Exhibit 4.3
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE (THE "NOTE SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), AND NEITHER THIS NOTE NOR SUCH SHARES MAY BE SOLD, ENCUMBERED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN
EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
QUALITY PRODUCTS, INC.
6% Convertible Note Due August 31, 2001
$ 200,000.00 Columbus, Ohio
August 29, 1997
Quality Products, Inc., a Delaware corporation (herein called the
"Company"), for value received, hereby promises to pay to Xxxxxxx X. Xxxxx, with
an address at 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000-0143 (the "Holder"), the principal sum of Two Hundred Thousand Dollars
($200,000.00) on August 30, 2001, at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or
such other address as the Holder shall have specified by written notice to the
Company (the "Payment Address") , in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts, and, except as otherwise provided herein, to pay
interest (computed on the basis of a 365- day year, using the number of days
actually elapsed) at such Payment Address, in like coin or currency, on said
principal sum from the date hereof, quarterly on November 30, February 22, May
31 and August 31 in each year, commencing as of the date hereof, at the rate of
six percent (6%) per annum. Interest shall be payable at the rate of twelve
(12%) percent on the entire unpaid principal amount of this Note from and after
the time such entire unpaid principal amount shall have become due and payable
(whether at maturity or by acceleration).
The entire unpaid principal amount of this Note, together with interest
thereon shall, at the option of the Holder, exercised by written notice to the
Company, forthwith be accelerated and become and be due and payable without
further notice if the Company fails to pay any principal or interest payable
hereunder as and when same become due and payable and such failure shall not
have been cured within thirty (30) days after written notice thereof to the
Company by the Holder of this Note.
ARTICLE 1
Redemption or Conversion of Note.
1.1 Optional Conversion at Holder's Request. Subject to and upon compliance with
the provisions of this Section 1.1, the registered holder of this Note shall
have the right, at its option, at any time prior to 5:00 P.M., New York City
time on August 31, 2001, to convert the unpaid principal amount of this Note
into fully paid and nonassessable shares of Common Stock of the Company.
(a) In order to exercise the conversion privilege, the Holder of
this Note to be converted in whole or in part shall surrender
the Note at the address of the Company, together with the
notice annexed hereto as Exhibit A. The number of shares of
Common Stock issuable upon conversion shall be determined by
dividing the amount of principal being converted by the
conversion price in effect at such time. Such Holder shall
thereupon be deemed the holder of the shares of Common Stock
so issued and the principal amount of the Note shall be deemed
to have been paid in full.
(b) As promptly as practicable after the surrender of such Note
and the receipt of such notice, the Company shall issue and
shall deliver at such office to such holder, or on his written
order, a certificate or certificates for the number of full
shares issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Section 1.1.
(C) Each conversion shall be deemed to have been effected on the
date on which such Note shall have been surrendered and such
notice shall have been received by the Company, as aforesaid,
and the person in whose name any certificate or certificates
for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become on said date the
holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock
transfer books of the Company shall be closed shall constitute
the person in whose name the certificates are to be issued as
the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open,
but such conversion shall be at the conversion price in
effect on the date upon which such Note shall have been
surrendered.
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1.2 No Cash Payments in Lieu of Fractional Shares. No fractional shares of stock
or scrip representing fractional shares shall be issued upon conversion of
Notes.
1.3 Taxes on Shares Issued. The issue of stock certificates on conversion of
this Note shall be made without charge to the Holder for any issue, stamp or
other similar tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of the Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the reasonable satisfaction of the
Company that such tax has been paid or that no such tax is payable.
1.4 Reservation of Shares; Shares to be Fully Paid, Compliance with Governmental
Requirements; Listing of Common Stock.
(a) The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares, or out of shares held in its treasury,
sufficient shares to provide for the conversion of this Note.
(b) Before taking any action which would cause an adjustment reducing
the conversion price below the then par value, if any, of the shares of Common
Stock issuable upon conversion of this Note, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted conversion price.
