SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January 28,
1999, by and among ICC TECHNOLOGIES, INC., a corporation organized under the
laws of the State of Delaware (the "Company"), and Capital Ventures
International (the "Purchaser ").
WHEREAS:
A. The Company and the Purchaser 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 "Securities Act");
B. The Company desires to sell, and the Purchaser desires to purchase, upon
the terms and conditions stated in this Agreement, (i) convertible debentures in
the aggregate principal amount of Six Million Dollars ($6,000,000) of the
Company, in the form attached hereto as Exhibit A (the "Debentures"),
convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), and (ii) warrants (the "Warrants"), in the form attached
hereto as Exhibit B, to acquire an aggregate number of shares of Common Stock
equal to forty percent (40%) of the amount determined by dividing (a) the
aggregate principal amount of the Debentures being purchased hereunder by (b)
the Variable Conversion Price (as defined in the Debentures) in effect on the
First Closing Date (as defined below). The shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures are referred to herein as
the "Conversion Shares" and the shares of Common Stock issuable upon exercise of
or otherwise pursuant to the Warrants are referred to herein as the "Warrant
Shares." The Debentures, the Warrants, the Conversion Shares and the Warrant
Shares are collectively referred to herein as the "Securities."
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchaser, intending to be legally
bound, hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS
a. Purchase of Debentures and Warrants. The issuance, sale and purchase of
the Debentures shall take place in two (2) separate closings, the first of which
is hereinafter referred to as the "First Closing" and the second of which is
hereinafter referred to as the "Second Closing."
(i) On the First Closing Date, subject to the satisfaction (or waiver)
of the relevant conditions set forth in Section 6 and Section 7 below, the
Company shall issue and sell to the Purchaser, and the Purchaser agrees to
purchase from the Company, 58.33% of the Debentures and the Warrants for
$3,500,000 (the "First Purchase Price").
(ii) On the Second Closing Date, subject to the satisfaction (or
waiver) of the conditions set forth in Section 6 and Section 7 below, the
Company shall issue and sell to the Purchaser and the Purchaser shall
purchase from the Company, 41.67% of the Debentures and Warrants for
$2,500,000 (the "Second Purchase Price" and, together with the First
Purchase Price, the "Purchase Prices").
b. Form of Payment. At each Closing the Purchaser shall pay the aggregate
Purchase Price for the Debentures and Warrants being purchased by the Purchaser
at such closing hereunder by wire transfer to the Company, in accordance with
the Company's written wiring instructions, against delivery of the duly executed
Debentures and Warrants and the Company shall deliver such Debentures and
Warrants against delivery of such Purchase Price.
c. Closing Dates. Subject to the satisfaction (or waiver) of the relevant
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Debentures and the Warrants pursuant to this
Agreement shall be (i) in the case of the First Closing, 12:00 noon on January
29, 1999, (the "First Closing Date") and (ii) in the case of the Second Closing,
12:00 noon on the fifth (5th) trading day following notification of satisfaction
(or waiver) of the conditions to such closing set forth in Section 7(b) hereof
(the "Second Closing Date" and, together with the First Closing Date, the
"Closing Dates") (subject, in each case, to a two (2) business day grace period
at either party's option, but, in any event, not later than February 2, 1999 in
the case of the First Closing), or, in each case, such other time, as may be
mutually agreed upon by the Company and the Purchaser. The closings shall occur
at the offices of Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as follows:
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a. Purchase for Own Account, Etc. Purchaser is purchasing the Securities
for Purchaser's own account and not with a present view toward the public sale
or distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities or blue sky
laws or an exemption from such registration is available, and that the Company
has no present intention of registering any such Securities other than as
contemplated by the Registration Rights Agreement. Notwithstanding anything in
this Section 2(a) to the contrary, by making the representations herein, the
Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Securities are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Securities.
d. Information. Purchaser has been furnished 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 specifically requested by
Purchaser. Purchaser has been afforded the opportunity to ask questions of the
Company and have received what Purchaser believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its representatives shall modify,
amend or affect Purchaser's right to rely on the Company's representations and
warranties contained in Section 3 below. Purchaser understands that Purchaser's
investment in the Securities involves a high degree of risk.
e. Governmental Review. Purchaser understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as provided in
the Registration Rights Agreement, the Securities have not been and are not
being registered under the Securities Act or any state securities laws, and may
not be transferred unless (a) subsequently registered thereunder, or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
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in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred under an exemption from such
registration, or (c) sold under Rule 144 promulgated under the Securities Act
(or a successor rule) ("Rule 144"), or (d) sold or transferred to an affiliate
of Purchaser who is an Accredited Investor; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities 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 the
Registration Rights Agreement).
g. Legends. Purchaser understands that the Debentures and the Warrants and,
until such time as the Conversion Shares and Warrant Shares have been registered
under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser under Rule 144, the certificates for the Conversion
Shares and Warrant Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered or sold in the absence of an effective registration
statement for the securities under applicable securities laws unless
offered, sold or transferred under an available exemption from the
registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder), or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. Purchaser agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, pursuant to an effective registration statement or under an exemption
from the registration requirements of the Securities Act. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering 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 Purchaser the Company
may require that the above legend be placed on any such Security and Purchaser
shall cooperate in the prompt replacement of such legend.
h. Authorization; Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
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i. Residency. Purchaser is a resident of the jurisdiction set forth under
the Purchaser's name on the Execution Page hereto executed by Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchaser as follows:
a. Organization and Qualification. The Company and each of its subsidiaries
is a corporation duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and has the requisite corporate
power to own its properties and to carry on its business as now being conducted.
The Company and each of 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. For purposes of this Agreement, "Material Adverse Effect" shall mean any
material adverse effect on (i) the Securities, (ii) the ability of the Company
to perform its obligations hereunder and under the Debentures, the Warrants or
the Registration Rights Agreement or (iii) the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, taken as a
whole.
b. Authorization; Enforcement. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Debentures, the Warrants and the Registration Rights Agreement,
to issue and sell the Debentures and Warrants in accordance with the terms
hereof, to issue the Conversion Shares upon conversion of the Debentures in
accordance with the terms thereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance of this Agreement, the Debentures, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Debentures and the Warrants, and the issuance and reservation
for issuance of the Conversion Shares and the Warrant Shares) 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
required; and (iii) this Agreement constitutes, and, upon execution and delivery
by the Company of the Registration Rights Agreement, the Debentures and the
Warrants, such agreements will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
c. Stockholder Authorization. Neither the execution, delivery or
performance of its obligations under this Agreement, the Debentures, the
Warrants or the Registration Rights Agreement by the Company nor the
consummation by it of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Debentures or Warrants or
the issuance or reservation for issuance of the Conversion Shares or Warrant
Shares) require any consent of or authorization by the Company's stockholders.
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d. Capitalization. The capitalization of the Company as of the date hereof,
including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Debentures and the Warrants)
exercisable for, or convertible into or exchangeable for any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Debentures and exercise of the Warrants is set forth on Schedule 3(d). All
of such outstanding shares of capital stock have been, or upon issuance will be,
validly issued, fully paid and nonassessable. No shares of capital stock of the
Company (including the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as disclosed in
Schedule 3(d), as of the 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 or
exercisable or exchangeable for, 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, nor are any such issuances or
arrangements contemplated and (ii) 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 Securities Act (except the
Registration Rights Agreement). Except as set forth on Schedule 3(d), there are
no securities or instruments containing antidilution or similar provisions that
will be triggered by the issuance of the Securities in accordance with the terms
of this Agreement, the Debentures or the Warrants. The Company has furnished to
the Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("Certificate of Incorporation"),
the Company's By-laws as in effect on the date hereof (the "By-laws"), and all
other instruments and agreements governing securities convertible into or
exercisable or exchangeable for capital stock of the Company.
e. Issuance of Shares. The Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance, and, upon conversion of the Debentures and
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
f. No Conflicts. The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Debentures and the Warrants by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Debentures, the Warrants, the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
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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 U.S. 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, with respect to clause (ii), 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, By-laws 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 actual or possible violations, defaults or rights as would not, individually
or in the aggregate, have a Material Adverse Effect. The businesses of the
Company and its subsidiaries are not being conducted, and shall not be conducted
so long as the Purchaser owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for actual or
possible violations, if any, the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement, the Debentures or the
Warrants, in each case in accordance with the terms hereof or thereof. Except as
set forth on Schedule 3(f), the Company is not in violation of the listing
requirements of the Nasdaq National Market ("NASDAQ") and does not reasonably
anticipate that the Common Stock will be delisted by NASDAQ for the foreseeable
future.
g. SEC Documents, Financial Statements. Since December 31, 1995, 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 "Exchange
Act") (all of the foregoing filed prior to the date hereof and after December
31, 1995, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to the Purchaser true and complete copies of the SEC Documents, except
for the exhibits and schedules thereto and the documents incorporated therein.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, 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
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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. None of the statements made in any such SEC
Documents is, or has been, required to be amended under applicable law nor are
any such amendments presently contemplated. 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 applicable with respect thereto. Such
financial statements have been prepared in accordance with U.S. 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 not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, 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, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in the aggregate, if reflected in such financial
statements, would not have a Material Adverse Effect.
h. Absence of Certain Changes. Since December 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in Schedule 3(h) or in the SEC Documents
filed prior to the date hereof.
i. Absence of Litigation. Except as disclosed in the SEC Documents filed
prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body including, without limitation, the SEC or
NASDAQ, pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such which will
have a Material Adverse Effect. There are no facts which, if known by a
potential claimant or governmental authority, could give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable to the
Company or any of its subsidiaries, could have a Material Adverse Effect.
j. Intellectual Property. Each of the Company and its subsidiaries owns or
is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the best knowledge of the Company,
neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any Intangibles
which, individually or in the aggregate, if the subject of an unfavorable
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decision, ruling or finding, would have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has received written notice of any pending
conflict with or infringement upon such third party Intangibles. Neither the
Company nor any of its subsidiaries has entered into any consent,
indemnification, forbearance to xxx or settlement agreements with respect to the
validity of the Company's or its subsidiaries' ownership or right to use its
Intangibles and, to the best knowledge of the Company, there is no reasonable
basis for any such claim to be successful. The Intangibles are valid and
enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing. The
Company and its subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Intangibles
used pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company of its
subsidiaries.
k. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee 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 expenses; 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; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
l. Disclosure. All information relating to or concerning the Company set
forth in this Agreement or provided to the Purchaser pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to a primary issuance of the
Company's securities.
m. Acknowledgment Regarding the Purchaser's Purchase of the Securities. The
Company acknowledges and agrees that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, and the relationship
between the Company and the Purchaser is "arms length" and that any statement
made by the Purchaser or any of its representatives or agents in connection with
this Agreement and the transactions contemplated hereby is not advice or a
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recommendation and is merely incidental to the Purchaser's purchase of
Securities and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
n. Form S-3 Eligibility. The Company is currently eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement).
o. No General Solicitation. Neither the Company nor any person
participating on the Company's behalf in the transactions contemplated hereby
has conducted any "general solicitation," as such term is defined in Regulation
D, with respect to any of the Securities being offered hereby.
p. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration of the Securities being
offered hereby under the Securities Act or cause this offering of Securities to
be integrated with any prior offering of securities of the Company for purposes
of the Securities Act or any applicable stockholder approval provisions,
including, without limitation, Rule 4460(i) of the NASD or any similar rule.
q. No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
by the Purchaser relating to this Agreement or the transactions contemplated
hereby.
r. Acknowledgment Regarding Securities. The Company's executive officers
have studied and fully understand the nature of the Securities being sold
hereunder. The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Debentures in accordance with the terms of the
Debentures is absolute and unconditional, regardless of the dilution that such
issuance may have on the ownership interests of other stockholders. Taking the
foregoing into account, the Company's Board of Directors has determined in its
good faith business judgment that the issuance of the Debentures and the
Warrants hereunder and the consummation of the other transactions contemplated
hereby are in the best interests of the Company and its stockholders.
s. Tax Status. Except as set forth in the SEC Documents filed prior to the
date hereof or on Schedule 3(s), the Company and each of its subsidiaries has
made or filed all federal, state and local income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its subsidiaries has
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set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to any statute of limitations relating to
the assessment or collection of any federal, state or local tax. None of the
Company's tax returns has been or is being audited by any taxing authority.
t. Title. The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(t) or such as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
u. Year 2000. To the best of the Company's knowledge:
(i) All hardware and software products used by the Company in the
administration and the business operations of the Company will be able to
accurately process date data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth century
(through 1999), the year 2000 and the twenty-first century, including leap
year calculations, when used in accordance with the product documentation
accompanying such hardware and software products.
(ii) All software developed and sold by the Company will be able to
accurately process date data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth century
(through 1999), the year 2000 and the twenty-first century, including leap
year calculations, when used in accordance with the product documentation
accompanying such software.
v. Insurance. The Company has in force fire, casualty, product liability
and other insurance policies, with extended coverage, sufficient in amount to
allow it to replace any of its material properties or assets which might be
damaged or destroyed or sufficient to cover liabilities to which the Company may
reasonably become subject, and such types and amounts of other insurance with
respect to its business and properties, on both a per occurrence and an
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aggregate basis, as are customarily carried by persons engaged in the same or
similar business as the Company. To the best knowledge of the Company, no
default or event has occurred that could give rise to a default under any such
policy.
w. Environmental Matters. There is no environmental litigation or other
environmental proceeding pending or threatened by any governmental regulatory
authority or others with respect to the current or any former business of the
Company or of any partnership or joint venture currently or at any time
affiliated with the Company. No state of facts exists as to environmental
matters or Hazardous Substances (as defined below) that involves the reasonable
likelihood of a material capital expenditure by the Company or that may
otherwise have a Material Adverse Effect. No Hazardous Substances have been
treated, stored or disposed of, or otherwise deposited, in or on the properties
owned or leased by the Company or by any partnership or joint venture currently
or at any time affiliated with the Company in violation of any applicable
environmental laws. The environmental compliance programs of the Company comply
in all respects with all environmental laws, whether federal, state or local,
currently in effect. As used herein, "Hazardous Substances" means any substance,
waste, contaminant, pollutant or material that has been determined by any
governmental authority to be capable of posing a risk of injury to health,
safety, property or the environment.
x. Exchange Agreements. The execution, delivery and performance by the
Company and its subsidiary of the Exchange Agreements, dated as of December 31,
1998, by and between the Company and the other signatories thereto, and the
consummation of the transactions contemplated thereby by the Company, its
subsidiary and the holders of less than 90% of the $22,200,000 principal amount
of Secured Promissory Notes referred to therein (the "Rare Medium Notes") does
not 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, rescission or cancellation of, any agreement, indenture
or instrument to which the Company or any of its subsidiaries is a party.
y. Rare Medium Note Holders. No event or circumstance relating to the
Company's relationship with holders of the Rare Medium Notes, including Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxxxx and Xxxxx Xxxxx, who were founders of Rare Medium, Inc.
and are current employees of the Company, including the event of default called
by such individuals on January 27, 1999, will result in a Material Adverse
Effect.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Section 6 and Section 7 of this Agreement.
b. Form D; Blue Sky Laws; Current Report. The Company agrees to file a Form
D with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Purchaser promptly after such filing. The Company shall, on
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or before the First Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Purchaser pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States or obtain exemption therefrom, and shall
provide evidence of any such action so taken to the Purchaser on or prior to the
First Closing Date. Within two trading days after the First Closing Date, the
Company agrees to file a Form 8-K concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 8-K.
c. Reporting Status. So long as the Purchaser beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
d. Use of Proceeds. The Company shall use the proceeds from the sale of the
Debentures and the Warrants as set forth on Schedule 4(d).
e. Additional Equity Capital; Right of First Offer.
