1
EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement (the "AGREEMENT"), dated as of
September 19, 1997, between Planet Polymer Technologies, Inc., a California
corporation (the "COMPANY"), and Special Situations Private Equity Fund, L.P., a
Delaware limited partnership (the "INVESTOR").
In consideration of the mutual covenants set forth herein, the
parties hereto agree as follows:
1. Sale of Stock and Warrant; Closing.
(a) Purchase and Sale. Subject to the terms and conditions
hereof, the Company shall issue and sell to the Investor, and the Investor shall
purchase from the Company, 500,000 shares (individually, a "PREFERRED SHARE"
and, collectively, the "PREFERRED SHARES") of Series A Convertible Preferred
Stock, without par value, of the Company, and a warrant, substantially in the
form of Exhibit A hereto (the "WARRANT"), to purchase up to 375,000 shares (the
"WARRANT SHARES") of common stock, without par value, of the Company (the
"COMMON STOCK"). The rights, preferences and privileges of the Preferred Shares
shall be set forth in the form of the Amended and Restated Certificate of
Determination (the "CERTIFICATE OF DETERMINATION") in the form annexed hereto as
Exhibit B. The purchase price per Preferred Share shall be $1.85, for an
aggregate purchase price of $925,000. The purchase price of the Warrant shall be
$75,000. The shares of Common Stock issuable upon conversion of the Preferred
Shares shall be hereinafter referred to as the "CONVERSION SHARES".
(b) Closing. The closing of the purchase and sale of the
Preferred Shares and the Warrant (the "CLOSING") shall take place at the offices
of Xxxxxxx, Calamari & Xxxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00
A.M. on September 22, 1997, or such later date on which the conditions set forth
in Sections 6 and 7 hereof shall have been satisfied or waived; provided,
however, that the Closing, in no event, shall occur later than
2
2
October 6, 1997. The date of the Closing shall be hereinafter referred to as the
"CLOSING DATE."
(c) Delivery. At the Closing, the Company shall deliver to the
Investor a stock certificate representing the Preferred Shares and the Warrant
against payment of the purchase price therefor by wire transfer of immediately
available funds to the account of the Company. In addition, the Company shall
deliver to the Investor such other agreements, documents, certificates and
opinions as specified in this Agreement or as may reasonably be requested by the
Investor.
2. Representations and Warranties of Investor. The Investor
represents and warrants to the Company as follows:
(a) Authorization. The Investor has the necessary power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of, and the performance under, this
Agreement by the Investor will not conflict with any rule, regulation, judgment
or agreement applicable to the Investor. All actions on the Investor's part
required for lawful execution and delivery of this Agreement have been or will
be effectively taken prior to the Closing.
(b) Purchase for Investment. The Investor is purchasing the
Preferred Shares and the Warrant, and will purchase the Conversion Shares and
the Warrant Shares (together with the Preferred Shares, the Warrant and the
Conversion Shares, the "SECURITIES"), for investment purposes only and not with
a view to, or for sale in connection with, a distribution thereof within the
meaning of the Securities Act of 1933 (the "SECURITIES Act"). The Investor
understands that it must bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and any
applicable state securities or blue sky laws or an exemption from such
registration is available. Notwithstanding anything in this Section 2(b) to the
contrary, the Investor, by making the representations herein, does not agree to
hold the Securities for any minimum or other specific term and reserves the
right to dispose of such Securities at any
3
3
time in accordance with or pursuant to registration or an exemption therefrom
under the Securities Act.
(c) Reliance On Exemptions. The Investor understands that the
Securities are being offered and sold in reliance upon specific exemptions from
the registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations and
warranties of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.
(d) Access to Information. The Investor has been afforded an
opportunity to ask questions of the Company's representatives concerning the
Company in making the decision to purchase the Preferred Shares and the Warrant,
and such questions have been answered to its satisfaction. However, neither the
foregoing nor any other due diligence investigation conducted by the Investor or
on its behalf shall limit, modify or affect the representations and warranties
of the Company in Section 3 of this Agreement or the right of the Investor to
rely thereon.
(e) Governmental Review. The Investor understands that no Federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.
(f) Investor's Qualifications. The Investor is an "accredited
investor" as defined in Rule 501 under Regulation D of the Securities Act
("REGULATION D"). The Investor is capable of evaluating the merits and risks of
an investment in the Securities and is financially capable of bearing a total
loss of this investment.
(g) Location. The office or offices of the Investor in which its
investment decision was made is located at the address of Investor set forth on
the signature page hereto.
(h) Restrictions on Transfer. The Investor understands that it
may not transfer any of the Securities unless
4
4
such Securities are registered under the Securities Act or unless an exemption
from registration and qualification requirements are available under the
Securities Act and applicable state securities laws. The Investor understands
that the Securities shall bear the following legend until such time as they have
been registered under the Securities Act or have been sold under Rule 144 under
the Securities Act ("RULE 144"):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. UNLESS THE SECURITIES ARE SOLD
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
3. Representations and Warranties of the Company. Except as set
forth in the Schedule of Exceptions attached hereto as Exhibit C, the Company
represents and warrants to the Investor as follows:
(a) Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and has all necessary corporate power and authority to own
or lease its assets and to carry on its business as now being conducted and
presently proposed to be conducted. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
its ownership or leasing of assets, or the conduct of its business, makes such
qualification necessary. Except for Deltco of Wisconsin, Inc., a Wisconsin
corporation (the "SUBSIDIARY"), the Company has no subsidiaries and no equity
interests in any corporation, partnership, joint venture or other entity.
