SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
November 12, 1999, by and between Thermacell Technologies, Inc., a corporation
organized under the laws of the State of Florida, U.S.A., with headquarters
located at 0000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000 (the
"Company") and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions 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 Buyer desires to purchase from the Company, and the Company
desires to sell to the Buyer, for the amounts and upon the terms and conditions
stated in this Agreement, at a closing (the "Closing") as herein described,
certain redeemable convertible promissory notes of the Company as described in
Recital B(i) below, and certain warrants of the Company as listed in Recital
B(ii) below.
(i) At the Closing (the "Closing"), $360,000.00 in aggregate
principal amount of the Company's Nine Percent (9%) Redeemable
Convertible Promissory Notes due November 1, 2002 (each a "Note"
and collectively, the "Notes"), which are convertible in
accordance with their terms into shares of the Company's common
stock, $.0001 par value per share ("Common Stock"), at a
conversion price per share as specified in the Notes. The Notes
shall be substantially in the form attached hereto as Exhibit A.
(ii) At the Closing, as additional consideration for Buyer's purchase
of the Notes a warrant (each a "Warrant" and collectively the
"Warrants") to purchase 150,000 shares of Common Stock at a
purchase price (the "Warrant Purchase Price") of $.75 per share,
which Warrants must be exercised if at all within three (3) years
after the date of issuance. The Warrants shall be substantially
in the form attached hereto as Exhibit B. As further
consideration for the Company executing and delivering the
Warrant, the parties agree that certain warrants previously
issued by the Company to the Buyer, each exercisable for 50,000
shares of Common Stock, and dated March 24, 1999, and June 25,
1999, respectively, shall be canceled, and neither party shall
have any further obligations with respect to said previously
issued warrants.
1
The Common Stock into which the Notes may be convertible (in accordance
with the terms of the Notes) may also be referred to herein as the "Conversion
Shares." The Common Stock received upon exercise of the Warrants shall be
referred to as the "Warrant Shares." Certain shares of Common Stock may (at the
Company's option as described in the Notes) be issued to the Buyer in payment of
interest (the "Interest Shares"). The Notes, the Conversion Shares, the
Warrants, the Warrant Shares and the Interest Shares (if any) may be
collectively referred to herein as the "Securities." All dollar ("$") amounts
stated in this Agreement shall refer to United States Dollars.
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit C
attached hereto 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, with respect to the
Securities.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase. The Buyer hereby agrees to purchase from the Company, and the
Company agrees to sell to the Buyer, as described in Recital B(i) above,
$360,000.00 worth of Notes at the Closing. The purchase price for the Notes
shall be $270,000.00 (the "Purchase Price").
b. The Closing. The date of the Closing shall be November 12, 1999 (the
"Closing Date"). The Buyer shall deliver the full Purchase Price to the Escrow
Agent (as defined in the Escrow Agreement substantially in the form of Exhibit D
attached hereto (the "Escrow Agreement")) for the purchase of the Securities on
or before the Closing Date. The Company shall deliver the Notes and the Warrant
being sold pursuant to this Agreement, each duly authorized, issued and executed
on behalf of the Company by its duly authorized officers, to the Escrow Agent on
or before the Closing Date.
c. Form of Payment. The Buyer shall pay the Purchase Price for the Notes
and the Warrants by wire transfer of immediately available funds in United
States Dollars, to be deposited into the Escrow Account as defined in the Escrow
Agreement, against delivery to the Escrow Agent of all of the duly executed
Notes and Warrants being purchased by the Buyer hereunder. The Escrow Agent
shall be responsible for delivery of the Purchase Price to the Company, and the
Notes and the Warrants to the Buyer, in accordance with the terms of the Escrow
Agreement and with the instructions of the said parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
2
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. Investment Purposes; Compliance With 1933 Act. The Buyer is purchasing
the Securities for its own account for investment only and not with a view
towards, or in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempt from the 0000 Xxx. The Buyer is not
purchasing the Securities for the purpose of covering short sale positions in
the Common Stock established on or prior to the date of the Closing. The Buyer
agrees to offer, sell or otherwise transfer the Securities only (i) in
accordance with the terms of this Agreement, the Notes and the Warrants, as
applicable, and (ii) pursuant to registration under the 1933 Act or to an
exemption from registration under the 1933 Act and any other applicable
securities laws. The Buyer does not by its representations contained in this
Section 2(a) agree to hold the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time pursuant to a
registration statement or in accordance with an exemption from registration
under the 1933 Act, in all cases in accordance with applicable state and federal
securities laws. The Buyer understands that it shall be a condition to the
issuance of the Conversion Shares, the Warrant Shares and the Interest Shares
(if any) that the Conversion Shares, the Warrant Shares and the Interest Shares
(if any) be and are subject to the representations set forth in this Section
2(a).
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501 (a) of Regulation D. The Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment made pursuant to this
Agreement. The Buyer is aware that it may be required to bear the economic risk
of an investment made pursuant to this Agreement for an indefinite period of
time, and is able to bear such risk for an indefinite period.
c. Reliance on Exemptions. The Buyer understands the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the applicable United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, acknowledgments,
understandings, agreements and covenants of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information. The 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 the Buyer, and specifically (but without limitation) the
Company's latest annual report on Form 10-KSB and its latest quarterly report as
filed on Form 10-QSB, as the same may have been amended prior to the date of
this Agreement, and the Company's latest unaudited financial statements
(collectively, the "Financial Statements"). The Buyer and its advisors, if any,
have been afforded the opportunity to ask all such questions of the Company as
they have in their discretion deemed advisable. The Buyer understands that its
investment in the Securities involves a high degree of risk. The Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
an informed investment decision with respect to the investment made pursuant to
this Agreement.
3
e. No Government Review. The Buyer understands that no United States
federal or state agency or any other government or governmental 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. The Buyer understands that: (i) except as provided
in the Registration Rights Agreement, 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 either (a) subsequently
registered thereunder or (b) the Buyer shall have delivered to the Company an
opinion by counsel reasonably satisfactory to the Company, in form, scope and
substance reasonably satisfactory to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person though whom the sale is made) may be deemed to be an
underwriter (as that 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 (in each case, other than pursuant to this Agreement or the
Registration Rights Agreement).
g. Legend. The Buyer understands that the Securities purchased at the
Closing, and until such time as the Conversion Shares, the Warrant Shares and
the Interest Shares (if any) (collectively with the Securities, the "Registrable
Securities"), have not been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold by the Buyer pursuant to
Rule 144 (as amended, or any applicable rule which operates to replace said
Rule) promulgated under the 1933 Act ("Rule 144"), the stock certificates
representing the Registrable Securities will bear a restrictive legend (the
"Legend") in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
4
The Legend shall be removed and the Company will issue certificates
without the Legend to the holder of the applicable Registrable Securities upon
which the Legend is stamped, in accordance with Section 5(b) which follows.
h. Authorization; Enforcement. This Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly and validly authorized,
executed and delivered by the Buyer and are each and collectively valid and
binding agreements of the Buyer enforceable in accordance with their terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to
the Buyer that:
a. Organization and Qualification: Reporting Company Status. The
Company and its subsidiaries are corporations duly organized and existing in
good standing under the laws of the respective jurisdictions in which they are
incorporated, except as would not have a Material Adverse Effect (as defined
below), and have the requisite corporate power to own their properties and to
carry on their business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the operations, properties or financial condition
of the Company and its subsidiaries taken as a whole. The Company has registered
its Common Stock pursuant to Section 12 of the 1934 Act, and the Common Stock is
eligible for trading on the Nasdaq Small Cap Market. The Company has received no
notice, either written or oral, with respect to the continued eligibility of the
Common Stock for such eligibility for trading, and the Company has maintained
all applicable requirements for the continuation of such eligibility for
trading, and the Company does not reasonably anticipate that the Common Stock
will be declared ineligible to trade on the Nasdaq Small Cap Market for the
foreseeable future. Seller shall use its best efforts to continue to keep its
stock eligible for trading on the Nasdaq Small Cap Market or a comparable stock
market or exchange. The Company has complied with all applicable requirements
(if any) of the National Association of Securities Dealers and the Nasdaq Small
Cap Market with respect to the issuance of the Securities.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Escrow Agreement, to issue and sell the
Registrable Securities in accordance with the terms hereof; (ii) the execution,
delivery and performance of this Agreement, the Notes, the Warrants, the
Registration Rights Agreement and the Escrow Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
5
required; (iii) this Agreement, the Registration Rights Agreement, the Escrow
Agreement and, on the Closing Date, the Securities sold at such Closing, have
been duly and validly authorized, executed and delivered by the Company; and
(iv) this Agreement, the Notes, the Warrants, the Registration Rights Agreement
and the Escrow Agreement constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting, generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application. The Company (and its legal
counsel) has examined this Agreement and is satisfied in its sole discretion
that this Agreement and the accompanying Exhibits, Schedules and the Addenda, if
any, are in accordance with Regulation D and are effective to accomplish the
purposes set forth herein and therein.
c. Capitalization. As of November 1, 1999, the authorized capital stock
of the Company consists of 20,000,000 shares of Common Stock of which 7,206,325
shares were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c) (attached only if there are items to be disclosed in accordance
with this Agreement), no shares of Common Stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities of the
Company, and (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
its or their securities under the 1933 Act (except as provided herein and in the
Registration Rights Agreement). If requested by the Buyer, the Company has
furnished to the Buyer, and the Buyer acknowledges receipt of same by its
signature hereafter, true and correct copies of the Company's Certificate of
Incorporation, as amended, as in effect on the date hereof ("Certificate of
Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the
"Bylaws").
d. Issuance of Securities. The Registrable Securities are (or, if
applicable, upon issuance will be) duly authorized and reserved for issuance,
and in all cases upon issuance shall be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
e. Acknowledgment Regarding Buyer's Purchase of the Securities. The
Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
6
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
f. 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 which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties contained herein of the Buyer.
g. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation or Bylaws or (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 result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) 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 for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or other
organizational documents, and neither the Company nor any of its/subsidiaries is
in default (and no event has occurred which, with notice or lapse of time or
both, would put the Company or any of its subsidiaries in default) under, nor
has there occurred any event giving others (with notice or lapse of time or
both) 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, except for possible defaults or rights as would not, in
the aggregate or individually, have a Material Adverse Effect. The business of
the Company and its subsidiaries is not being conducted, and shall not be
conducted so long as the Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity, except for possible
violations which neither singly or in the aggregate would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, 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 this
Agreement, the Notes, the Warrants, the Registration Rights Agreement or the
Escrow Agreement in accordance with the terms hereof and thereof.