(C) The Company covenants that all shares of Common Stock which may be
issued upon conversion of this Note will upon issue be fully paid and
nonassessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
(d) The Company further covenants that in the event that the Common
Stock shall be listed on any registered stock exchange or any other national
securities exchange (which term shall include the Nasdaq and the Nasdaq National
Market) the Company will, if permitted by the rules of such exchange, list and
keep listed and for sale so long as the Common Stock shall be so listed on such
exchange, upon official notice of issuance, all Common Stock issuable upon
conversion of this Note.
1.5 Reclassification, Reorganization or Merger. In case of any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the Company, or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which
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does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock or the class issuable upon conversion of
this Note) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
holder of this Note shall have the right thereafter by converting this Note, to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital reorganization and other
change, consolidation, merger, sale or conveyance by the Holder of the number of
shares of Common Stock which might have been acquired upon conversion of this
Note immediately prior to such reclassification, change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Note. The foregoing provisions of this Section 1.5 shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
1.6 Payment of Interest on Conversion. The Company shall not, upon conversion of
this Note, be required to pay any interest accrued thereon from the day
immediately following the immediately preceding interest payment date through
the date of conversion; provided, however, that the Company shall pay all unpaid
interest accrued through and including the immediately preceding interest
payment date.
1.7 Conversion Price. The conversion price is $.75 per share, subject to
adjustment as provided in section 1.8 herein.
1.8 Adjustment of Conversion Price. In case the Company shall on any one or more
occasions after the date hereof (1) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class) to all holders of its Common Stock, (2) split or subdivide
its outstanding Common Stock, or (3) combine its outstanding Common Stock into a
smaller number of shares, the conversion price in effect immediately prior
thereto shall be adjusted so that the Holder of the Note thereafter surrendered
for conversion shall be entitled to receive the number of shares of capital
stock of the Company which he would have owned or have been entitled to receive
after the happening of any of the events described above had such Note been
converted immediately prior to the happening of such event. Any adjustment made
pursuant to this Section 1.8 shall become effective immediately after the record
date in the case of a dividend or distribution or the effective date in the case
of a split, subdivision or combination. If, as a result of an adjustment made
pursuant to this Section 1.8, the Holder of the Note thereafter surrendered for
conversion shall become entitled to receive shares of two (2) or more classes of
capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a written statement delivered to the
Holder of the Note at his Payment Address) shall determine the allocation of the
adjusted conversion price between or among shares of such classes of capital
stock.
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ARTICLE 2
Registration under the Securities Act of 1933.
2.1 Piggyback Registration Rights. For the five year period commencing the date
hereof, the Company shall advise the Holder of the Note or the Note Shares by
written notice at least thirty (30) days prior to the filing of any registration
statement under the Act (other than a registration statement on Form S-4, Form
S-8 or subsequent similar forms) covering securities of the Company and will
upon the request of such holder, include in any such registration statement such
information as may be required to permit a public offering of the Note Shares;
provided, however, that if the registration statement relates to a public
offering by the Company of its securities and the managing underwriters advise
the Holder that the inclusion in the offering of securities being sold by the
Holder would adversely affect the ability of the Company to complete the public
offering (and other selling stockholders, if any, are similarly advised), then
the number of Note Shares to be registered by the Holder shall be reduced pro
rata to the extent necessary to reduce the amount of securities to be included
in the offering to the amount recommended by the managing underwriters. The
Holder hereby further agrees not to make any sales of the securities so included
for a period of one hundred eighty (180) days from the effective date of such
registration statement. The Company shall keep such registration statement
current for a period of up to six (6) months from the conclusion of such one
hundred eighty (180) day period; provided, however, that the Company shall not
be required to keep the registration statement effective beyond the date after
which the registration statement must be amended to include updated audited
financial statements. The Company shall supply prospectuses, qualify the Note
Shares for sale in such states as the Holder reasonably requests and furnish
indemnification in the manner as set forth in of this Article 2. Such holder
shall furnish information and indemnification in the manner set forth in of this
Article 2.