5
5
(b) Subsidiary. The Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state of Wisconsin,
and has all necessary corporate power and authority to own or lease its assets
and to carry on its business as now being conducted and presently proposed to be
conducted. The Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which its ownership
or leasing of assets, or the conduct of its business, makes such qualification
necessary. The Company owns all of the capital stock of the Subsidiary.
(c) Requisite Power and Authorization. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder, including without limitation the
issuance of the Securities. All corporate action of the Company required for the
execution and delivery of this Agreement and issuance and delivery of the
Securities has been duly and effectively taken, and no further actions,
authorizations or consents, including without limitation any of the shareholders
of the Company, are required. Each of this Agreement and the Warrant constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditor's rights, (ii) as limited by general
principles of equity that restrict the availability of equitable remedies and
(iii) as the indemnity provisions of Section 4(e) of this Agreement may be
limited by law. The Preferred Shares, when issued and delivered in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, charges, claims or
encumbrances. The Conversion Shares and the Warrant Shares, if and when issued
and delivered in compliance with the provisions of this Agreement, the
Certificate of Determination or the Warrant, as the case may be, will be validly
issued, fully paid and non-assessable, free and clear of any and all liens,
charges, claims or encumbrances. Assuming the truth and accuracy of the
representations and warranties of the Investor contained in Section 2 hereof at
the time of each respective issuance, all the Securities will be issued in
6
6
compliance with Federal and state securities laws. The Company has reserved a
sufficient number of shares of Common Stock necessary for issuance of the
Conversion Shares and the Warrant Shares.
(d) SEC Documents. Since August 2, 1995, the Company has timely
filed with the Securities and Exchange Commission (the "SEC") all reports,
statements, schedules and other documents (collectively, the "SEC DOCUMENTS")
required to be filed by it pursuant to the Securities Exchange Act of 0000 (xxx
"XXXXXXXX XXX"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder, 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. As of their respective
dates, the financial statements included in the SEC Documents (the "FINANCIAL
STATEMENTS") complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Except (i) as may be indicated in the notes to the Financial
Statements or (ii) in the case of the unaudited interim statements, as permitted
by Form 10-QSB under the Exchange Act, the Financial Statements have been
prepared in accordance with U.S. generally accepted accounting principles
consistently applied and fairly present in all material respects the financial
position of the Company as of the dates thereof and the consolidated results of
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal recurring year-end adjustments).
Other than liabilities incurred in the ordinary course of business subsequent to
the date of such Financial Statements, there are no liabilities of the Company
or the Subsidiary, whether absolute, contingent or otherwise, which have not
been reflected in the Financial Statements, which liabilities, individually or
in the aggregate, are material to the financial condition or operating results
of the Company.
7
7
(e) Capitalization. The capitalization of the Company as of the
date hereof, including (i) the authorized capital stock, (ii) the number of
shares issued and outstanding and in treasury, (iii) the number of shares
reserved for issuance pursuant to stock option, employee benefit or other plans,
(iv) the number of shares reserved for issuance and/or issuable pursuant to
securities exercisable for, or convertible into or exchangeable for any shares
of Common Stock, (v) the number of outstanding securities convertible into or
exchangeable for any shares of the Company's capital stock and (vi) the number
of shares to be reserved for issuance upon conversion of the Preferred Shares
and exercise of the Warrant, is set forth on Schedule 3(e). All outstanding
shares of capital stock have been duly authorized and validly issued and are
fully paid and non-assessable. Except as set forth on Schedule 3(e), the Company
has (i) no outstanding securities convertible into or exchangeable for any
shares of capital stock of the Company, (ii) no contracts, rights, options,
warrants, rights to subscribe to, calls or other agreements or commitments of
any nature whatsoever relating to the purchase or other acquisition of any
shares of its capital stock or securities convertible into or exchangeable for
any shares of it capital stock or (iii) any shares reserved for issuance.
(f) No Conflicts. Neither the execution, delivery and performance
by the Company of this Agreement nor the consummation of the transactions
contemplated hereby has constituted or resulted in, or will constitute or result
in, a default under or breach or violation of any term or provision of the
Articles of Incorporation or bylaws of the Company or material contracts to
which the Company is a party or Federal or state laws, rules or regulations,
writs, orders, judgments or decrees which are applicable to the Company or the
Subsidiary or their respective assets.