7
h. SEC Documents; Financial Statements. Since at least November 1,
1998, the Company has timely 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 filed prior to the date hereof and all
exhibits included therein and financial statements and schedules hereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to as the "SEC Documents"). The Company has delivered to
the Buyer as requested by the Buyer true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and 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. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer (including the
information referred to in Section 2(d) of this Agreement) 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. Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, in each case of clause
(i) and (ii) next above which, individually or in the aggregate, are not
material to the financial condition, business, operations, properties, operating
results or prospects of the Company. The SEC Documents contain a complete and
accurate list of all material undischarged written and oral contracts,
agreements, leases or other instruments to which the Company or any subsidiary
is a party or by which the Company or any subsidiary is subject (each a
"Contract"). None of the Company, its subsidiaries or, to the best of the
Company's knowledge, any of the other parties thereto, is in breach or violation
of any Contract, which breach or violation would have a Material Adverse Effect.
No event, occurrence or condition exists which, with the lapse of time, the
giving of notice, or both, or the happening of any further event or condition,
would become a default by the Company or its subsidiaries thereunder which would
have a Material Adverse Effect.
8
i. Absence of Certain Changes. Except as disclosed in the SEC
Documents, since November 1, 1998, there has been no material adverse change and
no material adverse development in the business, properties, operation,
financial condition, results of operations or prospects of the Company, other
than continued losses from operations. The Company has not taken any steps, and
does not currently have any reasonable expectation of taking any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings. The Company shall, at least until Buyer no longer holds any of the
Registrable Securities, maintain its corporate existence in good standing and
shall pay all taxes when due except for taxes it reasonably disputes.
j. Absence of Litigation. Except as set forth in the SEC Documents and
in Exhibit (j) (attached if applicable), there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the
Company, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
k. Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for or on behalf of
the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
l. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Notes may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize they have a potential dilutive effect. The board of directors of
the Company has concluded in its good faith business judgment that such issuance
is in the best interests of the Company. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes and Warrant
Shares upon exercise of the Warrants is binding upon it and enforceable
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders.
m. Eligibility to File Registration Statement. The Company
is currently eligible to file a registration statement with the SEC on Form S-1
or SB-2 under the 1933 Act, for the purpose of registering with the SEC the
resale of all of the Securities.
9
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Securities Laws. The Company agrees to timely file a Form D (and any
equivalent form required by applicable state law) with respect to the Securities
if and as required under Regulation D and applicable state securities laws and
to provide a copy thereof to the Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as is necessary to sell
the Securities being sold to the Buyer on such date under applicable securities
laws of the United States, and shall if specifically so requested provide
evidence of any such action so taken to the Buyer on or prior to the Closing
Date.
c. Reporting Status. As of the date of this Agreement, the Company is
subject to the reporting requirements of the 1934 Act. So long as the Buyer
beneficially owns any of the Securities, 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 reports under the
1934 Act even if the 1934 Act or the rules and regulations hereunder would
permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Securities for product development, expansion of sales and marketing
and working capital.
e. Financial Information. Until such time as the Buyer no longer
beneficially owns any of the Notes or the Warrants, the Company agrees to send
the following reports to the Buyer: (i) after filing with the SEC, a copy of
each of its Annual Reports on Form 10-K or 10-KSB, its quarterly Reports on Form
10-Q or 10-QSB, and any reports filed on Form 8-K; and (ii) as soon as
practicable after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of all of the Conversion
Shares, the Warrant Shares and the Interest Shares (if any). If at any time the
Company shall not have a sufficient number of shares of Common Stock to provide
for the issuance of all Conversion Shares, the Warrant Shares and the Interest
Shares (if any), then the Company shall use its best efforts to increase the
number of authorized shares of Common Stock to a number sufficient for such
purposes. Prior to complete conversion of the Notes, the Company shall not
reduce the number of shares reserved for issuance hereunder without the written
consent of the Buyer except for a reduction proportionate to a reverse stock
split effected for a business purpose other than affecting the requirements of
this Section, which reverse stock split affects all shares of Common Stock
equally.
10
g. Listing. Upon the Closing, the Company shall promptly secure the
listing of the Registrable Securities purchased by the Buyer upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then 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 shares of Registrable Securities from time to time issued under the
terms of this Agreement and the Registration Rights Agreement. If at the
relevant time the Company's Common Stock trades on the Nasdaq Small Cap Market,
the OTC Bulletin Board Market, or another national securities exchange or
market, then the Company shall use its best efforts to ensure that the
Conversion Shares, the Warrant Shares and the Interest Shares (if any) are
eligible to trade on such national securities exchange or market. The Company
shall at all times comply in all respects with the Company's reporting, filing
and other obligations under the by-laws or rules of the National Association of
Securities Dealers and the Nasdaq Small Cap Market (or such other national
securities exchange or market on which the Common Stock may be listed, as
applicable), if any.
h. Prospectus Delivery Requirement. The Buyer understands that the 1933
Act requires delivery of a prospectus relating to the Common Stock in connection
with any sale thereof pursuant to a registration statement under the 1933 Act
covering any resale by the Buyer of the Common Stock being sold, and the Buyer
shall comply with any applicable prospectus delivery requirements of the 1933
Act in connection with any such sale. The Company shall deliver a copy of the
required prospectus to the Buyer immediately upon registration of the
Registrable Securities.
i. NASDAQ "Twenty Percent" Rule. The number of shares of Common Stock
issuable upon conversion of the Notes being purchased pursuant to this
Agreement, together with (x) the shares of Common Stock issued upon conversion
of that Nine Percent Redeemable Convertible Promissory Note Due March 1, 2002,
which the Company issued and sold to the Buyer on March 24, 1999, pursuant to a
securities purchase agreement between the Company and the Buyer dated as of
March 23, 1999; and (y) the shares of Common Stock issued upon conversion of
that Nine Percent Redeemable Convertible Promissory Note Due July 1, 2002, which
the Company issued and sold to the Buyer on June 25, 1999, pursuant to a
securities purchase agreement between the Company and the Buyer dated as of
March 23, 1999 (collectively, the "Prior Notes"), shall not collectively exceed
twenty percent (20%) of the outstanding shares of the Company's Common Stock
without required shareholder or other consent to the issuance of more than
twenty percent (20%) of the outstanding shares of the Company's Common Stock.
The Company covenants and agrees that if necessary to permit the conversions of
the Prior Notes and the Notes, the Company will use its best efforts to obtain
such shareholder or other consent required, including without limitation
immediately calling a special meeting of the shareholders to vote on such
consent; and the Board of Directors of the Company has determined in its sole
discretion that it is in the best interests of the Company to support, and does
hereby agree to support if necessary, such consent. Nothing herein shall
prohibit the Buyer from converting all or any portion of the Prior Notes and/or
the Notes to the extent that the conversions do not violate the NASDAQ "twenty
percent" rule.
j. Intentional Acts or Omissions. Neither party shall
intentionally perform any act which if performed, or omit to perform any act
which if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
11
k. No Shorting. As a material inducement for the Company to enter into
this Agreement, the Buyer represents that it has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliate of the
Buyer beneficially owns any of the Securities, engage in any short sales of, or
hedging or arbitrage transactions with respect to, the Common Stock, or sell
"put" options or similar instruments with respect to the Common Stock. The
Company acknowledges that a sale of Common Stock on the date a conversion of a
Note or exercise of a Warrant is made, even such sale is made prior to the
delivery to the Company of a conversion or exercise notice (as applicable), is
not a short sale for purposes of this Section.
1. Conversion Restrictions. Notwithstanding anything to the contrary
set forth herein or in the Note or in the Prior Notes, in no event shall any
holder of the Note and/or the Prior Notes be entitled to convert any portion of
the Note, along with the Prior Notes, in excess of such portion of the principal
of the Note and the Prior Notes collectively that, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 9.9% of the
outstanding shares of the Common Stock following such conversion. If any court
of competent jurisdiction shall determine that the foregoing limitation is
ineffective to prevent a holder from being deemed the beneficial owner of more
than 9.9% of the then outstanding shares of Common Stock, then the Corporation
shall redeem so much of the outstanding principal amount of such holder's Note
and, if applicable, the Prior Notes (the "Redemption Portion") as is necessary
to cause such holder to be deemed the beneficial owner of not more than 9.9% of
the then outstanding shares of Common Stock. Upon such determination by a court
of competent jurisdiction and such redemption by the Company, the Redemption
Portion shall immediately and without further action be deemed repaid in full to
the holder, and the holder shall have no interest in or rights under such
Redemption Portion. Any and all interest paid on or prior to the date of such
determination shall be deemed interest paid on the remaining portion of the Note
or the Prior Notes, as applicable, held by the holder. Such redemption shall be
for cash at a redemption price equal to 100% of the face amount of the
Redemption Portion and shall be paid within two (2) business days after the
requirement therefor arises pursuant to this Section 4(1).
m. Restriction on Below Market Issuance of Securities. Until the date
which is six (6) months from the date hereof, the Company shall not issue or
agree to issue {other than (i) to the Buyer or other buyers pursuant to the
transactions contemplated herein, (ii) pursuant to any employee stock option
plan or employee stock purchase plan of the Company in effect on October 31,
1998, (iii) in connection with a merger or acquisition or to settle certain
professional fees, or (iv) with the consent of the Buyer, not to be unreasonably
withheld} any equity securities of the Company (or any security convertible into
or exercisable or exchangeable, directly or indirectly, for equity securities of
the Company) or debt securities of the Company if such securities are issued at
a price (or provide for a conversion, exercise or exchange price) which may be
less than the current market price for the Common Stock on the date of issuance
(in the case of Common Stock) or the date of conversion, exercise or exchange
(in the case of securities convertible into or exercisable or exchangeable,
directly or indirectly, for Common Stock). Except as provided with respect to
12
the transactions contemplated herein and in subsections (i), (ii), (iii) or (iv)
above of this Section 4(m), the Company shall not grant any additional so-called
"registration rights."
