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EXHIBIT J
NOTE EXCHANGE AGREEMENT
AGREEMENT dated as of January 26, 1998 among Quantum Industrial
Partners LDC, a Cayman Islands exempted limited liability duration company
("QIP") and T/F Purifiner, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, pursuant to a certain Securities Purchase Agreement dated
June 19, 1997 by and between QIP and the Company, QIP purchased from the
Company, among other things, a promissory note in the original principal amount
of $2,000,000 dated as of June 19, 1997, a copy of which is attached hereto as
Exhibit A (the "Original Note");
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WHEREAS, the Company desires to issue the Exchange Note (as
hereinafter defined) in payment for the Original Note and has requested that QIP
accept the exchange; and
WHEREAS, QIP is willing to exchange the Original Note for the Exchange
Note on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Encumbrances" means all voting trusts, arrangements, stockholder
agreements, proxies, liens, encumbrances, transfer restrictions, preemptive
rights, security, interests or community property rights.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Note" shall have the meaning set forth in Section 2.1
hereof.
"Material Adverse Effect" means a material adverse effect on the
assets, properties, business, prospects, operations or condition, financial or
otherwise, of the Company.
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"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Agreement" means the Registration Rights Agreement
between the Company and QIP dated as of June 19, 1997, as amended by that
amendment dated as of the date hereof (the "Amendment"), in the form attached
hereto as Exhibit B.
"SEC Documents" means all documents required to have been filed by the
Company with the SEC under Sections 13, 14(a) and 15(d) of the Exchange Act
since its registration of its Common Stock under Section 12(g) of the Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE II
PURCHASE AND SALE
2.1 Exchange of the Original Note. The Company hereby agrees to issue
the Company's 12% Senior Subordinated Convertible Note in the aggregate
principal amount of $2,000,000, in the form attached hereto as Exhibit C (the
"Exchange Note"), in exchange for the Original Note, subject to the terms and
conditions herein set forth, and QIP hereby agrees to exchange the Original Note
for the Exchange Note, subject to the terms and conditions herein set forth.
2.2 Closing. The closing (the "Closing") of the issuance of the
Exchange Note in exchange for the Original Note shall take place at the offices
of Akin, Gump, Strauss, Xxxxx & Xxxx, L.LP., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 on the date hereof. All transactions at the Closing shall be deemed
to take place simultaneously. At the Closing:
(a) QIP shall deliver to the Company the Original Note duly endorsed.
(b) The Company shall issue and deliver to QIP the Exchange Note duly
registered in the name of QIP.
(c) The Company shall deliver to an account designated by Akin, Gump,
Strauss, Xxxxx & Xxxx, L.L.P., the amounts owed it pursuant to Section 6.2.
Additionally, in connection with the closing of the transactions
contemplated hereby, the Company and QIP shall enter into the Amendment and each
shall make the closing deliveries required thereby pursuant to Article VI,
Closing Deliveries.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to QIP that:
3.1 Corporate Existence and Power; Capitalization. The Company is a
corporation duly incorporated and validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers required to
carry on its business as now being conducted. The Company has no subsidiaries.
The Company is authorized or duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities make such
qualification necessary. The capitalization of the Company as of the date hereof
is set forth on Schedule 3.1 hereto. The SEC Documents describe accurately all
outstanding stock options, warrants and other rights to purchase any equity
securities of the Company. Except as set forth on Schedule 3.1, there are no
outstanding options, warrants, rights to subscribe to, or securities or rights
convertible or exercisable into or exchangeable for any shares of capital stock
of the Company or arrangements by which the Company is or may become bound to
issue additional shares of its capital stock other than pursuant to the Exchange
Note.
3.2 Corporate Authorization. The execution, delivery and performance
by the Company of this Agreement, the Exchange Note and the Amendment and the
consummation by the Company of the transactions contemplated hereby and thereby,
are within the Company's corporate power and have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement, the
Exchange Note and the Amendment have each been duly and validly executed by the
Company and constitute the valid and binding agreements of the Company, each
enforceable against the Company in accordance with its terms.