(g) Consents. No approval, consent, order, authorization or other
action by, or notice to or filing with, any governmental authority or regulatory
or self regulatory agency, or any other person or entity, and no lapse of a
waiting period, is required in connection with the execution, delivery or
performance by the Company, or enforcement against the Company, of this
8
8
Agreement, the issue and delivery of any of the Securities or any other
transactions contemplated hereby except for (i) the filing of the Certificate of
Determination which shall be duly filed and effective prior to the Closing, (ii)
the filing of a Form D with the SEC and the California Department of
Corporations, (iii) filings required under state "blue sky" laws, (iv) the
filing of a Notice of Listing of Additional Shares with The Nasdaq Stock Market
in connection with the issuance of the Conversion Shares and the Warrant Shares,
and (v) the filing of a registration statement on Form S-3 with the SEC and the
receipt of an order declaring effectiveness from the SEC with respect thereto.
(h) No Material Adverse Change. Since June 30, 1997, the business
of the Company and the Subsidiary has been operated in the ordinary course and
substantially consistent with past practice, and there has not been any material
adverse change in the business, assets, financial condition, results of
operations, affairs or prospects of the Company and the Subsidiary (a "MATERIAL
ADVERSE CHANGE"). Since June 30, 1997, the Company has not (i) paid any
obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing, current liabilities, in each case in the
ordinary course of business; (ii) declared or made any payment or distribution
to its stockholders as such, or purchased or redeemed any of its shares of
capital stock or other securities, or obligated itself to do so: (iii)
mortgaged, pledged or subjected to any lien, charge, security interest or other
encumbrance any of its assets, tangible or intangible, except in the ordinary
course; (iv) sold, transferred or leased any of its assets except for fair value
in the ordinary course; (v) increased the compensation payable to any of its
officers or other employees, consultants or representatives by greater than
$10,000; (vi) cancelled or compromised any debt or claim, or waived or released
any right of material value; (vii) entered into any transaction other than in
the ordinary course; (viii) issued or sold any shares of capital stock or other
securities or granted any options, warrants or other purchase rights with
respect thereto; or (ix) agreed to do any of the foregoing (other than pursuant
hereto).
9
9
(i) Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or the Subsidiary, or any of their respective directors or
officers in their capacities as such, that questions the validity of this
Agreement or the issuance of the Securities, or the right of the Company to
enter into this Agreement or to consummate the transactions contemplated hereby,
or that might result, either individually or in the aggregate, in any Material
Adverse Change or in any change in the current equity ownership of the Company.
Neither the Company nor the Subsidiary is a party to or has had entered against
it any order, writ, injunction, judgment, stipulation or decree of any court,
administrative agency, commission, regulatory authority, other government agency
or instrumentality or self-regulatory agency.
(j) No Default. Neither the Company nor the Subsidiary is in
violation of or default under any provision of its Articles of Incorporation or
by-laws or in default under (and no event has occurred which, with notice or
lapse of time or both, would put the Company or the Subsidiary in default
under), nor has there occurred any event giving others (with notice or lapse of
time of both) any rights of termination, amendment, acceleration or cancellation
of, any contract, commitment, indenture or instrument to which it is a party or
by which it or its properties or assets is bound or affected except for possible
defaults or rights which would not, individually or in the aggregate, result in
a Material Adverse Change. To the best of the Company's knowledge, no other
party is in material default under or in material breach or violation of any
material contract, commitment or instrument to which the Company or the
Subsidiary is a party or by which any of their properties or assets are bound or
affected.
(k) Compliance with Laws. Each of the Company and the Subsidiary
is in compliance and has conducted its business and operations so as to comply
with all laws (including without limitation environmental laws), ordinances,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental or administrative
body or instrumentality, whether domestic or foreign. The Company has not during
the past three years received
10
10
any notice relating to any violation or potential violation of applicable law or
regulations.
(l) Title. The Company and the Subsidiary have good and
marketable title to all real and personal property owned by them which is
material to the business of the Company and the Subsidiary, in each case free
and clear of all liens, encumbrances and defects. Any property, real or
personal, held under lease by the Company or the Subsidiary is held by them
under valid and enforceable leases.
(m) Intellectual Property. Each of the Company and the Subsidiary
owns, or possesses adequate and enforceable rights to use, all trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge and, to its
knowledge, all patents and patent applications (collectively, the "INTANGIBLES")
necessary for the conduct of its business. To the knowledge of the Company,
neither the Company nor the Subsidiary has infringed or currently infringes or
is in conflict with any right of any other person with respect to any
Intangibles. To the knowledge of the Company, no person is infringing on or
violating the Intangibles owned or used by the Company or the Subsidiary.
(n) Registration Rights. The Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity other than the Investor. None of the registration rights disclosed on the
Schedule of Exceptions is senior in priority to the registration rights granted
in this Agreement.
(o) Nasdaq Requirements. The Common Stock has been designated for
inclusion in The Nasdaq SmallCap Market upon prior application and meets all
applicable requirements of the Nasdaq Stock Market ("NASDAQ") Marketplace Rule
4300 Series and any other applicable requirements for such listing. The issuance
and sale of the Securities will not, when issued and sold in accordance
11
11
with this Agreement, violate any applicable Rule of Nasdaq. The Company has not
received notification, written or oral, that (i) the termination of the
inclusion of the Common Stock on The Nasdaq SmallCap Market is pending or under
consideration or (ii) the Company has failed to satisfy any requirement of the
Rule 4300 Series or any other applicable requirement of Nasdaq. The Company does
not reasonably anticipate that the Common Stock will be delisted from Nasdaq for
the foreseeable future.
