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Exhibit 4.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
February____, 1998, by and among TMCI Electronics, Inc., a Delaware corporation,
located at 0000 Xxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the issue of 5% Convertible Subordinated
Debentures (the "DEBENTURES"), substantially in the form attached hereto as
Exhibit A, which shall be convertible into shares of the Company's Common Stock,
$.001 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), and the issue of warrants (the "WARRANTS") pursuant to a Warrant
Agreement, substantially in the form attached hereto as Exhibit B, to purchase
shares of Common Stock (the "WARRANT SHARES");
C. The Company is offering to sell, upon the terms and conditions stated
in this Agreement, up to five (5) Units at $1,100,000 per Unit. Each Unit
consists of four (4) Debentures, each in the principal amount of $275,000 which
pay interest of five percent (5%) per annum. The holder of each Debenture will,
subject to the conditions set forth herein, be issued Warrants to purchase
25,000 shares of Common Stock;
D. Subject to the terms and conditions set forth in this Agreement, the
Buyers may have the right to purchase up to four (4) additional Units (the
"ADDITIONAL UNITS").
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
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NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase of Debentures. Subject to satisfaction (or waiver) of
the conditions set forth in Sections 6(a) and 7(a), the Company shall issue and
sell to the Buyers and the Buyers severally shall purchase from the Company the
number of Units set forth opposite each Buyer's name on the Schedule of Buyers
(the "INITIAL CLOSING"). Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 1(c), 6(b) and 7(b), at the option of each
Buyer, the Company shall issue and sell to the Buyers the Additional Units (the
"ADDITIONAL CLOSINGS"). The Initial Closing and the Additional Closing
collectively are referred to in this Agreement as the "CLOSINGS." The purchase
price (the "PURCHASE PRICE") for each Unit at each of the Closings shall be
$1,100,000.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Eastern Time, within
five (5) business days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of Xxxxx & Xxxxxx, Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
or at such other location as is mutually agreed to by the Company and the
Buyers.
c. The Additional Closing Date. The date and time of the
Additional Closing (the "ADDITIONAL CLOSING DATE") shall be 10:00 a.m. Eastern
Time, on the date specified in an Additional Unit Notice (as defined below),
subject to satisfaction (or waiver) of the conditions to the Additional Closing
set forth in Sections 6(b) and 7(b) and the conditions set forth in this
paragraph, or such later date as is mutually agreed to by the Company and the
Buyers. For 120 days after the Initial Closing Date, but subject to the
requirements of Sections 6(b) and 7(b), each Buyer may purchase Additional Units
by delivering written notice to the Company (an "ADDITIONAL UNIT NOTICE") at
least seven days but not more than 20 days (the "ADDITIONAL UNIT NOTICE DATE")
prior to the Additional Closing Date set forth in such Buyer's Additional Unit
Notice. Each Additional Unit Notice shall set forth (i) the number of Additional
Units to be purchased by such Buyer at such Additional Closing, the aggregate
Purchase Price for such Additional Units and (ii) the date selected by the Buyer
for the Additional Closing Date. The Additional Closing shall occur on the
Additional Closing Date at the offices of Xxxxx & Xxxxxx, Xxx Xxxxx Xxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other location as is mutually agreed
to by the Company and the Buyers. The Initial Closing Date and the Additional
Closing Date collectively are referred to in this Agreement as the "CLOSING
DATES."
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d. Form of Payment. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to IBJ Xxxxxxxx Bank & Trust Company (the "ESCROW
AGENT") for the Units to be sold to such Buyer at the respective Closing, by
wire transfer of immediately available funds in accordance with the following
instructions:
Wire to:
IBJ Xxxxxxxx Bank & Trust Company, as For Credit to the Account:
Escrow Agent IBJ Xxxxxxxx Bank, as Escrow Agent
One State Street for TMCI Electronics, Inc.
Xxx Xxxx, Xxx Xxxx 00000 Account No. ES317
Routing No. 000000000 Attn: Corporate Trust Department
(Reference: TMCI Electronics, Inc. -
"Buyer Name")
and (ii) the Company shall deliver to each Buyer certificates (in
the denominations such Buyer shall request) representing such principal amount
of Debentures which such Buyer is then purchasing (as indicated opposite such
Buyer's name on the Schedule of Buyers), duly executed on behalf of the Company
and registered in the name of such Buyer or its designee.
Each Buyer and the Company hereby agree that the funds from
payment of the Purchase Price shall be held in escrow by the Escrow Agent and
invested in its money market account until the Escrow Agent has received
notification from the Company, consisting of a facsimile copy of the
certificates representing the Debentures that have been issued in the Buyers'
names along with a written certification by the Company's counsel that the
certificates representing the Debentures the Buyer is then purchasing have been
placed with an overnight delivery service for expedited delivery to the Buyer.
Upon receipt of said documentation, the Company shall instruct the Escrow Agent
to disburse the funds in accordance with its instructions. The Buyers and the
Company hereby acknowledge and agree that the Escrow Agent is acting solely as
an escrow agent in connection with the transaction, has not participated in the
offer or sale of the Units, has conducted no investigation of the transaction or
of either party, has not provided any advice nor made any representation or
warranty with respect to this Agreement and/or the transaction and has not
advised or made any representation or warranty with respect to the transaction's
compliance with federal, state or foreign law.