3.3 Governmental and Court Authorization. The execution, delivery and
performance by the Company of this Agreement, the Exchange Note and the
Amendment require no consent, approval or authorization of, or filing,
registration or qualification with, any governmental body, agency, official,
court or other authority that has not been obtained or made.
3.4 Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Exchange Note and the Amendment do not and will
not (A) contravene or conflict with the Company's certificate of incorporation
or by-laws, or (B) (i) contravene or conflict with or constitute a violation of
any provision of any federal or state law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company, (ii) require any
consent, approval or other action by any Person or constitute a default under or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of the Company or to a loss of any benefit to which the Company is
entitled under any provision of any agreement, contract, indenture, lease or
other instrument binding upon the Company or any license, franchise, permit or
other similar authorization held by the Company or (iii) result in the creation
or imposition of any Encumbrances on the Exchange Note.
3.5 SEC Documents; Disclosure Documents. Each report or proxy
statement delivered to QIP is a true and complete copy of such document as filed
by the Company with the SEC. The Company has delivered to QIP all SEC Documents
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filed with the SEC since January 1, 1994. The Company has filed in a timely
manner all documents that the Company was required to file with the SEC under
Sections 13, 14(a) and 15(d) of the Exchange Act since its registration of its
Common Stock under Section 12(g) of the Exchange Act. As of their respective
filing dates, all SEC Documents filed by the Company with the SEC complied in
all material respects with the Exchange Act or the Securities Act, as
applicable. None of the SEC Documents as of their respective dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto. The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
present the financial position of the Company at the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring adjustments).
3.6 Due Authorization and Validity of the Exchange Note. The Exchange
Note has been duly authorized and when delivered against payment therefor as
contemplated hereby will be validly issued, fully paid and non-assessable and
will not be subject to any preemptive or similar rights. The Common Stock
issuable upon conversion of the Exchange Note has been reserved for issuance
and, when issued upon conversion of the Exchange Note, will be validly issued,
fully paid and non-assessable and will not be subject to any preemptive or
similar rights.
3.7 Absence of Certain Changes. Except for liquidity issues which
have been fully disclosed by the Company to QIP, in connection with QIP's
representation on the Board of Directors of the Company or otherwise, since
September 30, 1997, there has been no Material Adverse Effect.
3.8 Litigation. Except as set forth in the SEC Documents or as set
forth in Schedule 3.8, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of their respective properties before any court or
arbitrator or any governmental body, agency, official or authority which (i)
could reasonably be expected to have a Material Adverse Effect or (ii) in any
manner would enjoin, alter, call into question, affect or delay the transactions
contemplated by this Agreement.
3.9 FIRPTA. The Company is not a "United States real property holding
corporation" within the meaning of Section 896(c)(2) of the Internal Revenue
Code of 1986, as amended.
3.10 No Undisclosed Liabilities. The Company has no liabilities or
obligations not disclosed in the SEC Documents and those incurred in the
ordinary course of the Company's business since September 30, 1997.
3.11 No Brokers. The Company has taken no action which would give rise
to any claim by any Person for brokerage commissions, finders' fees or similar
payments by QIP relating to this Agreement or the transactions contemplated
thereby.
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3.12 Disclosure. No representation, warranty or statement made by the
Company in this Agreement, the Registration Agreement or any agreement,
certificate, statement or document furnished by or on behalf of the Company in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, misleading.
3.13 Transactions with Affiliates. Except as set forth in the SEC
Documents or as set forth in Schedule 3.13, there are no business relationships
or related party transactions that would be required to be disclosed therein by
Item 404 of Regulation S-K of the SEC that are not so disclosed.