(p) Registration Statement. The Company is currently eligible to
register the resale of its Common Stock under the Securities Act under a
registration statement on Form S-3. To the best of the Company's knowledge,
there exist no facts or circumstances that would inhibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to
the Conversion Shares and the Warrant Shares.
(q) No Misrepresentation. No representation or warranty by the
Company in this Agreement and no statements of the Company contained in any
document (including without limitation any SEC Document), certificate, schedule
or other information furnished or to be furnished by or on behalf of the Company
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains or shall contain any untrue statement of material fact or omits
or shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or the Subsidiary or their respective
businesses, affairs, assets, properties, prospects, operations or financial
conditions which has not been publicly disclosed, but which, under applicable
law, rule or regulation, would be required to be disclosed by the Company in a
registration statement filed on the date hereof by the Company under the
Securities Act with respect to the primary issuance of the Company's securities.
The Company has delivered true and complete copies of all documents requested by
the Investor.
(r) Anti-Dilution and Other Shares. No shareholder of the Company
or other person or entity has any preemptive right of
12
12
subscription or purchase or contractual right of first refusal or similar right
with respect to the Securities. Issuance of the Securities will not result in
the issuance of any additional shares of Common Stock or the triggering of other
anti-dilution or similar rights contained in any options, warrants, debentures
or other agreements or commitments of the Company.
(s) No Brokers or Finders. No person or entity has or will have,
as a result of any act or omission by the Company, any right, interest or valid
claim against the Investor for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement.
(t) Option Plan. The Company represents and warrants that (i) its
Board of Directors had intended that the maximum number of shares of Common
Stock which could be sold pursuant to Options (as defined in the Company's 1995
Stock Option Plan) under the Company's 1995 Stock Option Plan was to remain,
following a reverse stock split effected by the Company on July 18, 1995,
500,000 shares and (ii) that the number of shares of Common Stock currently
reserved for issuance by the Board of Directors under such Plan is 500,000
shares.
4. Registration Rights.
(a) Definitions. For purposes of this Section 4:
(i) "Register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Securities Act and pursuant to Rule 415 under
such Act (or any successor rule providing for the offering of
securities on a continuous basis), and the declaration or ordering of
effectiveness of such registration statement by the SEC.
(ii) "Registrable Securities" means all shares of Common Stock of
the Company issued and issuable as Conversion Shares or Warrant
Shares, and any shares of Common Stock issued or issuable, from time
to time (with any adjustments), as a
13
13
distribution on, in exchange for or otherwise with respect to the
foregoing.
(iii) "Holder" means any person owning of record Registrable
Securities or any assignee of record of such Registrable Securities to
whom rights under this Section 4 have been assigned in accordance with
this Agreement and, as the case may be, the terms of the Warrant.
(b) Shelf Registration.
(i) The Company, within 45 days following the Closing Date, shall
file a registration statement under the Securities Act on Form S-3
(or, if not available, on such Form as is then available to effect a
registration of all Registrable Securities, subject to the consent of
the Investor) for, and shall obtain all such qualifications and
compliances as may be required and as would permit the sale and
distribution of, all Registrable Securities, and shall use its best
efforts to secure the effectiveness of such registration statement no
later than 90 days following the Closing Date.
(ii) The Company shall pay all expenses incurred in connection
with any registration, qualification and compliance (excluding
underwriters' and brokers' discounts and commissions), including,
without limitation, all filing, registration and qualification fees,
printer and accounting fees and reasonable fees and disbursements of
counsel for the selling Holder or Holders and counsel for the Company;
provided, however, that the Company shall be required to pay expenses
incurred in connection with the qualification of the Registrable
Securities under blue sky laws only in California, New York and such
other states as the Holders shall reasonably request.
(iii) The Company shall use its best efforts to cause the
registration statement filed pursuant to this Section 4(b) to remain
effective until the earliest of (A) the date on which all Registrable
Securities shall have been sold, (B) the date
14
14
on which all Registrable Securities, in the opinion of counsel to the
Holder may be sold immediately to the public in any single three-month
period pursuant to Rule 144 or (C) the fifth anniversary of the
Closing.
(c) Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to keep the registration statement
effective for the period set forth in Section 4(b)(iii) hereof.
(iii) Furnish to each Holder and its legal counsel (A) promptly
after filing with the SEC, one copy of such registration statement and
any amendment thereto, each preliminary prospectus and final
prospectus and each amendment or supplement thereto and each letter
written by or on behalf of the Company to the SEC or the staff of the
SEC and each correspondence therefrom, (B) on the date of
effectiveness of such registration statement or amendment, a notice
that such registration statement or amendment has been declared
effective, and (C) such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and all amendments thereto and such other documents as
any Holder may reasonably request, in order to facilitate the
disposition of the Registrable Securities owned by such Holder that
are included in such registration statement.
(iv) Use its best efforts to register and qualify the Registrable
Securities covered by such registration statement under such other
securities or "blue sky" laws of
15
15
such states and jurisdictions as shall be reasonably requested by any
Holder, and maintain the effectiveness of such registrations and
qualifications, provided, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any
such states or jurisdictions.