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e. Delivery of Warrants. Subject to satisfaction of the
conditions set forth in this Section 1(e), the Company shall deliver to the
Buyers Warrants as set forth below. Upon the earlier to occur (the "WARRANT
DELIVERY DATE") of (i) the first anniversary of the Closing Date or (ii) the
date which is three months after the date the Registration Statement (as that
term is defined in the Registration Rights Agreement) becomes effective, each
Buyer that holds any Debentures on such date shall be entitled to receive
Warrants from the Company in an amount equal to 25,000 for each Debenture held
by such Buyer. On the Warrant Delivery Date, the Buyers shall notify the Company
in writing (the "WARRANT DELIVERY NOTICE") of (i) the principal amount of
Debentures then held by such Buyer; (ii) the number of Warrants to which such
Buyer is entitled to receive; and (iii) the address to which the Company shall
send such Warrants. Within three Business Days of receipt of the Warrant
Delivery Notice, the Company shall deliver to each Buyer at such address
indicated in the Warrant Delivery Notice certificates representing such number
of Warrants to which such Buyer is then entitled, duly executed on behalf of the
Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the Units, the
Debentures and the Warrants, (ii) upon conversion of the Debentures, will
acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares then issuable (the Debentures, the
Warrants, the Conversion Shares and the Warrant Shares are collectively referred
to herein as the "SECURITIES"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that such Buyer reserves the right to dispose of
the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer, including all SEC Documents (as defined
below). Such Buyer and its advisors, if any, have been afforded the
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opportunity to review materials and to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3. Such Buyer understands that its investment in
the Securities involves a high degree of risk. Such Buyer has specifically
reviewed the risk factors set forth in the Company's Annual Report on Form
10-KSB, as amended, for the fiscal year ended December 31, 1996. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
e. No Government Review. Such Buyer understands that no United
States federal or state authority or agency or any other governmental authority
or agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering of
the Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as the term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Debentures and the Warrants and, until such time as
the sale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, as contemplated by the Registration Rights Agreement, the
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
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INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO TMCI
ELECTRONICS, INC., THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped if, unless otherwise required by state securities laws, (i) such
Security is registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in form and substance reasonably acceptable to the Company, to the effect that a
public sale, assignment or transfer of such Security may be made without
registration under the 1933 Act, or (iii) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold. Each Buyer acknowledges,
covenants and agrees to sell all Securities, including those Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement with respect to which the Buyer has
been notified (and the Buyer has not received any notice to the contrary) is
effective under the 1933 Act, or (ii) advice of counsel that such sale is exempt
from registration required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors
rights and remedies.
i. Trading Restrictions. During the period of thirty days prior
to and including the Closing Date, such Buyer and its affiliates have not,
directly or indirectly, entered into any short position or similar hedge of the
Common Stock and have not used shares of Common Stock to cover any such short
position or similar hedge.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
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a. Organization and Qualification. The Company and each of its
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdictions in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their respective
businesses as now being conducted. The Company and each of its subsidiaries are
duly qualified as foreign corporations to do business and are in good standing
in every jurisdiction in which the nature of the business conducted by them
makes such qualification necessary, except to the extent that the failure to be
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
liabilities, financial condition or prospects of the Company and its
subsidiaries, taken as a whole, or on the transactions contemplated hereby.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement (including the Irrevocable Transfer Agent
Instructions, as defined in Section 5), the Registration Rights Agreement, the
Debentures, and the Warrant Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby,
including without limitation the issuance of the Debentures, the issuance of the
Conversion Shares upon conversion thereof, the issuance of the Warrants and the
issuance of the Warrant Shares upon exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the Company, and
(iv) each of the Transaction Documents constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 25,000,000 shares of Common Stock, of which
4,006,238 shares are issued and outstanding, 1,750,000 shares are reserved and
available for issuance pursuant to the Company's stock option and purchase plans
as listed on Schedule 3(c) and the options and other rights to acquire shares as
listed on Schedule 3(c), 2,800,000 shares are reserved and available for
issuance upon exercise of the Class A Warrants to purchase Common Stock at the
exercise prices set forth in Schedule 3(c) (the "CLASS A WARRANTS"), subject to
adjustment in accordance with the terms of the Warrant Agreement relating to the
Class A Warrants, and no other shares are reserved and available for issuance
pursuant to securities (other than the Debentures, the Warrants and the Class A
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock. All of such outstanding shares have been, or upon issuance in accordance
with the terms of the relevant governing instrument will be, validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule 3(c), no
shares of Common Stock are subject to preemptive rights or any
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other similar rights or any liens or encumbrances suffered or permitted by the
Company or were issued in violation of the 1933 Act or applicable state
securities laws. Except as disclosed in Schedule 3(c), as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement)
and (iv) there are no outstanding securities of the Company or any of its
subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may become bound to redeem or purchase a
security of the Company or any of its subsidiaries. Except as disclosed in
Schedule 3(c), there are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the Securities
as described in this Agreement, the Debentures or the Warrant Agreement. The
Company has furnished to the Buyers true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
d. Issuance of Securities. The Debentures are duly authorized for
issuance and sale to the Buyers by the Company pursuant hereto. 3,300,000 shares
