the Warrants are not being exercised on behalf of, or
for the account or benefit of, a "U.S. person", or (B) a written opinion of
United States legal counsel, in form and substance satisfactory to the Company,
to the effect
-33-
that the Warrants and the Shares have been registered under the Securities Act
and any applicable state securities or blue sky laws or are exempt from the
registration requirements under the Securities Act and any applicable state
securities or blue sky laws.
5. TRANSFER OF WARRANTS.
(a) The Warrants shall be transferable only on the books of
the Company maintained at the Company's principal office upon delivery of this
Certificate with the form of assignment attached hereto duly completed and
signed by the Holder or by its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. The Company may, in its discretion, require, as a condition to any
transfer of Warrants, a signature guarantee, which may be provided by a
commercial bank or trust company, by a broker or dealer which is a member of the
National Association of Securities Dealers, Inc., or by a member of a national
securities exchange, The Securities and Futures Authority Limited in the United
Kingdom, or The International Stock Exchange in London, England. Upon any
registration of transfer, the Company shall deliver a new warrant certificate or
warrant certificates of like tenor and evidencing in the aggregate a like number
of Warrants to the person entitled thereto in exchange for this Certificate,
subject to the limitations provided herein, without any charge except for any
tax or other governmental charge imposed in connection therewith.
(b) Subject to the restriction specified on the first page
of this Certificate, the Warrants may be transferred only to: (i) ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇ Inc. ("RPC Inc."); (ii) any corporation, partnership, joint
venture or other entity which is a successor by merger or consolidation to RPC
Inc. or RPC Ltd.; (iii) any purchaser of substantially all of the assets of RPC
Inc. or RPC Ltd.; (iv) any officer, director, employee or agent of RPC Inc. or
RPC Ltd.; (v) any of the stockholders of RPC Inc. or RPC Ltd., (vi) the
stockholders or partners of their respective transferees in the event of the
liquidation, dissolution or winding-up of RPC Inc. or RPC Ltd.; or (vii) the
respective nominees of any of the foregoing parties.
(c) Notwithstanding anything in this Certificate to the
contrary, neither any of the Warrants nor any of the Shares issuable upon
exercise of any of the Warrants shall be transferable, except upon compliance by
the Holder with any applicable provisions of the Securities Act and any
applicable state securities or blue sky laws.
6. EXCHANGE AND REPLACEMENT OF WARRANT
CERTIFICATES; LOSS OR MUTILATION OF
WARRANT CERTIFICATES.
(a) This Certificate is exchangeable without expense, upon
the surrender hereof by the Holder at the principal office of the Company, for a
new warrant certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Shares in such denominations as shall be
designated by the Holder at the time of such surrender.
-34-
(b) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Certificate and, in case of such loss, theft or destruction, of indemnity and
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Certificate, if mutilated, the Company will make and deliver a new warrant
certificate of like tenor, in lieu thereof.
7. INITIAL EXERCISE PRICE; ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF SHARES.
(a) INITIAL EXERCISE PRICE. The Warrants are exercisable at
the Initial Exercise Price per Share, subject to adjustment from time to time as
provided herein.
(b) ADJUSTMENT ON FIRST ANNIVERSARY OF ISSUANCE; COMPUTATION
OF ADJUSTED PRICE. In the event that the average closing bid price during the
thirty business days immediately prior to the first anniversary of the date of
issuance of the Warrants is less than the Conversion Price (as defined in the
Note Agreement of even date herewith between the Company and the registered
holders of the Company's 8% Senior Convertible Notes Due 1999 (the "Notes")),
then (i) the Exercise Price shall be reduced to a price equal to ten percent
(10%) less than the average closing bid price for such thirty day period and
(ii) the number of Shares issuable upon the exercise of each Warrant shall be
adjusted to equal the number of shares of Common Stock into which the entire
original principal amount of the Notes would have then been convertible, based
on the reduced Conversion Price, regardless of whether or not any of the Notes
remain outstanding.
(c) OTHER ADJUSTMENTS; COMPUTATION OF ADJUSTED PRICE.