(v) Use its best efforts promptly to secure the designation and
quotation of all Registrable Securities covered by a registration
statement on Nasdaq.
(vi) Notify each Holder of Registrable Securities included in
such registration statement, at any time when a prospectus relating
thereto shall be required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus
included in such registration statement shall include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and upon
such notice the Company shall promptly correct such misstatement or
omission and deliver to each Holder copies of the corrected
prospectus.
(vii) Take all reasonable actions required to prevent the entry
of any stop order issued or threatened by the SEC or any state
regulatory authority with respect to any registration statement
covering Registrable Securities, and notify each Holder of any such
stop order or take all reasonable actions to remove it if entered.
(viii) Permit one counsel designated by the Holders to review
such registration statement and all amendments and supplements thereto
in a reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel shall reasonably
object.
(d) Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action
16
16
pursuant to Section 4(b) that a selling Holder shall furnish to the Company such
information regarding such Holder, the Registrable Securities held by such
Holder, and the intended method of disposition of such Securities as reasonably
shall be required to effect the registration of the Registrable Securities.
(e) Indemnification. In the event that any Registrable Securities
shall be included in a registration statement under this Agreement:
(i) To the extent permitted by law, the Company shall indemnify
and hold harmless each Holder, the partners, shareholders, officers and
directors of each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act
against any joint or several losses, claims, damages, liabilities or
expenses (together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in
respect thereof, "CLAIMS") to which any of them may become subject insofar
as such Claims arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such registration statement, or
contained in the final prospectus (as amended or supplemented, if the
Company shall file any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to such
17
17
registration statement (the matters in the foregoing clauses (i) through
(iii) being, collectively, "VIOLATIONS"). The Company shall reimburse the
indemnified party promptly, as such expenses shall be incurred and shall be
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim. The indemnification agreement contained in this Section 4(e)(i): (i)
shall not apply to a Claim arising out of or based upon a Violation which
shall occur in reliance upon and in conformity with information furnished
in writing to the Company by such indemnified party expressly for use in
connection with such registration statement or any such amendment or
supplement thereto; (ii) shall not apply to amounts paid in settlement of
any Claim if such settlement shall be effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld;
and (iii) with respect to any preliminary prospectus, shall not inure to
the benefit of any indemnified party if the untrue statement or omission of
material fact in any prospectus shall have been corrected on a timely basis
and the indemnified party shall have failed to utilize such corrected
prospectus. This indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the indemnified party and
shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 8.
(ii) In connection with any registration statement in which a
Holder shall participate, such Holder, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the registration statement, its employees, agents,
attorneys and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any
other shareholder selling securities pursuant to such registration
statement or any of its directors or officers or any person who controls
such underwriter or shareholder within the meaning of the Securities Act or
the Exchange Act, against any Claim to which any of them may become
subject, under the Securities
18
18
Act, the Exchange Act or otherwise, insofar as such Claim shall arise out
of or shall be based upon any Violation, in each case to the extent (and
only to the extent) that such Violation shall occur in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in connection with such registration statement. Such
Holder shall reimburse the indemnified party for any reasonable legal or
other reasonable expenses (promptly as such expenses shall be incurred and
shall be due and payable) incurred in connection with investigating or
defending any such Claim. The indemnity agreement contained in this Section
4(e)(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement shall be effected without the prior written consent of such
Holder, which consent shall not be unreasonably withheld and; provided,
further, that the total amounts payable by a Holder under this Section
4(e)(ii) shall not exceed the aggregate proceeds (net of discounts or
commissions) received by such Holder upon the sale of such Holder's
Registrable Securities included in such registration statement.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 4(e)(ii) shall not
inure to the benefit of any other shareholder selling securities pursuant
to the registration statement if the untrue statement or omission of
material fact in any prospectus shall have been corrected on a timely basis
in the prospectus and such shareholder shall have failed to utilize such
corrected prospectus.
(iii) Promptly after receipt by an indemnified party under this
Section 4(e) of notice of the commencement of any action (including,
without limitation, any governmental action), such indemnified party, if a
claim in respect thereof shall be made against any indemnifying party under
this Section 4(e), shall deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall be entitled
to participate therein, and, to the extent it desires, to assume the
defense thereof, with counsel mutually satisfactory to the indemnified
person, after which the indemnifying person shall not be liable to
19
19
such indemnified person for any legal expenses subsequently incurred by
such indemnified person in connection with the defense thereof. An
indemnified party shall have the right to retain its own counsel, with fees
and expenses to be paid by the indemnifying party, if the indemnifying
party shall have failed to assume the defense of any such action or if, in
the reasonable opinion of counsel retained by the indemnifying party,
representation of such indemnified party by the counsel retained would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
action. No indemnifying person shall be responsible for paying the fees and
expenses of more than one separate counsel for all indemnified parties.
Failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any action, if the indemnifying
party shall be materially prejudiced thereby, shall relieve such
indemnifying party of liability, but only to the extent that such
indemnifying party shall be prejudiced with respect to a specific claim. An
indemnified party shall not, without the prior written consent of the
indemnifying party, settle or compromise or consent to the entry of a
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder unless such
settlement, compromise or consent shall include an unconditional release of
such indemnifying party from all liability arising out of such claim,
action, suit or proceeding.
(iv) If the indemnification provided for in Sections 4(e)(i) or
4(e)(ii) hereof is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any liability under the
Securities Act, then, and in each such case, the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall to the extent
permitted by applicable law contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as shall be appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
20
20
indemnified party on the other in connection with the Violation that
resulted in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact shall have related to information
supplied by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement, alleged statement, omission or
alleged omission; provided, that, in no event, shall any contribution under
this Section (iv) by any Holder exceed the proceeds from the offering
received by such Holder. No person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act)
shall be entitled to contribution from any person or entity who shall not
have been guilty of such fraudulent misrepresentation.
(f) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Registrable Securities to the public without
registration, while a public market shall exist for the Common Stock of the
Company, the Company shall:
(i) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times while the Company
shall be reporting under the Exchange Act;
(ii) Use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(iii) So long as a Holder shall own any Registrable Securities,
furnish to the Holder forthwith upon request a
21
21
written statement by the Company as to its compliance with the
reporting requirements of Rule 144, the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of
the Company and such other reports and documents of the Company as a
Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such Securities
without registration.
(g) Default Shares. In the event that the registration statement
to be filed pursuant to Section 4(b) shall not be declared effective by the SEC
within 135 days from the Closing Date (the "DEFAULT DATE"), regardless of
whether or not such registration statement shall have been filed, the Company
shall issue and deliver, free of charge and without cost, to the Investor (i)
within 10 days of the Default Date, certificates representing a number of fully
paid, non-assessable shares of Common Stock equal to 5% of the Conversion Shares
and the Warrant Shares and (ii) within 10 days of the last date of each
additional 30-day period in which such registration statement shall not have
been declared effective by the SEC, additional certificates representing a
number of fully paid, non-assessable shares of Common Stock equal to 5% of the
Conversion Shares, the Warrant Shares and any issued Default Shares.
Notwithstanding anything to the contrary contained in this Section 4(g), the
135-day period preceding the Default Date or an additional 30-day period
referred to above shall be extended for a period of time equal to the number of
days in which an act of God, earthquake, fire, other natural disaster, shut-down
of the United States government, strike or act of war occurring during such
period continues and reasonably prevents action from being taken to achieve
effectiveness of the registration statement. Any and all shares of Common Stock
issued and delivered by the Company pursuant to this Section 4(g) shall
constitute "Registrable Securities," and the Company shall be required to
register them under the Securities Act in accordance with the provisions of this
Agreement.
(h) Holder Delivery Obligations. A Holder shall comply with
applicable provisions of the Securities Act and state
22
22
securities or "blue sky" laws in connection with the use or delivery of any
preliminary or final prospectus.
5. Covenants of the Company. The Company hereby covenants that:
(a) Exchange Act Filings. The Company shall use its best efforts
to file in a timely manner all reports required to be filed by it under the
Exchange Act, and, promptly upon filing, deliver copies of such reports to the
Investor.
(b) Authorized Shares. The Company shall, from and at all times
after the Closing, maintain a reserve of authorized shares of Common Stock
sufficient to cover the issuance of the Conversion Shares and the Warrant
Shares.
(c) Use of Proceeds. The Company shall use the proceeds from the
sale of the Securities as set forth on Schedule 5(c).
(d) Nasdaq Requirements. The Company shall use its best efforts
to continue to meet all requirements necessary for inclusion of the Common Stock
in The Nasdaq SmallCap Market, including, without limitation, those set forth in
the Nasdaq Marketplace Rule 4300 Series. The Company shall use its best efforts,
including, without limitation, promptly filing any notification, application,
form or other information and paying any fees, to list on The Nasdaq SmallCap
Market all of the Conversion Shares and Warrant Shares.
