EXHIBIT 4.6
WARRANT AND REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the 27th day of September, 1996, by and between
H.E.R.C. PRODUCTS INCORPORATED ("Company") and THE EQUITY GROUP, INC.
("Holder").
WHEREAS, on September 27, 1996 ("Date of Grant"), the Company
agreed to issue a warrant ("Warrant") to The Equity Group, Inc., a New York
corporation ("Equity"), to purchase up to 50,000 shares of the common stock,
$.01 par value ("Common Stock"), and in connection therewith the Company agreed
to grant the registration rights set forth below, said Warrant being issued in
respect of Equity's services to the Company pursuant to that certain Consulting
Agreement entered into between Equity and the Company on September 27, 1996 (the
"Consulting Agreement") pursuant to which Equity will render financial public
relations and consulting services to the Company for a period of up to two years
until September 30, 1998.
NOW THEREFORE, in consideration of the covenants herein
contained, the parties hereto hereby agree as follows:
1. Issuance. The Company hereby issues to the Holder the right to purchase
up to an aggregate of 50,000 shares of Common Stock on the terms and conditions
herein set forth (such right being referred to as the "Warrant").
2. Purchaser Price. The purchase price of each share of Common Stock
subject to this Warrant shall be $2.75.
3. Exercise and Term. The Holder has the right to purchase the shares of
Common Stock subject to this Warrant from September 27, 1996 until the close of
business on September 26, 2001.
4. Payment of Exercise Price. The purchase price for the shares of Common
Stock pursuant to which the Warrant is exercised, will be paid in full at the
time of exercise, in cash by certified check or wire transfer, unless otherwise
agreed to in writing by the Company. Exercise of any Warrant hereunder shall be
by written notice to the Company at its principal place of business, specifying
the number of shares of Common Stock being purchased and accompanied by payment
of the purchase price and any withholding tax obligations imposed on the Company
by reason of the exercise of the Warrant. In the event that the tax obligation,
if any, is not paid, the Company will be permitted to treat as payment of any
withholding tax amount due, the exercise of that number of whole shares of
Common Stock equal to the amount of the tax due divided by the fair market value
of the Common Stock as of the date the Warrant is exercised, and the Company
will be permitted to deduct such number of shares of Common Stock from the total
number being exercised. Certificates representing the shares as to which the
Warrant shall have been exercised shall be registered in the name of the person
exercising the Warrant.
5. Rights of Stockholder. The Holder shall not have any of the rights of a
stockholder with respect to the Common Stock covered by the Warrant until the
date of the issuance of a stock certificate for shares of Common Stock purchased
hereunder.
6. Transferability. Unless consented to in writing by the Company, which
consent shall not be unreasonably withheld, this Warrant and the rights
conferred may not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this Warrant or any right conferred
hereby, or upon the levy of any attachment or similar process on the rights
conferred hereby, without the written consent of the Company, this Warrant and
the rights conferred hereby shall immediately become null and void. Before the
Company consents to any transfer, assignment, pledge or hypothecation of
this Warrant, the transferee, assignee or pledgee of the Warrant shall agree to
be bound by the terms of this Warrant and deliver such other certificates and
agreements as the Company reasonably requests. Notwithstanding the foregoing and
subject to paragraph 8 below, the Warrant may be transferred to the then current
officers, directors and shareholders of the Holder (the "Permitted
Transferees"), provided such Permitted
Transferees agree to be bound by the terms of this Warrant and deliver such
certificates and agreements as the Company reasonably requests.
7. Restricted Nature of Securities. This Warrant and the shares of Common
Stock receivable on the exercise of the Warrant are not registered under the
Securities Act of 1933, as amended (the "Act"). As a condition to the sale of
Common Stock on the exercise of the Warrant, the person exercising such warrant
may be required by the Company to give it such documents, including such
appropriate investment representations as may be required by Counsel for the
Company and such additional agreements as the Counsel for the Company may
determine, as a condition to the acceptance of the exercise of any Warrant
hereunder.
The Holder represents that it has received and carefully
reviewed the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995, Quarterly Reports on Form 10-QSB for the quarters ended March
31, 1996 and June 30, 1996, and Annual Report to Stockholders and related proxy
materials for the Company's Annual Meeting, held on July 18, 1996, and has been
granted the opportunity to obtain any additional, publicly available information
relating to the Company and ask questions of executives of the Company that it
deems necessary to verify the accuracy and completeness of the information
provided to it. Holder represents that it is acquiring this Warrant and will
acquire the Common Stock on its exercise solely for its own account, for the
purpose of investment and not with a view to or for resale in connection with
any distribution thereof, except in compliance with the Act, any applicable
state securities laws and the rules and regulations thereunder. Holder
represents that its knowledge and experience in financial and business matters
is such that it is capable of evaluating an investment in the Warrant and that
its financial condition is such that it can bear the economic risks of acquiring
and holding this Warrant.