Subject to the exceptions referred to in PARAGRAPH (h) below, in the event that
the Company shall at any time after the initial issuance date of the Warrants
represented by this Certificate issue or sell any shares of Common Stock (other
than the issuance or sale of Common Stock referred to in PARAGRAPH (h) below),
including shares of Common Stock held in the Company's treasury, for a
consideration per share less than the Exercise Price in effect immediately prior
to the issuance or sale of such shares, or without consideration, then forthwith
upon such issuance or sale, the Exercise Price shall (until another such
issuance or sale) be reduced to a price (calculated to the nearest full cent)
equal to the quotient derived by dividing (i) an amount equal to the sum of (A)
the product of (x) the total number of shares of Common Stock outstanding
immediately prior to such issuance or sale, multiplied by (y) the Exercise Price
in effect immediately prior to such issuance or sale, plus, (B) the aggregate of
the amount of all consideration, if any, received by the Company upon such
issuance or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; PROVIDED, HOWEVER, that in no event
shall the Exercise Price be adjusted pursuant to this computation to an amount
in excess of the Exercise Price in effect immediately prior to such computation,
except in the case of readjustments provided for in PARAGRAPH (d) below or a
combination of outstanding shares of Common Stock provided for in PARAGRAPH (e)
below.
For the purposes of any computation to be made in accordance with
this PARAGRAPH (c), the following provisions shall be applicable:
-35-
(i) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be
the amount of cash received by the Company for such shares (or, if
shares of Common Stock are offered by the Company for
subscription, the subscription price, or, if such shares of Common
Stock shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial 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, or
any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, or on
the exercise of options, rights or warrants or on the conversion
or exchange of convertible or exchangeable securities) 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 shall be deemed to be the value of such consideration as
determined in good faith by the Board of Directors of the Company.
(iii) 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
stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without
consideration.
(iv) 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
SUBPARAGRAPH (ii) above.
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or
issuable (subject to readjustment upon the actual issuance
thereof) upon the exercise of options, rights, warrants and upon
the conversion or exchange of convertible or exchangeable
securities.
(d) OPTIONS, RIGHTS, WARRANTS AND CONVERTIBLE AND
EXCHANGEABLE SECURITIES. Except in the case of the Company issuing rights to
subscribe for shares of Common Stock distributed to all the shareholders of the
Company and Holders of Warrants pursuant to PARAGRAPH (i),
-36-
in the event that the Company shall at any time after the initial issuance date
of the Warrants represented by this Certificate issue any options, rights or
warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock (other than the
issuance or exercise of options, rights, warrants or preferred stock referred to
in PARAGRAPH (h) below), (i) for a consideration per share less than the
Exercise Price in effect immediately prior to the issuance of such options,
rights, or warrants, or such convertible or exchangeable securities, or (ii)
without consideration, the Exercise Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making a computation in accordance with the provisions of
PARAGRAPH (c) above; PROVIDED, HOWEVER, that:
(i) The aggregate maximum number of shares of
Common Stock issuable under such options, rights or warrants shall
be deemed to be issued and outstanding at the time such options,
rights or warrants are issued, and for a consideration equal to
the minimum purchase price per share of Common Stock provided for
in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration
received on the issue or sale of shares of Common Stock), if any,
received by the Company for such options, rights or warrants, and
if no minimum price is provided in such options, rights or
warrants, then the consideration shall be equal to zero;
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 SUBPARAGRAPH (i) (and for
the purposes of SUB-PARAGRAPH (v) OF PARAGRAPH (c) above) shall be
reduced by such number of shares of Common Stock as to which
options, warrants and/or rights shall have expired or terminated
unexercised, and such number of shares of Common Stock shall no
longer be deemed to be issued and outstanding, and the Exercise
Price then in effect shall forthwith be readjusted and thereafter
be the price which it would have been had adjustment been made on
the basis of the issuance only of shares of Common Stock actually
issued or issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not have expired or
terminated unexercised.