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. Transfer Agent Instructions. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the Buyer or its nominee,
for the Conversion Shares, the Warrant Shares and the Interest Shares (if any)
in accordance with the terms of the Notes or the Warrants, as applicable, and in
such amounts as specified from time to time by the Buyer to the Company, upon
conversion of the Notes and exercise of the Warrants. All such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement
only to the extent required by applicable law and as specified in the
Transaction Documents. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the Conversion Shares and the
Interest Shares (if any) prior to the registration of same under the 1933 Act,
will be given by the Company to its transfer agent and that the Conversion
Shares, the Warrant Shares and the Interest Shares (if any) shall otherwise be
freely transferable on the books and records of the Company as and to the extent
permitted by applicable law and provided by this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Conversion Shares, the Warrant Shares and/or the Interest Shares
(if any). If the Buyer (x) provides the Company with an opinion of counsel
reasonably satisfactory to Company, that is reasonably satisfactory in form,
substance and scope to the Company, that registration by the Buyer of the Notes,
the Warrants, the Conversion Shares, the Warrant Shares and/or the Interest
Shares (if any) is not required under the 1933 Act, or (y) transfers Registrable
Securities to an affiliate which is an accredited investor (in accordance with
the provisions of this Agreement) or in compliance with Rule 144, then in either
instance the Company shall permit the said transfer, and if applicable promptly
(and in all events within two (2) trading days after receipt by the Company of
each of the original documents and things to be delivered by the Buyer to effect
a conversion of the applicable Notes) instruct its transfer agent to issue one
or more certificates in such name and in such denominations as specified by the
Buyer
b. Removal of Legends. The Legend shall be removed and the Company
shall issue a certificate without such Legend to the holder of any Security upon
which it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Registrable Securities, including those represented by a
certificate(s) from which the Legend has been removed, or which were originally
issued without the Legend, shall be made only pursuant to an effective
registration statement (and to deliver a prospectus in connection with such
sale) or in compliance with an exemption from the registration requirements of
13
the 1933 Act. In the event the Legend is removed from any Security or any
Security is issued without the Legend and thereafter the effectiveness of a
registration statement covering the sales of such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to the holder of
such Security, the Company shall be entitled to require that the Legend be
placed upon any such Security which cannot then be sold pursuant to an effective
registration statement or Rule 144 or with respect to which the opinion referred
to in clause (y) next above has not been rendered, which Legend shall be removed
when such Security may be sold pursuant to an effective registration statement
or Rule 144 (or such holder provides the opinion with respect thereto described
in clause (y) next above.
c. Conversion of Notes. The Buyer shall have the right to convert the
Notes sold hereunder by delivering via facsimile an executed and completed
Notice of Conversion (as defined in the Notes) to the Company and delivering
within three (3) business days thereafter the original Notice of Conversion with
respect to the Notes then being converted by express courier to the Company.
Each date on which a Notice of Conversion is telecopied to the Company in
accordance with the provisions hereof shall be deemed a "Conversion Date." The
Company will transmit a certificate or certificates (collectively the
"Certificate") representing the shares of Common Stock issuable upon conversion
of any Notes converted pursuant to such Notice of Conversion (along with a
replacement Note representing the portion of any partially converted Notes not
so converted, if such partially converted Note is delivered to the Company in
accordance with the terms of the Notes) to the Buyer via express courier, within
three (3) business days after the relevant Conversion Date (the third business
day after the relevant Conversion Date shall be referred to hereinafter as the
"Deadline").
d. Injunctive Relief for Breach. The Company acknowledges that the
remedy at law for a breach of its obligations under Sections 5(a), 5(b) and 5(c)
above will cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly the Company agrees
that the remedy at law for a breach of its obligations under such Sections would
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of such Sections, the Buyer shall be entitled, in
addition to all other remedies at law or in equity (including without limitation
those remedies specified in Section 5(e) below), 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.
e. Liquidated Damages for Non-Delivery of Certificates. In addition to
the provisions of Section 5(d) above, the Company understands and agrees that a
delay in the issuance of the Certificates beyond the Deadline will result in
economic loss and other damages to the Buyer. As partial compensation to the
Buyer for such loss, the Company agrees to pay liquidated damages (and which the
Company acknowledges is not a penalty) to the Buyer for issuance and delivery of
the Certificates after the Deadline, in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
seven (7) business days from the date of delivery by the Buyer to the Company of
a facsimile Notice of Conversion (or, if later, from the date on which all other
14
necessary documentation duly executed and in proper form required for conversion
of Notes as described in this Agreement and in the Notes, including the original
executed Notice of Conversion, all in accordance with this Agreement only if
such necessary documentation has not been delivered to the Company within the
three (3) business day period after facsimile delivery to the Company of the
Notice of Conversion required in this Agreement)):
No. Business Days Late Liquidated Damages
---------------------- ------------------
(in US$)
1 $300
2 $400
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,000
10 $1,500
11+ $1,500 + $500 for
each Business Day Late
beyond 11 days
The Company shall pay the Buyer any liquidated damages incurred as
called for under this Section 5(e) by certified or cashier's check upon the
earlier of (i) issuance of the Certificates to the Buyer or (ii) each monthly
anniversary of the receipt by the Company of the Buyer's Notice of Conversion.
Nothing herein shall limit the Buyer's right to pursue actual damages for the
Company's failure to issue and deliver the Certificates to the Buyer in
accordance with the terms of this Agreement or for breach by the Company of this
Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell the Notes and the
Warrants at Closing is subject to the satisfaction, on or before the Closing
Date as described herein, 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:
a. The parties shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, and the parties shall have delivered
the respective documents or signature pages thereof (via facsimile or otherwise
as permitted in the Escrow Agreement) to the Escrow Agent.
b. The Buyer shall have delivered to the Escrow Agent on behalf of the
Company the Purchase Price by wire transfer of immediately available funds
pursuant to the wiring instructions provided to the Buyer by the Escrow Agent.
15
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer on or before the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase the Notes and the Warrants is
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for the sole benefit of
the Buyer and may be waived by the Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, and the parties shall have delivered
the respective documents or signature pages thereof (via facsimile or otherwise
as permitted in the Escrow Agreement), to the Escrow Agent on behalf of each
other;
b. The representations and warranties of the Company shall be true and
correct in all material respects as of the date made and as of the Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company on or prior to the Closing Date. The Buyer may require a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by the Buyer.
c. On or before the Closing Date, the Company shall have issued and
have duly executed by the authorized officers of the Company, and delivered to
the Escrow Agent on behalf of the Buyer, the original Notes and Warrants being
sold at the Closing.
d. The Common Stock shall be listed for on the Nasdaq Small Cap Market
or another national securities exchange or market, and trading in the Common
Stock on such market shall not have been suspended by the SEC or other relevant
regulatory agency.
e. The Company shall not have received, as of the Closing Date, from
the National Association of Securities Dealers or any other relevant regulatory
agency, any written or oral communication as to its actual or potential
ineligibility for the Common Stock to continue trading on a national securities
exchange or market.
16
f. The Escrow Agent shall have received on behalf of the Buyer the
opinion of Company counsel, dated as of the Closing Date, in the form attached
hereto as Exhibit E.
g. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
h. The Company shall have executed the security agreement in the form
attached hereto as Exhibit F (the Security Agreement), and filed financing
statements with respect to the Collateral (as defined in the Security Agreement)
as required under the laws of the State of Florida to perfect a security
interest in the Collateral.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. In the event of any litigation regarding the
interpretation or application of this Agreement, the parties irrevocably consent
to jurisdiction in any of the state or federal courts located in the State of
Illinois and waive their respective rights to object to venue in any such court,
regardless of the convenience or inconvenience thereof to any party. Service of
process in any civil action relating to or arising out of this Agreement
(including also all Exhibits or Addenda hereto) or the transaction(s)
contemplated herein may be accomplished in any manner provided by law. The
parties hereto agree that a final, non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
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 signature pages from such counterparts have been delivered to the
Escrow Agent on behalf of the other party. In the event any signature page is
delivered by facsimile transmission (which the parties agree is an acceptable
form of delivery), the party using such means of delivery shall cause three (3)
additional originally executed signature pages to be physically delivered to the
Escrow Agent on behalf of the other party within two (2) business days after the
execution and delivery hereof.
c. Headings; Gender, Etc. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, the feminine to the masculine and neuter, and the
neuter to the masculine and feminine, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
17
the Section or paragraph in which such word appears. If any date specified
herein falls upon a Saturday, Sunday or public or legal holidays, the date shall
be construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For purposes of this Agreement, a "business day" is any
day other than a Saturday, Sunday or public or legal holiday.
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 and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by U. S. Mail or delivered personally or
by courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
If to the Company: Thermacell Technologies, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000.0000
Facsimile: (000) 000.0000
Attention: Mr. John Pidorenko,
Chief Executive Officer
With a copy to: Xx. Xxxxxx Xxxxxxx, Chief Financial Officer
000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxx, Xxxxxxx 00000
Telephone: 000.000.0000
Facsimile: 727.441.8185
If to the Buyer, at the address on the signature page of this Agreement. Each
party shall provide written notice to the other party of any change in address.
Notices of conversion for the Notes need only be sent to the Company at the
Sarasota, Florida address noted above (or such other address as may be provided
in writing to the Buyer).
18
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld), and in any event any assignee of
the Buyer shall be an accredited investor (as defined in Regulation D).
Notwithstanding the foregoing, if applicable, any of the entities constituting
the Buyer (if greater than one (1) entity) may assign its rights hereunder to
any of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company; provided, however, that any such assignment shall not
release such assigning entity from its obligations hereunder unless such
obligations are assumed by such affiliate and the Company has prior to such
assignment and assumption consented in writing to the same; and no such
assignment shall be made unless it is made in accordance with any applicable
securities laws of any applicable jurisdiction. Any request for an assignment
made hereunder by the Buyer shall if requested by the Company be accompanied by
an opinion by counsel reasonably satisfactory to the Company, that is in form,
substance and scope reasonably satisfactory to the Company, that such assignment
is proper under applicable law.
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 8(1), the representations and warranties of the Company and the Buyer
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 8 shall survive the final Closing of the purchase and sale of
Securities purchased and sold hereby for a period of twelve (12) months after
such Closing.
j. Publicity. The Company and the Buyer shall have the right
to review before issuance by the other, any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without prior consultation with or
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations.
k. Further Assurance. 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 Closing shall not have occurred
on or before ten (10) business days from the date hereof, this Agreement shall
terminate at the close of business on such date. Neither party may unilaterally
terminate this Agreement after the Closing for any reason other than a material
breach of this Agreement by the non-terminating party. Such termination shall
not be the sole remedy for a breach of this Agreement by the non-terminating
19
party, and each party shall retain all of its rights hereunder at law or in
equity. Notwithstanding anything herein to the contrary, a party whose breach of
a covenant or representation and warranty or failure to satisfy a condition
prevented the Closing shall not be entitled to terminate this Agreement.
m. Remedies; Indemnification. No provision of this Agreement providing
for any specific remedy to a party shall be construed to limit such party to the
specific remedy described, and any other remedy that would otherwise be
available to such party at law or in equity shall be so available. Nothing in
this Agreement shall limit any rights a party may have with any applicable
federal or state securities laws with respect to the transactions contemplated
hereby. The Company acknowledges that the remedies at law for any breach of its
obligations under this Agreement are inadequate and that in addition thereto the
Buyer shall be entitled to equitable relief, including injunction and specific
performance, in the event of any such breach, without the necessity of
demonstrating the inadequacy of money damages. To the extent permitted by law,
the Company will indemnify, hold harmless and defend the Buyer, the directors,
officers and each person who controls the Buyer within the meaning of the 1933
Act or the 1934 Act, if any, and any underwriter (as defined in the 0000 Xxx)
for the Buyer, and the directors and the officers of, and each person, if any,
who controls, any such underwriter within the meaning of the 1933 Act or the
1934 Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, together with actions,
proceedings or inquiries by any regulatory or self regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
this Agreement or in a Registration Statement or the omission or alleged
omission to state a material fact therein required to be stated or necessary to
make the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading, or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations").
n. Buyer's Expenses. The Company agrees to pay US$2,500.00 out of
escrow at Closing to the law firm of Xxxxx & Lardner as partial reimbursement
for Buyer's legal fees incurred as a result of the transactions contemplated
herein. The Escrow Agent is and shall be instructed to disburse such funds at
Closing along with the Escrow Agent's documentation/closing fee and any other
fees and expenses to be paid at the Closing in accordance with the Company's
instructions to the Escrow Agent.