8. Sales Under Securities Act. Anything in this Agreement to the contrary
notwithstanding, the Holder hereby agrees that it shall not sell, transfer by
any means or otherwise dispose of this Warrant or the shares of Common Stock
acquired by him upon exercise of the Warrant hereunder without registration
under the Act, or in the event that they are not so registered, unless (a) an
exemption from the Act is available thereunder, and (b) the Holder has furnished
the Company with notice of such proposed transfer, and the Counsel for the
Company, in its reasonable opinion, shall deem such proposed transfer to be so
exempt, or the Holder has furnished the Company with notice of such proposed
transfer, together with an opinion of legal counsel reasonably satisfactory to
the Counsel for the Company, that in such counsel's opinion such proposed
transfer shall be so exempt.
9. Stop Transfer: Legend.
(a) The Company may place stop transfer orders with its transfer agent
against the transfer of the shares of Common Stock issuable under the Warrant
hereof in the absence of registration under the Act or an exemption therefrom
provided herein.
(b) The certificates evidencing shares of Stock to be issued upon the
exercise of the Warrant may bear the following legends:
"The shares represented by this certificate have been
acquired for investment and have not been registered
under the Securities Act of 1933, as amended. The
shares may not be sold or transferred in the absence
of such registration or an exemption therefrom under
said Act."
"The shares represented by this certificate have been
acquired pursuant to an warrant agreement dated
September 27, 1996, a copy of which is on file with
the Company, and may not be transferred, pledged or
disposed or exempt in accordance with the terms and
conditions thereof."
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10. Adjustment to Number of Securities.
(a) If the outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind of stock or
securities of the Company through stock dividend, stock split or reverse stock
split, or stock of a different par value or without par value through amendment
to the Company's Certificate of Incorporation, an appropriate and proportionate
adjustment shall be made in the number and/or kind of securities allocated to
this Warrant, without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding portion of this Warrant, but with a
corresponding adjustment in the price for each share of Common Stock or other
unit of any security remaining covered by this Warrant.
(b) Upon the effective date of the dissolution or liquidation of the
Company, or of a reorganization, merger or consolidation of the Company with one
or more corporations in which the Company will not survive as an independent,
publicly owned corporation, or of a transfer of substantially all the property
or more than eighty percent (80%) of the then outstanding shares of Common Stock
of the Company to another corporation, any Warrant granted hereunder shall
terminate unless provision be made in writing in connection with such
transaction for the assumption of the Warrant granted, or the substitution for
the Warrants of new warrants covering the shares of a successor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to number and
kind of stock and prices, in which event the Warrant theretofore granted or the
new warrants substituted therefor, shall continue in the manner and under
the terms so provided.
(c) Adjustments under this paragraph shall be made by the Board of
Directors, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under any such adjustment.
11. "Piggyback" Registration.
(a) Basic Right. If at any time prior to September 26, 2001 the Company
proposes to register for sale by it or for the account of others, any of its
equity securities under the Act, other than in connection with a merger,
acquisition or exchange offer, and other than an offering on Form S-8 or any
successor form on which the Holder's securities may be registered, and provided
further that any person to which the Company has granted a registration right
prior to the Date of Grant does not object in writing to the exercise of the
Holder's registration rights hereunder in connection with any registration
rights of theirs, the Company shall, at least fifteen (15) days prior to the
filing of such registration statement with the Securities and Exchange
Commission (the "Commission"), give notice of its intention to do so to the
Holder. If the Holder notifies the Company within ten (10) days after the giving
of such notice by the Company of its desire to include any shares of Common
Stock received on exercise of this Warrant in such proposed registration
statement (which notice must state the number of shares to be included and the
proposed plan of disposition thereof), the Company shall, subject to the
provisions of subparagraph (b) below, include the shares designated by said
Holder in such registration statement. Notwithstanding the foregoing, the
Company shall not be obligated to register any shares of Common Stock receivable
upon exercise of this Warrant at any time the shares are registered pursuant to
an effective registration statement under the Act or the Holder may sell the
shares in a public transaction pursuant to Rule 144 promulgated under the Act or
pursuant to another exemption from registration of the shares and/or transaction
under the Act.
(b) Withdrawal of Registration Statement. Notwithstanding the provisions of
subparagraph (a) above, the Company shall at all times have the absolute right
to elect not to file any proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof. In addition,
notwithstanding the provisions of subparagraph (a) above, the Company may
exclude from such registration statement all or a portion of the shares of
Common Stock for which registration was requested by the Holder if, in the
written opinion of the Company's managing underwriter, if any, the inclusion of
all or a portion of such shares, when added to the securities being registered
for sale by the Company, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering. If less than all of the shares
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of Common Stock requested for inclusion in said registration statement are to be
included pursuant to the foregoing provision, the shares of Common Stock which
are included shall be allocated among the selling shareholders (other than the
Company) on a pro rata basis.