(ii) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and
outstanding at the time of issuance of such securities, and for a
consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of shares of
Common Stock) received by the Company for such securities, 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 or exchange such
convertible or exchangeable securities (whether by reason of
redemption or otherwise), the number of shares of Common Stock
deemed to be
-37-
issued and outstanding pursuant to this SUBPARAGRAPH (ii) (and for
the purpose of this SUBPARAGRAPH (v) OF PARAGRAPH (c) above) shall
be reduced by such number of shares of Common Stock as to which
the conversion or exchange rights shall have expired or terminated
unexercised, and such number of shares shall no longer be deemed
to be issued and outstanding and the Exercise Price then in effect
shall forthwith be readjusted and thereafter be the price which it
would have been had adjustment been made on the basis of the
issuance only of the shares of Common Stock actually issued or
issuable upon the conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
(iii) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to
in SUBPARAGRAPH (i) above, or in the price per share at which the
securities referred to in SUBPARAGRAPH (ii) above are convertible
or exchangeable, such options, rights or warrants or conversion or
exchange rights, as the case may be, 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
or warrants or convertible or exchangeable securities at the new
price in respect of the number of shares issuable upon the
exercise of such options, rights or warrants or the conversion or
exchange of such convertible or exchangeable securities.
(iv) When an adjustment has been made in the Exercise
Price pursuant to this PARAGRAPH (d) in respect of the issuance of
any options, rights or warrants to subscribe for shares of Common
Stock or the issuance of any securities convertible into or
exchangeable for shares of Common Stock, no additional adjustment
in the Exercise Price shall be made pursuant to PARAGRAPH 7(c)
above upon the issuance of shares of Common Stock upon the
exercise of such options, rights or warrants or upon the
conversion or exchange of such securities.
(e) SUBDIVISION AND COMBINATION. In the event that the
Company shall at any time after the initial issuance date of the Warrants and
before the exercise or expiration of all the Warrants subdivide or combine the
outstanding shares of Common Stock or declare a dividend consisting solely of
shares of Common Stock, the Exercise Price shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of combination.
(f) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this PARAGRAPH 7, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full share by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of Shares issuable upon
exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
-38-
(g) ADJUSTMENT FOR RECLASSIFICATION, CONSOLIDATION, MERGER,
SALE OR CONVEYANCE. In the event of any reclassification or change of the
outstanding shares of Common Stock into different securities (other than a
change in the number of outstanding shares or a change in par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in the event of any consolidation of the Company with, or
merger of the Company into, another corporation (other than a consolidation or
merger in which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding shares of Common
Stock into different securities, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of all or substantially all
of the assets of the Company, the Holder shall thereafter have the right to
convert into and to purchase the kind and respective number of shares of stock
and other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
Shares underlying the Warrants immediately prior to any such events at a price
equal to the product of (x) the number of Shares issuable upon exercise of the
Warrants and (y) the Exercise Price, both as in effect immediately prior to the
record date for such reclassification, change, consolidation, merger, sale or
conveyance.
(h) NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price shall be made:
(i) upon (A) the issuance of options or warrants to any
employee, executive, officer, director, agent, advisor or
consultant pursuant to any existing benefit, incentive, stock
option or profit sharing plan of the Company or (B) the issuance
or sale by the Company of any shares of Common Stock pursuant to
the exercise of any such options or warrants; or
(ii) upon the issuance or sale by the Company of any
shares of Common Stock pursuant to the exercise of any options,
warrants or the conversion of preferred stock previously issued
and outstanding or authorized on the initial issuance date of the
Warrants represented by this Certificate; or
(iii) if the amount of said adjustment shall be less
than two cents ($0.02) per Share; 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 adjustment which, together with any
adjustment so carried forward, shall amount to at least two cents
($0.02) per Share.