(i) The Company agrees that during the period beginning on the date
hereof and ending on the date which is 90 days following the First Closing
Date (the "Initial Lock-Up Period"), the Company will not, without the
prior written consent of the Purchaser or Purchaser's agent, which consent
shall not be unreasonably withheld, contract with any party to obtain
additional financing in which any equity or equity-linked securities are
issued (including any debt financing with an equity component) ("Future
Offerings"). In addition, the Company agrees that during the period
beginning upon the termination of the Initial Lock-Up Period and ending on
the date which is 180 days following the First Closing Date (the
"Subsequent Lock-up Period" and, together with the Initial Lock-Up Period,
the "Lock-Up Period"), the Company will not, without the prior written
consent of the Purchaser or the Purchaser's agent, which consent will not
be unreasonably withheld, conduct any Future Offering having common stock
registration rights and/or public resale rights effective within 270 days
after the First Closing Date. For the avoidance of doubt, the Company may
conduct a Future Offering during the Subsequent Lock-Up Period in which the
Future Offering has common stock registration rights and/or public resale
rights effective after 270 days after the First Closing Date.
Notwithstanding anything in this Section 4(e)(i) to the contrary, at any
time during the Subsequent Lock-Up Period, the Company may conduct a Future
Offering (subject to the Purchaser's rights set forth in Section 4(e)(ii)
below) consisting solely of (A) Common Stock or (B) Common Stock and
warrants to purchase shares of common Stock (the "Future Offering
Warrants"), so long as (x) the shares of Common Stock are sold for a price
per share which is not less than 90% of the Closing Bid Price (as defined
in the Debentures) (and not subject to any future adjustments or resets) of
the Common Stock on the trading day immediately preceding the day of such
sale, (y) the Future Offering Warrants cannot be exercised for a number of
shares of Common Stock in excess of 20% (and not subject to any future
adjustments or resets) of the number of shares of Common Stock sold in the
Future Offering, and (z) the exercise price of the Future Offering Warrants
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is not less than the Closing Bid Price of the Common Stock on the trading
day immediately preceding the day of such sale (and not subject to any
future adjustments or resets).
(ii) The Company will not conduct any Future Offering during the
period beginning on the date hereof and ending 180 days following the
expiration of the Lock-Up Period, unless it shall have first delivered to
the Purchaser, at least ten (10) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing the Purchaser an
option during the ten (10) business day period following delivery of such
notice to purchase all of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this sentence and in Section 4(e)(i) are
collectively referred to as the "Capital Raising Limitations"). The Capital
Raising Limitations shall not apply to any transaction involving issuances
of securities as consideration in a merger, consolidation or acquisition of
assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or as
consideration for the acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to (i) the
issuance of securities pursuant to an underwritten public offering, (ii)
the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the
date hereof or (iii) the grant of additional options or warrants, or the
issuance of additional securities, under any duly authorized Company stock
option or restricted stock plan for the benefit of the Company's employees
or directors.
f. Expenses. The Company shall pay to the Purchaser or its agent at the
First Closing, reimbursement for the expenses reasonably incurred by the
Purchaser and its affiliates and advisors in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation,
Purchaser's and its affiliates' and advisors' reasonable due diligence and
attorneys' fees and expenses (the "Expenses"). In addition, from time to time
thereafter, upon the Purchaser's written request, the Company shall pay to
Purchaser such additional Expenses, if any, not covered by such payment, in each
case to the extent reasonably incurred by the Purchaser or its affiliates or
agents in connection with the negotiation, preparation, execution and delivery
of this Agreement and the other agreements to be executed in connection
herewith. Notwithstanding the foregoing, the Company shall not be obligated to
reimburse the Purchaser for more than $50,000 (of which $25,000 was paid prior
to the date hereof) pursuant to this Section 4(f).
g. Financial Information. The Company agrees to send the following reports
to the Purchaser until the Purchaser transfers, assigns or sells all of its
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
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h. 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 full conversion of the Debentures and issuance of the
Conversion Shares in connection therewith and the full exercise of the Warrants
and the issuance of the Warrant Shares in connection therewith and as otherwise
required by the Debentures and the Warrants. In that regard, a "sufficient
number of shares" with respect to the Debentures shall be deemed to be equal to
the number of shares of Common Stock required to be reserved for issuance by the
Company pursuant to Article IV of the Debentures, including, without limitation,
any increase in the number of shares so reserved that may be required in certain
circumstances pursuant to such Article. The Company shall not reduce the number
of shares reserved for issuance upon conversion of the Debentures and the full
exercise of the Warrants (except as a result of any such conversion or exercise)
without the written consent of the Purchaser.
i. Listing. The Company shall promptly secure the listing of the Conversion
Shares and Warrant Shares 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 all Conversion
Shares from time to time issuable upon conversion of the Debentures and all
Warrant Shares from time to time issuable upon exercise of the Warrants. The
Company will take all action necessary to continue the listing and trading of
its Common Stock on the NASDAQ, the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and such exchanges, as applicable. In the event the Common Stock is not
eligible to be traded on any of the NASDAQ, NYSE or AMEX and the Common Stock is
not eligible for listing on any such exchange or system, the Company shall use
its best efforts to cause the Common Stock to be eligible for trading on the
over-the-counter bulletin board at the earliest practicable date and remain
eligible for trading while any Conversion Shares and Warrant Shares are
outstanding. The Company shall promptly provide to the holders of the Debentures
copies of any notices it receives regarding the continued eligibility of the
Common Stock for trading in the over-the-counter market or, if applicable, any
securities exchange (including the NASDAQ) on which securities of the same class
or series issued by the Company are then listed or quoted, if any.
j. Corporate Existence. Except as provided in the immediately succeeding
sentence, so long as the Purchaser beneficially owns any Securities, the Company
shall maintain its corporate existence. The Company may merge, consolidate or
sell all or substantially all of its assets, provided that the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the Debentures and the Warrants (except as otherwise
provided therein) and the agreements and instruments entered into in connection
herewith regardless of whether or not the Company would have had a sufficient
number of shares of Common Stock authorized and available for issuance in order
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to effect the conversion of all Debentures and the exercise in full of all
Warrants outstanding as of the date of such transaction and (ii) is a publicly
traded corporation whose common stock is listed for trading on the NASDAQ, NYSE
or AMEX. Notwithstanding the foregoing, the Company covenants and agrees that it
will not engage in any merger, consolidation or sale of all or substantially all
of its assets at any time prior to the effectiveness of the registration
statement required to be filed pursuant to the Registration Rights Agreement
without (A) providing the Purchaser with written notice of such transaction at
least sixty (60) days prior to the consummation of the transaction and (B)
obtaining the written consent of the Purchaser on or before the 10th day after
the delivery of such notice by the Company.
k. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
l. Redemptions and Dividends. So long as the Purchaser beneficially owns
any Debentures, the Company shall not, without first obtaining the written
approval of the Purchaser, repurchase, redeem, or declare or pay any cash
dividend or distribution on, any shares of capital stock of the Company.
m. Purchaser Trading Restriction. The Purchaser agrees not to sell, on any
given trading day, a number of shares of Common Stock of the Company in excess
of the greater of (i) twenty percent (20%) multiplied by the number of shares of
Common Stock traded on such trading day on the principal market or exchange on
which shares of Common Stock are traded on such day as reported by Bloomberg
Financial Markets or other reputable financial reporting service ("Common Stock
Volume"), or (ii) twenty percent (20%) multiplied by the average daily Common
Stock Volume over the immediately preceding thirty (30) consecutive trading
days.
n. Best Efforts to Prevent Impairment. To protect the interests of the
Purchaser as a holder of Debentures and Warrants, the Company shall use its best
efforts (i) to prevent the occurrence of an event of default under the Rare
Medium Notes and (ii) to satisfy and cause its subsidiary to satisfy their
obligations under the Rare Medium Notes and the guaranty, security agreement and
pledge agreement entered into in connection therewith (the "Security
Agreements"). In addition, the Company (i) shall not, without the prior written
consent of the Purchaser, permit any additional assets hereafter acquired by the
Company or any of its subsidiaries by way of merger, consolidation or purchase
of all or substantially all of the assets of another company to become
collateral under or otherwise become subject to the terms of the Security
Agreements and (ii) shall seek to terminate the Security Agreements or otherwise
obtain from the holders of the Rare Medium Notes the release of all collateral
securing such Notes. For the avoidance of doubt, the immediately preceding
sentence is not intended to prevent the Company from conducting its consolidated
operations and otherwise utilizing its consolidated assets in an efficient
manner. Notwithstanding the foregoing, in the event of a default under the Rare
Medium Notes or the Security Agreements, the Company shall use its best efforts
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to negotiate with the holders of the Rare Medium Notes to prevent such holders
from exercising their rights to seize the assets or capital stock of the
Company's subsidiary, Rare Medium Inc.
o. Key Man Life Insurance. As soon as practicable following the First
Closing, but in any event within 30 days after the First Closing, the Company
shall obtain key man life insurance in respect of Xxxxx X. Xxxxxx, the benefit
amount of which shall be an amount which is customary for the chairman and chief
executive officer of a company of a comparable size and in the same line of
business as the Company.
p. Reservation of Shares. Notwithstanding anything in this Agreement, the
Debentures or the Warrant to the contrary, in the event that the Company does
not have sufficient authorized and unissued and unreserved shares of Common
Stock to consummate a strategic transaction with the entity referred to in
clause (v) of Article VIII.H(vii) of the Debenture, then the Holder shall
reasonably negotiate in good faith with the Company as to a temporary reduction
in the aggregate number of shares of Common Stock reserved for issuance upon
conversion of the Debentures and exercise of the Warrants.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
the Purchaser to the Company upon conversion of the Debentures or exercise of
the Warrants, as applicable. To the extent and during the periods provided in
Section 2(f) and Section 2(g) of this Agreement, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement.
b. 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 transfer of the Conversion Shares and the
Warrant Shares prior to registration of the Conversion Shares and the Warrant
Shares under the Securities Act or without an exemption therefrom, will be given
by the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or under an exemption from the registration
requirements of applicable securities law.
c. If the Purchaser provides the Company with an opinion of counsel, which
opinion of counsel shall be in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
registration, or the Purchaser provides the Company with reasonable assurances
that such Securities may be sold under Rule 144 or such Securities may be sold
-17-
pursuant to an effective Registration Statement, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Debentures
and the Warrants to the Purchaser hereunder is subject to the satisfaction, at
or before the appropriate Closing Date, of each of the following conditions
thereto, 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. With respect to each Closing Date:
(i) The Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to
the Company.
(ii) The Purchaser shall have delivered the Purchase Price in
accordance with Section 1(b) above.
(iii) The representations and warranties of the Purchaser shall be
true and correct as of the date when made and as of such Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be
true and correct as of such date), and the Purchaser 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 Purchaser at or prior to such Closing
Date.
(iv) 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 prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of the Purchaser hereunder to purchase Debentures and
Warrants hereunder is subject to the satisfaction, at or before the appropriate
Closing Date, of each of the following conditions, provided that these
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. With respect to the First Closing:
(i) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to
the Purchaser.
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(ii) The Company shall have delivered to the Purchaser duly executed
Debentures and Warrants (in such denominations as the Purchaser shall
request) in accordance with Section 1(b) above.
(iii) The Common Stock shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASDAQ.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when 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, which representations and warranties shall be true and
correct as of such 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 at or prior to the Closing Date. The Purchaser
shall have received 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 Purchaser.
(v) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding 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 questions the validity of, or challenges
or prohibits the consummation of, any of the transactions contemplated by
this Agreement.
(vi) The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Purchaser and in substantially the form of
Exhibit D attached hereto.
(vii) The Company shall have delivered evidence reasonably
satisfactory to the Purchaser that the Company's transfer agent has agreed
to act in accordance with irrevocable instructions in the form attached
hereto as Exhibit E.
(viii) No material adverse change or development in the business,
operations, properties, prospects, financial condition, or results of
operations of the Company shall have occurred since the date hereof.
b. With respect to the Second Closing:
(i) The Company shall have delivered duly executed Debentures and
Warrants (each in such denominations as such Purchaser shall request) to
such Purchaser in accordance with Section 1(b) above.
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(ii) The Common Stock shall be authorized for quotation on NASDAQ or
the Nasdaq Small Cap Market and trading in the Common Stock (or Nasdaq
markets generally) shall not have been suspended by the SEC or Nasdaq.
(iii) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Second 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 at or prior to the
Second Closing Date. The Purchaser shall have received a certificate,
executed by the chief executive officer of the Company, dated as of the
Second Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by the Purchaser.
(iv) 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 prohibits the consummation of any of the transactions
contemplated by this Agreement.
(v) The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Second Closing Date, in form, scope and substance
reasonably satisfactory to the Purchaser and in substantially the form of
Exhibit D attached hereto.
(vi) The Registration Statement required to be filed by the Company
pursuant to Section 2(a) of the Registration Rights Agreement shall have
been declared effective by the SEC no later than the one hundred and
twentieth (120th) day after the First Closing Date and shall be effective
and available for use by such Purchaser as of the Second Closing Date.
(vii) No Event of Default (as defined in Article VIII of the
Debentures) shall have occurred.
(viii) The average of the Closing Bid Prices (as defined in the
Debentures) of the Common Stock for the seven (7) consecutive trading days
ending on the trading day immediately prior to the Second Closing Date
shall be greater than the Floor Price (as defined in the Debentures).