12. Terms and Conditions Relating to Registration of Shares. Anything in
paragraph 11 above contained to the contrary notwithstanding, the following
terms and conditions shall apply to each registration of shares of Common Stock
under the Act pursuant to the provisions of paragraph 11 above:
(a) Registration Not Required. The Company shall not be required to
register any shares of Common Stock under the Act if, in the written opinion of
counsel for the Company, which shall be in form and substance reasonably
satisfactory to the Holder of the relevant shares of Common Stock, said shares
may be sold in the manner set forth in the notice to the Company requesting
registration without the need for compliance with the registration provisions of
the Act.
(b) Amendment of Registration Statement. The Company shall, as
expeditiously as possible, prepare and file with the Commission such amendments
and supplements to the registration statement (and to any prospectus included
therein) as may be necessary to keep such registration statement effective until
the sale of the shares of Common Stock so registered has been completed or until
the expiration of a period of 90 days after the effective date of the
registration statement, whichever is earlier.
(c) Prospectuses, etc. The Company shall furnish to the selling Holder,
such number of prospectuses, preliminary prospectuses and other documents as the
selling Holder may reasonably request in order to facilitate the public sale of
its shares of Common Stock.
(d) Expenses. The Company shall pay all costs, fees and expenses in
connection with the registration of the shares of Common Stock, including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses; provided, however, that the Company shall not be
required to pay any (i) fees and expenses of legal counsel for the Holder, (ii)
transfer taxes, or (iii) underwriters' or brokers' fees, discounts or
commissions.
(e) Indemnification.
(1) By the Company. The Company shall indemnify, to the full extent
permitted by law, the Holder, its directors and officers (if applicable) and
each person, if any, who controls the Holder within the meaning of Section 15 of
the Act, against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein (in the case of the prospectus or any preliminary prospectus,
in light of the circumstances under which they were made) not misleading, except
insofar as the same are caused by or contained in any information with respect
to the Holder furnished in writing to the Company by the Holder expressly for
use therein.
(2) By the Holder. In connection with any registration statement in which
the Holder is participating, the Holder shall indemnify, to the full extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of Section 15 of the Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of a material fact or any omission or alleged omission
to state a material fact necessary to make the statements in the registration
statement or prospectus or preliminary prospectus (in the case of the prospectus
or any preliminary prospectus, in light of the circumstances under which they
were made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission is contained in or caused by any information with
respect to the Holder furnished in writing to the Company by the Holder
expressly for use therein.
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(3) Indemnification Procedures. Any person who is entitled to
indemnification under this subparagraph 12(f) shall (i) give prompt written
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party shall not be subject to any liability for any settlement made
without its consent. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(4) Contribution. If for any reason the indemnification provided for in the
preceding subparagraph 12(f)(i) or 12(f)(ii) is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
claim, damage, liability or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(5) Actions by Holder. The Holder shall, at his cost and expense, complete,
execute and deliver all questionnaires, powers of attorney, undertakings and
other documents and instruments, and take all such other actions, as are from
time to time reasonably requested by the Company.
(6) Use of Prospectus. The Holder, upon receipt of notice from the Company
of the occurrence of an event which requires a post-effective amendment to the
registration statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of his shares of Common Stock until he has
received copies of a supplemented or amended prospectus from the Company.
13. Miscellaneous Provisions.
(a) Applicable Law. This Agreement will be deemed to have been made and
delivered in New York City and will be governed as to validity, interpretation,
construction, effect and in all other respects b the internal laws of the State
of New York. The Company and the Holder each hereby agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York,
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum for such suit, action
or proceeding, irrevocably consents to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York in any such suit, action or proceeding and agrees
to accept and acknowledge service or any and all process which may be served in
any such suit, action or proceeding in New York State Supreme Court, County of
New York or in the United States District Court for the Southern District of New
York and agrees that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon in
any suit, action or proceeding.
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(b) Amendment. This Agreement may only be amended by a written instrument
executed by the Company and by the Holder.
(c) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
(d) Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(e) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
If to the Holder, to: The Equity Group Inc.
919 Third Avenue
New York, New York 10019
Attention: Robert D. Goldstein
If to Company, to: H.E.R.C. Products Incorporated
3622 North 34th Avenue
Phoenix, Arizona 85017
Attention: Secretary
(f) Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
(g) Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
(h) Gender. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter gender,
shall include all other genders.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
H.E.R.C. PRODUCTS INCORPORATED
By:
Gary S. Glatter, President
THE EQUITY GROUP, INC.
By:
Robert D. Goldstein, President
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