of Common Stock (subject to adjustment pursuant to the Company's covenant set
forth in Section 4(f)) have been duly authorized and reserved for issuance upon
conversion of the Debentures. Upon issuance in accordance with the terms and
conditions of this Agreement and the Debentures, the Conversion Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof with the holders being entitled to all
rights accorded to a holder of Common Stock. The Warrants are duly authorized
for issuance and sale to the Buyers by the Company pursuant hereto. 900,000
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f)) have been duly authorized and reserved for issuance
upon exercise of the Warrants. Upon exercise in accordance with the terms and
conditions of this Agreement and the Warrant Agreement, the Warrant Shares will
be validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof with the holders being entitled to
all rights accorded to a holder of Common Stock. Assuming the accuracy of the
representations of the Buyers set forth in the this Agreement, the issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
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e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
(including, without limitation, the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
the Certificate of Incorporation or the By-laws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected, except to the extent that matters within clauses (ii) and (iii)
immediately above would not have a Material Adverse Effect. Except as disclosed
in Schedule 3(e), neither the Company nor its subsidiaries is in violation of
any term of or in default under (i) the Certificate of Incorporation or the
By-laws or their organizational charter or by-laws, respectively, or (ii) any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries, except to the extent that such violation or default would not
have a Material Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
ordinance, rule or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms thereof. Except as disclosed
in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company is not in violation of the
listing requirements of the Nasdaq SmallCap Market or the Nasdaq National
Market, as applicable, as in effect on the date hereof and on each of the
Closing Dates and is not aware of any facts which would reasonably lead to
delisting of the Common Stock by the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, in the foreseeable future.
f. SEC Documents; Financial Statements. Except as set forth on
Schedule 3(f), since March 5, 1996, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to each Buyer or its respective
representatives true and complete copies of the SEC Documents. Except as set
forth on Schedule 3(f), as of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
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regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth on Schedule 3(f), as of their respective dates,
the financial statements of the Company included in the SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the Company to the Buyers which is
not included in the SEC Documents, taken as a whole in light of the SEC
Documents, including, without limitation, information referred to in Section
2(d), contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the light of
the circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since September 30, 1997 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition or results of operations of the Company. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or the Common Stock or any of its subsidiaries except as expressly set forth in
Schedule 3(h).
i. Acknowledgment Regarding Buyers' Purchase of Units, Debentures
and Warrants. The Company acknowledges and agrees that each of the Buyers is
acting solely in the capacity of arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
of the Buyers or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter
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into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
j. No Undisclosed Liabilities. Except as disclosed on Schedule
3(j), no material event, liability, development or circumstance has occurred or
exists, with respect to the Company or its subsidiaries or their respective
business, properties, prospects, operations or financial conditions, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the Nasdaq
SmallCap Market or the Nasdaq National Market, as applicable, nor will the
Company or any of its subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. Neither the
Company nor any of its subsidiaries is a party to a collective bargaining
agreement, and the Company and its subsidiaries believe that relations with
their employees are good. Each of the Company and its subsidiaries is in
compliance in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations and published interpretations thereunder. None of the following
events has occurred or is reasonably expected to occur that when taken together
with all other such events could reasonably be expected to result in a Material
Adverse Effect: (i) any "reportable event," as defined in Section 4043 of ERISA
or the regulations issued thereunder, with respect to any "employee pension
benefit plan" as such term is defined in Section 3 of ERISA (other than a
Multiemployer Plan (as defined below)) subject to the provisions of Title IV of
ERISA or Section 412 of the Internal Revenue Code of 1986, as amended (the
"CODE"), or Section 302 of ERISA (a "PLAN"); (ii) the adoption of any amendment
to a Plan that would require the provision of security pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA; (iii) the existence with respect
to any Plan of an "accumulated funding deficiency" (as defined in
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Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iv)
the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (v) the incurrence of any liability under Title IV of ERISA with respect
to the termination of any Plan or the withdrawal or partial withdrawal of the
Company or any of its subsidiaries from any Plan or "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA ("MULTIEMPLOYER PLAN"); (vi) the receipt
by the Company or any of its subsidiaries from the Pension Benefit Guaranty
Corporation or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(vii) the receipt by the Company or any of its subsidiaries of any notice
concerning the imposition of liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA or of a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; and (viii) the occurrence of a
"prohibited transaction" with respect to which the Company or any of its
subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code) and with respect to which the Company or such subsidiary would be
liable for the payment of an excise tax.
n. Intellectual Property Rights. To the knowledge of the Company,
the Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights to conduct
their respective businesses as now conducted, except to the extent that the
failure to possess such rights or licenses would not have a Material Adverse
Effect. The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of any trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar rights
of others, and, except as set forth on Schedule 3(n), there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or any of its subsidiaries regarding any
trademarks, trade names, patents, patent rights, invention, copyright, license,
service names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing, except for such
facts and circumstances which would not have a Material Adverse Effect.