8 GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in the State of Delaware in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
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Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that service
of process upon the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any Purchaser to serve
process in any other manner permitted by law. The Company agrees 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
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability 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 Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser.
f. Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
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If to the Company:
ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
If to the Purchaser, to the address set forth under such Purchaser's name
on the signature page hereto.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Except as
provided herein, neither the Company nor any Purchaser shall assign this
Agreement or any rights or obligations hereunder, except, upon the prior written
consent of the other, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the Purchaser may assign its rights hereunder to
any of its "affiliates," as that term is defined under the Exchange Act, without
the consent of the Company or to any other person or entity with the consent of
the Company. This provision shall not limit the Purchaser's right to transfer
the Securities pursuant to the terms of this Agreement, the Debentures, the
Warrants or the Registration Rights Agreement or to assign the Purchaser's
rights hereunder and/or thereunder to any such transferee. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Debentures, the Warrants or the Registration Rights Agreement, the Securities
may be pledged and all rights of the Purchaser under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with the Purchaser's margin or brokerage accounts.
h. 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.
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i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
Closings hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable federal or state securities
laws. The Company agrees to indemnify and hold harmless the Purchaser and each
other holder of the Securities and all of their stockholders, officers,
directors, employees, partners, members, agents and direct or indirect investors
and affiliates and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Debentures, the Warrants, the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement, the Debentures, the Warrants, the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement, the
Debentures, the Warrants, the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (d) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of the Purchaser or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
j. Publicity. The Company and the Purchaser shall have the right to review
before issuance any press releases, SEC, NASDAQ or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Purchaser, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
-23-
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
l. Termination. In the event that the First Closing shall not have occurred
on or before February 2, 1999, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Debentures,
the Warrants and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
n. Equitable Relief. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Purchaser by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
hereunder (including, but not limited to, its obligations pursuant to Section 5
hereof) will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement (including, but not
limited to, its obligations pursuant to Section 5 hereof), that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-24-
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Agreement to be duly executed as of the date first above written.
ICC TECHNOLOGIES, INC.
By:
---------------------------
Name:
-------------------------
Title:
-----------------------
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc.,
its authorized agent
By:
---------------------------
Name:
-------------------------
Title:
-----------------------
RESIDENCE: Cayman Islands
ADDRESS:
c/o Heights Capital Management, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx and Xxxxxxx Xxxxxx
with copies of all notices to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
EXHIBIT A
to
Securities
Purchase
Agreement
THIS CONVERTIBLE TERM DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR ANY SUCH OFFER, SALE OR TRANSFER IS MADE UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
CONVERTIBLE TERM DEBENTURE
Date:______________ $__________
FOR VALUE RECEIVED, ICC TECHNOLOGIES, INC., a corporation organized under
the laws of the State of Delaware (hereinafter called the "Borrower" or the
"Corporation") hereby promises to pay to the order of
___________________________________ or registered assigns (individually, the
"Holder," and collectively with the holders of all other debentures of same like
and tenor, the "Holders") the sum of _____________________ Dollars ($________)
on the four year anniversary of the date hereof (the "Scheduled Maturity Date"),
and to pay interest on the unpaid principal balance hereof at the rate of eight
percent (8%) per annum from the date hereof (the "Issue Date") until the same
becomes due and payable (which interest shall accrue on a daily basis), whether
at maturity or upon prepayment, repayment or otherwise. Any amount of principal
of or interest on this Debenture which is not paid when due shall bear interest
at the rate of fifteen percent (15%) per annum from the due date thereof until
the same is paid. Interest shall be calculated based on a 360 day year and shall
commence accruing on the Issue Date and, to the extent not converted in
accordance with the provisions hereof, shall be payable in arrears at such time
as the outstanding principal balance hereof with respect to which such interest
has accrued becomes due and payable hereunder. All payments of principal and
interest (to the extent not converted in accordance with the terms hereof) shall
be made in, and all references herein to monetary denominations shall refer to,
lawful money of the United States of America. All
payments shall be made at such address as the Holder shall have given or shall
hereafter give to the Borrower by written notice made in accordance with the
provisions of this Debenture.
This Debenture is being issued by the Borrower along with similar
convertible term debentures (the "Other Debentures" and, together with this
Debenture, the "Debentures") pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among the Borrower and the other
signatory thereto (the "Securities Purchase Agreement").
ARTICLE I
PREPAYMENT
A. Mandatory Prepayment. Upon the occurrence of an Event of Default (as
defined below), this Debenture shall be prepaid by the Borrower in accordance
with the provisions of Article VII hereof. Except as provided in Paragraph B of
this Article I, this Debenture may not be prepaid at the option of Borrower
without the prior written consent of the Holder.
B. Prepayment at Borrower's Option.
(i) So long as no Event of Default shall have occurred, beginning on
the tenth (10th) trading day of each ten (10) consecutive trading day period (if
any) during which the Closing Bid Prices (as defined below) for the Common Stock
on each such trading day are less than the Floor Price (as defined below) and
provided the Borrower is not in material violation of any of its obligations
under the Securities Purchase Agreement or the Registration Rights Agreement,
then the Borrower shall have the right, in accordance with the procedures set
forth below, to prepay ("Prepayment at Borrower's Election") all or any portion
in excess of $500,000 of the then outstanding Debentures (other than Debentures
which are the subject of a Notice of Conversion delivered prior to the delivery
date of the Optional Prepayment Notice (as defined below)) for an amount of cash
equal to the Optional Prepayment Amount (as defined below). The Borrower, in its
sole discretion, may exercise its right to effect a Prepayment at Borrower's
Election not more than one time during each Prepayment Window Period (as defined
below). To effect a Prepayment at Borrower's Election, the Borrower shall
deliver an Optional Prepayment Notice to the Holder during the period (the
"Prepayment Window Period") beginning on such tenth (10th) consecutive trading
day and ending on the earlier of (A) the sixtieth (60th) calendar day after such
tenth (10th) trading day and (B) the trading day immediately preceding the first
trading day after such tenth (10th) trading day on which the Closing Bid Price
of the Common Stock is not less than the Floor Price. Any optional prepayment
pursuant to this Paragraph B shall be made ratably among the Holders of
Debentures in proportion to the principal amount of Debentures then outstanding.
Holders of Debentures may convert all or any part of their Debentures selected
for prepayment hereunder into Common Stock pursuant to Article III hereof by
delivering a Notice of Conversion to the Borrower at any time prior to the
Effective Date of Prepayment as defined in subparagraph (iii). The "Optional
Prepayment Amount" with respect to each Debenture means 120% multiplied by the
sum of the
2
principal amount of such Debenture plus all accrued and unpaid interest and
Conversion Default Payments (if any) thereon through the date of prepayment. In
addition, upon receipt of an Optional Prepayment Notice, the Holder shall be
entitled to certain rights as set forth in Section 11(b) of the Warrants (as
defined in Article III.C(ii) hereof). Notwithstanding anything herein to the
contrary, the Borrower shall have no right to effect a Prepayment at Borrower's
Election after the third (3rd) Prepayment Window Period shall have terminated.
(ii) The Borrower may not deliver an Optional Prepayment Notice to a
holder of Debentures unless on or prior to the date of delivery of such Optional
Prepayment Notice, the Borrower shall have deposited with American Stock
Transfer and Trust Company or another escrow agent reasonably satisfactory to
the Holder, as a trust fund, cash sufficient in amount to pay all amounts to
which the holders of Debentures are entitled upon such prepayment pursuant to
subparagraph (i) of this Paragraph B, with irrevocable instructions and
authority to such transfer agent or escrow agent to complete the prepayment
thereof in accordance with this Paragraph B. Any Optional Prepayment Notice
delivered in accordance with the immediately preceding sentence shall be
accompanied by a statement executed by a duly authorized officer of its transfer
agent or escrow agent, certifying the amount of funds which have been deposited
with such transfer agent or escrow agent and that the transfer agent or escrow
agent has been instructed and agrees to act as prepayment agent hereunder.
(iii) The Borrower shall effect each prepayment under this Article I.B
by giving at least five (5) business days but not more than ten (10) business
days prior written notice (the "Optional Prepayment Notice") of (a) the date
(but such date shall in no event be later than five (5) days after the date of
the Optional Prepayment Notice) on which such prepayment is to become effective
(the "Effective Date of Prepayment"), (b) the Debentures selected for prepayment
and (c) the Optional Prepayment Amount to (i) the Holders of Debentures selected
for prepayment at the address and facsimile number of such Holders, appearing in
the Borrower's register for the Debentures and (ii) the transfer agent for the
Common Stock, which Optional Prepayment Notice shall be deemed to have been
delivered on the business day after the Borrower's fax (with a copy sent by
overnight courier to the Holders of Debentures) of such notice to the Holders of
Debentures.
(iv) The Optional Prepayment Amount shall be paid to the Holder of the
Debentures being prepaid on or before the date which is three (3) business days
after the Effective Date of Prepayment; provided, however, that the Borrower
shall not be obligated to deliver any portion of the Optional Prepayment Amount
until either the Debentures being prepaid are delivered to the office of the
Borrower or the transfer agent, or the Holder notifies the Borrower or the
transfer agent that such Debentures have been lost, stolen or destroyed and
delivers the documentation in accordance with Article X.H hereof.
Notwithstanding anything herein to the contrary, in the event that the
Debentures being prepaid are not delivered to the Borrower or the transfer agent
prior to the 3rd business day following the Effective Date of Prepayment, the
prepayment of the Debentures pursuant to this Article I.B shall still be deemed
effective as of the Effective Date of Prepayment and the Optional Prepayment
Amount shall be
3
paid to the Holder of Debentures being prepaid within five (5) business days of
the date the Debentures are actually delivered to the Borrower or the transfer
agent.
ARTICLE II
CERTAIN DEFINITIONS
The following terms shall have the following meanings:
A. "Closing Bid Price" means, for any security as of any date, the closing
bid price of such security on the principal United States securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to Holders of a majority
of the aggregate principal amount represented by the then outstanding Debentures
("Majority Holders") if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (collectively, "Bloomberg"), or if the
foregoing does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Majority Holders,
with the costs of such appraisal to be borne by the Corporation.
B. "Conversion Amount" means the portion of the principal amount of this
Debenture being converted plus any accrued and unpaid interest thereon through
the Conversion Date, each as specified in the notice of conversion in the form
attached hereto (the "Notice of Conversion").
C. "Conversion Date" means, for any Optional Conversion (as defined below),
the date specified in the Notice of Conversion so long as the copy of the Notice
of Conversion is faxed (or delivered by other means resulting in notice) to the
Corporation at or before 11:59 p.m., New York City time, on the Conversion Date
indicated in the Notice of Conversion; provided, however, that if the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the Holder faxes or otherwise delivers the
Notice of Conversion to the Corporation.
D. "Conversion Price" means (i) with respect to any Conversion Date
occurring prior to the earliest of (a) the 181st day following January 28, 1999,
(b) the first Announcement Date (as defined in Article VIII.C hereof) after
January 28, 1999 or (c) the delivery by the
4
Corporation of the notice specified in Section 4(j)(A) of the Securities
Purchase Agreement (such earliest date, whether or not occuring prior to the
date of issuance hereof, referred to herein as the "First Variable Conversion
Date"), the Initial Conversion Price and (ii) with respect to any Conversion
Date on or after the First Variable Conversion Date, the lower of the Fixed
Conversion Price and the Variable Conversion Price, but in no event less than
the Floor Price, each in effect as of such date and subject to adjustment as
provided herein.
E. "Fixed Conversion Price" means the lower of (i) the Initial Conversion
Price and (ii) the amount obtained by multiplying 105% by the Market Price in
effect on the First Variable Conversion Date, subject to adjustment as provided
herein.
F. "Floor Price" means $2.49, subject to adjustment as provided herein.
G. "Initial Conversion Price" means $5.27, subject to adjustment as
provided herein.
H. "Market Price" means, as of any date of determination, the average of
the lowest Closing Bid Prices for the Corporation's common stock, par value $.01
per share ("Common Stock"), for any two (2) trading days during the fifteen (15)
consecutive trading days ending on the trading day immediately preceding such
date of determination (subject to equitable adjustment for any stock splits,
stock dividends, reclassifications or similar events during such fifteen (15)
trading day period), and shall be subject to adjustment as provided herein. For
the avoidance of doubt, the trading day immediately preceding any Conversion
Date is the last calendar day that is a trading day and which is immediately
preceding the Conversion Date.
I. "N" means the number of days from, but excluding, the Issue Date.
J. "Variable Conversion Price" means the amount obtained by multiplying 92%
by the Market Price then in effect.
K. "Warrant" shall mean the Warrants issued by the Company to the initial
Holder.
L. The Fixed Conversion Price, Initial Conversion Price and Floor Price are
collectively referred to herein as the "Fixed Amounts."
5
ARTICLE III
CONVERSION
A. Conversion at the Option of the Holder. (i) Subject to the limitations
on conversions contained in Paragraph C of this Article III, the Holder may, at
any time and from time to time on or after the Issue Date, convert (an "Optional
Conversion") all or any part of the outstanding principal amount of this
Debenture, plus all accrued interest thereon through the Conversion Date, into a
number of fully paid and nonassessable shares of Common Stock determined in
accordance with the following formula:
Conversion Amount
Conversion Price
B. Mechanics of Conversion. In order to effect an Optional Conversion, a
Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to the Corporation or the transfer agent for the Common Stock and
(y) surrender or cause to be surrendered this Debenture, duly endorsed, along
with a copy of the Notice of Conversion as soon as practicable thereafter to the
Corporation or the transfer agent. Upon receipt by the Corporation of a
facsimile copy of a Notice of Conversion from a Holder, the Corporation shall
immediately send, via facsimile, a confirmation to such Holder stating that the
Notice of Conversion has been received, the date upon which the Corporation
expects to deliver the Common Stock issuable upon such conversion and the name
and telephone number of a contact person at the Corporation regarding the
conversion. The Corporation shall not be obligated to issue shares of Common
Stock upon a conversion unless either this Debenture is delivered to the
Corporation or the transfer agent as provided above, or the Holder notifies the
Corporation or the transfer agent that such certificates have been lost, stolen
or destroyed and delivers the documentation to the Corporation required by
Article IX.H hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the surrender of
this Debenture accompanied by a Notice of Conversion, the Corporation shall, no
later than the later of (a) the second business day following the Conversion
Date and (b) the business day following the date of such surrender (or, in the
case of lost, stolen or destroyed certificates, after provision of indemnity
pursuant to Article IX.H) (the "Delivery Period"), issue and deliver to the
Holder or its nominee (x) that number of shares of Common Stock issuable upon
conversion of the portion of this Debenture being converted and (y) a new
Debenture in the form hereof representing the balance of the principal amount
hereof not being converted, if any. If the Corporation's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, and so long as the certificates therefor do not bear a legend
and the Holder thereof is not then required to return such certificate for the
placement of a legend thereon, the Corporation shall cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to the Holder
by crediting the account of the Holder or its nominee with DTC through its
Deposit Withdrawal Agent Commission system ("DTC
6
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall deliver to the Holder physical certificates
representing the Common Stock issuable upon conversion. Further, a Holder may
instruct the Corporation to deliver to the Holder physical certificates
representing the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the conversion of this Debenture.