2.2 Demand Registration Rights. If the Holder of the Note Shares shall give
notice to the Company at any time during the two year period commencing October
1, 1998 hereof to the effect that such holder contemplates the transfer of all
of his Note Shares under such circumstances that a public offering distribution
(within the meaning of the Act) of the Note Shares will be involved, then the
Company shall, within sixty (60) days after receipt of such notice, file a
registration statement pursuant to the Act, to the end that the Note Shares may
be sold under said Act as promptly as practicable thereafter; provided that such
holder shall furnish the Company with appropriate information (relating to the
intentions of such holder) in connection therewith as the Company shall
reasonably request in writing. The Company shall keep such registration
statement current for such time, not to exceed six (6) months, as the Holder of
the Note Shares may request. Notwithstanding the foregoing, the filing of the
registration statement contemplated by this Section 2.2 may be delayed for a
period not exceeding six (6) months if the Board of Directors of the Company
determines that such delay is in the Company's best interests. The rights
granted pursuant to this Section 2.2 may only be exercised (i) on one occasion;
and (ii) subsequent to the acquisition of the Note Shares upon conversion of the
Note.
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2.3 Other Provisions Pertaining to Registration Rights. The following provision
of this Article shall also be applicable:
(a) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Article 2 hereof; provided,
however, that any Holder whose Note Shares are included in such registration
statement pursuant to this Article 2 shall, however, bear the fees of his own
counsel and accountants and any transfer taxes or underwriting discounts or
commissions applicable to the Note Shares sold by him pursuant thereto.
(b) The Company shall indemnify and hold harmless each such holder and
each underwriter, within the meaning of the Act, who may purchase from or sell
for any such holder any Note Shares from and against any and any losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement for any
post-effective amendment thereto or any registration statement under the Act or
any prospectus included therein required to be filed or furnished by reason of
this Article 2 or any application or other filing under any state securities law
caused by any omission or alleged omissions to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading to which such holder or any such underwriter or any of them may
become subject under the Act, the Securities Exchange Act of 1934, as amended,
or other Federal or state statutory law or regulation, at common law or
otherwise, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished or required to be furnished to
the Company by any such holder or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that any such
holder or underwriter shall at the same time indemnify the Company, its
directors, each officer signing the related registration statement, each person,
if any, who controls the Company within the meaning of such Act and each other
holder, from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus required to be filed
or furnished by reason of this Article 2 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or alleged
untrue statement or omission is based upon information furnished to the Company
by any such holder or underwriter expressly for use therein.
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ARTICLE 3
Miscellaneous
3.1 Notices. Notice shall be given to the Company by certified mail, return
receipt requested. Notices to the Company shall be addressed to Quality
Products, Inc., 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000, Attention: President,
or such other address as the Company may, from time to time advise the Holder.
Notices to the Holder shall be addressed to its respective Payment Address and
shall be given by certified mail, return receipt requested. Notices shall be
deemed given on the date mailed.
3.2 Governing Law. This Note shall be governed by the laws of the State of
Delaware applicable to agreements executed and to be performed wholly within
such state.
3.3 Waiver of Trial by Jury. In any legal proceeding to enforce payment of this
Note, the Company waives trial by jury and counterclaims, if any.
QUALITY PRODUCTS, INC.
By:/s/Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx,
President
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Exhibit A
NOTICE OF CONVERSION
[To be Signed Only Upon Conversion
of Part or All of Notes]
QUALITY PRODUCTS, INC.
The undersigned, the holder of the foregoing
Note, hereby surrenders such Note for conversion into shares of Common Stock of
QUALITY PRODUCTS, INC. to the extent of __________________ Dollars $_______
unpaid principal amount due on such Note, and requests that the certificates for
such shares be issued in the name(s) of , and delivered to
, whose address(es) is(are)
.
DATED:
____________________________________
(Signature)
(Signature must conform in all respects to name
of holder as specified on the face of the
Note.)
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