o. Environmental Laws. (i) The Company and its subsidiaries (x)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety or
emissions, discharges, releases, threatened releases, removal, remediation or
abatement of pollutants, contaminants, chemicals or industrial, hazardous or
toxic substances or wastes into or in the environment (including without
limitation air, surface water, ground water or land), or otherwise used in
connection with the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
or toxic substances or wastes, as defined under such applicable laws
("ENVIRONMENTAL LAWS"), (y) have received all permits, licenses or other
approvals required of them under applicable
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Environmental Laws to conduct their respective businesses and (z) are in
compliance with all terms and conditions of any such permit, license or
approval, except to the extent that the matters within clauses (x), (y) or (z)
above would not have a Material Adverse Effect.
(ii) There is no substance designated a "hazardous substance" by
any Environmental Law, including asbestos, petroleum, urea formaldehyde
insulation and petroleum by-products ("HAZARDOUS SUBSTANCE") present at any of
the real property currently owned or leased by the Company or any of its
subsidiaries, except to the extent that such presence could not reasonably be
expected to have a Material Adverse Effect; and with respect to such real
property, there has not occurred (x) any release or, to the knowledge of the
Company, any threatened release of a Hazardous Substance or (y) any discharge
or, to the knowledge of the Company, threatened discharge of any Hazardous
Substance into the ground, surface or navigable waters which discharge or
threatened discharge violates any federal, state, local or foreign laws, rules
or regulations concerning water pollution.
(iii) None of the Company or any of its subsidiaries has disposed
of, transported, or arranged for the transportation or disposal of any Hazardous
Substance where such disposal, transportation or arrangement would give rise to
liability pursuant to any Environmental Law other than any such liabilities that
could not reasonably be expected to have a Material Adverse Effect.
(iv) There are no underground storage tanks, asbestos-containing
materials, polychlorinated biphenyls or urea formaldehyde insulation at any of
the real property currently owned or leased by the Company or any of its
subsidiaries in violation of any Environmental Law.
p. Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, except to the extent that the
failure to have good and marketable title would not have a Material Adverse
Effect, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(p) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its subsidiaries.
Any real property and facilities held under lease by the Company or any of its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
q. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any of its subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
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r. Regulatory Permits. The Company and its subsidiaries possess
all certificates, authorizations, approvals, licenses, easements, rights-of-way,
orders and permits ("PERMITS") issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses,
except to the extent that the failure to possess such certificates,
authorizations and permits would not have a Material Adverse Effect; and neither
the Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such Permit.
s. Compliance With Law. Except as set forth on Schedule 3(s),
each of the Company and its subsidiaries has complied with, has not received any
notice of violation of, and has no knowledge of any facts which with or without
notice could reasonably be expected to constitute a violation of, any laws,
ordinances, rules, regulations, orders, judgment, injunctions, awards or decrees
of any governmental entity applicable to the Company and its subsidiaries and
their properties, except for any violation or failure so to comply which could
not reasonably be expected to have a Material Adverse Effect.
t. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
u. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect.
v. Tax Status. Except as set forth on Schedule 3(v), the Company
and each of its subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
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w. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Debentures and
the number of Warrant Shares issuable upon exercise of the Warrants will
increase under the circumstances set forth in the Debentures and the Warrant
Agreement. The Company further acknowledges that its obligations to issue
Conversion Shares upon conversion of the Debentures and to issue Warrant Shares
upon exercise of the Warrants in accordance with this Agreement, the Debentures
and the Warrant Agreement (subject to the terms and conditions thereof), as the
case may be, are absolute and unconditional regardless of the dilutive effect
that such issuances may have on the ownership interests of other stockholders of
the Company.
x. No Other Agreements. Except as set forth on Schedule 3(x), the
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents.
y. No Material Misstatement. None of the representations or
warranties of the Company contained herein and none of the information contained
in the Schedules hereto furnished by the Company is false or misleading in any
material respect or omits to state a material fact necessary to make the
statements herein or therein not misleading in any material respect.
4. COVENANTS.
a. Best Efforts. Each party shall use its commercially reasonable
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States and
shall provide evidence of any such action so taken to the Buyers or prior to the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all of the Conversion Shares and
all of the Warrant Shares and (B) none of the Units, Debentures and Warrants is
outstanding (the "REGISTRATION PERIOD"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file
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reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Units for substantially the same purposes and in substantially the
same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement), during the Registration Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its
Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its subsidiaries; and (iii) copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.