(iii) No Fractional Shares. If any conversion of this Debenture would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of Common Stock issuable
upon conversion of the Debentures shall be the next higher whole number of
shares.
(iv) Conversion Disputes. In the case of any dispute with respect to a
conversion, the Corporation shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with subparagraph (i) above. If such
dispute involves the calculation of the Conversion Price, the Corporation shall
submit the disputed calculations to an independent outside accountant via
facsimile within two business days of receipt of the Notice of Conversion. The
accountant, at the Corporation's sole expense, shall audit the calculations and
notify the Corporation and the Holder of the results no later than two business
days from the date it receives the disputed calculations. The accountant's
calculation shall be deemed conclusive, absent manifest error. The Corporation
shall then issue the appropriate number of shares of Common Stock in accordance
with subparagraph (i) above.
(v) In the event that the Conversion Price in respect of any conversion
is equal to the Floor Price, then the Holder shall be entitled to the rights set
forth in Section 11(c) of the Warrants.
C. No Five Percent Holders. In no event shall a Holder of the Debentures be
entitled to receive shares of Common Stock upon a conversion to the extent that
the sum of (x) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (exclusive of shares issuable upon conversion of the
unconverted portion of the Debentures or the unexercised or unconverted portion
of any other securities of the Corporation (including, without limitation, the
warrants (the "Warrants") issued by the Corporation pursuant to the Securities
Purchase Agreement) subject to a limitation on conversion or exercise analogous
to the limitations contained herein) and (y) the number of shares of Common
Stock issuable upon the conversion of the Debentures with respect to which the
determination of this subparagraph is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock. For purposes of this subparagraph, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13 D-G thereunder, except as otherwise
7
provided in clause (x) above. Except as provided in the immediately succeeding
sentence, the restriction contained in this subparagraph (ii) shall not be
altered, amended, deleted or changed in any manner whatsoever unless the holders
of a majority of the outstanding shares of Common Stock and the Holders of a
majority of the outstanding principal amount of the Debentures shall approve
such alteration, amendment, deletion or change.
ARTICLE IV
RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On January 28, 1999, the Corporation shall reserve
3,180,723 shares of the authorized but unissued shares of Common Stock for
issuance upon conversion of the Debentures and thereafter the number of
authorized but unissued shares of Common Stock so reserved (the "Reserved
Amount") shall not be decreased and shall at all times be sufficient to provide
for the conversion of the Debentures at the then current Conversion Price
thereof, taking into account any adjustments pursuant to Article VIII hereof,
and to provide for any shares of Common Stock issued or then issuable as a
result of a Conversion Default hereunder, the occurrence of an Event of Default
hereunder or any other payment convertible into shares of Common Stock pursuant
to the terms hereof or the Registration Rights Agreement. The Reserved Amount
shall be allocated to the Holders of the Debentures as provided in Article IX.D.
B. Increases to Reserved Amount. If the Reserved Amount for any trading day
(such trading day being the "Authorization Trigger Date") shall be less than
100% of the number of shares of Common Stock issuable upon conversion of the
Debentures, the Corporation shall immediately notify the Holders of the
Debentures of such occurrence and shall take immediate action (including, if
necessary, seeking shareholder approval to authorize the issuance of additional
shares of Common Stock) to increase the Reserved Amount to 100% of the number of
shares of Common Stock then issuable upon conversion of the Debentures. In the
event the Corporation fails to so increase the Reserved Amount within, in the
event shareholder approval is required, ninety (90) days, or, in the event only
approval of the corporation's Board of Directors is required, five (5) days
after an Authorization Trigger Date, each Holder of the Debentures shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time by delivery of a Default Notice (as defined in Article VII.C) to
the Corporation, to require the Corporation to prepay for cash, at the Default
Amount (as defined in Article VII.B), the Holder's Debentures (plus accrued
interest thereon). If the Corporation fails to pay the Default Amount within
five (5) business days after its receipt of such Default Notice, then such
Holder shall be entitled to the remedies provided in Article VII.C.
C. Adjustment to Conversion Price. If the Corporation is prohibited, at any
time, from issuing shares of Common Stock upon conversion of the Debentures to
any Holder because the Corporation does not then have available a sufficient
number of authorized and reserved
8
shares of Common Stock, then the Fixed Conversion Price in respect of any
Debentures held by any Holder (including Debentures submitted to the Corporation
for conversion, but for which shares of Common Stock have not been issued to any
such Holder) shall be adjusted as provided in Article V.A.
ARTICLE V
FAILURE TO SATISFY CONVERSIONS
A. Conversion Defaults; Adjustments to Conversion Price. The following
shall constitute a "Conversion Default": (i) following the submission by a
Holder of a Notice of Conversion, the Corporation fails for any reason to
deliver, on or prior to the fourth business day following the expiration of the
Delivery Period for such conversion, such number of freely tradeable shares of
Common Stock to which such Holder is entitled upon such conversion or (ii) the
Corporation provides notice to any Holder at any time of its intention not to
issue freely tradeable shares of Common Stock upon exercise by any Holder of its
conversion rights in accordance with the terms of the Debentures. In the case of
any Conversion Default, the Floor Price shall automatically and permanently be
reset to $.01 and not be subject to any further adjustment pursuant to Article
VIII hereof or otherwise. In addition in the case of a Conversion Default
described in clause (i) above, the Fixed Conversion Price in respect of any
Debentures held by such Holder (including Debentures submitted to the
Corporation for conversion, but for which shares of Common Stock have not been
issued to such Holder) shall thereafter be the lesser of (x) the Fixed
Conversion Price on the date of the Conversion Default and (y) the lowest
Variable Conversion Price in effect during the period beginning on, and
including, such date through and including (A) in the case of a Conversion
Default referred to in clause (i) above, the earlier of (1) the day such shares
of Common Stock are delivered to the Holder and (2) the day on which the Holder
regains its rights as a Holder of the Debentures with respect to such
unconverted Debentures pursuant to the provisions of Article IX.L hereof. In the
case of a Conversion Default described in clause (ii) above, the Fixed
Conversion Price with respect to any conversion thereafter shall be the lowest
Conversion Price (without reference to or limitation by any Floor Price) in
effect at any time during the period beginning on, and including, the date of
the occurrence of such Conversion Default through and including the Default Cure
Date (as hereinafter defined). Following any adjustment to the Fixed Conversion
Price pursuant to this Article V.A, the Fixed Conversion Price shall thereafter
be subject to further adjustment for any events described in Article VIII. Upon
the occurrence of each reset of the Fixed Conversion Price pursuant to this
Paragraph A, the Corporation, at its expense, shall promptly compute the new
Fixed Conversion Price and prepare and furnish to each Holder of the Debentures
a certificate setting forth such new Fixed Conversion Price and showing in
detail each Conversion Price in effect during such reset period.
"Default Cure Date" means (i) with respect to a Conversion Default
described in clause (i) of its definition, the date the Corporation effects the
conversion of all of the outstanding Debentures, and (ii) with respect to a
Conversion Default described in clause (ii) of its definition,
9
the date the Corporation issues freely tradeable shares of Common Stock in
satisfaction of all conversions of the Debentures in accordance with Article
III.A, and (iii) with respect to either type of a Conversion Default, the date
on which the Corporation prepays the Debentures held by such Holder pursuant to
paragraph C of this Article V.
B. Buy-In Cure. Unless the Corporation has notified the applicable Holder
in writing prior to the delivery by such Holder of a Notice of Conversion that
the Corporation is unable to honor conversions, if (i) (a) the Corporation fails
for any reason to deliver during the Delivery Period shares of Common Stock to a
Holder upon a conversion of the Debentures or (b) there shall occur a Legend
Removal Failure (as defined in Article VII.A(iv) below) and (ii) thereafter,
such Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to make delivery in satisfaction of a sale by such Holder of the
unlegended shares of Common Stock (the "Sold Shares") which such Holder
anticipated receiving upon such conversion (a "Buy-In"), the Corporation shall
pay such Holder (in addition to any other remedies available to the Holder) the
amount by which (x) such Holder's total purchase price (including brokerage
commissions, if any) for the unlegended shares of Common Stock so purchased
exceeds (y) the net proceeds received by such Holder from the sale of the Sold
Shares. For example, if a Holder purchases unlegended shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for $10,000, the Corporation will be required to
pay the Holder $1,000. A Holder shall provide the Corporation written
notification and supporting documentation indicating any amounts payable to such
Holder pursuant to this Paragraph B. The Corporation shall make any payments
required pursuant to this Paragraph B in accordance with and subject to the
provisions of Article IX.X.
X. Right to Require Prepayment. If the Corporation fails, and such
failure continues uncured for five (5) business days after the Corporation has
been notified thereof in writing by the Holder, for any reason to issue shares
of Common Stock within 10 business days after the expiration of the Delivery
Period with respect to any conversion of the Debentures, then the Holder may
elect at any time and from time to time prior to the Default Cure Date for such
Conversion Default, by delivery of a Default Notice (as defined in Article
VII.C) to the Corporation, to have all or any portion of such Holder's
outstanding Debentures prepaid by the Corporation for cash, at the Default
Amount (as defined in Article VII.B). If the Corporation fails to pay such
Default Amount within five business days after its receipt of a Default Notice,
then such Holder shall be entitled to the remedies provided in Article VII.C.
ARTICLE VI
[INTENTIONALLY OMITTED]
10
ARTICLE VII
EVENTS OF DEFAULT
A. Events of Default. In the event (each of the events described in clauses
(i)-(ix) below after expiration of the applicable cure period (if any) being an
"Event of Default"):
(i) the Corporation fails (i) to pay the principal hereof when due,
whether at maturity, prepayment pursuant to Article I.B hereof, upon
acceleration or otherwise or (ii) to pay any installment of interest hereon when
due and such failure continues for a period of five (5) business days after the
due date hereof;
(ii) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of the Debentures) is suspended from trading on any of,
or is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market for an aggregate of 10 trading days in any nine month
period;
(iii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of that certain Registration Rights
Agreement by and among the Corporation and the other signatories thereto entered
into in connection with the Securities Purchase Agreement (the "Registration
Rights Agreement") has not been declared effective by the 180th day following
January 28, 1999 or such Registration Statement, after being declared effective,
cannot be utilized by the Holders of the Debentures for the resale of all of
their Registrable Securities (as defined in the Registration Rights Agreement)
for an aggregate of more than 30 days;
(iv) the Corporation fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the Holders of the
Debentures upon conversion of any of the Debentures as and when required by this
Debenture, the Securities Purchase Agreement or the Registration Rights
Agreement (a "Legend Removal Failure"), and any such failure continues uncured
for five business days after the Corporation has been notified thereof in
writing by the Holder;
(v) the Corporation provides notice to any Holder of the Debentures,
including by way of public announcement, at any time, of its intention not to
issue, or otherwise refuses to issue, shares of Common Stock to any Holder of
the Debentures upon conversion in accordance with the terms of the Debentures;
(vi) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of its
assets (the presentation of any such transaction for stockholder approval being
conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of the Corporation);
11
(b) merge, consolidate or engage in any other business combination
with any other entity (other than pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Corporation
and other than pursuant to a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged and the Corporation has not
sold or issued Common Stock (or securities convertible into or exercisable for
Common Stock) equal to 20% or more of the Common Stock or 20% or more of the
voting power outstanding before the issuance); or
(c) have fifty percent (50%) or more of the voting power of its
capital stock owned beneficially by one person, entity or "group" (as such term
is used under Section 13(d) of the Securities Exchange Act of 1934, as amended);
or
(vii) the Corporation otherwise shall breach any material term
hereunder (including; without limitation, Article IV hereof) or under the
Securities Purchase Agreement, including, without limitation, the
representations and warranties in the Securities Purchase Agreement or the
Registration Rights Agreement and such breach continues uncured for 10 business
days after the Corporation has been notified thereof in writing by any Holder;
(viii) the Corporation or any subsidiary of the Corporation shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed;
(ix) bankruptcy, insolvency, reorganization 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 Corporation or any
subsidiary of the Corporation; or
(x) Rare Medium, Inc. shall be in default (after expiration of any
applicable cure period) under its Secured Promissory Note dated April 15, 1998,
in the aggregate original principal amount of $22,200,000.
then, upon the occurrence of any such Event of Default, at the option of each
Holder, exercisable in whole or in part at any time and from time to time by
delivery of a Default Notice (as defined in Paragraph C below) to the
Corporation while such Event of Default continues, the Corporation shall pay the
Holders (and upon the occurrence of an Event of Default specified in
subparagraphs (viii) and (ix) of this Paragraph A, the Corporation shall be
required to pay the Holders), in satisfaction of its obligation to pay the
outstanding principal amount of the Debentures and accrued and unpaid interest
thereon, an amount equal to the Default Amount and such Default Amount, together
with all other ancillary amounts payable hereunder, shall immediately become due
and payable, all without demand, presentment or notice, all of which are hereby
expressly waived, together with all costs, including, without limitation, legal
fees and expenses of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. For the avoidance
of doubt, the occurrence of any event described in clauses
12
(v), (vi), (viii), (ix) or (x) above shall immediately constitute an Event of
Default and there shall be no cure period.
Upon the Corporation's receipt of any Default Notice hereunder (other than
during the three trading day period following the Corporation's delivery of a
Default Announcement (as defined below) to all of the Holders in response to the
Corporation's initial receipt of a Default Notice from a Holder of the
Debentures, the Corporation shall immediately (and in any event within one
business day following such receipt) deliver a written notice (a "Default
Announcement") to all Holders of the Debentures stating the date upon which the
Corporation received such Default Notice and the amount of the Debentures
covered thereby. The Corporation shall not redeem any Debentures during the
three trading day period following the delivery of a required Default
Announcement hereunder. At any time and from time to time during such three
trading day period, each Holder of the Debentures may request (either orally or
in writing) information from the Corporation with respect to the instant default
(including, but not limited to, the aggregate principal amount outstanding of
Debentures covered by Default Notices received by the Corporation) and the
Corporation shall furnish (either orally or in writing) as soon as practicable
such requested information to such requesting Holder.