20
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
[SIGNATURE PAGE FOLLOWS]
Securities Purchase Agreement - Exhibits and Schedules
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Registration Rights Agreement
Exhibit D Escrow Agreement
Exhibit E Opinion of Counsel for Thermacell Technologies, Inc.
Exhibit F Security Agreement
Schedule 3(c) Outstanding Options, Warrants, Registration Rights, etc.
21
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
NOVEMBER 12, 1999]
COMPANY:
THERMACELL TECHNOLOGIES, INC.
By:___________________________________________
Mr. John Pidorenko, Chief Executive Officer
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., its General Partner
By:____________________________________________
Xx. Xxxxxx X. Xxxxxxxxx, Chief Operating Officer
Buyer's Address: 000 Xxxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000.000.0000
Telecopier: 312.427.5396
22
Schedule 3(c)
Outstanding Options to Purchase Common Stock:
Outstanding Warrants to Purchase Common Stock:
Promissory Notes Convertible Into Common Stock:
(1) Convertible Note issued to the Augustine Fund, L.P., on March 24,
1999.
(2) Convertible Note issued to the Augustine Fund, L.P., on June 25,
1999.
Commitments to Sell and Register Common Stock:
---------------------------------------------
23
EXHIBIT A (Form of Note)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
DATE: NOVEMBER 12, 1999
NOTE # 01 U.S.$360,000.00
THERMACELL TECHNOLOGIES, INC.
NINE PERCENT (9%) REDEEMABLE CONVERTIBLE PROMISSORY NOTE
DUE NOVEMBER 1, 2002
THIS NOTE is one of a duly authorized issue of Notes (a "Note" or the
"Notes") of Thermacell Technologies, Inc., a corporation duly organized and
validly existing under the laws of the State of Florida, U.S.A. (the "Company")
designated as its Nine Percent (9%) Redeemable Convertible Notes Due November 1,
2002, in an aggregate principal face value for all Notes of this series of Three
Hundred Sixty Thousand and 00/100 United States Dollars (US$360,000.00).
FOR VALUE RECEIVED, the Company promises to pay to THE AUGUSTINE FUND,
L.P., the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of Three Hundred Sixty Thousand and 00/100 United
States Dollars (US$360,000.00) on November 1, 2002 (the "Maturity Date"), and to
pay interest on the principal sum outstanding, at the rate of nine percent (9%)
per annum due and payable in quarterly installments in arrears, on June 30,
September 30, December 31 and March 31 of each year during the term of this
Note, with the first such payment to be made on March 31, 2000. Accrual of
interest on the outstanding principal amount, payable in cash or common stock of
the Company at the Company's option, shall commence on the date hereof and shall
continue until payment in full of the outstanding principal amount has been made
or duly provided for. The interest so payable will be paid to the person in
whose name this Note (or one or more predecessor Notes) is registered on the
1
records of the Company regarding registration and transfers of the Note (the
"Note Register"); provided, however, that the Company's obligation to a
transferee of this Note arises only if such transfer, sale or other disposition
is made in accordance with the terms and conditions of that Securities Purchase
Agreement of even date herewith between the Company and The Augustine Fund, L.P.
(the "Securities Purchase Agreement").
The principal of, and interest on, this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal of and any and
all accrued and unpaid interest due upon this Note on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the record Holder of
this Note as of the fifth business day (as defined in the Securities Purchase
Agreement) prior to the Maturity Date and addressed to such Holder at the last
address appearing on the Note Register. The forwarding of such funds shall
constitute a payment of outstanding principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this Note to
the extent of the sum represented by such payment plus any amounts so deducted
or withheld. Except as herein provided, this Note may not be prepaid without the
prior written consent of the Holder.
This Note is subject to the following additional provisions:
1. Note Exchangeable. The Note is exchangeable commencing thirty (30)
days from the date hereof for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same, but not of denominations of less than Fifty Thousand United States Dollars
(US$50,000.00) without the Company's written consent. No service charge will be
made for such registration or transfer or exchange.
2. Withholding. The Company shall be entitled to withhold
from all payments of principal or interest pursuant to this Note any amounts
required to be withheld under the applicable provisions of the United States
income tax or other applicable laws at the time of such payments.
3. Transfer/Exchange of Note; Registered Holder; Opinion of Counsel;
Legend. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "1933 Act") and applicable
state securities laws. Prior to due presentment for transfer of this Note, the
Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company's Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not his Note be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary.
2
The Holder understands and acknowledges by its acceptance hereof that
(i) except as provided in the Securities Purchase Agreement and in that
Registration Rights Agreement attached as Exhibit C to the Securities Purchase
Agreement (the "Registration Rights Agreement"), both such documents
incorporated herein by reference, this Note and the shares of common stock in
the Company issuable upon conversion thereof as herein provided ("Conversion
Shares") 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, or (b) the Holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, substance and scope to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other regulation and/or exemption under the 1933 Act or the rules and
regulations of the United States Securities and Exchange Commission (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 (other than pursuant to the terms of the Securities Purchase
Agreement and the Registration Rights Agreement) or to comply with the terms and
conditions of any exemption thereunder.
Any Conversion Shares issued upon conversion of this Note, and if
applicable, any common stock of the Company issued in payment of interest as
herein provided, shall, if and only to the extent required by law, bear legends
in similar form to the legends set forth on the first page of this Note.
4. Conversion of Note into Common Stock; Redemption by the Company.
---------------------------------------------------------------
(a) The Holder of this Note is entitled, at its option, at any time
commencing the earlier of (i) the date on which the Registration Statement (as
defined in the Securities Purchase Agreement) is declared effective by the SEC;
or (ii) the date which is ninety (90) days after the date first written at the
top of this Note, to convert all or a portion of the original principal face
amount of this Note into shares of common stock in the Company, $.0001 par value
per share (defined hereinafter as the "Common Stock"), at a conversion price
(the "Conversion Price") for each share of Common Stock equal to one hundred
five percent (105%) of the average of the closing bid prices for the Common
Stock for the three (3) trading days immediately preceding the Conversion Date
(as hereinafter defined), as reported on the National Association of Securities
Dealers OTC Bulletin Board Market (or on such other national securities exchange
or market as the Common Stock may trade at such time). Such conversion shall be
achieved by submitting to the Company the fully completed form of conversion
notice attached hereto as Exhibit I (a "Notice of Conversion"), executed by the
Holder of this Note evidencing such Holder's intention to convert this Note or
the specified portion (as herein provided) hereof. A Notice of Conversion may be
submitted via facsimile to the Company at the telecopier number for the Company
provided in the Securities Purchase Agreement (or at such other number as
requested in advance of such conversion in writing by the Company), and if so
3
submitted the original Notice of Conversion shall be delivered to the Company
within three (3) business days. The Company and the Holder shall each keep
records with respect to the portion of this Note then being converted and all
portions previously converted; upon receipt by the Holder of the requisite
Conversion Shares, the outstanding principal amount of the Note shall be reduced
by the amount specified in the Notice of Conversion resulting in such Conversion
Shares. The Company may from time to time, but is not required to, instruct the
Holder and the Holder shall surrender this Note along with the Notice of
Conversion for the purposes of making a notation thereon as to the amount of
principal being converted, or of canceling this Note and issuing a new Note in
the same form with the principal amount of such Note reduced by the amount
converted. Such new or notated Note shall be delivered to the Holder within
three (3) business days after such Holder's surrender to the Company. No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. Accrued interest on the converted portion of the Note shall be
payable upon conversion thereof, in cash or Common Stock at the Conversion
Price, at the Company's option. The date on which a notice of conversion is
given (the "Conversion Date") shall be deemed to be either the date on which the
Company receives from the Holder an original Notice of Conversion duly executed,
or, if earlier, the date set forth in such Notice of Conversion if the original
Notice of Conversion is received by the Company within three (3) business days
thereafter.
In all cases, the Company shall deliver the Conversion Shares to the
Holder within three (3) business days after the Conversion Date with respect to
such Conversion Shares being delivered, and at the address specified in the
Notice of Conversion. The Company acknowledges that the Securities Purchase
Agreement requires that the Company pay liquidated damages for late or
non-delivery of Conversion Shares.
Subject to the provisions of Paragraph 4(b) hereof, at the Maturity
Date, the remaining portion of this Note which remains unconverted, if any, plus
accrued interest shall be automatically converted into shares of Common Stock as
of the Maturity Date, as if the Holder had converted the remaining portion of
this Note according to the provisions of this Section 4, with the Conversion
Date being equivalent in such event to the Maturity Date, as if the Holder had
provided the Company with a Notice of Conversion with respect to the outstanding
principal amount of this Note on the Maturity Date. Other than a conversion made
on the Maturity Date in accordance with this paragraph, conversions of this Note
must be effected in increments of at least Ten Thousand U.S. Dollars ($10,000)
of principal amount of this Note (or such lesser outstanding principal amount of
this Note).