3.14 Intellectual Property. Except as disclosed in the SEC Documents
or Schedule 3.14 hereto:
(a) the Company owns, possesses, controls or is licensed under,
such patents (or applications therefor), trademarks and service marks (and
registrations thereof), copyrights (and registrations thereof), utility models,
inventions, know-how, trade secrets, and other intellectual property (all of
aforesaid referred to as "Necessary Intellectual Property Rights") as are
necessary for the operation of the business now conducted or operated by the
Company, including but not limited to the property listed on Schedule 3.14;
(b) to the knowledge of Company all Necessary Intellectual
Property Rights are valid and subsisting and the Company is unaware of any fact
which, individually or in the aggregate, would materially detrimentally affect
the validity, ownership or enforceability of the Necessary Intellectual Property
Rights;
(c) the Company is not aware of, or has not received notice of,
any asserted right with respect to any of the Necessary Intellectual Property
Rights which, if determined unfavorably with respect to the interests of the
Company would have a Material Adverse Effect;
(d) the Company is unaware of any patent, trademark, copyright
or other intellectual property license to which the Company is a party as
licensor or licensee, which has been revoked, terminated or canceled, or which
is likely or subject to being revoked, terminated or canceled, where the
revocation, cancellation or termination would have a Material Adverse Effect;
and
(e) the Company has not been notified or advised, has not been
the recipient of a claim, or is otherwise not aware, that any activity of the
Company infringes or violates the patent, trademark, copyright or other
intellectual property right of any third party.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QIP
QIP hereby represents and warrants, to the Company as of the date
hereof that:
4.1 Organization; Existence. QIP is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
and QIP has all necessary corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now being conducted.
4.2 Corporate Authorization. The execution, delivery and performance
by QIP of this Agreement and the Amendment and the consummation by QIP of the
transactions contemplated hereby and thereby are within QIP's corporate powers
and have been duly authorized by all necessary corporate or other action on the
part of QIP.
4.3 Governmental and Court Authorization. The execution, delivery and
performance by QIP of this Agreement and the Amendment require no consent,
approval or authorization of, or filing, registration or qualification with, any
governmental body, agency, official, court or authority that has not been
obtained or made.
4.4 Non-Contravention. The execution, delivery and performance by QIP
of this Agreement and the Amendment do not and will not (A) contravene or
conflict with the certificate of incorporation or bylaws of it or (B) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
it.
4.5 Purchase for Investment; Legends.
(a) The Exchange Note is being acquired for its own account, and not
with a view to public distribution in violation of the Securities Act.
Notwithstanding the foregoing, QIP shall have the right at all times to sell or
otherwise dispose of all or any part of the Exchange Note or the Common Stock
issuable upon conversion of the Exchange Note pursuant to a registration, or
exemption therefrom, under the Securities Act. It is an "accredited investor" as
defined in Rule 501 under the Securities Act.
(b) Upon original issuance thereof, and until such time as the same
is no longer required under the applicable requirements of the Securities Act,
the Exchange Note (and all Common Stock issued in exchange therefor or
substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, ASSIGNED, OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
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ARTICLE V
COVENANTS
5.1 Registration. If and to the extent required by the Registration
Agreement, the Company agrees that it will register the Common Stock issuable
upon conversion of the Exchange Note for sale under federal and state securities
laws in accordance with the Registration Agreement.
5.2 Transactions with Affiliates. So long as the Exchange Note is
outstanding, without QIP's written consent, the Company shall not conduct any
business or enter into any transaction or series of similar transactions with
any Affiliate of the Company or any legal or beneficial owner of 5% or more of
any class of capital stock of the Company with an affiliate of such owner unless
the terms of such business, transaction or series of transactions are set forth
in writing and as favorable to the Company as terms that would be obtainable at
the time for a comparable transaction or series of similar transactions in arm's
length dealings with an unrelated third person. For purposes of this Section
5.2, the Buyer shall not be deemed to be an Affiliate. Notwithstanding the
foregoing, so long as the Exchange Note is outstanding, the Company shall not
make, or cause any other party to make, any loans to any shareholders of the
Company. The Company further agrees that it will not enter into any transaction
with any Affiliate or legal or beneficial owner of 5% or more of any class of
capital stock of the Company or an Affiliate or family member of such person
unless the terms of such transaction have been presented to and approved by the
Board of Directors of the Company.