(e) Nasdaq Cap. Unless permitted by the applicable rules and
regulations of Nasdaq (or the principal exchange on which the Common Stock shall
be listed or traded), the Company shall not grant or issue any additional
shares, or options, warrants, securities or other rights exercisable for,
convertible into or exchangeable for shares, of Common Stock, or enter into any
other commitments or agreements which call for the grant or issuance thereof,
if, following such grant or issue, the aggregate maximum number of shares of
Common Stock (i) issued or issuable upon conversion of the Preferred Shares,
(ii) issued under the
23
23
Certificate of Determination as dividends, (iii) issued as Default Shares under
Section 4(g) hereof, (iv) issued or issuable upon exercise of the Warrant and
(v) issued or issuable upon exercise of up to 100,000 warrants issued to LBC
Capital Resources, Inc. ("LBC") pursuant to that certain letter agreement, dated
May 9, 1997, between the Company and LBC would equal or exceed 20% of the total
shares of Common Stock outstanding on the Closing Date. Unless permitted by the
applicable rules and regulations of Nasdaq (or the principal securities exchange
on which the Common Stock shall be listed or traded), the aggregate number of
shares of Common Stock (i) issued or issuable upon conversion of the Preferred
Shares, (ii) issued under the Certificate of Determination as dividends, (iii)
issued as Default Shares under Section 4(g) hereof, (iv) issued or issuable upon
exercise of the Warrant and (v) issued or issuable upon exercise of up to
100,000 warrants issued to LBC pursuant to that certain letter agreement, dated
May 9, 1997, between the Company and LBC shall not exceed the number of shares
of Common Stock that the Company can issue pursuant to Nasdaq Marketplace Rule
4310(c)(25)(H) (as amended as set forth in SEC Release No. 34-38469). (a)
(f) Management and Other Rights. At no time shall the Company
have outstanding more than an aggregate of 925,000 (i) shares of Common Stock
and/or (ii) options, warrants, securities or other rights to acquire,
exercisable for, convertible into or exchangeable therefor (or enter into any
other commitments or agreements which call for the grant or issuance thereof)
which were issued or granted to management, other employees, directors or
consultants as compensation. For purposes of this Section 5(f), Common Stock
shall not include any shares outstanding as of the date hereof and "warrants"
shall include any warrants issued to LBC pursuant to that certain letter
agreement, dated May 9, 1997, between the Company and LBC. The provisions of
this Section 5(f) shall cease to apply at such time as there shall be less than
100,000 Preferred Shares outstanding.
(g) Grant of Registration Rights. Prior to the date on which the
Conversion Shares shall have been issued, the Company shall not grant or issue
to any person or entity any registration
24
24
rights senior in priority to the rights granted under this Agreement.
(h) Certain Legal Expenses. The Company shall pay to Xxxxxxx,
Calamari and Xxxxxxx, counsel to the Investor, at the Closing, its fees and
expenses with respect to this Agreement and the transactions contemplated hereby
in an amount not to exceed $15,000.
(i) Removal of Legends. Any legend endorsed on a certificate
pursuant to Section 2(h) and any related stop transfer instructions with respect
to such Securities shall be removed, and the Company shall issue promptly a
certificate without such legend to the holder thereof, if (i) such Securities
have been transferred pursuant to a registration statement declared effective
under the Securities Act, (ii) such legend may be properly removed under the
terms of Rule 144 or (iii) such holder shall provide the Company with an opinion
of counsel, reasonably satisfactory to the Company, to the effect that a sale,
transfer or assignment of such Securities may be made without registration.
(j) Board Representation. So long as the Investor owns at least
200,000 Preferred Shares or at least 10% of the outstanding Common Stock, the
Investor shall have the right to appoint one person, reasonably acceptable to
the Company, as a director on the Board of Directors of the Company.
(k) Amendments to the Certificate of Determination. On or before
September 22, 1997, the Company shall duly file with the appropriate regulatory
agencies in California an amendment to the original certificate of determination
of the Series A Convertible Preferred Stock filed and effective on September 9,
1997, in such form that after such amendment shall have been accepted for filing
and become effective, the certificate of determination of the Series A
Convertible Preferred Stock shall be in the form of the Certificate of
Determination annexed hereto as Exhibit B. The Company shall use its best
efforts to cause the Certificate of Determination to be accepted for filing and
become effective.
25
25
6. Conditions to Obligations of the Investor. The obligation of
the Investor to purchase the Preferred Shares and the Warrant at the Closing
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions, any of which may be waived by the Investor:
(yy) Representations and Warranties; Performance of Obligations.
The representations and warranties of the Company set forth in this Agreement
shall have been true and correct when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date, except for representations and warranties
made as of a specific date which shall be true and correct as of such date. The
Company shall have performed, satisfied and complied with all obligations and
conditions required to be performed or observed by it under this Agreement on or
prior to the Closing Date.
(a) Consents and Waivers. The Company shall have made all filings
and obtained any and all consents (including, without limitation, all
governmental or regulatory consents, approvals or authorizations required in
connection with the valid execution and delivery of this Agreement), permits and
waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement, including, without limitation, a waiver relating
to Section 6.13 of that certain warrant to purchase shares of Common Stock,
dated June 8, 1995, issued to AM-RE Services, Inc.
(b) No Litigation or Legislation. No Federal, state or local
statute, rule or regulation shall have been enacted prior to the Closing, and no
litigation, proceeding, government inquiry or investigation shall be pending,
which prohibits or seeks to prohibit or materially restricts the consummation of
the transactions contemplated by this Agreement or the other agreements referred
to herein, or materially restricts or impairs the ability of the Investor to own
an equity interest in the Company.
(c) Compliance Certificate. The Company shall have delivered to
the Investor a certificate, executed by the Chairman of the Board and Chief
Executive Officer of the Company, dated the
26
26
Closing Date, certifying to the fulfillment of the conditions specified in
Section 6(a).
(d) Opinion of Counsel. The Investor shall have received from
Xxxxxx Godward LLP, counsel to the Company, an opinion addressed to the
Investors, dated the Closing Date, in substantially the form attached hereto as
Exhibit D.
(e) Certificate of Determination. The Company shall have duly
filed with the Secretary of State of the State of California the Certificate of
Determination and such Certificate of Determination shall have been accepted for
filing and become effective.