g. Right of First Refusal. Except with respect to the proposed
transactions identified on Schedule 4(g), so long as an aggregate of at least
20% of the Debentures underlying the Units issued at the Closings remains
outstanding, but subject to the exceptions described below, the Company shall
not enter into a binding agreement or otherwise agree with any party for any
equity financing (including any debt financing with an equity component) or
issue any equity securities of the Company or securities convertible or
exchangeable into or for equity securities of the Company (including debt
securities with an equity component) in any form ("FUTURE OFFERINGS") during the
period beginning on the Initial Closing Date and ending on and including the
date which is 365 days after the Initial Closing Date, unless it shall have
first delivered to each Buyer written notice (the "FUTURE OFFERING NOTICE")
describing the proposed Future Offering, including the terms and conditions
thereof, and providing each Buyer an option to purchase up to its Aggregate
Percentage (as defined below), as of the date of delivery of the Future Offering
Notice, in the Future Offering on the same terms and conditions set forth in the
Future Offering Notice (the limitations referred to in this sentence are
collectively referred to as the "CAPITAL RAISING LIMITATION"). For purposes of
this Section 4(g), "AGGREGATE PERCENTAGE" at any time with respect to any Buyer
shall mean the percentage obtained by dividing (i) the aggregate number of
Conversion Shares issued or issuable, as if a conversion occurred on such date,
upon conversion of the Debentures held by such Buyer (without giving effect to
the limitations on conversion contained herein or in the Debentures) and Warrant
Shares issued or issuable, as if exercise occurred on such date, upon exercise
of the Warrants held by such Buyer (without giving effect to the limitations on
exercise contained herein or in the Warrants) by (ii) the aggregate number of
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Conversion Shares issued or issuable, as if a conversion occurred on such date,
upon conversion of the Debentures held by all of the Buyers and Warrant Shares
issued or issuable, as if exercise occurred on such date, upon exercise of the
Warrants held by all of the Buyers. A Buyer can exercise its option to
participate in a Future Offering by delivering written notice thereof to
participate to the Company within ten (10) business days of receipt of a Future
Offering Notice, which notice shall state the quantity of securities being
offered in the Future Offering that such Buyer will purchase, up to its
Aggregate Percentage, and that number of securities it is willing to purchase in
excess of its Aggregate Percentage. In the event that one or more Buyers fail to
elect to purchase up to each such Buyer's Aggregate Percentage then each Buyer
which has indicated that it is willing to purchase a number of securities in
excess of its Aggregate Percentage shall be entitled to purchase its pro rata
portion (based on the relation of (i) the aggregate number of Conversion Shares
issued or issuable, as if a conversion occurred on such date, upon conversion of
the Debentures held by such Buyer (without giving effect to the limitations on
conversion contained herein or in the Debentures) and Warrant Shares issued or
issuable, as if exercise occurred on such date, upon exercise of the Warrants
held by such Buyer (without giving effect to the limitations on exercise
contained herein or in the Warrants) to (ii) the aggregate number of Conversion
Shares issued or issuable, as if a conversion occurred on such date, upon
conversion of the Debentures held by all of the Buyers which are participating
in the Future Offering and Warrant Shares issued or issuable, as if exercise
occurred on such date, upon exercise of the Warrants held by all of the Buyers
which are participating in the Future Offering) of the securities in the Future
Offering which one or more Buyers have not elected to purchase. In the event the
Buyers fail to elect to fully participate in the Future Offering within the
periods described in this Section 4(g), the Company shall have sixty (60) days
thereafter to sell the securities of the Future Offering respecting which such
Buyer's rights were not exercised upon terms and conditions no more favorable to
the purchasers thereof than the terms and conditions specified in the Future
Offering Notice. In the event the Company has not sold such securities of the
Future Offering within such 60-day period, the Company shall not thereafter
issue or sell such securities without first offering such securities to the
Buyers in the manner provided in this Section 4(g). The Capital Raising
Limitation shall not apply to (i) a loan from a commercial bank, (ii) any
transaction involving the Company's issuances of securities (A) as consideration
in a merger or consolidation, (B) in connection with any strategic partnership
or joint venture (the primary purpose of which is not to raise equity capital),
or (C) as consideration for the acquisition of a business, product or license by
the Company, (iii) the issuance of Common Stock in an underwritten public
offering, (iv) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof, (v) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan for the benefit of the Company's employees, officers, directors or
consultants or (vi) a single issuance by the Company consisting solely of Common
Stock provided that the consideration received by the Company for each such
share of Common Stock issued is not less than the greater of (A) the closing
price of a share of Common Stock on the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, on the day prior to the date of issuance of such
shares and (B) the average of the closing prices on the Nasdaq SmallCap Market
or the Nasdaq National Market, as applicable, for the Common Stock for the 20
consecutive trading days immediately preceding the date of issuance of
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such shares. The Buyers shall not be required to participate or exercise their
right of first refusal with respect to a particular Future Offering in order to
exercise their right of first refusal with respect to later Future Offerings.
h. Listing. The Company shall promptly use its best efforts to
secure the listing of all of the Registrable Securities (as defined in the
Registration Rights Agreement) upon the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, upon which shares of Common Stock are listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Nasdaq SmallCap Market or the Nasdaq National Market, as
applicable. Neither the Company nor any of its subsidiaries shall take any
action which may result in the delisting or suspension of the Common Stock on
the Nasdaq SmallCap Market. The Company shall promptly provide to the Buyers
copies of any notices it receives from the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(h).
i. Filing of SEC Documents. The Company shall make such filing or
filings with the SEC as are necessary to comply with the 1933 Act and the 1934
Act and to describe the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing.