(b) Notwithstanding anything herein to the contrary, the Company shall
have the right (but not the obligation) to redeem all or any portion of this
Note, provided the Company is not then in violation of any of its obligations
under this Note or under the Securities Purchase Agreement or any addenda
thereto, under the following conditions. At any time prior to delivery of any
Notice of Conversion (in this Section 4(b), a "Notice") to the Company by the
Holder in accordance with the terms of this Note, the Company may give to the
Holder notice (a "Redemption Notice") that it intends to pay the Holder the Cash
Redemption Amount (as hereinafter defined) with respect to all or such portion
of the Note referred to in the Redemption Notice. The "Cash Redemption Amount"
4
shall be equal to one hundred percent (100%) of the face amount of the portion
of the Note to be redeemed pursuant to the Redemption Notice, and shall be paid
to the Holder according to the Holder's written instructions to the Company
within three (3) business days after delivery of the Redemption Notice with
respect to such Note or portion thereof to be redeemed. If the Company does not
redeem within the time limits herein specified and according to the terms of
this Section 4(b), then unless waived by the Holder, the Redemption Notice shall
be null and void, and the Holder may convert all or such portion of this Note as
the Holder in its discretion determines.
5. Obligations of the Company Herein are Unconditional. No provision of
this Note shall alter or impair the obligation of the Company, which obligation
is absolute and unconditional, to repay the principal amount of this Note at the
time, place, rate, and in the coin currency, hereinabove stated. This Note and
all other Notes now or hereafter issued in replacement of this Note on the same
or similar terms are direct obligations of the Company. This Note ranks at least
equally with all other Notes now or hereafter issued under the terms set forth
herein. The Conversion Price and number of shares of Common Stock issuable upon
conversion shall be subject to adjustment from time to time as provided in
Section 6 below.
6. Adjustments.
-----------
(a) In the event the Company should at any time or from time to time,
after the date of this Note, fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock (equal to at least ten percent
(10%) or more of the Company's then issued and outstanding shares of Common
Stock) or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of this Note shall be
increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(b) If the number of shares of Common Stock outstanding at any time
after the date of this Note is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price shall be appropriately increased so that the number of shares
of Common Stock issuable upon conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
(c) In the event the Company, at any time while all or any portion of
this Note is outstanding, shall be consolidated with or merged into any other
corporation or corporations or shall sell or lease all or substantially all of
its property and business as an entirety, then lawful provisions shall be made
5
as part of the terms of such consolidation, merger, sale or lease so that the
holder of this Note may thereafter receive in lieu of such Common Stock
otherwise issuable to such holder upon conversion of this Note, but at the
conversion rate which would otherwise be in effect at the time of conversion, as
hereinbefore provided, the same kind and amount of securities or assets as may
be issuable, distributable or payable upon such consolidation, merger, sale or
lease with respect to Common Stock of the Company.
7. Reservation of Shares. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Note, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Note, in addition to such other remedies as
shall be available to Holder, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase the number of
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including without limitation, using its best
efforts to obtain the requisite stockholder approval necessary to increase the
number of authorized shares of the Company's Common Stock.
8. Note Holder Not Deemed a Stockholder. No Holder, as such, of this
Note shall be entitled (prior to conversion of this Note into Common Stock, and
only then to the extent of such conversion) to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Note be construed to confer upon the Holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Note of the
Conversion Shares which he or she is then entitled to receive upon the due
conversion of all or a portion of this Note. Notwithstanding the foregoing, the
Company will provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
9. No Limitation on Corporate Action. No provisions of this Note and no
right or option granted or conferred hereunder shall in any way limit, affect or
abridge the exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its Certificate of Incorporation, reorganize, consolidate or
merge with or into another corporation, or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights and
powers.
10. Representations of Holder.Upon conversion of all or a portion of
this Note, the Holder shall confirm in writing, in a form reasonably
satisfactory to the Company, that the Conversion Shares so purchased are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and that such Holder is an Accredited Investor (as defined in Rule 501(a)
of Regulation D promulgated under the 1933 Act). The Company acknowledges that
6
Holder's duly executed certification on the Notice of Conversion is satisfactory
confirmation of the facts set forth in the immediately preceding sentence. If
such Holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such Holder's conversion of all or a
portion of the Note that the Company receive such other representations as the
Company considers reasonably necessary to assure the Company that the issuance
of its securities upon conversion of the Note shall not violate any United
States or state securities laws.
11. Waiver of Demand, Presentment, Etc. The Company hereby expressly
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
12. Attorney's Fees. The Company agrees to pay all costs and
expenses, including without limitation reasonable attorney's fees, which may be
incurred by the Holder in collecting any amount due under this Note or in
enforcing any of Holder's conversion rights as described herein.
13. Default. If one or more of the following described "Events of
Default" shall occur:
(a) The Company shall continue in default in the payment of principal
or interest on this Note for a period of ten (10) days after a notice
of default is received by the Company with respect to any such
payment; or
(b) Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration Rights
Agreement, or in any certificate or financial or other written
statement heretofore or hereafter furnished by or on behalf of the
Company in connection with the execution and delivery of this Note or
the Securities Purchase Agreement or the Registration Rights Agreement
shall be false or misleading in any material respect at the time made
and the Holder shall have provided seven (7) days prior written notice
to the Company of the alleged misrepresentation or breach of warranty
and the same shall continue uncured for a period of seven (7) days
after such written notice from the Holder; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or
obligation of the Company under this Note or the Securities Purchase
Agreement and such failure shall continue uncured for a period of seven
(7) days after written notice from the Holder of such failure; or
(d) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as they become due;
(iii) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (iv) apply for, or consent to the
appointment of, a trustee, liquidator, or receiver for its or for a
substantial part of its property or business; or
7
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without
the Company's consent and such appointment is not discharged within
sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within sixty (60) days
thereafter; or
(g) Any money judgment, writ or Note of attachment, or similar process
in excess of Two Hundred Thousand United States Dollars (US$200,000.00)
in the aggregate shall be entered or filed against the Company or any
of its properties or assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of fifteen (15) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed within
sixty days after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a petition
filed in, any such proceeding; or
(i) The Company shall have its Common Stock delisted from the NASDAQ
Small Cap Market or suspended from trading thereon, and shall not have
its Common Stock relisted on the same or another national securities
exchange such as the OTC Bulletin Board Market, or have such suspension
lifted, as the case may be, within ten (10) business days; or
(j) The Company shall have received a notice of default on the payment
of any debt(s) aggregating in excess of Two Hundred Thousand United
States Dollars (US$200,000.00) beyond any applicable grace period;
then, or at any time thereafter, and in any and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
in one instance shall not be deemed to be a waiver in another instance or for
any other prior or subsequent Event of Default) at the option of the Holder and
in the Holder's sole discretion, the Holder may immediately accelerate the
maturity hereof, whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Company, anything
herein or in any Note or other instrument contained to the contrary
notwithstanding, and the Holder may immediately, and upon the expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law or equity.
8
14. Note a General Unsecured Obligation of the Company. This Note
represents a general unsecured obligation of the Company. No recourse shall be
had for the payment of the principal of, or the interest on, this Note, or for
any claim based thereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer, director, or agent of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
15. Enforceability. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.
16. Entire Agreement. This Note and Exhibit I attached hereto, the
Securities Purchase Agreement and the Exhibits attached thereto and the
Registration Rights Agreement and the Exhibits attached thereto (if any)
constitute the full and entire understanding between the Company and the Holder
with respect to the subject matter hereof and thereof. Neither this Note nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
17. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the state of Delaware without giving effect to
applicable principles of conflict of law.
18. Headings. Headings in this Note are for convenience only,
and shall not be used in the construction of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized, all as of the date first
hereinabove written.
THERMACELL TECHNOLOGIES, INC.
By: _____________________________________
Xxxx Pidorenko, Chief Executive Officer
9
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $ of the Nine Percent
(9%) Convertible Note Due November 1, 2002, No. 01, into shares of Common Stock
of Thermacell Technologies, Inc. (the "Company"), according to the terms and
conditions set forth in such Note, as of the date written below. If securities
are to be issued to a person other than the Undersigned, the Undersigned agrees
to pay all applicable transfer taxes with respect thereto.
The Undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the SEC under the 1933 Act.
The Undersigned also represents that the Conversion Shares are being
acquired for the Holder's own account and not as a nominee for any other party.
The Undersigned represents and warrants that all offers and sales by the
Undersigned of the Conversion Shares shall be made pursuant to registration of
the same under the 1933 Act, or pursuant to an exemption from registration under
the 1933 Act. The Undersigned acknowledges that the Conversion Shares shall if
(and only if) required by law contain the legend contained on page 1 of the
Note.
Conversion Date:* ________________________
Applicable Conversion Price: ______________________
Holder (Print True Legal Name): _____________________________
----------------------------------------------
(Signature of Duly Authorized Representative of Holder)
Address of Holder: ____________________________
----------------------------
* This original Notice of Conversion must be received by the Company by the
third business day following the Conversion Date.
10
EXHIBIT B (the Form of Warrant)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
THERMACELL TECHNOLOGIES, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. 01 Number of Shares: 150,000
Date of Issuance: November 12, 1999
Thermacell Technologies, Inc., a Florida corporation (the "Company"),
hereby certifies that, for value received, The Augustine Fund, L.P., and
permitted assigns, the registered holder hereof ("Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company upon surrender of
this Warrant, at any time after the date hereof, but not after 5:00 P.M. New
York time on the Expiration Date (as defined herein) One Hundred Fifty Thousand
(150,000) fully paid and nonassessable shares of Common Stock (as defined
herein) of the Company (each a "Warrant Share" and collectively the "Warrant
Shares") at a purchase price of U.S.$.75 per share (the "Exercise Price") in
lawful money of the United States. The number of Warrant Shares purchasable
hereunder and the Exercise Price are subject to adjustment as provided in
Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant
shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the Company which
are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
1
"Expiration Date" means the date which is three (3) years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the City of New York or
the State of New York (a "Holiday"), the next preceding date that is not a
Holiday.
"Market Price" means the closing bid price on the day prior to the date
on which the Exercise Form is delivered to the Company, as quoted on the
National Association of Securities Dealers' OTC Bulletin Board Market or such
other national securities exchange or market on which the Common Stock may then
be listed.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement between the holder hereof (or its predecessor in interest) and the
Company for the purchase of this Warrant and the other Securities (as defined in
the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant or any Warrant
Shares, or of any interest in either thereof which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended, or
applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S.$.75 per share.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors; and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M.
New York Time on the Expiration Date. The rights represented by this Warrant may
be exercised by the Holder, as a whole or from time to time in part (except that
this Warrant shall not be exercisable as to a fractional share) by (i) delivery
of a written notice, in the form of the exercise form attached as Exhibit I
hereto (an "Exercise Form"), of the Holder's election to exercise this Warrant,
2
which notice shall specify the number of Warrant Shares to be purchased, (ii)
payment to the Company of an amount equal to the Warrant Exercise Price
multiplied by the number of Warrant Shares as to which the Warrant is being
exercised (plus any applicable issue or transfer taxes) in immediately available
funds (either by wire transfer or a certified or cashier's check drawn on a
United States bank), for the number of Warrant Shares as to which this Warrant
shall have been exercised, and (iii) the surrender of this Warrant, properly
endorsed, at the principal office of the Company (or at such other agency or
office of the Company as the Company may designate by notice to the Holder).