B. Definition of Default Amount. The "Default Amount" with respect to a
Debenture means an amount equal to the greater of:
(i) V x M
----------
C P
and (ii) V x 115%
where:
"V" means the aggregate principal amount of the Debentures being paid plus
all accrued and unpaid interest thereon through the payment date;
"CP" means the Conversion Price in effect on the date on which the
Corporation receives the Default Notice; and
"M" means (i) with respect to all repayments other than repayments pursuant
to Article VII.A(vi) hereof, the highest Closing Bid Price of the Corporation's
Common Stock during the period beginning on the date on which the Corporation
receives the Default Notice and ending on the date immediately preceding the
date of payment of the Default Amount and (ii) with respect to repayments
pursuant to Article VII.A(vi) hereof, the greater of (a) the amount determined
pursuant to clause (i) of this definition or (b) the fair market value, as of
the date on which the Corporation receives the Default Notice, of the
consideration payable to the holder of a share of Common Stock pursuant to the
transaction which triggers the repayment obligation. For
13
purposes of this definition, "fair market value" shall be determined by the
mutual agreement of the Corporation and Holders of a majority-in-interest of the
then outstanding principal amount of the Debentures, or if such agreement cannot
be reached within five business days prior to the date of repayment, by an
investment banking firm selected by the Corporation and reasonably acceptable to
Holders of a majority-in-interest of the then outstanding principal amount of
the Debentures, with the costs of such appraisal to be borne by the Corporation.
C. Failure to Pay Default Amounts. If the Corporation fails to pay any
Holder the Default Amount with respect to any Debenture within five business
days after its receipt of a notice requiring such repayment (a "Default
Notice"), then the Holder of any Debenture delivering such Default Notice (i)
shall be entitled to interest on the Default Amount at a per annum rate equal to
the lower of twenty-four percent (24%) and the highest interest rate permitted
by applicable law from the date on which the Corporation receives the Default
Notice until the date of payment of the Default Amount hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article III) all or any portion of the Default Amount, plus
interest as aforesaid, into shares of Common Stock at the lowest Conversion
Price in effect during the period beginning on the date on which the Corporation
receives the Default Notice and ending on the Conversion Date with respect to
the conversion of such Default Amount. In the event the Corporation is not able
to repay all of the outstanding Debentures subject to Default Notices delivered
prior to the date upon which such repayment is to be effected, the Corporation
shall repay the outstanding Debentures from each Holder pro rata, based on the
total amounts due the Debentures at the time of repayment included by such
Holder in all Default Notices delivered prior to the date upon which such
repayment is to be effected relative to the total amounts due under the
Debentures at the time of repayment included in all of the Default Notices
delivered prior to the date upon which such repayment is to be effected.
ARTICLE VIII
ADJUSTMENTS TO THE CONVERSION PRICE AND FIXED AMOUNTS
The Conversion Price and Fixed Amounts shall be subject to adjustment from
time to time as follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issue Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, each Fixed Amount shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, each Fixed
Amount shall be proportionately increased. In such event, the Corporation shall
notify the Corporation's transfer agent of such change on or before the
effective date thereof.
14
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after the
Issue Date, there shall be (i) any reclassification or change of the outstanding
shares of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), (ii) any consolidation or merger of the Corporation with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Corporation or (iv)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property (each of (i) - (iv) above
being a "Corporate Change"), then the Holders of the Debentures shall thereafter
have the right to receive upon conversion, in lieu of the shares of Common Stock
otherwise issuable, such shares of stock, securities and/or other property as
would have been issued or payable in such Corporate Change with respect to or in
exchange for the number of shares of Common Stock which would have been issuable
upon conversion (without giving effect to the limitations contained in Article
III.C) had such Corporate Change not taken place, and in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
Holders of a majority of the principal amount of the Debentures then
outstanding) shall be made with respect to the rights and interests of the
Holders of the Debentures to the end that the economic value of the Debentures
are in no way diminished by such Corporate Change and that the provisions hereof
(including, without limitation, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is not the Corporation,
an immediate adjustment of each Fixed Amount so that each Fixed Amount
immediately after the Corporate Change reflects the same relative value as
compared to the value of the surviving entity's common stock that existed
between such Fixed Amount and the value of the Corporation's Common Stock
immediately prior to such Corporate Change and an immediate revision to the
Variable Conversion Price so that it is determined as provided in Article II.H
but based on the price of the common stock of the surviving entity and the
market in which such common stock is traded) shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the conversion thereof. The Corporation shall not
effect any Corporate Change unless (i) each Holder of the Debentures has
received written notice of such transaction at least 45 days prior thereto, but
in no event later than 20 days prior to the record date for the determination of
shareholders entitled to vote with respect thereto, and (ii) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument (in form and substance reasonably satisfactory to the Holders of a
majority of the principal amount of the Debentures then outstanding) the
obligations of the Debentures. The above provisions shall apply regardless of
whether or not there would have been a sufficient number of shares of Common
Stock authorized and available for issuance upon conversion of the Debentures
outstanding as of the date of such transaction, and shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
C. Adjustment Due to Major Announcement. In the event the Corporation at
any time after the Issue Date (i) makes a public announcement that it intends to
consolidate or merge with any other entity (other than a merger in which the
Corporation is the surviving or continuing entity and its capital stock is
unchanged) or to sell or transfer all or substantially all of the assets
15
of the Corporation or (ii) any person, group or entity (including the
Corporation) publicly announces a tender offer, exchange offer or another
transaction to purchase 50% or more of the Corporation's Common Stock or
otherwise publicly announces an intention to replace a majority of the
Corporation's Board of Directors by waging a proxy battle or otherwise (the date
of the announcement referred to in clause (i) or (ii) of this Paragraph C is
hereinafter referred to as the "Announcement Date"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the tenth
trading day following the earlier of the consummation of the proposed
transaction or tender offer, exchange offer or another transaction or the
Abandonment Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price determined in accordance with
Article II.E on the Conversion Date set forth in the Notice of Conversion for
the Optional Conversion. From and after the tenth trading day following the
Abandonment Date, the Conversion Price shall be determined as set forth in
Article II.E. "Abandonment Date" means with respect to any proposed transaction
or tender offer, exchange offer or another transaction for which a public
announcement as contemplated by this Paragraph C has been made, the date upon
which the Corporation (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer, exchange offer or
another transaction which caused this Paragraph C to become operative.
D. Adjustment Due to Distribution. If, at any time after the Issue Date,
the Corporation shall declare or make any distribution of its assets (or rights
to acquire its assets) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then the Holders of the Debentures shall be entitled, upon any
conversion of the Debentures after the date of record for determining
shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion (without giving effect to the limitations
contained in Article III.C) had such Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such Distribution.
E. Issuance of Other Securities With Variable Conversion Price. If, at any
time after the Issue Date, the Corporation shall issue any securities which are
convertible into or exchangeable for Common Stock ("Convertible Securities") at
a conversion price or exchange rate which is more favorable to the holders of
such Convertible Securities than the Conversion Price mechanism provided for
herein, then such conversion price or exchange rate shall be applicable hereto.
F. Purchase Rights. If, at any time after the Issue Date, the Corporation
issues any Convertible Securities or rights to purchase stock, warrants,
securities or other property (the "Purchase Rights") pro rata to the record
holders of any class of Common Stock, then the
16
Holders of the Debentures will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which such Holder could
have acquired if such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Debentures (without giving effect to
the limitations contained in Article III.C) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
G. Adjustment of Floor Price. Except as otherwise provided in Paragraphs A
and B of this Article VIII, if, at any time prior to the Scheduled Maturity
Date, the Corporation issues or sells, or in accordance with Paragraph H hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Market Price (as
hereinafter defined) on the date of issuance (a "Dilutive Issuance"), then
effective immediately upon the Dilutive Issuance, the Floor Price will be
adjusted in accordance with the following formula:
F' = F x O + P/M
------------------
CSDO
where:
F' = the adjusted Floor Price;
F = the then current Floor Price;
M = the then current Market Price (as defined in
Section 4(1)(ii) of the Warrant);
O = the number of shares of Common Stock
outstanding immediately prior to the
Dilutive Issuance;
P = the aggregate consideration, calculated as
set forth in Paragraph H hereof, received by
the Corporation upon such Dilutive Issuance;
and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as defined in Section
4(l)(i) of the Warrant) immediately after
the Dilutive Issuance.
H. Effect on Floor Price of Certain Events. For purposes of determining the
adjusted Floor Price under Paragraph G hereof, the following will be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the
17
Market Price in effect on the date of issuance of such Options ("Below Market
Options"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Market Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share. For purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such Below Market Options"
is determined by dividing (i) the total amount, if any, received or receivable
by the Corporation as consideration for the issuance or granting of all such
Below Market Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Below Market Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Below Market Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or exchange
thereof at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Floor Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Corporation in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Paragraph H(ii)(B) if applicable) is less than the Market
Price in effect on the date of issuance of such Convertible Securities, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Corporation for such price per share. For
the purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such exercise, conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Corporation
as consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the exercise, conversion or exchange thereof at the time
such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Floor Price will be made upon the
actual issuance of such Common Stock upon exercise, conversion or exchange of
such Convertible Securities.
(iii) If the Corporation in any manner issues or sells any Convertible
Securities with a fluctuating conversion or exercise price or exchange ratio (a
"Variable Rate Convertible
18
Security"), then the "price per share for which Common Stock is issuable upon
such exercise, conversion or exchange" for purposes of the calculation
contemplated by Paragraph H(ii)(A) shall be deemed to be the lowest price per
share which would be applicable (assuming all holding period and other
conditions to any discounts contained in such Convertible Security have been
satisfied) if the Market Price on the date of issuance of such Convertible
Security was 75% of the Market Price on such date (the "Assumed Variable Market
Price"). Further, if the Market Price at any time or times thereafter is less
than or equal to the Assumed Variable Market Price last used for making any
adjustment under this Article VIII with respect to any Variable Rate Convertible
Security, the Floor Price in effect at such time shall be readjusted to equal
the Floor Price which would have resulted if the Assumed Variable Market Price
at the time of issuance of the Variable Rate Convertible Security had been 75%
of the Market Price existing at the time of the adjustment required by this
sentence.
(iv) Change in Option Price or Conversion Rate. If there is a change at
any time in (i) the amount of additional consideration payable to the
Corporation upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution), the Floor Price in effect at the time of such change will be
readjusted to the Floor Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(v) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Floor Price then in effect will be readjusted to
the Floor Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other than in
respect of the actual number of shares of Common Stock issued upon exercise or
conversion thereof), never been issued.
(vi) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Debenture will be the
amount received by the Corporation therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Corporation in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration part or all of which shall be other than cash,
including, in the case of a strategic or similar arrangement in which the other
entity will provide services to the Corporation, purchase services from the
Corporation or otherwise provide intangible consideration to the Corporation,
the
19
amount of the consideration other than cash received by the Corporation
(including the net present value of the contribution expected by the Corporation
for the provided or purchased services) will be the fair market value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation will be the Market
Price thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger or consolidation
in which the Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The Corporation shall calculate, using standard commercial
valuation methods appropriate for valuing such assets, the fair market value of
any consideration other than cash or securities; provided, however, that if the
Holder does not agree to such fair market value calculation within three (3)
business days after receipt thereof from the Corporation, then such fair market
value will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Corporation and
reasonably acceptable to the Holder hereof, with the costs of such appraisal to
be borne by the Corporation.
(vii) Exceptions to Adjustment of Floor Price. No adjustment to the
Floor Price will be made (i) upon the exercise of any warrants, options or
convertible securities (other than those certain Secured Promissory Notes of a
subsidiary of the Company dated April 15, 1998, in the aggregate original
principal amount of $22,200,000) issued and outstanding on January 28, 1999 and
set forth on Schedule 3(d) of the Securities Purchase Agreement in accordance
with the terms of such securities as of such date; (ii) upon the grant or
exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit plan of the Corporation now existing or to be
implemented in the future, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Corporation or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon the issuance of any
Debentures or Warrants in accordance with the terms of the last sentence of
Section 4(e)(i) of the Securities Purchase Agreement; (iv) upon conversion of
the Debentures or exercise of the Warrants; (v) upon the issuance of any Common
Stock, Options or Convertible Securities at any time prior to the 150th day
after January 28, 1999 pursuant to a strategic transaction with that certain
entity identified in the confidential letter from the Corporation's legal
counsel to the Holder's legal counsel; or (vi) upon the issuance of any Common
Stock, Options or Convertible Securities which are issued in connection with the
Corporation's acquisitions of (A) Circumstance Design (Big Hand), (B) FS3
Interactive, (C) Hype or (D) Fire Engine Red.
I. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price or Fixed Amounts pursuant to this Article
VIII, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each Holder of the Debentures a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any Holder of the Debentures,
furnish
20
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price or Fixed Amounts at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of
any Debenture.
ARTICLE IX
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of any
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
B. Notices. Any notices required or permitted to be given under the terms
of this Debenture shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Corporation:
ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
If to the Holder, to the address set forth under such Holder's name on the
signature page to the Securities Purchase Agreement executed by such Holder.
Each party shall provide notice to the other parties of any change in address.
21
C. Amendment Provision. Except as set forth in Article III.C, this
Debenture and any provision hereof may only be amended by an instrument in
writing signed by the Corporation and all of the Holders. The term "Debenture"
and all references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. Assignability; Allocation of Reserved Amount. This Debenture shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of the Holder and its successors and assigns. In the event a Holder
shall sell or otherwise transfer any of such Holder's Debentures, each
transferee shall be allocated a pro rata portion of such transferor's Reserved
Amount. Each increase to the Reserved Amount shall be allocated pro rata among
the Holders of Debentures based on the outstanding principal amount of
Debentures held by each Holder at the time of the increase in the Reserved
Amount. Any portion of the Reserved Amount which remains allocated to any person
or entity which does not hold any Debentures shall be allocated to the remaining
Holders of Debentures, pro rata based on the outstanding principal amount of
Debentures then held by such Holders.
E. Cost of Collection. If default is made in the payment of this Debenture,
the Corporation shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.
F. Governing Law; Jurisdiction. This Debenture shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Corporation
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in the State of Delaware in any suit or proceeding
based on or arising under this Debenture and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Corporation irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Corporation further agrees that
service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding. Nothing herein shall affect the right of any Holder to
serve process in any other manner permitted by law. The Corporation agrees 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.
G. Denominations. At the request of Holder, upon surrender of this
Debenture, the Corporation shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $25,000 as Holder shall request.
H. Lost or Stolen Debentures. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Debenture and (ii)
(y) in the case of loss, theft or destruction, of indemnity (without any bond or
other security) reasonably satisfactory to the Corporation, or (z) in the case
of mutilation, upon surrender and cancellation of any Debenture, the Corporation
shall execute and deliver a new Debenture of like tenor and date. However, the
22
Corporation shall not be obligated to reissue such lost or stolen Debenture if
the Holder contemporaneously requests the Corporation to convert such Debenture.
I. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective and thereafter so long as any Debentures are outstanding, the
Corporation shall deliver (or cause its transfer agent to deliver) to each
Holder a written report notifying the Holders of any occurrence which prohibits
the Corporation from issuing Common Stock upon any such conversion. The report
shall also specify (i) the total outstanding principal amounts of Debentures as
of the end of such quarter, (ii) the total number of shares of Common Stock
issued upon all conversions of Debentures prior to the end of such quarter,
(iii) the total number of shares of Common Stock which are reserved for issuance
upon conversion of the Debentures as of the end of such quarter and (iv) the
total number of shares of Common Stock which may thereafter be issued by the
Corporation upon conversion of the Debentures before the Corporation would
exceed the Reserved Amount. The Corporation (or its transfer agent) shall
deliver the report for each quarter to each Holder prior to the tenth day of the
calendar month following the quarter to which such report relates. In addition,
the Corporation (or its transfer agent) shall provide, within 15 days after
delivery to the Corporation of a written request by any Holder, any of the
information enumerated in clauses (i) - (iv) of this Paragraph I as of the date
of such request. Simultaneously with delivering such quarterly statements or
responding to such written request, the Corporation shall issue a press release
with substantially the same information.
J. Payment of Cash; Defaults. Whenever the Corporation is required to make
any cash payment to a Holder under the Debentures (whether a Default Amount or
upon prepayment, repayment or otherwise), such cash payment shall be made to the
Holder within five business days after delivery by such Holder of a notice
specifying that the Holder elects to receive such payment in cash and the method
(e.g., by check, wire transfer) in which such payment should be made. If such
payment is not delivered within such five business day period, such Holder shall
thereafter be entitled to interest on the unpaid amount at a per annum rate
equal to the lower of twenty-four percent (24%) and the highest interest rate
permitted by applicable law until such amount is paid in full to the Holder.
K. Restrictions on Shares. The shares of Common Stock issuable upon
conversion of this Debenture may not be sold or transferred unless (i) they
first shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon conversion
of this Debenture that have not been so registered and that have not been sold
under an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
23
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED,
SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Debenture, the Corporation shall remove
the foregoing legend from the certificate and issue to such holder a new
certificate therefor free of any transfer legend, if (i) with such request, the
Corporation shall have received either (A) an opinion of counsel, in form,
substance and scope customary for opinions in such circumstances, to the effect
that any such legend may be removed from such certificate, or (B) satisfactory
representations from Holder that Holder is eligible to sell such security under
Rule 144 or (ii) a registration statement under the Securities Act covering the
resale of such securities is in effect. Nothing in this Debenture shall (i)
limit the Corporation's obligation under the Registration Rights Agreement, or
(ii) affect in any way Holder's obligations to comply with applicable securities
laws upon the resale of the securities referred to herein.
L. Status as Debenture Holder. Upon submission of a Notice of Conversion by
a Holder of the Debentures, (i) the principal amount of the Debentures and the
interest thereon covered thereby shall be deemed converted into shares of Common
Stock as of the Conversion Date and (ii) the Holder's rights as a holder of such
Debentures shall cease and terminate (but only with respect to that portion of
the Debentures covered by such Notice of Conversion), excepting only the right
to receive certificates for such shares of Common Stock and to any remedies
provided herein or otherwise available at law or in equity to such Holder
because of a failure by the Corporation to comply with the terms of the
Debentures. In situations where Article V.B is applicable, the number of shares
of Common Stock referred to in clauses (i) and (ii) of the immediately preceding
sentence shall be determined on the date on which such shares of Common Stock
are delivered to the Holder. Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the tenth business
day after the expiration of the Delivery Period with respect to a conversion of
Debentures for any reason, then (unless the Holder otherwise elects to retain
its status as a holder of Common Stock by so notifying the Corporation within
five business days after the expiration of such 10 business day period) the
portion of the principal amount and interest thereon subject to such conversion
shall be deemed outstanding under the Debentures and the Corporation shall, as
soon as practicable, return the Debentures to the Holder. In all cases, the
Holder shall retain all of its rights and
24
remedies (including, without limitation, (i) the right to receive payments
pursuant to Article V.C to the extent required thereby for such Conversion
Default and any subsequent Conversion Default and (ii) the right to have the
Conversion Price with respect to subsequent conversions determined in accordance
with Article V.A) for the Corporation's failure to convert the Debentures.
M. Obligation to Cure. If the Corporation is prohibited from issuing shares
of Common Stock to a Holder for any reason, the Corporation shall immediately
notify the Holders of Debentures of such occurrence and shall take immediate
action (including, if necessary, seeking the approval of its shareholders) to
eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities on
the Corporation's ability to issue shares of Common Stock.
N. Remedies Cumulative. The remedies provided in this Debenture shall be
cumulative and in addition to all other remedies available under this Debenture,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Corporation to comply with the terms of
this Debenture. The Corporation acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the
Debentures and that the remedy at law for any such breach may be inadequate. The
Corporation therefore agrees, in the event of any such breach or threatened
breach, that the Holders of the Debentures shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
25
IN WITNESS WHEREOF, Borrower has caused this Debenture to be executed
by its duly authorized officer.
ICC TECHNOLOGIES, INC.
By:________________________________
Name:
Title:
Exhibit 1
NOTICE OF CONVERSION
To: ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
The undersigned hereby elects to convert $____________ principal amount of the
Debenture (the "Conversion"), into shares of common stock ("Common Stock") of
ICC Technologies, Inc. (the "Corporation") according to the conditions of the
Convertible Term Debenture dated ____________, 1999 (the "Debenture"), as of the
date written below. If securities are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any.
The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
(which is ________________) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC Transfer").
In the event of partial exercise, please reissue an appropriate Debenture(s) for
the principal balance which shall not have been converted.
Check Box if Applicable:
|_| In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned
hereby requests that the Corporation issue and deliver to the
undersigned or its nominee (if applicable) physical certificates
representing such shares of Common Stock.
Date of Conversion:____________________________________
Applicable Conversion Price:___________________________
Amount of Accrued and Unpaid Interest
on the Principal Amount to be converted,
if any:________________________________________________
Default Amount to be converted, if any:____________
Number of Shares of
Common Stock to be Issued:_____________________________
Signature:_____________________________________________
Name:__________________________________________________
Address:_______________________________________________
EXHIBIT B
to Securities
Purchase
Agreement
VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON THE FIFTH ANNIVERSARY OF ISSUANCE
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase _________ Shares of
Common Stock, par value $.01 per share
Date: _____________
ICC TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CAPITAL VENTURES INTERNATIONAL, or
its registered assigns, is entitled to purchase from ICC TECHNOLOGIES, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, ___________________________________ (_________) fully paid and
nonassessable shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), at an exercise price per share (the "Exercise Price")
equal to $5.27. The number of shares of Common Stock purchasable hereunder (the
"Warrant Shares") and the Exercise Price are subject to adjustment as provided
in Section 4 hereof and the Exercise Price is subject to reset as provided in
Section 11 hereof. The term "Warrants" means this Warrant and the other warrants
of the Company issued pursuant to that certain Securities Purchase Agreement,
dated as of January 28, 1999, by and among the Company and the other signatory
thereto (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company by 11:59 p.m. New York time on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof) and upon (i) payment
to the Company in cash, by certified or official bank check or by wire transfer
for the account of the Company, of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the holder is permitted to effect
a Cashless Exercise (as defined in Section 12(c) hereof) pursuant to Section
12(c) hereof, delivery to the Company of a written notice of an election to
effect a Cashless Exercise for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered and the completed Exercise Agreement shall have been delivered and
payment shall have been made for such shares as set forth above or, if such day
is not a business day, on the next succeeding business day. The Warrant Shares
so purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof within a reasonable
time, not exceeding two business days, after this Warrant shall have been so
exercised (the "Delivery Period"). If the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, and so long as the certificates therefor do not bear a legend
and the holder is not obligated to return such certificate for the placement of
a legend thereon, the Company shall cause its transfer agent to electronically
transmit the Warrant Shares so purchased to the holder by crediting the account
of the holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC
Transfer are not satisfied, the Company shall deliver to the holder physical
certificates representing the Warrant Shares so purchased. Further, the holder
may instruct the Company to deliver to the holder physical certificates
representing the Warrant Shares so purchased in lieu of delivering such shares
by way of DTC Transfer. Any certificates so delivered shall be in such
denominations as may be requested by the holder hereof, shall be registered in
the name of such holder or such other name as shall be designated by such holder
and, following the date on which the Warrant Shares have been registered under
the Securities Act pursuant to that certain Registration Rights Agreement, dated
as of January 28, 1999, by and between the Company and the other signatory
thereto (the "Registration Rights Agreement") or otherwise may be sold by the
holder pursuant to Rule 144 promulgated under the Securities Act (or a successor
rule), shall not bear any restrictive legend. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company fails for
any reason to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "Exercise
Default"), then the Company shall pay to the holder payments ("Exercise Default
2
Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) hereof) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with this Section 1 (the "Exercise Default Date")
exceeds the Exercise Price in respect of such Warrant Shares, multiplied by (c)
the number of shares of Common Stock the Company failed to so deliver in such
Exercise Default, multiplied by (d) .24, where N = the number of days from the
Exercise Default Date to the date that the Company effects the full exercise of
this Warrant which gave rise to the Exercise Default. The accrued Exercise
Default Payment for each calendar month shall be paid in cash or shall be
convertible into Common Stock, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash, cash payment
shall be made to holder by the fifth day of the month following the month in
which it has accrued; and
(b) In the event holder elects to take such payment in Common Stock, the
holder may convert such payment amount into Common Stock (in accordance with the
terms contained in Article VII of the Debentures of the Company issued pursuant
to the Securities Purchase Agreement (the "Debentures")) at the lower of the
Exercise Price in respect of the Warrant Shares triggering the Exercise Default
or the Market Price (as defined in Section 4(l)) (as in effect at the time of
conversion) at any time after the fifth day of the month following the month in
which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages for
the Company's failure to maintain a sufficient number of authorized shares of
Common Stock as required pursuant to the terms of Section 3(b) hereof or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. Period of Exercise. This Warrant is immediately exercisable, at any time
or from time to time on or after the date of initial issuance of this Warrant
(the "Issue Date") and before 5:00 p.m., New York City time, on that date which
is five (5) years after the Issue Date (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the Exercise Period, the Company shall at
all times have authorized, and reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant (without giving effect to the
limitations on exercise set forth in Section 7(g) hereof).
3
(c) Listing. The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the lowest Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all or
substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of issuance of
any Warrant Shares, take such actions as the Company shall reasonably determine
are necessary to qualify the Warrant Shares for, or obtain exemption for the
Warrant Shares for, sale to the holder of this Warrant upon the exercise hereof
under applicable securities or "blue sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the holder of
this Warrant prior to such date; provided, however, that the Company shall not
be required to qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction.
4. Antidilution Provisions. During the Exercise Period, except as provided
in Section 11(e) hereof, the Exercise Price (or Exercise Prices, in the event
that the Exercise Price as to some Warrant Shares has been reset pursuant to
Section 11 hereof) and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 4.
4
In the event that any adjustment of the Exercise Price(s) as required
herein results in a fraction of a cent, such Exercise Price(s) shall be rounded
up or down to the nearest cent.
(a) Adjustment of Exercise Price(s). Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "Dilutive Issuance"), then effective immediately upon
the Dilutive Issuance, the Exercise Price(s) will be adjusted in accordance with
the following formula:
E' = E x O + P/M
------------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section
4(1)(ii));
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as
set forth in Section 4(b) hereof, received
by the Company upon such Dilutive Issuance;
and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as defined in Section
4(l)(i)) immediately after the Dilutive
Issuance.
(b) Effect on Exercise Price(s) of Certain Events. For purposes of
determining the adjusted Exercise Price(s) under Section 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities exercisable, convertible into or exchangeable for
Common Stock ("Convertible Securities") (such warrants, rights and
options to purchase Common Stock or Convertible Securities are
hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is
less than the Market Price in effect on the date of issuance of such
Options ("Below Market Options"), then the maximum total number of
shares of Common Stock issuable upon the exercise of all such Below
Market Options (assuming full exercise, conversion or exchange of
Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. For purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon the exercise of such
5
Below Market Options" is determined by dividing (i) the total amount,
if any, received or receivable by the Company as consideration for the
issuance or granting of all such Below Market Options, plus the
minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options,
plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or
exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Exercise
Price(s) will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Market Options or upon the exercise,
conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is
issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less
than the Market Price in effect on the date of issuance of such
Convertible Securities, then the maximum total number of shares
of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such
exercise, conversion or exchange" is determined by dividing (i)
the total amount, if any, received or receivable by the Company
as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise
Price(s) will be made upon the actual issuance of such Common
Stock upon exercise, conversion or exchange of such Convertible
Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise
price or exchange ratio (a "Variable Rate Convertible Security"),
then the "price per share for which Common Stock is issuable upon
such exercise, conversion or exchange" for purposes of the
calculation contemplated by Section 4(b)(ii)(A) shall be deemed
to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any
discounts contained in such Convertible Security have been
satisfied) if the Market Price on the date of issuance of such
Convertible Security was 75% of the Market Price on such date
(the "Assumed Variable Market Price"). Further, if the Market
6
Price at any time or times thereafter is less than or equal to
the Assumed Variable Market Price last used for making any
adjustment under this Section 4 with respect to any Variable Rate
Convertible Security, the Exercise Price(s) in effect at such
time shall be readjusted to equal the Exercise Price(s) which
would have resulted if the Assumed Variable Market Price at the
time of issuance of the Variable Rate Convertible Security had
been 75% of the Market Price existing at the time of the
adjustment required by this sentence.
(iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company
upon the exercise, conversion or exchange of any Convertible
Securities; or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (in each such case,
other than under or by reason of provisions designed to protect
against dilution), the Exercise Price(s) in effect at the time of such
change will be readjusted to the Exercise Price(s) which would have
been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially
granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon exercise,
conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to exercise, convert
or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price(s) then in effect will be readjusted to
the Exercise Price(s) which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number
of shares of Common Stock issued upon exercise or conversion thereof),
never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant
will be the amount received by the Company therefor, before deduction
of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Company in
connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash,
including, in the case of a strategic or similar arrangement in which
the other entity will provide services to the Company, purchase
services from the Company or otherwise provide intangible
consideration to the Company, the amount of the consideration other
than cash received by the Company (including the net present value of
the contribution expected by the Company for the provided or purchased
services) will be the fair market value of such consideration, except
where such consideration consists of securities, in which case the
amount of consideration received by the Company will be the Market
Price thereof as of the date of receipt. In case any Common Stock,
7
Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business
of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The
Company shall calculate, using standard commercial valuation methods
appropriate for valuing such assets, the fair market value of any
consideration other than cash or securities; provided, however, that
if the holder hereof does not agree to such fair market value
calculation within three (3) business days after receipt thereof from
the Company, then such fair market value will be determined in good
faith by an investment banker or other appropriate expert of national
reputation selected by the Company and reasonably acceptable to the
holder hereof, with the costs of such appraisal to be borne by the
Company.