j. Sale Restrictions. As long as the Buyers hold Debentures, the
Buyers agree not to enter into any short position involving the Common Stock
(including by selling put equivalent positions, as that term has meaning under
the rules promulgated by the SEC under Section 16(a) of the 1934 Act).
k. Lock-Up Provisions. At any time after the date on which the
Registration Statement with respect to the Securities is declared effective (the
"EFFECTIVE DATE"), the Buyers can sell or otherwise transfer up to 25% of the
Conversion Shares. On and after the 90th day after the Effective Date, the
Buyers can sell or otherwise transfer an additional 25% of the Conversion
Shares. The Buyers agree not to sell or otherwise transfer the remaining 50% of
the Conversion Shares at any time beginning on and including the Initial Closing
Date and ending on a date which is twelve months after the Initial Closing Date;
provided, however, that if the closing price for the Common Stock is $7.50 per
share for any ten (10) consecutive trading days, all of the Conversion Shares
would be freely tradeable. In the event that the Debentures are called for
conversion by the Company, the Conversion Shares received by the Buyers would be
freely tradeable and not be subject to any lock-up provisions.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for (i) the Conversion
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Debentures in accordance with the terms and
conditions of the Transaction Documents and (ii) the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
exercise of the Warrants in accordance with the terms and conditions of the
Transaction Documents (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(g). The Company warrants that, except as set forth in the Transaction
Documents, no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) (prior to registration of the Conversion Shares and Warrant Shares
under the 1933 Act), will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares or the Warrant Shares. If a Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form and substance to the
Company, that registration of a resale by such Buyer of any of such Securities
is not required under the 1933 Act, the Company shall permit the transfer, and
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer and without any
restrictive legends. The Company acknowledges that a breach by it of its
obligations arising under this Section 5 will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company hereunder
to issue and sell Units to each Buyer at the Initial Closing is subject to the
satisfaction, at or before the Initial Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents (other than the Debentures and the Warrants) and delivered the same to
the Company.
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(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Units being purchased by such Buyer at the Initial
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) The representations and warranties of such Buyer in
this Agreement shall be true and correct in all material respects as of the date
when made and as of the Initial Closing Date as though made at that time (except
for representations and warranties that speak as of a fixed date), and such
Buyer shall have performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by such Buyer at or prior to the
Initial Closing Date.
(iv) No suit, action or other proceeding shall have been
commenced (and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(v) All consents, Permits, authorizations, approvals,
waivers and amendments required for the consummation of the transactions
contemplated by the Transaction Documents shall have been obtained.
b. Additional Closing Date. The obligation of the Company
hereunder to issue and sell the Additional Units to each Buyer at the Additional
Closing is subject to the delivery to the Company of the Additional Notice by
the Buyer and the satisfaction, at or before the Additional Closing Date, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with written notice thereof:
(i) Such Buyer shall have delivered to the Company the
Purchase Price for the Additional Units being purchased by such Buyer at the
Additional Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer in
this Agreement shall be true and correct in all material respects as of the date
when made and as of the Additional Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by such Buyer
at or prior to the Additional Closing Date.
(iii) No suit, action or other proceeding shall have been
commenced (and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
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(iv) All consents, Permits, authorizations, approvals,
waivers and amendments required for the consummation of the transactions
contemplated by the Transaction Documents shall have been obtained.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder
to purchase the Units at the Initial Closing is subject to the satisfaction, at
or before the Initial Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company
with written notice thereof:
(i) The Company shall have executed each of the
Transaction Documents, and delivered the same to such Buyer.
(ii) The Common Stock shall be authorized for quotation on
the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable; trading
in the Common Stock issuable upon conversion of the Debentures and upon exercise
of the Warrants, which are to be traded on the Nasdaq SmallCap Market or the
Nasdaq National Market, as applicable, shall not have been suspended by the SEC
or The Nasdaq Stock Market, Inc.; and all of the Conversion Shares issuable upon
conversion of the Debentures, and all of the Warrant Shares issuable upon
exercise of the Warrants, to be sold at the Initial Closing shall be listed upon
the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable.
(iii) The representations and warranties of the Company in
this Agreement shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 3, in which case, such representations and warranties
shall be true and correct without further qualification) as of the date when
made and as of the Initial Closing Date as though made at that time and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Initial Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Initial
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, without limitation, an update as
of the Initial Closing Date regarding the representation contained in Section
3(c).
(iv) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Initial Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the form of
Exhibit D attached hereto.
(v) The Company shall have executed and delivered to such
Buyer the Debentures (in such denominations as such Buyer shall request) being
purchased by such Buyer at the Initial Closing.
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(vi) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 3(b)(ii) (the "RESOLUTIONS").
(vii) As of the Initial Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Debentures and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 150% of the
number of shares of Common Stock which would be issuable upon conversion of the
then outstanding Debentures and upon exercise of the then outstanding Warrants,
including for such purposes any Debentures and any Warrants to be issued at such
Closing.
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary in such corporation's jurisdiction of incorporation issued by
the Secretary of State of such jurisdiction of incorporation as of a date within
10 days of the Initial Closing.
(ix) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (a) the Resolutions, (b) the Articles
of Incorporation and (c) Bylaws, each as in effect at the Initial Closing.