(i) DIVIDENDS AND OTHER DISTRIBUTION WITH RESPECT TO
OUTSTANDING SECURITIES. In the event that the Company shall at any time prior
to the exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock or preferred stock, or a cash
dividend or distribution payable out of current or retained earnings or a
dividend consisting solely of preferred stock paid only to preferred
stockholders) or otherwise distribute to its stockholders any
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monies, assets, property, rights, evidences of indebtedness, securities (other
than shares of Common Stock), whether issued by the Company or by another person
or entity, or any other thing of value, the Holder of the unexercised Warrants
shall thereafter be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, to receive, upon the exercise
of such Warrants, the same monies, property, assets, rights, evidences of
indebtedness, securities or any other thing of value that it would have been
entitled to receive at the time of such dividend or distribution. At the time
of any such dividend or distribution, the Company shall make appropriate
reserves to ensure the timely performance of the provisions of this
PARAGRAPH (i).
(j) SUBSCRIPTION RIGHTS FOR SHARES OF COMMON STOCK OR OTHER
SECURITIES. If the Company shall at any time after the initial issuance date of
the Warrants represented by this Certificate and prior to the exercise or
expiration of all the Warrants issue any rights to subscribe for shares of
Common Stock or any other securities of the Company to all the stockholders of
the Company, the Holder of the unexercised Warrants shall be entitled, in
addition to the Shares receivable upon the exercise of the Warrants, to receive
such rights on a pro rata basis at the time such rights are distributed to the
other stockholders of the Company.
(k) STATEMENT ON WARRANTS. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, the warrant certificates representing the Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the warrant certificate representing
the Warrants initially issuable.
8. REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. If, at any time during the five
(5) years beginning on the initial issuance date of the Warrants represented by
this Certificate, the Company proposes to prepare and file any new registration
statement under the Securities Act covering the public sale of Common Stock of
the Company for cash (in any case, other than in connection with an employee
benefit plan, a dividend reinvestment plan or pursuant to a registration
statement Form S-8 or any successor form) (collectively, a "Registration
Statement"), it will give written notice by certified or registered mail, at
least thirty (30) days prior to the filing of each such Registration Statement,
to the Holder of its intention to do so. If the Holder notifies the Company
within fifteen (15) days after receipt of any such notice of such Holder's
desire to include in such proposed Registration Statement any shares of Common
Stock (i) issued or issuable to the Holder upon exercise of the Holder's
Warrants, and (ii) that are owned by the Holder (the "Registrable Shares")
(which notice shall specify the number of Registrable Shares owned by the
Holder, the number intended to be disposed of by the Holder, if any, and the
intended method of disposition of such Registrable Shares), the Company shall
use reasonable efforts to include, to the extent possible, in such Registration
Statement the number of Registrable Shares which the Company has been so
requested to register by the Holder, at the Company's sole cost and expense and
at no cost or expense to the Holder, except that the Holder shall pay (i) all
underwriters', broker-dealers', placement agents' and similar selling discounts,
commissions and fees
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relating to the Holder's Registrable Shares, (ii) all registration and filing
fees imposed under the Securities Act, by any stock exchange or under applicable
state securities or blue sky laws based on the Holder's Registrable Shares,
(iii) all transfer, franchise, capital stock and other taxes, if any, applicable
to the Holder's Registrable Shares, and (iv) any costs and expenses of legal
counsel, accountants or other advisors retained by the Holder (collectively, the
"Holder's Expenses"), all of which shall be paid by the Holder; PROVIDED, THAT:
(i) anything in this Section to the contrary
notwithstanding, if the Company's securities so registered for
sale are to be distributed in an underwritten offering and the
managing underwriter shall advise the Company in writing that, in
its opinion, the amount of securities to be offered should be
limited in order to assure a successful offering, the amount of
Registrable Shares to be included in such Registration Statement
shall be so limited and shall be allocated among the persons
selling such securities in the following order of priority: (A)
first to be registered will be the securities the Company proposes
to sell, (B) next to be registered will be the securities subject
to any demand or other piggyback registration rights granted by
the Company before the initial issuance date of the Warrants, and
(C) next to be registered will be the Registrable Shares and any
other shares of Common Stock subject to similar piggyback
registration rights granted by the Company as of the initial
issuance date of the Warrants in proportion, as nearly as
practicable, to the number of shares of Common Stock desired and
eligible to be sold by each holder of such shares of Common Stock;
and
(ii) anything in this Section to the contrary
notwithstanding, the Company shall not be required to include any
of the Holder's Registrable Shares in a registration statement if
in the written opinion of legal counsel to the Company the
securities for which registration is requested may be sold
publicly without registration under the Securities Act; and
(iii) if the securities or blue sky laws of any
jurisdiction in which the securities so registered are proposed to
be offered would require the Holder's payment of greater
registration expenses than those otherwise required by this
Section and if the Company shall determine, in good faith, that
the offering of such securities in such jurisdiction is necessary
for the successful consummation of the registered offering, then
the Holder shall either agree to pay the portion of the
registration expenses required by the securities or blue sky laws
of such jurisdiction to be paid by the Holder or withdraw his
request for inclusion of his Registrable Shares in such
registration; and
(iv) notwithstanding the provisions of this PARAGRAPH
8(a), the Company shall have the right at any time and for any
reason or for no reason after it shall have given written notice
pursuant to this paragraph (irrespective of whether a written
request for inclusion of any such securities shall have been made)
to elect
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not to file any such proposed Registration Statement, or to
withdraw the same after the filing but prior to the effective date
thereof and, thereupon, shall be relieved from its obligation to
proceed with such registration.