(vi) Exceptions to Adjustment of Exercise Price(s). No adjustment
to the Exercise Price(s) will be made (i) upon the exercise of any
warrants, options or convertible securities (other than those certain
Secured Promissory Notes of a subsidiary of the Company, dated April
15, 1998, in the aggregate original principal amount of $22,200,000)
issued and outstanding on January 28, 1999 and set forth on Schedule
3(d) of the Securities Purchase Agreement in accordance with the terms
of such securities as of such date; (ii) upon the grant or exercise of
any stock or options which may hereafter be granted or exercised under
any employee benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose;
(iii) upon the issuance of any Debentures or Warrants in accordance
with the terms of the Securities Purchase Agreement; (iv) upon
conversion of the Debentures or exercise of the Warrants; (v) upon the
issuance of any Common Stock, Options or Convertible Securities at any
time prior to the 150th day after January 28, 1999 pursuant to a
strategic transaction with that certain entity identified in the
confidential letter from the Company's legal counsel to the holder's
legal counsel; or (vi) upon the issuance of any Common Stock, Options
or Convertible Securities which are issued in connection with the
Company's acquisitions of (A) Circumstance Design (Big Hand), (B) FS3
Interactive, (C) Hype or (D) Fire Engine Red.
(c) Subdivision or Combination of Common Stock. If the Company, at any
time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a greater number of shares, then, after the
date of record for effecting such subdivision, the Exercise Price(s) in
effect immediately prior to such subdivision will be proportionately
reduced. If the Company, at any time during the Exercise Period, combines
(by reverse stock split, recapitalization, reorganization, reclassification
or otherwise) its shares of Common Stock into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price(s) in effect immediately prior to such combination will be
proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price(s) pursuant to the provisions of this Section 4, the number
of shares of Common Stock issuable upon exercise of this Warrant at each
such Exercise Price shall be adjusted by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number
8
of shares of Common Stock issuable upon exercise of this Warrant at such
Exercise Price immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of the
Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of
the Company other than in connection with a plan of complete liquidation of
the Company at any time during the Exercise Period, then as a condition of
such consolidation, merger or sale or conveyance, adequate provision will
be made whereby the holder of this Warrant will have the right to acquire
and receive upon exercise of this Warrant in lieu of the shares of Common
Stock immediately theretofore acquirable upon the exercise of this Warrant,
such shares of stock, securities, cash or assets as may be issued or
payable with respect to or in exchange for the number of shares of Common
Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to
insure that the provisions of this Section 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock or
securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if
other than the Company) assumes by written instrument the obligations under
this Warrant and the obligations to deliver to the holder of this Warrant
such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the holder may be entitled to acquire.
Notwithstanding the foregoing, in the event of any consolidation of the
Company with, or merger of the Company into, any other corporation, or the
sale or conveyance of all or substantially all of the assets of the
Company, at any time during the Exercise Period, the holder of the Warrant
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair value of this Warrant as
determined in accordance with customary valuation methodology used in the
investment banking industry.
(f) Distribution of Assets. In case the Company shall declare or make
any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase, by way
of return of capital or otherwise (including any dividend or distribution
to the Company's shareholders of cash or shares (or rights to acquire
shares) of capital stock of a subsidiary) (a "Distribution"), at any time
during the Exercise Period, then the holder of this Warrant shall be
entitled upon exercise of this Warrant for the purchase of any or all of
the shares of Common Stock subject hereto, to receive the amount of such
assets (or rights) which would have been payable to the holder had such
holder been the holder of such shares of Common Stock on the record date
for the determination of shareholders entitled to such Distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price(s), then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price(s) resulting from such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at each such price upon exercise, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation
is based. Such calculation shall be certified by the chief financial
officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of an Exercise
Price shall be made in an amount of less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but
any such lesser adjustment shall be carried forward and shall be made at
9
the time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than 1%
of such Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained
earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the
Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its
assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
10
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least thirty (30) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing,
the Company shall publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the holder of this Warrant.
(k) Certain Events. If, at any time during the Exercise Period, any event
occurs of the type contemplated by the adjustment provisions of this Section 4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Section 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price(s) and the
number of shares of Common Stock acquirable upon exercise of this Warrant at
each such Exercise Price so that the rights of the holder shall be neither
enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) in the
case of any adjustment required by Section 4(a) resulting from the
issuance of any Options, the maximum total number of shares of Common
Stock issuable upon the exercise of the Options for which the
adjustment is required (including any Common Stock issuable upon the
conversion of Convertible Securities issuable upon the exercise of
such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible
Securities, the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of the Convertible
Securities for which the adjustment is required, as of the date of
issuance of such Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of the
closing bid prices for the shares of Common Stock as reported on The
Nasdaq National Market ("Nasdaq") by Bloomberg Financial Markets
("Bloomberg") for the five consecutive trading days immediately
preceding such date, or (ii) if Nasdaq is not the principal trading
market for the shares of Common Stock, the average of the last
reported bid prices as reported by Bloomberg on the principal trading
market for the Common Stock during the same period, or, if there is no
bid price for such period, the last reported sales price as reported
by Bloomberg for such period, or (iii) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market
Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Company and reasonably
acceptable to the holder, with the costs of the appraisal to be borne
by the Company. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply with
respect to any other security in respect of which a determination as
to market value must be made hereunder.
11
(iii) "Common Stock," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant shall
include only Common Stock in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character
referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares (at the Exercise Price therefor) as shall be designated by the holder
hereof at the time of such surrender.
12
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant
in connection with any transfer, exchange, or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 7. The Company shall indemnify
and reimburse the holder of this Warrant for all losses and damages arising as a
result of or related to any breach of the terms of this Warrant, including costs
and expenses (including reasonable legal fees) incurred by such holder in
connection with the enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as
a condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such exercise, transfer, or exchange may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an "accredited investor" as defined in Rule 501(a)
promulgated under the Securities Act; provided that no such opinion, letter, or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer. Notwithstanding
anything contained herein to the contrary, this Warrant shall not be exercisable
by a holder hereof to the extent (but only to the extent) that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
(including the Debentures) subject to a limitation on
13
conversion or exercise analogous to the limitation contained herein) and (b) the
number of shares of Common Stock issuable upon exercise of the Warrants (or
portion thereof) with respect to which the determination described herein is
being made, would result in beneficial ownership by such holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock. To the
extent the above limitation applies, the determination of whether and to what
extent this Warrant shall be exercisable with respect to other securities owned
by such holder shall be in the sole discretion of the holder and submission of
this Warrant for full or partial exercise shall be deemed to be the holder's
determination of whether and the extent to which this Warrant is exercisable, in
each case subject to such aggregate percentage limitation. No prior inability to
exercise the Warrants pursuant to this Section shall have any effect on the
applicability of the provisions of this Section with respect to any subsequent
determination of exercisability. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (a) hereof. The restrictions
contained in this Section 7(g) may not be amended without the consent of the
holder of this Warrant and the holders of a majority of the Company's then
outstanding Common Stock.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
9. Notices. Any notices required or permitted to be given under the terms
of this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier, or by
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
ICC TECHNOLOGIES, INC.
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxx Xxxxxx
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
14
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees 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.
11. Exercise Price Resets.
(a) Upon Reset of Fixed Conversion Price of Debentures. In the event that
the Fixed Conversion Price of the Debentures is reset on the First Variable
Conversion Date to the product of 105% multiplied by the Market Price in effect
on the First Variable Conversion Date, then the Exercise Price with respect to
all Warrant Shares issuable upon exercise of this Warrant shall be reset (but in
no event increased) to also equal such product (the "Fixed Conversion Price
Reset").
(b) Upon Prepayment of Debentures. In the event that the Company delivers
an Optional Prepayment Notice to the holder of this Warrant as to some or all of
the Debentures held by such holder, then the Exercise Price as to a number of
Warrant Shares issuable upon the exercise of this Warrant shall automatically be
reduced (but in no event increased) to the Market Price in effect on the date of
delivery of the Optional Prepayment Notice (the "Prepayment Reset"). The number
of Warrant Shares as to which the Prepayment Reset shall apply shall equal the
product of (i) the number of Warrant Shares issuable upon exercise of this
Warrant on the Issue Date, as adjusted pursuant to the provisions of Section 4
hereof, multiplied by (ii) a fraction, the numerator of which is the aggregate
principal amount of Debentures subject to prepayment pursuant to the Optional
Prepayment Notice and the denominator of which is the aggregate principal amount
of Debentures purchased by such holder pursuant to the Securities Purchase
Agreement. Each Prepayment Reset pursuant to this Section 11(b) shall reset the
Exercise Price as to the Warrant Shares having the highest Exercise Price at the
time such reset occurs.
(c) Upon Conversion of Debenture at Floor Price. In the event that the
holder of this Warrant converts any of such holder's Debentures at a Conversion
Price equal to the Floor Price, then the Exercise Price as to a number of
Warrant Shares issuable upon exercise of this Warrant shall automatically be
reduced to $.01 (the "Floor Price Reset"). The number of Warrant Shares as to
which the Floor Price Reset shall apply shall equal the amount by which (i) the
quotient obtained by dividing (A) the Conversion Amount in respect of such
Debenture conversion by (B) the
15
Conversion Price which would have been in effect in respect of such Debenture
conversion had the Conversion Price been equal to the Variable Conversion Price
and not the Floor Price, exceeds (ii) the number of shares of Common Stock
actually issuable in respect of such Debenture conversion in accordance with the
terms of the Debentures. Each Floor Price Reset pursuant to this Section 11(c)
shall reset the Exercise Price as to the Warrant Shares having the highest
Exercise Price at the time such reset occurs.
(d) Notices, etc. Upon the occurrence of each Fixed Conversion Price Reset,
Prepayment Reset and Floor Price Reset, then, and in each such case, the Company
shall give notice thereof to the holder of this Warrant, which notice shall
state the number of Warrant Shares as to which the reset applies and the prior
and reset Exercise Prices therefor, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. Such
calculation shall be certified by the chief financial officer of the Company.
(e) Further Adjustments. The Exercise Price in effect after a Fixed
Conversion Price Reset and Prepayment Reset, but not after a Floor Price Reset,
shall be subject to adjustment pursuant to the provisions of Section 4 hereof.
(f) Defined Terms. All capitalized terms used in this Section 11, but not
defined in this Warrant shall have the respective meanings assigned to such
terms in the Debentures.
12. Miscellaneous.
(a) Amendments. Except as provided in Section 7(g) hereof, this Warrant and
any provision hereof may only be amended by an instrument in writing signed by
the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several Sections
of this Warrant are inserted for purposes of reference only, and shall not
affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained
in this Warrant, if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act, this Warrant may be exercised at any time after the first anniversary of
the Issue Date until the end of the Exercise Period, by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock 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 in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the last reported sale price per share of the Common Stock on
the date of exercise (as reported on the Nasdaq National Market,
16
or if not so reported, as reported on the principle United States securities
market on which the Common Stock is then traded) and the Exercise Price, and the
denominator of which shall be such last reported sale price per share of Common
Stock.
(d) Business Day. For purposes of this Warrant, the term "business day"
means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
ICC TECHNOLOGIES, INC.
By: _________________________________
Name:____________________________
Title:___________________________
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: ICC TECHNOLOGIES, INC.
00 Xxxx 00xx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxx Xxxxxx
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of ICC TECHNOLOGIES, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
evidenced by the attached Warrant and herewith makes payment of the Exercise
Price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any Common Stock obtained on exercise of the Warrant, except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
|_| The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC Transfer").
|_| In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:_________________ _____________________________________
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints _____________________________
_____________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: _____________________, ____
In the presence of
------------------
Name: ____________________________________________
Signature: _________________________________
Title of Signing Officer or Agent (if any):
Address: __________________________________
__________________________________
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
EXHIBIT C
to
Securities
Purchase
Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of January 28,
1999, by and among ICC TECHNOLOGIES, INC., a corporation organized under the
laws of the State of Delaware (the "Company"), and the undersigned (together
with affiliates, the "Initial Investor").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investor (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investor (i)
convertible debentures ("Debentures") in the aggregate principal amount of Six
Million Dollars ($6,000,000), which are convertible into shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), and (ii) warrants
(the "Warrants") to acquire an aggregate of 639,642 shares of Common Stock. The
shares of Common Stock issuable upon conversion of or otherwise pursuant to the
Debentures are referred to herein as the "Conversion Shares" and the shares of
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants are
referred to herein as the "Warrant Shares."
B. To induce the Initial Investor 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
"Securities Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investor and any transferees or
assignees who agree 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 Securities Act and pursuant to
Rule 415 under the Securities 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 (i) the Conversion Shares,
(ii) the Warrant Shares and (iii) any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a
distribution on or in exchange for or otherwise with respect to any of
the foregoing, whether as default payments or otherwise.
(iv) "Registration Statement" means one or more registration
statements of the Company under the Securities Act registering all of
the Registrable Securities.