In addition, and notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company in a cashless exercise, including a written
calculation of the number of Warrant Shares to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price, the Holder shall
surrender this Warrant for, and the Company shall issue in respect thereof, the
number of Warrant Shares determined by multiplying the number of Warrant Shares
to which the Holder would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
The Warrant Shares so purchased shall be deemed to be issued to the
Holder or Holder's designees, as the record owner of such Warrant Shares, as of
the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment (or notice of an
election to effect a Cashless Exercise) shall have been made for such Warrant
Shares as set forth above. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), a certificate
or certificates for the Warrant Shares so purchased, registered in the name of,
or as directed by, the Holder, shall be delivered to, or as directed by, the
Holder within three (3) business days after such rights shall have been so
exercised.
(b) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except (i) it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be deemed to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
(c) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute only involves the number of
Warrant Shares receivable by the Holder under a Cashless Exercise, the Company
shall submit the disputed calculations to an independent accounting firm of
national standing via facsimile within two (2) business days of receipt of the
Exercise Form. The accountant shall audit the calculations and notify the
Company and the Holder of the results no later than two (2) business days from
the date it receives the disputed calculations. The accountant's calculation
3
shall be deemed conclusive absent manifest error. The Company shall then issue
the appropriate number of shares of Common Stock in accordance with this
Section.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale. If
such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of the Warrant that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of the Warrant shall not violate any United States or state
securities laws.
4
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
(a) The holder of this Warrant understands that (i) this Warrant and the
Warrant Shares have not been and are not being registered under the Securities
Act or any state securities laws (other than as described in the Securities
Purchase Agreement and the Registration Rights Agreement), and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement) under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any reclassification,
capital reorganization or other change of outstanding shares of the Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock),
the Company shall cause effective provision to be made so that the Holder shall
have the right thereafter, by exercising this Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that
could have been purchased upon exercise of the Warrant immediately prior to such
reclassification, capital reorganization or other change, consolidation or
merger. Any such provision shall include provision for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations or mergers. If the
consideration received by the holders of Common Stock is other than cash, the
value shall be as determined by the Board of Directors of the Company acting in
good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect
a stock dividend, a stock split, a stock combination, or a reverse stock split
of the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking reasonably satisfactory to the Company, issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen or
5
destroyed. In the event the holder hereof asserts such loss, theft or
destruction of this Warrant, the Company may require such holder to post a bond
issued by a surety reasonably satisfactory to the Company with respect to the
issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company: Thermacell Technologies, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000.0000
Facsimile: (000) 000.0000
Attention: Mr. John Pidorenko,
Chief Executive Officer
If to Holder, to it at the address set forth below Holder's signature on the
signature page of the Securities Purchase Agreement (Holder is defined therein
as the "Buyer"). Each party shall provide notice to the other party of any
change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the laws
of the State of Delaware. Headings are for convenience only and shall not affect
the meaning or construction of any of the provisions hereof. This Warrant shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of the Holder and its successors and assigns. The Holder may not
assign this Warrant except in accordance with applicable federal and state
securities laws. The Holder shall immediately notify the Company with respect to
any permitted assignment of this Warrant.
Section 13. Date. The date of this Warrant is November 12, 1999. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
[SIGNATURE PAGE FOLLOWS]
6
[SIGNATURE PAGE TO XXXXXXX # 00 DATED NOVEMBER 12, 1999]
THERMACELL TECHNOLOGIES, INC.
By: __________________________________
Mr. John Pidorenko, Chief Executive Officer
7
EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
THERMACELL TECHNOLOGIES, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of U.S. $ (unless
effected by a Cashless Exercise in accordance with the terms of the Warrant),
the aggregate Warrant Exercise Price of such Warrant Shares in full pursuant to
the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant, except under
circumstances that will not result in a violation of the 1933 Act or applicable
state securities laws.
(ii) The undersigned requests that the stock certificates for the Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to the terms of the Warrant in the name of the Holder (or such
other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated: , ____.
-----------------------
HOLDER: ___________________________________
By: ________________________________________
Name: _____________________________________
Title: ______________________________________
Address: ___________________________________
Number of Warrant Shares
Being Purchased: ________________________
8
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
November 12, 1999, by and between Thermacell Technologies, Inc., a corporation
organized under the laws of the State of Florida, U.S.A., with headquarters
located at 0000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000 (the
"Company"), and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. In connection with the Securities Purchase Agreement by and between
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyer (i) a number of
the Company's Nine Percent (9%) Redeemable Convertible Promissory Notes Due
November 1, 2002 (the "Notes") and (ii) a number of Warrants (as defined in the
Securities Purchase Agreement). The Notes are convertible in accordance with
their respective terms into common stock of the Company, $.0001 par value per
share ("Common Stock"). The Warrants are exercisable in accordance with their
terms into Common Stock. The Common Stock into which the Notes are convertible
may be referred to herein as the "Conversion Shares." The Common Stock into
which the Warrants are exercisable may be referred to herein as the "Warrant
Shares." In accordance with the terms of the Notes, shares of Common Stock may
be issued in payment of interest ("Interest Shares").
B. The Buyer has agreed to purchase and pay for the Notes and
the Warrants as provided in the Securities Purchase Agreement. Upon each such
purchase, the Company will issue and deliver the Notes and the Warrants to the
Buyer.
C. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
AGREEMENTS
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 by all parties hereto,
the Company and the Buyer hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
i. "Investor" or "Investors" means the Buyer and any permitted
transferee(s) or assignee(s) thereof to whom the Buyer assigns this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
iii. "Registrable Securities" means the Conversion Shares and the
Interest Shares (if any) underlying or issued in accordance with or upon
conversion of the Notes, the Warrants, the Warrant Shares, and any shares of
capital stock issued or issuable from time to time (with any adjustments) on or
in exchange for or otherwise with respect to either of the foregoing (including
without limitation any shares issued pursuant to Section 2(b) hereinafter).
iv. "Registration Statement" or "Registration Statements"
means a registration statement or statements of the Company filed under the 0000
Xxx.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. (i) The Company shall use its best efforts
to prepare, and, on or before the date that is thirty (30) days after the date
of the Closing, file with the SEC a Registration Statement or Registration
Statements (as necessary) on Form SB-2 (or, if such form is unavailable for such
a registration, on such other form as is available for such a registration of
all of the Registrable Securities) (any of which may contain a combined
prospectus with other registrations by the Company), covering the resale by the
Buyer of all of the Registrable Securities, which Registration Statement(s), to
the extent allowable under the 1933 Act and the rules promulgated thereunder
(including without limitation Rule 416), shall state that such Registration
Statement(s) also covers such indeterminate number of additional shares (the
"Indeterminate Shares") of Common Stock as may become issuable upon conversion
of the Notes to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(ii) To the extent the Indeterminate Shares for any reason can not be
registered under the Registration Statement(s) required under Section 2(a)(i)
above, then with respect to such Indeterminate Shares, the Company shall use its
best efforts to prepare, and, on or before the date that is ten (10) days after
the Indeterminate Shares become issuable, file with the SEC a Registration
Statement or Registration Statements (as necessary) on Form SB-2 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration of all of the Indeterminate Shares) (any of which may
contain a combined prospectus with other registrations by the Company), covering
the resale of all of the Indeterminate Shares.
A copy of the Registration Statement(s) (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of the Buyer, which approval
shall not be unreasonably withheld or denied) the Buyer and its counsel prior to
its filing or other submission.
b. Liquidated Damages. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within ninety (90) days after the date of the Closing (other than by
reason of any act or failure to act in a timely manner by the Investor or its
counsel) (the "Registration Deadline") or if, after the Registration Statement
has been declared effective by the SEC, sales cannot be made pursuant to the
2
Registration Statement (by reason of a suspension, a stop order, the Company's
failure to update the Registration Statement, or any other reason outside the
control of the Investor), or (ii) the Common Stock is not listed or included for
quotation on the National Association of Securities Dealers Automated Quotation
system Small Cap Market ("NASDAQ Small Cap"), or another United States national
securities exchange or market; then in either case (in either case, a "Delay")
the Company will make payments to the Investors, as liquidated damages and in
such amounts and at such times as shall be determined pursuant to this Section
2(b) as relief and as a partial remedy for the damages to the Investor by reason
of any such delay in or reduction of its ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity), an amount to be determined as follows. The Company shall
pay to the Investor an amount equal to the purchase price for the Notes
purchased at the Closing (including, without limitation, any Notes that have
been converted into Conversion Shares then held by such Investors) (the
"Aggregate Share Price") multiplied by two hundredths (.02) times the sum of:
(i) the number of months (prorated for partial months) beginning the day after
the Registration Deadline and ending on the date the Registration Statement is
declared effective by the SEC, provided, however, that there shall be excluded
from such period any delays which are reasonably attributable to changes
required by the Investor in the Registration Statement with respect to
information relating to the Investor, including, without limitation, changes to
the plan of distribution, or to the failure of the Investor to conduct its
review of the registration statement pursuant to Section 2(a) above in a
reasonably prompt manner; (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective by the SEC; and (iii) the
number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the NASDAQ Small Cap or another United
States national exchange after the Registration Statement has been declared
effective.
By way of illustration, if the Registration Statement were to become
effective two months after the end of the Registration Deadline, the Company
would pay US$20,000 for the first month, and $20,000 for the second month, based
upon an assumed (for purposes of this illustration) aggregate sale of
US$1,000,000 worth of Notes (and thereafter would continue to pay US$20,000 per
month until the Registration Statement becomes effective).
Such amounts shall be paid in cash or, at the Investor's option such
amounts may be convertible into Common Stock at the "Conversion Price" for the
Notes, as defined in the Notes. Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth in the Securities Purchase
Agreement and/or the Notes), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for the full amount owed up to the date of such interim payment at the end
of each thirty (30) day period.
3
Notwithstanding anything in this Section 2(b) to the contrary, the
Company shall not be subject to the penalties specified in this Section 2(b)
with respect to a delay in registering the Registrable Securities past the
Registration Deadline, provided that such delay is solely attributable to the
SEC or its examiners.
c. Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall send to the Investor written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company, to the extent permitted by
law, shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
will be included in the Registration Statement; provided that no portion of the
equity securities which the Company is offering for its own account shall be
excluded; provided, further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company.