If the Holder's Registrable Shares are included in the
Registration Statement, the Holder shall furnish the Company in writing with
such appropriate information in connection with the sale of such Shares,
including, without limitation, information about the Holder, the Registrable
Shares, other securities of the Company owned by the Holder, and the plan of
distribution, as the Company shall reasonably request or as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement. In addition, if the offering is underwritten,
the Company shall have the exclusive right to select the underwriter. The
Holder shall execute and deliver all documents reasonably requested by the
underwriter and any other documents customary in similar offerings, including,
without limitation, underwriting agreements, custody agreements, powers of
attorney, indemnification agreements, and agreements restricting other sales of
securities.
The rights and obligations under PARAGRAPHS 8(a) AND (b) shall
terminate at the earlier of (i) five (5) years after the initial issuance date
of the Warrants, or (ii) the date all of the Holder's Registrable Shares have
been transferred by the Holder, except for transfers in accordance with
PARAGRAPH 5(b) above.
(b) COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.
The Company covenants and agrees as follows:
(i) The Company shall pay all costs, fees and expenses
in connection with all Registration Statements filed pursuant to
PARAGRAPH (a) above including, without limitation, the Company's
legal and accounting fees, printing expenses, filing fees and
other expenses, except that the Holder shall pay all of the
Holder's Expenses (as defined in PARAGRAPH (a)).
(ii) The Company will use its reasonable efforts to
qualify or register the Registrable Shares included in a
Registration Statement for offering and sale under the securities
or blue sky laws of such states of the United States as are
reasonably requested by the Holder; PROVIDED, HOWEVER, that the
Company shall not be required to (i) qualify or register the
Registrable Shares in any jurisdiction in which the Company would
be required to qualify as a broker or dealer in securities under
the securities or blue sky laws of such jurisdictions, (ii)
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not already so qualified, (iii) subject
itself to taxation in any such jurisdiction, or (iv) consent to
general service of process in any such jurisdiction.
(c) INDEMNIFICATION.
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(i) To the extent permitted by law, the Company shall
indemnify and hold harmless each Holder of the Registrable Shares
to be sold pursuant to any Registration Statement (such Holder
being hereinafter referred to as a "Distributing Holder"), each
underwriter (an "Underwriter") and each person, if any, who
controls such Distributing Holder or Underwriter within the
meaning of Section 15 of the Securities Act and each director of
such Distributing Holder and Underwriter, against all loss, claim,
damage, expense or liability (or actions in respect thereof) to
which any of them may become subject under the Securities Act or
otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in any
such Registration Statement or any preliminary prospectus or final
prospectus constituting part thereof or any amendments or
supplements thereto, or arising out of or based upon the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, and will reimburse the Distributing Holder and
Underwriter and each such controlling person and director of the
Distributing Holder and Underwriter for any legal or other
expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability
or action as such expenses are incurred (including reasonable
attorneys' fees); PROVIDED, HOWEVER, that (A) the Company will
not be liable in any such case to the extent that any such loss,
claim, damage, expense or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by, or on behalf
of, such Distributing Holder, any other Distributing Holder or any
such Underwriter specifically for use therein, and (B) such
indemnity shall not inure to the benefit of such Distributing
Holder or Underwriter (or such controlling person or director of
the Distributing Holder or Underwriter) if any such loss, claim,
damage, expense or liability arises out of or is based upon (i)
any Distributing Holder's or the Underwriter's failure to deliver
timely a copy of the final prospectus (or the final prospectus as
then amended, revised or supplemented), or (ii) any such untrue
statement or omission of a material fact that was corrected in the
final prospectus (or the most recent amendment, revision or
supplement thereto) and any Distributing Holder or the Underwriter
failed to deliver it in a timely manner.