5.3 Restricted Payments. So long as the Exchange Note is outstanding,
the Company will not, without the prior written consent of QIP, (i) declare or
pay any dividend or make any other payment or distribution on account of any
capital stock of the Company, (ii) purchase redeem or otherwise acquire or
retire for value any capital stock of the Company or (iii) except for
indebtedness set forth on Schedule 5.3 that the Company is already committed to
retiring, purchase, redeem, defease or otherwise acquire or retire for value any
indebtedness that is subordinate or pari passu to the Note (each a "Restricted
Payment").
ARTICLE VI
CLOSING DELIVERIES
Simultaneously with the execution and delivery of this Agreement, the
following deliveries shall be made:
6.1 Amendment to Registration Rights Agreement. QIP and the Company
shall enter into the Amendment.
6.2 Reimbursement. The Company shall have reimbursed QIP for its
out-of-pocket costs and expenses incurred in connection with the closing of the
transactions contemplated by this Agreement and the Amendment.
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6.3 Officer's Certificate. The Company shall deliver a certificate
from its Secretary attesting to the authenticity of the following documents: (i)
the certificate of incorporation of the Company; (ii) the by-laws of the
Company; and (iii) the resolutions of the Company authorizing the issuance of
the Exchange Note and the exchange of the Original Note therefore and the
reservation of shares of Common Stock issuable upon conversion of the Exchange
Note.
6.4 Opinion. The Company shall cause Atlas, Xxxxxxxx, Trop & Borkson,
P.A., to deliver to QIP an opinion in the form attached hereto as Exhibit C.
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ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing.
7.2 Indemnification. The Company shall indemnify and hold harmless
QIP (and its directors, officers, employees, Affiliates and permitted assigns)
from and against all losses, liabilities, charges, damages, deficiencies, costs
and expenses (including interest, penalties and attorney's fees and
disbursements) (collectively, "Loss"), sustained or incurred by QIP based upon
or arising out of (i) any inaccuracy or defect or breach of any representation
or warranty by the Company in this Agreement or (ii) any failure by the Company
to perform or observe any term or covenant of this Agreement or the Registration
Agreement required to be performed by it, and will reimburse QIP for any
reasonable legal or other expenses incurred by it in connection with the
investigating or defending of any Loss.
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ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices, requests and other communications to any
part hereunder shall be in writing (including telecopy or similar writing) and
shall be effective upon receipt and shall be given, if to QIP, to:
Quantum Industrial Partners LDC
c/o Curacao Corporation Company, N.V.
Kaya Flamboyan
Willemstad, Curacao
Netherlands, Antilles
Fax: 000-0-000-000
with a copy to:
Xxxxx Fund Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxx
Fax: (000) 000-0000
and
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
If the Company to:
T/F Purifiner, Inc.
0000 Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X.X. Xxxx
Fax: (000) 000-0000
with a copy to:
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
New River Center - Suite 1900
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxxxxxx
Fax: (000) 000-0000
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or to such other address or Person as any of the parties may designate by
written notice hereunder.
8.2 Amendments: No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by QIP and the Company, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law;
8.3 Expenses. All reasonable costs and expenses incurred by QIP in
connection with this Agreement and the Amendment shall be paid by the Company.
8.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
8.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
8.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
8.7 Entire Agreement. This Agreement, the Exchange Note and the
Amendment constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement.
8.8 Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought against
either of the parties in the courts of the State of New York in New York City,
or, if it has or can acquire jurisdiction, in the United States District Court
for the Southern District of New York, and each of the parties hereby consents
to the jurisdiction of such courts (and of the appropriate appellate courts) in
any such suit, action or proceeding and waives any objection to venue laid
therein. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the State of New York.
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8.9 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
QUANTUM INDUSTRIAL PARTNERS LDC
By: ____________________________
Name:
Title:
T/F PURIFINER, INC.
By: ____________________________
Name:
Title:
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