Any exclusion of Registrable Securities shall be made pro rata among
the Investors seeking to include Registrable Securities, in proportion to the
number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right of the Investor to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
d. Eligibility for Form SB-2.The Company represents and warrants that
it meets the requirements for the use of Form SB-2 for registration of the
resale by the Buyer of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form SB-2. In the event that Form
SB-2 is not available for registration of the Registrable Securities, the
Company shall register the securities on another appropriate form.
4
3. RELATED OBLIGATIONS. In connection with the registration
of the Registrable Securities, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement(s) effective pursuant to Rule 415
at all times until the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future), (ii) the date as of which the Investors may immediately sell all
of the Registrable Securities without restriction pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto) or otherwise, or (iii) the
date on which none of the Notes is outstanding (the "Registration Period"),
which Registration Statement(s) (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement. In the event
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
or issuable upon conversion of the Notes, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the need therefor arises (based on the market
price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) promptly after the same
is prepared and publicly distributed, filed with the SEC, or received by the
Company, (i) one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto in each case relating to such Registration Statement (other than any
portion thereof which contains information for which the Company has sought
confidential treatment) and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement; and (ii)
such number of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned (or to be owned) by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement(s) under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds (or has the right to hold) Registrable Securities
being offered reasonably requests (but in no event greater than three states in
the Unites States), (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
5
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause more than nominal expense or burden to the
Company, or (e) make any change in its charter or bylaws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
g. The Company is subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act").
For so long as the Buyer beneficially owns any of the Securities, 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 reports under the 1934 Act even if the 1934 Act or the rules and
regulations hereunder would permit such termination.
h. At the request of the Investor, but no more than three (3) times in
any one ninety (90) day period, the Company shall furnish, on the date of
effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Investor may reasonably request an opinion, dated as of such
requested date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Company's transfer agent
and/or to the Investors. Such opinion shall be substantially as set forth in
Exhibit I attached hereto.
i. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
6
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance reasonably satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3(i). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, the
Investors may reasonably request and registered in such names as the Investors
may request. Not later than the date on which any Registration Statement
registering the resale of Registrable Securities is declared effective, the
Company shall deliver (at its expense) to its transfer agent instructions,
accompanied by any required opinion of counsel, that permit sales of unlegended
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions.
l. Upon the Closing, the Company shall promptly secure the listing of
the Registrable Securities then underlying the Notes then purchased by the Buyer
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then 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 shares of Registrable Securities from time to time
issued under the terms of this Agreement and the Registration Rights Agreement.
The Company shall at all times comply in all respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers and the Nasdaq Small Cap Market (and
such other national exchange on which the Common Stock may be listed, as
applicable).
7
m The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
n. The Company shall comply with all applicable laws relating to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the Securities Exchange Act of
1934, as amended, and all the rules and regulations promulgated by the SEC).
o. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OTHER OBLIGATIONS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
a. At least ten (10) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
8
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses incurred by the Company
pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION. The Company agrees to pay all reasonable
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company. If Investors who hold a majority of Registrable
Securities undertake to resell the Registrable Securities in an underwritten
public offering, the Company will reasonably cooperate as is customarily
required in an underwritten public offering. The Investors who participate in
such a public offering shall pay all expenses incurred in connection with such
registration, whether incurred by them or the Company, including without
limitation, underwriting discounts and commissions, all registration, listing
and qualification fees, printing charges, and fees and disbursements of
accountants and counsel for the Company.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 0000 Xxx) for the
Investors, and the directors and the officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, together with actions,
proceedings or inquiries by any regulatory or self regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
9
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of the material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company or the failure of the Investor to comply with federal or state law
relating to the offering or sale of the Registrable Securities; and (iv) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based upon any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
10
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that the
Company shall have the right to approve the selection of counsel and legal fees
and expenses of such firm shall be reasonable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
11
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, (vi) such transferee shall submit evidence
reasonably satisfactory to the Company that the Transferee is an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment. Notwithstanding anything herein to the contrary, no assignment of
the rights represented by this Agreement shall be effective unless in compliance
with any applicable securities laws of any applicable jurisdiction.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
12
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company: Thermacell Technologies, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000.0000
Facsimile: (000) 000.0000
Attention: Mr. John Pidorenko,
Chief Executive Officer
With a copy to: Xx. Xxxxxx Xxxxxxx, Chief Financial Officer
000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: 727.441.8185
If to the Buyer, at the address on the signature page of the Securities
Purchase Agreement. Each party shall provide written notice to the other party
of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. The Company acknowledges that the
remedies at law for any breach of its obligations under this Agreement are
inadequate and that in addition thereto the Buyer shall be entitled to equitable
relief, including injunction and specific performance, in the event of any such
breach, without the necessity of demonstrating the inadequacy of money damages.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the state of Delaware without regard to the principles of
conflict of laws. 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. The Company irrevocably consents to the
jurisdiction of the state and federal courts of the state of Illinois in any
suit or proceeding arising out of or based on this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of inconvenient forum
to the maintenance of such suit or proceeding. Service of process in any civil
action relating to or arising out of this Agreement (including also all Exhibits
or Addenda hereto) or the transaction(s) contemplated herein may be accomplished
in any manner provided by law.
e. This Agreement, the Escrow Agreement, the Notes, the Warrants, and
the Securities Purchase Agreement (including all exhibits and addenda thereto)
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the other agreements previously identified supersede
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.
13
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of the
signature page of this Agreement bearing the signature of the party so
delivering this Agreement to the Escrow Agent, with the original executed
Agreement to be delivered to the Escrow Agent via overnight delivery.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
[SIGNATURE PAGE FOLLOWS]
14
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
NOVEMBER 12, 1999]
COMPANY:
THERMACELL TECHNOLOGIES, INC.
By:_____________________________________
Mr. John Pidorenko, Chief Executive Officer
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., a General Partner
By:____________________________________________
Xx. Xxx Xxxxxxxxx, Chief Operating Officer
BUYER'S ADDRESS:
000 Xxxx Xxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000.000.0000
Telecopier: 312.427.5396
15
EXHIBIT I TO REGISTRATION RIGHTS AGREEMENT
[DATE]
[NAME AND ADDRESS OF BUYER]
[NAME AND ADDRESS OF COMPANY'S TRANSFER AGENT]
Re: Registration of Certain Securities of Thermacell Technologies, Inc.
Ladies and Gentlemen:
We are counsel to Thermacell Technologies, Inc., a Florida Corporation
(the "Company"), whose stock is listed for trading on the Nasdaq Small Cap
Market utilizing the symbol "VCLL." We understand that The Augustine Fund, L.P.
(the "Holder") has purchased from the Company (a) a number of the Company's Nine
Percent (9%) Redeemable Convertible Notes Due November 1, 2002 (the "Notes"),
and (b) a number of warrants (the "Warrants") to purchase common stock of the
Company, $.0001 par value per share ("Common Stock"). The Notes are convertible
in accordance with their terms and the terms of the Securities Purchase
Agreement (as hereinafter defined) into Common Stock. The Notes and the Warrants
were purchased pursuant to a Securities Purchase Agreement between the Company
and the Holder dated as of November 12, 1999 (including all Exhibits and Addenda
thereto, the "Securities Purchase Agreement").
Pursuant to a Registration Rights Agreement between the Company and the
Holder dated as of November 12, 1999, the Company agreed with the Holder, among
other things, to register the Common Stock into which the Notes (and, as
applicable, Common Stock issued (i) in payment of interest on the Notes and/or
(ii) in payment of certain penalties for late or non-registration of the said
Common Stock) are convertible and into which the Warrants are exercisable
(collectively, the "Registrable Securities") under the Securities Act of 1933,
as amended (the "1933 Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, the Company is a
reporting issuer under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and has filed a registration statement on Form SB-2, No.
___________, on [DATE SB-2 WAS FILED OR AMENDED TO INCLUDE THE REGISTRABLE
SECURITIES] (the "Registration Statement") with the United States Securities and
Exchange Commission relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[OTHER INTRODUCTORY AND SCOPE OF EXAMINATION LANGUAGE TO BE INSERTED,
AS IS USUAL AND CUSTOMARY FOR SUCH OPINION LETTERS.]
Based upon the foregoing, we are of the opinion that the Registrable
Securities have been registered under the 1933 Act and may thus be resold by you
pursuant to the Registration Statement.
Very truly yours,
[NAME OF LAWYER/FIRM]
16
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of November 12,
1999, by and among Thermacell Technologies, Inc., a corporation organized under
the laws of the State of Florida, U.S.A., with headquarters located at 0000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000 (the "Company"), the
buyer set forth on the execution page hereof (the "Buyer") and H. XXXXX XXXXXXX,
XX., a duly licensed attorney who practices law in the State of North Carolina,
U.S.A., as Escrow Agent (the "Escrow Agent").
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in that Securities Purchase Agreement between the
Company and the Buyer dated of even date herewith (the "Securities Purchase
Agreement").
W I T N E S S E T H:
WHEREAS, the Buyer and the Company have entered into the Securities
Purchase Agreement, pursuant to which the Company has agreed to sell, and the
Buyer has agreed to purchase, at the Closing, a number of Notes along with a
number of Warrants (collectively, the "Securities"); and
WHEREAS, the Buyer and the Company have agreed to effectuate the
Closing utilizing an escrow arrangement as described in this Agreement; and
WHEREAS, it is a condition of the Company's obligation to sell, and the
Buyer's obli-gation to purchase, the Securities, that this Agreement be executed
and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
1.1 Deposit. On the Closing Date, by wire transfer of immediately
available funds in United States Dollars, Buyer shall deposit the full purchase
price for the Securities (the "Escrow") with the Escrow Agent, to be held by the
Escrow Agent in a separate non-interest bearing account (the "Escrow Account"),
established at Wachovia Bank, N.A., (the "Bank"), subject to the terms and
provisions contained herein. At the request of the Company the Escrow Agent
shall provide the Company with all Bank statements, notices and other writings
which it receives from the Bank in connection with the Escrow Account.
1
2. DISBURSEMENT OF ESCROW/SECURITIES.
2.1 Disbursement. At the Closing, upon receipt by the Escrow Agent of
all of the moneys, documents, and things from the respective parties with
respect to such Closing as described in the Securities Purchase Agreement and as
further described in Sections 2.1(a) and 2.1(b) below, the Escrow Agent shall
deliver to each party via facsimile the documents and things (or if requested by
the parties, only the signature pages thereto) to have been delivered by the
other party in accordance with the Securities Purchase Agreement and this
Agreement. The Escrow Agent shall transfer, by the next business day following
the Closing, by wire transfer to the Company the full Escrow then held, less any
charges and fees agreed to be paid by the Company. The Escrow Agent shall, upon
receipt thereof, deliver (via overnight delivery service) to the Company
originals of all other documents and things listed in Section 2.1(b) below. The
Escrow Agent shall, upon receipt thereof, deliver (via overnight delivery
service) originals of all of the documents and things listed in Section 2.1(a)
below to the Buyer at the address provided in writing by the Buyer to the Escrow
Agent.