(ii) To the extent permitted by law, each Distributing
Holder shall, severally and jointly, indemnify and hold harmless
the Company, its directors, officers, employees and agents, each
Underwriter and each person, if any, who controls any of the
foregoing within the meaning of Section 15 of the Securities Act,
against all loss, claim, damage, expense or liability (or actions
in respect thereof) to which any of them may become subject under
the Securities Act or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of any material fact
contained in any such Registration Statement or any
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preliminary prospectus or final prospectus constituting part
thereof or any amendments or supplements thereto, or arising out
of or based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, and will reimburse the Company and
each such director, officer, employee, agent, Underwriter or
controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action as
such expenses are incurred (including reasonable attorneys' fees)
in each case to the extent, but only to the extent, that (A) such
untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by, or on behalf of,
such Distributing Holder or any other Distributing Holder
specifically for use therein, or (B) such loss, claim, damage,
expense or liability arises out of or is based upon (i) any
Distributing Holder's failure to deliver in a timely manner a copy
of the final prospectus (or the final prospectus as then amended,
revised or supplemented), or (ii) any such untrue statement or
omission of a material fact that was corrected in the final
prospectus (or the most recent amendment, revision or supplement
thereto) and any Distributing Holder failed to deliver it in a
timely manner. Notwithstanding the foregoing, such indemnity
shall not inure to the benefit of such Underwriter (or such
controlling person of the Underwriter) if any such loss, claim,
damage, expense or liability arises out of or is based upon (i)
the Underwriter's failure to deliver in a timely manner a copy of
the final prospectus (or the final prospectus as then amended,
revised or supplemented), or (ii) any such untrue statement or
omission of a material fact that was corrected in the final
prospectus (or, the most recent amendment, revision or supplement
thereto) and the Underwriter failed to deliver it in a timely
manner.
(iii) Promptly after receipt by an indemnified party
under this PARAGRAPH 8(c) of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof
is to be made against the indemnifying party under this PARAGRAPH
8(c), notify the indemnifying party in writing of the commencement
thereof; PROVIDED, HOWEVER, that the omission so to notify the
indemnifying party will not relieve the indemnifying party from
any liability that it may have to any indemnified party otherwise
than under this PARAGRAPH 8(c) except to the extent such
indemnifying party is materially prejudiced by such lack of
notice. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to
assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the
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indemnifying party will not be liable to such indemnified party
under this PARAGRAPH 8(c) for any legal or other expenses
subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation
requested by the indemnifying party or required by law. If the
indemnifying party does not elect to assume the defense of any
such claim, action or proceeding, the indemnifying party shall not
be liable for any settlement thereof which is effected without its
prior written consent. No indemnifying party shall, without the
prior written consent of the indemnified party, agree to the
settlement of any such claim, action or proceeding if the effect
thereof would be to find the indemnified party has violated the
Securities Act, the United States Securities Exchange Act of 1934,
as amended, or any state securities or blue sky laws.