7. Conditions to Obligation of the Company. The obligation of the
Company to sell and issue the Preferred Shares and the Warrant to the Investor
at the Closing shall be subject to the fulfillment on or prior to the Closing
Date of the following conditions, any of which may be waived by the Company:
(a) Representations and Warranties. The representations and
warranties made by the Investor in this Agreement shall have been true and
correct when made, and shall be true and correct on the Closing Date with the
same force and effect as if they had been made on and as of said date.
(b) No Litigation or Legislation. No Federal, state or local
statute, rule or regulation shall have been enacted after the date hereof, and
no litigation, proceeding, government inquiry or investigation shall be pending,
which prohibits or seeks to prohibit or materially restricts the consummation of
the transactions contemplated by this Agreement or the other agreements referred
to herein, or materially restricts or impairs the ability of the Investor to own
an equity interest in the Company.
(c) Certificate of Determination. The Certificate of
Determination shall have been accepted for filing and become effective.
8. Miscellaneous.
27
27
(a) Survival. All representations, warranties and covenants of
the parties contained herein shall survive the Closing. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Each of the
Company and the Investor irrevocably consent to the exclusive jurisdiction of
the United States Federal courts located in New York County, New York, in any
suit or proceeding based on or arising under this Agreement and irrevocably
agree that all claims in respect of such suit or proceeding may be determined in
such courts. The Company irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding. Service of process on the Company
mailed by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of the Investor to serve process in any manner permitted by
law.
(c) Finder's Fee. Each party agrees to indemnify and hold the
other harmless from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which such party or any of its officers,
partners, employees or representatives shall be responsible.
(d) Further Assurances. Each party, whether prior to or after the
Closing, shall execute, acknowledge and deliver all such other instruments and
documents, and shall take all such other actions, as may be reasonably requested
by the other party for the purpose of effecting and evidencing the consummation
of the transactions contemplated by this Agreement.
(e) Successors. This Agreement shall be binding upon and inure to
the benefit of the successors and permitted assigns
28
28
of the parties hereto; provided, however, that the rights of the Investor
hereunder may be transferred in connection with a transfer by such Investor of
all or part of the Securities in accordance with the terms of this Agreement or
the terms of the Warrant, as applicable. Any transferee of any of the Securities
to whom rights are so transferred, other than an affiliate of the Investor,
shall be required, as a condition precedent to acquiring such Securities, to
agree in writing to be bound by all the terms and conditions of this Agreement.
(f) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(g) Entire Agreement. This Agreement, including and incorporating
all Schedules and all Exhibits hereto and referred to herein, constitutes and
contains the entire agreement and understanding of the parties regarding the
subject matter of this Agreement and supersedes any and all prior negotiations,
correspondence, understandings and agreements, written or oral, among the
parties with respect to the subject matter hereof.
Notices. All notices required to be given hereunder shall be in writing
and shall be given by personal delivery, facsimile transmission, nationally
recognized overnight carrier (prepaid) or registered or certified mail, postage
prepaid with return receipt requested. Notices shall be addressed, if to the
Company, at its principal corporate offices located at 0000 Xxxxxxxxxxxx Xxxxxx,
Xxxxx X, Xxx Xxxxx, Xxxxxxxxxx, 00000, facsimile No.: (000) 000-0000, Attention:
Xxxxx X. Xxxx and, if to the Investor, at 000 X. 00xx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, facsimile No.: (000) 000-0000, Attention: Xxxxxx X. Xxxxx.
Notices delivered personally shall be deemed given as of actual receipt; notices
sent via facsimile transmission shall be deemed given as of one business day
following receipt by the sender of written confirmation of transmission thereof;
notices sent via overnight courier shall be deemed given as of one business day
following sending; and notices mailed shall be deemed given as of five business
days after proper mailing. A party may change his or its address by written
notice in accordance with this Section 8(h).
29
29
(h) Amendments and Waivers. Except as otherwise provided herein,
this Agreement may not be amended, and no term of the Agreement may be waived,
except pursuant to the written consent of the Company and the Investor.
(i) Severability. If one or more provisions of this Agreement
shall be held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement to the extent unenforceable and the balance of this
Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law.
(j) Expenses. Except as otherwise provided herein, the parties
hereto shall pay their own costs and expenses.
(k) Publicity. The parties shall consult with each other, to the
extent practicable, as to the form and content of any press releases and other
third party communications or disclosures relating to this Agreement or the
transactions contemplated hereby, and shall use reasonable efforts, acting in
good faith, to agree upon disclosure which shall be satisfactory to both
parties.
(l) Headings. The headings of this Agreement are for convenience
of reference and shall not form a part of, or affect the interpretation of, this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PLANET POLYMER TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
30
30
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: 000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
31
EXHIBIT A
FORM OF WARRANT
32
EXHIBIT B
CERTIFICATE OF DETERMINATION
33
EXHIBIT C
SCHEDULE OF EXCEPTIONS
34
EXHIBIT D
OPINION OF COUNSEL TO THE COMPANY
35
SCHEDULE 3(e)
Capitalization
36
SCHEDULE 5(c)
Use of Proceeds