The Closing may take place via facsimile. This shall be accomplished in
the following manner. Each party shall deliver via facsimile to the Escrow
Agent, at the telecopier number provided on the signature page to this
Agreement, the first page and the fully executed signature page to each of the
documents and things to be executed by such party at the Closing. If stock
certificates, Notes or Warrants are to be delivered, each such certificate or
document shall be delivered via overnight courier to the Escrow Agent. Upon
receipt of the requisite documents and things via facsimile or otherwise from
each party, the Escrow Agent shall in turn send to each party the documents and
things received from the other party. Thereafter, upon receipt by the Escrow
Agent of the Purchase Price and the original Notes and Warrants being sold at
such Closing, the Escrow Agent shall wire transfer the Escrow (less any charges
and fees agreed to be paid by the Company to third parties) to the Company.
Nothing herein to the contrary notwithstanding, the Escrow Agent shall not
release the Escrow to the Company prior to taking physical possession of the
Notes and Warrants being sold at the Closing; likewise, the Escrow Agent shall
not release the original Notes or Warrants being sold at the Closing prior to
receipt in the Escrow Account of the Purchase Price for such Securities. Each
party closing the transactions contemplated herein via facsimile shall deliver
via overnight courier service to the Escrow Agent complete originals of all
documents and things (as called for in Sections 2.1(a) and 2.1(b) below) within
one (1) business day after such delivery via facsimile. Each party hereby agrees
that a facsimile of each document and thing to be delivered hereunder, once
delivered to the Escrow Agent, shall be binding upon such party in the same
manner as would an original to the full extent allowed by applicable law.
(a). Items to be Delivered by the Company to the Escrow Agent.
--------------------------------------------------------
At the Closing. On the Closing Date, the Company shall deliver to the
Escrow Agent on behalf of the Buyer, unless otherwise stated, three (3) fully
executed (by the authorized officer(s) of the Company) originals of each of the
following documents: (I) the Securities Purchase Agreement, (II) the
Registration Rights Agreement of even date herewith between the Company and the
2
Buyer, (III) a Note or Notes representing the full Purchase Price, along with
one (1) copy of each Note issued by the Company; (IV) the fully executed Warrant
along with one (1) copy of the Warrant; (V) the executed original Legal Opinion
(Exhibit E to the Securities Purchase Agreement) along with one (1) copy
thereof; and (VII) this Agreement.
(b) Items to be Delivered by the Buyer to the Escrow Agent.
-------------------------------------------------------
At the Closing. On or before the Closing Date, the Buyer shall deliver
to the Escrow Agent on behalf of the Company, unless otherwise stated, three (3)
fully executed originals of each of the following documents: (I) the Securities
Purchase Agreement, (II) the Registration Rights Agreement of even date herewith
between the Company and the Buyer, (III) this Agreement; and (IV) the full
purchase price for the Securities being purchased at such Closing, via wire
transfer to the Escrow Account.
2.2 Controversies. If any controversy arises between two or more of the
parties hereto, or between any of the parties hereto and any person not a party
hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five (5) days after the Escrow
Agent receives a copy thereof. The Escrow Agent shall assume that no such
controversy has arisen unless and until it receives written notice from the
Buyer or the Company that such controversy has arisen, which refers specifically
to this Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies shall be
disbursed or otherwise transferred except in accordance with this Section 2,
Section 4 or Section 5.1(b). Without limiting the foregoing, neither Escrow
Agent nor the Buyer shall be entitled to any right of offset against the Escrow
or otherwise entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of his
duties hereunder is subject to the following terms and conditions, which the
parties to this Agreement hereby agree shall govern and control with respect to
the rights, duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to investigate
the correctness or accuracy of any document or to determine whether or not the
signatures contained in said documents are genuine or to require documentation
or evidence substantiating any such document or signature.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto. The
Escrow Agent shall not be prohibited from owning an equity interest in the
Company, the Buyer, another buyer, any of their respective subsidiaries or any
third party that is in any way affiliated with or conducts business with either
the Company, the Buyer or another buyer.
3.6 The Company and the Buyer specifically acknowledge that the Escrow
Agent is a practicing attorney in Raleigh, North Carolina U.S.A., and may have
worked with the Company, the Buyer, or affiliates of either of them on other
unrelated transactions, and that they and each of them has specifically
requested that the Escrow Agent draft the documents for the said transactions
and act as Escrow Agent with respect to the said transactions. Each party
represents that it has retained legal and other counsel of its choosing with
respect to the transactions contemplated herein and in the Securities Purchase
Agreement, and is satisfied in its sole discretion with the form and content of
the documentation drafted by the Escrow Agent. The Escrow Agent may own an
equity interest in the Company and/or may be an equity owner of the Buyer or
another buyer, and may increase or sell any such interest, so long as in
accordance with any and all applicable law. The said parties hereby waive any
objection to the Escrow Agent so acting based upon conflict of interest or lack
of impartiality. The Escrow Agent agrees to act impartially and in accordance
with the terms of this Agreement and with the parties' respective instructions,
so long as they are not in conflict with the terms of this Agreement.
4. TERMINATION. This Agreement shall terminate on the earlier of (a)
the date on which the Escrow and all other escrowed documents and things
described herein shall have been fully disbursed in accordance with the terms
and conditions of this Agreement, (b) any other date agreed to by the Buyer and
the Company, or (c) the next business day after the expiration of the last of
the Notes and the Warrants to be issued by the Company in accordance with the
terms of the Securities Purchase Agreement, in which event the Escrow shall be
disbursed in full to the Company.
4
5. MISCELLANEOUS.
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company and the Buyer each agree, jointly and severally, to
indemnify the Escrow Agent for, and to hold him harmless against, any loss
incurred without willful misconduct or bad faith on the Escrow Agent's part,
arising out of or in connection with the administration of this Agreement,
including the costs and expenses of defending himself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall not apply to a party with respect
to a direct claim against the Escrow Agent by such party alleging in good faith
a breach of this Agreement by the Escrow Agent, which claim results in a final
non-appealable judgment against the Escrow Agent with respect to such claim.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyer, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction
sitting in Wake County, North Carolina or in any appropriate federal court, in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Amendments. This Agreement may be modified or amended only
by a written instrument executed by each of the parties hereto.
5.3 Notices. All communications required or permitted to be given under
this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Securities Purchase Agreement and, in the case of
the Escrow Agent, at 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx Xxxxxxxx
X.X.X. 00000.
5.5 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of North
Carolina.
5.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
THERMACELL TECHNOLOGIES, INC.
By:_____________________________________
Mr. John Pidorenko, Chief Executive Officer
THE BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., its General
Partner
By:____________________________________________
Xx. Xxxxxx X. Xxxxxxxxx, Chief Operating Officer
ESCROW AGENT:
------------------------------------------
H. XXXXX XXXXXXX, XX., ESQ.
Address: 0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx XXX 00000
Telephone 000.000.0000
Telecopier 919.785.3116
6
EXHIBIT E
[Date]
BUYER'S NAME AND ADDRESS
x/x X. Xxxxx Xxxxxxx, Xx., Xxx., as Escrow Agent
Law Offices of H. Xxxxx Xxxxxxx, Xx.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Re: Purchase and Sale of an Aggregate of up to US$360,000.00 in
Principal Amount of Nine Percent (9%) Convertible Notes (the "Notes") of
Thermacell Technologies, Inc., Due November 1, 2002.
Ladies and Gentlemen:
We have acted as counsel to Thermacell Technologies, Inc. ("the
Company"), a corporation organized under the laws of the State of Florida, in
connection with the proposed issuance and sale of an aggregate of US$360,000.00
in face value of Notes of the Company pursuant to that Securities Purchase
Agreement between you and the Company (including all Exhibits and Appendices
thereto) (the "Agreement"), in a closing with an aggregate purchase price of Two
Hundred Seventy Thousand United States Dollars ($270,000.00). The Agreement also
requires the Company to issue warrants (the "Warrants") to purchase common stock
of the Company, $.0001 par value per share ("Common Stock"). This opinion is
delivered pursuant to the terms of the Agreement. The Agreement provides that
the Notes and the Warrants have been or will be issued to you in accordance with
and in the amounts set forth your Agreement.
For purposes of rendering this opinion, We have examined and relied
upon the Agreement, along with such other documents, agreements and records as
we deemed necessary to render the opinions set forth below. In addition we have
relied upon the written certifications of certain executive officers of the
Company.
In connection with this examination, we have assumed the following: (i)
that the Agreement has been executed by each of the parties thereto in the same
form as the forms which we have examined; (ii) the genuineness of all
signatures, the legal capacity of natural persons, the authenticity and accuracy
of all documents submitted to us as originals, and the conformity to originals
of all documents submitted to us as copies (including facsimiles); (iii) that
the Agreement has been duly and validly authorized, executed and delivered by
the party or parties thereto, on the dates noted thereon; and (iv) that written
certifications to us of certain executive officers of the Company were true and
correct when made.
Based upon the foregoing, to the best of our knowledge after reasonable
inquiry, we are of the opinion that:
1. The Company is subject to the reporting requirements of
Sections 13(a) or 15(d) of such The Securities Exchange Act of 1934, as amended.
2. The Company complies with the eligibility requirements for use of
Form SB-2 (or equivalent Form) to file the registration statement contemplated
by the Agreement for the pur-pose of registering with the Securities and
Exchange Commission the Common Stock into which the Notes are convertible and
into which the Warrants are exercisable.
3. The Agreement, when fully and properly executed by duly authorized
officers of all parties thereto, shall be enforceable in accordance with their
terms, except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors' rights generally, and except as to compliance
with federal, state and foreign securities laws, as to which no opinion is
expressed.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred. This opinion is as of the date hereof, and we undertake no obligation
to advise you of any changes after such date which may affect the opinions
expressed herein, whether or not such changes would, if now existing and known
to us, cause any change or modification to this opinion. This opinion is based
solely upon the laws of the United States and the state of _________, as
currently in effect, and does not include the interpretation or statement
concerning the laws of any other state or jurisdiction. Insofar as the
enforceability of the Agreement may be governed by the laws of other states, we
have assumed that such laws are identical in all aspects to the laws of the
State of _________.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Agreement, and may not be
relied upon by any other person or entity or for any other purpose without our
prior consent.
Very truly yours,
----------------------