(iv) If recovery is not available under the foregoing
indemnification provisions of this PARAGRAPH 8(c) for any reason
other than as specified therein, the parties entitled to
indemnification by the terms thereof shall be entitled to
contribution toward the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities
referred to in SUBPARAGRAPH 8(c)(i) OR 8(c)(ii) above, except that
no person found to be liable for fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not also found
to be liable for such fraudulent misrepresentation. In
determining the amount of contribution to which the respective
parties are entitled, there shall be considered the relative
benefits received by each party from the offering of the
securities, the parties' relative knowledge and access to
information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any untrue
statement or omission, and any other equitable considerations
appropriate under the circumstances, including, without
limitation, the relative fault of the parties. The amount paid by
an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this SUBPARAGRAPH
8(c)(iv) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim that is the subject
of this SUBPARAGRAPH 8(c)(iv) (including reasonable attorneys'
fees).
9. NOTICES TO WARRANT HOLDERS. Nothing contained in this
Certificate shall be construed as conferring upon the Holder the right to vote
or to consent or to receive notice as a stockholder in respect of any meetings
of stockholders for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the exercise or expiration of the Warrants, any of the following events
shall occur:
(i) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution
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payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(ii) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company
or securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant to
subscribe therefor; or
(iii) a dissolution, liquidation or winding-up of the
Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and
business as an entirety shall be proposed; or
(iv) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another entity;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding-up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding-up or sale.
10. RESERVATION AND LISTING OF SECURITIES.
(a) The Company covenants and agrees that at all times
during the period the Warrants are exercisable, the Company shall reserve and
keep available, free from preemptive rights, out of its authorized and unissued
shares of Common Stock or out of its authorized and issued shares of Common
Stock held in its treasury, solely for the purpose of issuance upon exercise of
the Warrants, such number of Shares as shall be issuable upon the exercise of
the Warrants.
(b) The Company covenants and agrees that, upon exercise of
the Warrants in accordance with their terms and payment of the Exercise Price
therefor, all Shares issued or sold upon such exercise shall not be subject to
the preemptive rights of any stockholder and when issued and delivered in
accordance with the terms of the Warrants shall be duly and validly issued,
fully paid and non-assessable, and the Holder shall receive good and valid title
to such Shares free and clear from any adverse claim (as defined in the
applicable Uniform Commercial Code), except such as have been created by the
Holder.
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(c) As long as the Warrants shall be outstanding, the
Company shall use its reasonable efforts to cause all Shares issuable upon the
exercise of the Warrants to be quoted by or listed on any national securities
exchange or other securities listing service on which the shares of Common Stock
of the Company are then listed.
11. SURVIVAL. All agreements, covenants, representations and
warranties herein shall survive the execution and delivery of this Certificate
and any investigation at any time made by or on behalf of any party hereto and
the exercise, sale and purchase of the Warrants and the Shares (and any other
securities or properties) issuable on exercise hereof.
12. REMEDIES. The Company agrees that the remedies at law of the
Holder, in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms hereof, may not be adequate
and such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
13. REGISTERED HOLDER. The Company may deem and treat the
registered Holder hereof as the absolute owner of this Certificate and the
Warrants represented hereby (notwithstanding any notation of ownership or other
writing hereon made by anyone), for the purpose of any exercise of the Warrants,
of any notice, and of any distribution to the Holder hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
14. NOTICES. All notices and other communications from the
Company to the Holder of the Warrants represented by this Certificate shall be
in writing and shall be deemed to have been duly given if and when personally
delivered, two (2) business days after sent by overnight courier or ten (10)
days after mailed by certified, registered or international recorded mail,
postage prepaid and return receipt requested, or when transmitted by telefax,
telex or telegraph and confirmed by sending a similar mailed writing, if to the
Holder, to the last address of such Holder as it shall appear on the books of
the Company maintained at the Company's principal office or to such other
address as the Holder may have specified to the Company in writing.
15. HEADINGS. The headings contained herein are for convenience
of reference only and are not part of this Certificate.
16. GOVERNING LAW. This Certificate shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by, and construed in accordance with, the laws of said state,
without regard to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed
by its duly authorized officers under its corporate seal.
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Dated February 15, 1996
FIBERCHEM, INC.
By: -------------------------------------
Name: -------------------------------------
Title: -------------------------------------
Attest:
-----------------------------------
Secretary
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