(x) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
(xi) No suit, action or other proceeding shall have been
commenced (and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(xii) All consents, Permits, authorizations, approvals,
waivers and amendments required for the consummation of the transactions
contemplated by the Transaction Documents shall have been obtained.
b. Additional Closing Date. The option of each Buyer hereunder to
purchase the Additional Units at the Additional Closing is subject to such
Buyer's delivery to the Company of an Additional Unit Notice and the
satisfaction, at or before the Additional Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with written notice thereof:
(i) The Company shall have complied with the requirements
of Section l(c) and all of the Additional Notice Conditions set forth in Section
l(d) shall have been satisfied.
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(ii) The Common Stock shall be authorized for quotation on
the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable; trading
in the Common Stock issuable upon conversion of the Debentures and upon exercise
of the Warrants, which are to be traded on the Nasdaq SmallCap Market or the
Nasdaq National Market, as applicable, shall not have been suspended by the SEC
or The Nasdaq Stock Market, Inc.; and all of the Conversion Shares issuable upon
conversion of the Debentures, and all of the Warrant Shares issuable upon
exercise of the Warrants, to be sold at the Additional Closing shall be listed
upon the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable.
(iii) The representations and warranties of the Company in
this Agreement shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 3, in which case, such representations and warranties
shall be true and correct without further qualification) as of the date when
made and as of the Additional Closing Date as though made at that time and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Additional Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Additional Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer including, without limitation, an
update as of the Additional Closing Date regarding the representation contained
in Section 3(c).
(iv) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Additional Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the form of
Exhibit D attached hereto.
(v) The Company shall have executed and delivered to such
Buyer the Debentures (in such denominations as such Buyer shall request) being
purchased by such Buyer at the Additional Closing.
(vi) The Board of Directors of the Company shall have
adopted, and shall not have amended, the Resolutions.
(vii) As of the Additional Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Debentures and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 150% of the
number of shares of Common Stock which would be issuable upon conversion of the
then outstanding Debentures and upon exercise of the then outstanding Warrants,
including for such purposes any Debentures and any Warrants to be issued at such
Additional Closing.
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary in such corporation's
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jurisdiction of incorporation issued by the Secretary of State of such
jurisdiction of incorporation as of a date within 10 days of the Additional
Closing.
(ix) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (a) the Resolutions, (b) the
Certificate of Incorporation and (c) Bylaws, each as in effect at the Additional
Closing.
(x) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
(xi) No suit, action or other proceeding shall have been
commenced (and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(xii) All consents, Permits, authorizations, approvals,
waivers and amendments required for the consummation of the transactions
contemplated by the Transaction Documents shall have been obtained.
8. INDEMNIFICATION.
a. In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their officers, directors, employees
and agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "BUYER
INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "BUYER INDEMNIFIED
LIABILITIES"), incurred by any Buyer Indemnitee as a result of, or arising out
of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any certificate,
instrument or document delivered pursuant thereto, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or any certificate, instrument or document delivered pursuant thereto,
or (c) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Buyer
Indemnified Liabilities which is permissible under applicable law.
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b. In consideration of the Company's execution and delivery of
the Transaction Documents and in addition to all of the Buyers' other
obligations under the Transaction Documents, the Buyers severally and not
jointly (the "Responsible Buyer") shall defend, protect, indemnify and hold
harmless the Company and all of its officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "COMPANY
INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Company Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "COMPANY INDEMNIFIED
LIABILITIES"), incurred by any Company Indemnitee as a result of, or arising out
of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Responsible Buyer in the Transaction Documents or any
certificate, instrument or document delivered pursuant thereto, (b) any breach
of any covenant, agreement or obligation of the Responsible Buyer contained in
the Transaction Documents or any certificate, instrument or document delivered
pursuant thereto. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Buyers shall make the maximum
contribution to the payment and satisfaction of each of the Company Indemnified
Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the
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event any signature page is delivered by facsimile transmission, the party using
such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between or among the Buyers, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and the Transaction Documents contain the entire understanding
of the parties with respect to the matters covered therein and, except as
specifically set forth therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the holders of at least two-thirds (2/3) of
the Units outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
f. Notices. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically generated and kept on file by the
sending party); (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
TMCI Electronics, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
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With copies to:
Xxxxx & Xxxxxx
One Chase Xxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx X. London, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxx
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number or person to whose
attention notices shall be given.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Units. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of two-thirds (2/3) of the Units then outstanding. No
Buyer shall assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Company, except that a Buyer may assign some or
all of its rights hereunder to an "affiliate" of such Buyer (as such term is
defined in the 1934 Act), without the consent of the Company; provided, however,
that any such assignment shall not release such Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set
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forth in Section 8, shall survive each of the Closings. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. Publicity. The Company and one representative selected by the
Buyers shall have the right to approve before issuance any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although each Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not
have occurred with respect to a Buyer on or before five (5) business days from
the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. Finders. Private Investors Equity Group ("Private Investors"),
a member of the National Association of Securities Dealers ("NASD") and X.X.