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. The Company shall file with the United
States Securities and Exchange Commission ("SEC"), on or prior to the date
(the "Filing Date") which is twenty (20) days after the Issue Date (as
defined in the Debentures) a Registration Statement on Form S-3 (or, if
Form S-3 is not then available, on such form of Registration Statement as
is then available to effect a registration of all of the Registrable
Securities, subject to the consent of the Initial Investor) covering the
resale of at least 3,874,365 Registrable Securities, which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Debentures and exercise of the Warrants to prevent dilution resulting from
stock splits, stock dividends or similar transactions. The Registrable
Securities included in the Registration Statement shall be allocated to the
Investors as set forth in Section 11(k) hereof. The Registration Statement
(and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to
the review by) the Initial Investor and its counsel prior to its filing or
other submission.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
-2-
Initial Investor, shall have the right to select one legal counsel to
represent the Investors and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. In the
event that any Investors elect not to participate in such underwritten
offering, the Registration Statement covering all of the Registrable
Securities shall contain appropriate plans of distribution reasonably
satisfactory to the Investors participating in such underwritten offering
and the Investors electing not to participate in such underwritten offering
(including, without limitation, the ability of nonparticipating Investors
to sell from time to time and at any time during the effectiveness of such
Registration Statement).
c. Payments by the Company. The Company shall use its best efforts to
cause the Registration Statement required to be filed pursuant to Section
2(a) hereof to become effective as soon as practicable, but in no event
later than the one hundred fiftieth (150th) day after the Issue Date (the
"Registration Deadline"). 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 filed with the SEC by the Filing Date or
declared effective by the SEC on or before the Registration Deadline or if,
after the Registration Statement has been declared effective by the SEC,
sales of all the Registrable Securities (including any Registrable
Securities required to be registered pursuant to Section 3(b) hereof)
cannot be made pursuant to the Registration Statement (by reason of a stop
order or the Company's failure to update the Registration Statement or any
other reason outside the control of the Investors) or (ii) the Common Stock
is not listed or included for quotation on the Nasdaq Small Cap Market (the
"Small Cap"), the Nasdaq National Market (the "NNM"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any
time after the Registration Deadline, then the Company will make payments
to the Investors in such amounts and at such times as shall be determined
pursuant to this Section 2(c) as partial relief for the damages to the
Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to
each Investor an amount equal to the product of (i) the aggregate principal
amount of the Debentures held by such Investor (including, without
limitation, Debentures that have been converted into Conversion Shares then
held by such Investor) (the "Aggregate Principal Amount"), multiplied by
(ii) one and one-half percent (1.5%), multiplied by (iii) the sum of (x)
the number of months (pro rated for partial months) after the Filing Date
and prior to the date the Registration Statement required to be filed
pursuant to Section 2(a) is filed with the SEC, plus (y) the number of
months (pro rated for partial months) after the one hundred twentieth
(120th) day after the Issue Date and prior to the date the Registration
Statement filed pursuant to Section 2(a) is declared effective by the SEC,
plus (z) the number of additional months (prorated for partial months) that
sales of any Registrable Securities cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective or the Common Stock is not listed or included for quotation on
the NNM, the NYSE or AMEX; provided, however, that there shall be excluded
from each such period any delays which are solely attributable to changes
(other than corrections of Company mistakes with respect to information
previously provided by the Investors) required by the Investors in the
Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of
-3-
distribution. For example, if the Registration Statement is not effective
by the Registration Deadline, the Company would pay $15,000 per month
(commencing on the 120th day after the Issue Date) for each $1,000,000 of
Aggregate Principal Amount until the Registration Statement becomes
effective. Such amounts shall be paid in cash or, at each Investor's
option, may be convertible into Common Stock at the Conversion Price (as
defined in the Debentures). 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 under Article
III of the Debentures), 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 each such thirty (30) day period.
d. 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 Securities 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)
and the Company is not prohibited from including such Registrable
Securities on such Registration Statement, the Company shall send to each
Investor who is entitled to registration rights under this Section 2(d)
written notice of such determination and, if within fifteen (15) days after
the date of such notice, such Investor shall so request in writing, the
Company 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)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit. 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 (except to the extent any existing
agreements otherwise provide). No right to registration of Registrable
-4-
Securities under this Section 2(d) 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(d) 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.
e. Eligibility for Form S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investor and any other Investor 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 S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a) as soon as practicable
after the Issue Date (but in no event later than the Filing Date), and
cause such Registration Statement relating to Registrable Securities to
become effective as soon as practicable after such filing (but in no event
later than the Registration Deadline), and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable Securities have
been sold and (ii) the date on which all of the Registrable Securities (in
the reasonable opinion of counsel to the Initial Investor) may be
immediately sold to the public without registration or restriction pursuant
to Rule 144(k) under the Securities Act (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) (i) shall comply in all material respects with the requirements of
the Securities Act and the rules and regulations of the SEC promulgated
thereunder and (ii) 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 not misleading. The financial
statements of the Company included in the Registration Statement or
incorporated by reference therein will comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC applicable with respect thereto. Such financial
statements will be prepared in accordance with U.S. 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 not include footnotes or may be condensed on summary
statements and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to immaterial year-end adjustments).
-5-
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 Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is, for any three
(3) consecutive trading days (the last of such three (3) trading days being
the "Registration Trigger Date"), insufficient to cover one hundred and
five percent (105%) of the Registrable Securities issued or issuable upon
conversion of the Debentures and exercise of the Warrants (without giving
effect to any limitations on conversion or exercise contained in Article
III.C of the Debentures or Section 7(g) of the Warrants), 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
one hundred thirty-five percent (135%) of the Registrable Securities so
issued or issuable (without giving effect to any limitations on conversion
or exercise contained in Article III.C of the Debentures or Section 7(g) of
the Warrants) as of the Registration Trigger Date, in each case, as soon as
practicable, but in any event within fifteen (15) days after the
Registration Trigger Date (based on the market price of the Common Stock
and other relevant factors on which the Company reasonably elects to rely).
The Company shall cause such amendment and/or new Registration Statement to
become effective as soon as practicable following the filing thereof. In
the event the Company fails to obtain the effectiveness of any such
Registration Statement within sixty (60) days after a Registration Trigger
Date, each Investor shall thereafter have the option, exercisable in whole
or in part at any time and from time to time by delivery of a written
notice to the Company (a "Repurchase Notice"), to require the Company to
purchase for cash, at an amount per share equal to the Default Amount (as
defined in Article VII of the Debentures), a portion of the Investor's
Debentures such that the total number of Registrable Securities included on
the Registration Statement for resale by such Investor exceeds 105% of the
Registrable Securities issued or issuable upon conversion of such
Investor's Debentures and exercise of such Investor's Warrants (without
giving effect to any limitations on conversion or exercise contained in
Article III.C of the Debentures or Section 7(g) of the Warrants). If the
Company fails to purchase any of such Debentures within five (5) business
days after its receipt of a Repurchase Notice, then such Investor shall be
entitled to the remedies provided in Article VII.C of the Debentures.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and
prospectus and each amendment or supplement thereto, 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
(including, without limitation, any request to accelerate the effectiveness
-6-
of any Registration Statement or amendment thereto), and each item of
correspondence from the SEC or the staff of the SEC, in each case relating
to such Registration Statement (other than any portion, if any, thereof
which contains information for which the Company has sought confidential
treatment), (ii) on the date of effectiveness of the Registration Statement
or any amendment thereto, a notice stating that the Registration Statement
or amendment has been declared effective, and (iii) 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 by such Investor.
d. The Company shall use its best efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (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 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 the Company undue expense or burden, 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. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for
the offering, the Company shall enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution obligations,
with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor by telephone and facsimile of the
happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in the 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 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.
-7-
g. 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 practicable moment (including in each case by
amending or supplementing such Registration Statement) 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 (and if such Registration Statement
is supplemented or amended, deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request).
h. The Company shall permit a single firm of counsel designated by the
Initial Investor to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing
with the SEC, and not file any document in a form to which such counsel
reasonably objects.
i. The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close
of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration
Statement.
j. At the request of any Investor, the Company shall furnish, on the
date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors and in form, scope and substances as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to
the 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 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
confidence and shall not make any disclosure (except to an Investor) 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 subpoena or other 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
-8-
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 satisfactory to the
Company) with the Company with respect thereto, substantially in the form
of this Section 3(k). 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. Nothing herein shall be deemed
to limit the Investors' ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.
l. 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 order from a court or governmental body of competent jurisdiction,
(iv) such information has been made generally available to the public other
than by disclosure in violation of this or any other agreement, or (v) such
Investor consents to the form and content of any such disclosure. 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 prior to making such disclosure, and allow
the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i) cause
all the Registrable Securities covered by the Registration Statement to be
listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the
same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure the designation and quotation, of all the
Registrable Securities covered by the Registration Statement on the NNM or
the Small Cap and, without limiting the generality of the foregoing, to
arrange for or maintain at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities.
n. 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.
o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates
-9-
to be in such denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
an opinion of such counsel in the form attached hereto as Exhibit 1.
p. At the request of any Investor, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related 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 Securities Act and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated by the SEC).
r. The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
s. From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company
to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority in interest of
the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. 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. At least five (5) business 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.
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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 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 in interest of the
Registrable Securities being offered 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 underwriter(s) of such offering and the Company and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless such
Investor has notified the Company in writing of such Investor's election
not to participate in such underwritten distribution.
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(f)
or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g)
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. Notwithstanding anything to the
contrary, the Company shall cause the transfer agent for the Registrable
Securities to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Debentures and Warrants in
connection with any sale of Registrable Securities with respect to which
such Investor has entered into a contract for sale prior to receipt of such
notice and for which such Investor has not yet settled.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (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
in excess of those payable by the Company pursuant to Section 5 below.
Notwithstanding anything in this Section 4(e) to the contrary, this Section
4(e) is not intended to limit an Investor's rights under Section 2(a) or
3(b) hereof.
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5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, the fees and disbursements of one counsel selected by
the Investors, and underwriting discounts and commissions shall be borne by the
Company. In addition, the Company shall pay all of the Investors' costs and
expenses (including legal fees) incurred in connection with the enforcement of
the rights of the Investors hereunder.
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 (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees
and agents of such Investor and each person who controls any Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any,
(each, an "Indemnified Person"), against any joint or several losses,
claims, damages, liabilities or expenses (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
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 therein a material fact 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 Securities Act, the Exchange 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 (the matters in
the foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(c) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
other Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
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
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the Company by such Indemnified Person expressly for use in the
Registration Statement or any such amendment thereof or supplement thereto;
(ii) 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; and (iii) with respect to
any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person 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, if such corrected
prospectus was timely made available by the Company pursuant to Section
3(c) hereof, and the Indemnified Person was promptly advised in writing not
to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. 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 severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, its employees, agents
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, 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 Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange 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; and subject to Section 6(c) such Investor will reimburse any
legal or other expenses (promptly as such expenses are incurred and are due
and payable) 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 Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds actually received by 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, and the Indemnified Party failed to utilize such corrected
prospectus.
-13-
c. 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 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 such
indemnifying party shall not be entitled to assume such defense and 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 conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding or the actual or potential defendants in,
or targets of, any such action include both the Indemnified Person or the
Indemnified Party and the indemnifying party and any such Indemnified
Person or Indemnified Party reasonably determines that there may be legal
defenses available to such Indemnified Person or Indemnified Party which
are in conflict with those available to such indemnifying party. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest
of the Registrable Securities included in the Registration Statement to
which the Claim relates (with the approval of the Initial Investor if it
holds Registrable Securities included in such Registration Statement), if
the Investor is entitled to indemnification hereunder, or by the Company,
if the Company is entitled to indemnification hereunder, as applicable. 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 actually 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.
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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 person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) 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 EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities 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. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the
Securities Act and the Exchange 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 and availability of such reports and other
documents is required for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns Debentures,
Warrants or Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange 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 Investors to sell
such securities pursuant to Rule 144 without registration.
-15-
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Debentures, the Warrants or the 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 after such
assignment, (ii) the Company is 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)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Securities Purchase Agreement, the Debentures or the Warrants, the Securities
(as defined in the Securities Purchase Agreement) may be pledged, and all rights
of the Investors under this Agreement or any other agreement or document related
to the transaction contemplated hereby may be assigned, without further consent
of the Company, to a bona fide pledgee in connection with an Investor's margin
or brokerage accounts.
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 written consent of the Company, the Initial
Investor (to the extent the Initial Investor still owns Debentures, Warrants or
Registrable Securities) and Investors who hold a majority in interest of the
Registrable Securities or, in the case of a waiver, with the written consent of
the party charged with the enforcement of any such provision. 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.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five (5) days after being placed in the
mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier or confirmed telecopy, in each case addressed to a
party. The addresses for such communications shall be:
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If to the Company:
ICC Technologies, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
If to an Investor, at such address as such Investor shall have provided in
writing to the Company or such other address as such Investor furnishes by
notice given in accordance with this Section 11(b).
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.
d. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in the State of Delaware.
The Company irrevocably consents to the jurisdiction of the United States
federal courts and state courts located in the State of Delaware in any
suit or proceeding based on or arising under 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 an
inconvenient forum to the maintenance of such suit or proceeding. The
Company further agrees that service of process upon the Company mailed by
first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein
shall affect an Investor's right to serve process in any other manner
permitted by law. The Company agrees 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.
e. This Agreement, the Securities Purchase Agreement, the Debentures
and the Warrants (including all schedules and exhibits thereto) constitute
the entire agreement among 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, the Securities Purchase Agreement, the Debentures
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and the Warrants supersede all prior agreements and understandings among
the parties hereto and thereto with respect to the subject matter hereof
and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the 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 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 a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
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.
j. All consents, approvals and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Investors holding
a majority in interest of the Registrable Securities (determined as if all
Debentures and Warrants then outstanding had been converted into or
exercised for Registrable Securities) then held by all Investors.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable
Securities included thereon shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the
time of such establishment or increase, as the case may be. In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be allocated a pro rata portion of the
number of Registrable Securities included on a Registration Statement for
such transferor. Any shares of Common Stock included on a Registration
Statement and which remain allocated to any person or entity which does not
hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of shares of Registrable Securities
then held by such Investors. For the avoidance of doubt, the number of
Registrable Securities held by an Investor shall be determined as if all
Debentures and Warrants then outstanding and held by an Investor were
converted into or exercised for Registrable Securities.
l. For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ICC TECHNOLOGIES, INC.
By: ____________________________________________________________
Name: __________________________________________________________
Its: ___________________________________________________________
INITIAL INVESTOR:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc.,
Its authorized agent
By: ________________________________________________________
Name: ______________________________________________________
Title: _____________________________________________________
EXHIBIT 1
to
Registration
Rights
Agreement
[Date]
[Name and address
of transfer agent]
RE: ICC TECHNOLOGIES, INC.
Ladies and Gentlemen:
We are counsel to ICC TECHNOLOGIES, INC., a corporation organized under the
laws of the State of Delaware (the "Company"), and we understand that [Name of
Investor] (the "Holder") has purchased from the Company (i) convertible
debentures due January 28, 2003 (the "Debentures") which are convertible into
shares (the "Conversion Shares") of the Company's common stock, par value $.01
per share (the "Common Stock"), and (ii) warrants (the "Warrants") to acquire
shares of Common Stock (the "Warrant Shares"). The Debentures and the Warrants
were issued by the Company pursuant to a Securities Purchase Agreement, dated as
of January 28, 1999, by and among the Company and the signatories thereto (the
"Agreement"). Pursuant to a Registration Rights Agreement, dated as of January
__, 1999, by and among the Company and the signatories thereto (the
"Registration Rights Agreement"), the Company agreed, among other things, to
register the Registrable Securities (as that term is defined in the Registration
Rights Agreement) under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms provided in the Registration Rights Agreement. In
connection with the Company's obligations under the Registration Rights
Agreement, on _____ __, 1999, the Company filed a Registration Statement on Form
S-3 (File No. 333- _____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