Xxxxx & Company, Inc. ("Xxxxx") have entered into an agreement with the Company
pursuant to which Private Investors has acted as a finder in connection with
this Offering. The compensation under such agreement will be determined solely
by reference to such agreement. The following description of such compensation
is subject in all respects to the terms of such agreement. Compensation is to be
paid to Private Investors and includes: (a) a cash payment from 2% to 10% of the
gross proceeds from the Offering, depending upon the total amount raised; (b) a
non-accountable expense allowance equal to 2% of the gross proceeds of the
Offering subject to certain conditions; (c) shares of Common Stock with a value
equal to 5% of the gross proceeds of the Offering divided by the stated
conversion price of the Debentures; (d) Warrants to purchase 10% of the number
of shares issuable upon conversion of the Debentures at the Stated Conversion
Price; and (e) additional compensation in the event that any of the Warrants are
exercised. Private Investors may reallow a portion of its compensation to NASD
members or other qualified parties. The Company, Private Investors and Xxxxx
have agreed to indemnify each other in connection with the certain liabilities
under the Securities Act of 1933.
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n. Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. Unless
the context otherwise requires: (a) words in the singular include the plural and
in the plural include the singular; (b) "or" is disjunctive but not exclusive;
(c) "including" means "including, without limitation,"; (d) masculine pronouns
include the feminine pronouns and feminine pronouns include the masculine
pronouns; and all references herein to Sections or Exhibits are references to
Sections of or Exhibits to this Agreement unless otherwise specified.
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IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY: BUYERS:
TMCI ELECTRONICS, INC. XXXXXXXX, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By:________________________ By: _______________________________
Name:______________________ Name: Xxxxxxx X. Xxxxxx
Its:_______________________ Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: Investment Advisor
By: _______________________________
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By: _______________________________
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
RAPHAEL, L.P.
By: _______________________________
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
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RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: _______________________________
Name: Xxxxxxx X. Xxxxxx
Its: Managing Officer
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EXHIBIT A
[Form of Face of Class B Warrant Certificate]
No. WB Class B Warrants
VOID AFTER MARCH 5, 2001
STOCK PURCHASE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
TMCI ELECTRONICS, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the
number of Class B Redeemable Common Stock Purchase Warrants ("Warrants")
specified above. Each Warrant initially entitles the Registered Holder
to purchase, subject to the terms and conditions set forth in this
Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, $.001 par value
("Common Stock"), of TMCI ELECTRONICS, INC., a Delaware corporation (the
"Company"), at any time between the Initial Warrant Exercise Date (as
herein defined) and the Expiration Date (as hereinafter defined), upon
the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse hereof duly executed, at the corporate
office of AMERICAN STOCK TRANSFER AND TRUST COMPANY, as Warrant Agent,
or its successor (the "Warrant Agent"), accompanied by payment of $5.50
(the "Purchase Price") in lawful money of the United States of America
in cash or by official bank or certified check made payable to TMCI
ELECTRONICS, INC.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement")
dated as of _______________, 1998, by and between the Company and the
Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby
are subject to modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of
the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Warrants
represented hereby, the Company shall cancel this Warrant Certificate
upon the surrender hereof and shall execute and deliver a new Warrant
Certificate or Warrant Certificates of like tenor, which the Warrant
Agent shall countersign, for the balance of such Warrants.
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33
The term "Initial Warrant Exercise Date" shall mean the date of
the Warrant Agreement.
The term "Expiration Date" shall mean 5:00 p.m. (New York time)
on March 5, 2001 or such earlier date as the Warrants shall be redeemed.
If such date shall in the State of New York be a holiday or a day on
which the banks are authorized to close, then the Expiration Date shall
mean 5:00 p.m. (New York time) the next following day which in the State
of New York is not a holiday or a day on which banks are authorized to
close.
The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same
to become effective and to keep such registration statement current
while any of the Warrants are outstanding. This Warrant shall not be
exercisable by a Registered Holder in any state where such exercise
would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant
Agent, for a new Warrant Certificate or Warrant Certificates of like
tenor representing an equal aggregate number of Warrants, each of such
new Warrant Certificates to represent such number of Warrants as shall
be designated by such Registered Holder at the time of such surrender.
Upon due presentment with any transfer fee in addition to any tax or
other governmental charge imposed in connection therewith, for
registration of transfer of this Warrant Certificate at such office, a
new Warrant Certificate or Warrant Certificates representing an equal
aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant
Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to vote or to
receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided
in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.01 per Warrant, at any time after one (1) year
from the Effective Date, provided the Market Price (as defined in the
Warrant Agreement) for the securities issuable upon exercise of such
Warrant shall equal or exceed $8.75 per share. Notice of redemption
shall be given not later than the thirtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after
the date fixed for redemption, the Registered Holder shall have no
rights with respect to this Warrant except to receive the $.01 per
Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder
as the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by
anyone other than a duly authorized officer of the Company or the
Warrant Agent) for all purposes and shall not be affected by any notice
to the contrary.
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34
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
-3-
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IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two of its
officers thereunto duly authorized and a facsimile of its corporate seal
to be imprinted hereon.
TMCI ELECTRONICS, INC.
By: ______________________________
Its
Date: ______________________________
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: ______________________________
Its
Authorized Officer
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