Exhibit 10.1
AMENDMENT TO REDEMPTION AND CONVERSION AGREEMENT
Amendment dated April ___, 2002, to Redemption and Conversion Agreement
dated as of the 11th day of January, 2002, among Tech Laboratories, Inc., a New
Jersey corporation (the "Company") and the holders identified on Schedule A
hereto ("Holder" or "Holders").
W I T N E S S E T H:
WHEREAS, the Company and Holders have entered into Subscription
Agreements at or about October 13, 2000 ("Subscription Agreements"), pursuant to
which the Company sold to the Holders certain 6.5% promissory notes (the
"Notes") of the Company in the aggregate principal amounts set forth on Schedule
A hereto: and
WHEREAS, the Company and Holders entered into a Redemption and
Conversion Agreement dated as of January 11, 2002 ("Redemption Agreement"); and
WHEREAS, the parties desire to amend the Redemption Agreement in order,
among other things, to cure any and all breaches and/or defaults occurring under
the Redemption Agreement and any breaches and defaults including, but not
limited to, an Event of Default (as that term is defined under the Notes) under
the Subscription Agreements and Notes arising by virtue of the Company's default
under the Redemption Agreement and to cure such other defaults as specifically
provided herein; and
WHEREAS, the parties desire to provide for a certain payment by the
Company upon execution hereof and to provide for additional optional repayments
under the Notes.
NOW, THEREFORE, the parties agree as follows:
1. Upon the execution hereof, the Company will pay an aggregate of one
hundred ten thousand dollars ($110,000) to the Holders, which payment shall be
allocated among the Holders toward a reduction of the amount due under the
Notes, first to interest and then to principal. The outstanding balances due
under the Notes before and after giving effect to such payment are set forth on
Schedule A attached hereto.
2. (a) In consideration of the payment described in paragraph 1. above,
any default or breach under the Redemption Agreement and/or any default under
the Subscription Agreements and the Notes, limited to an Event of Default under
the Notes arising by virtue of the Company's default under the Redemption
Agreement and the occurrence of a Non-Registration Event (as that term is
defined in the Subscription Agreement) under the Subscription Agreement, and any
payments otherwise presently due or rights exercisable pursuant to Sections
9.1(c), 9.2, 9.5 (subject to the limitation described in paragraph 2(b) hereof),
and 10.4 of the Subscription Agreements, such defaults, and to the extent such
defaults or breaches are Events of Default under the Notes, are hereby waived
and thereby cured. It is further agreed such waiver is subject to delivery of
certificates representing shares which were previously the subject of a Notice
of Conversion, copies of which are attached hereto as Exhibits A1-A2 and shall
apply to any additional shares which are the subject of a Notice of Conversion
given prior to June 28, 2002. It is understood and agreed to by the parties that
the waiver and curing of the defaults, including any Events of Default under the
Notes, is limited to those defaults (and Events of Default) arising from the
Company's failure to meet its material obligations under the Redemption
Agreement and its failure to make certain payments and deliver certain shares
subject to a Notice of Conversion under the Notes and Subscription Agreements.
It is the intention of the parties to provide for the payment described in
paragraph 1., the optional payments in paragraphs 4. and 5., and to return the
parties to STATUS QUO ANTE the execution of the Redemption Agreement; provided,
however, it is not the intention of the parties to provide for an inadvertent
waiver of any default or Event of Default not specified in this amendment or not
known.
(b) Notwithstanding anything to the contrary contained herein
or in the Redemption Agreement, the Subscription Agreement, and the Notes, the
parties agree that no Event of Default shall exist under the Notes due to a
Non-Registration Event and the penalties and payments to which the Holders would
otherwise be entitled under Section 9.1(c), any right of redemption under
Section 9.2, any rights or payments under Section 9.5 (except the actual loss to
the holders resulting from any buy-in with respect only to those shares subject
to the Notices of Conversion given prior to the date hereof and with respect to
which amount the Company shall be liable), and any payments due or rights
exercisable under Section 10.4 are hereby waived and deemed cured so long as the
registration statement on Form SB-2 filed by the Company with the Securities and
Exchange Commission (the "Commission") (or any amendment thereto which the
Company agrees to file expeditiously) has been declared effective on or before
June 28, 2002, which registration statement includes all of the Registerable
Securities (as defined in the Subscription Agreement); provided, however, if
such registration statement has not been declared effective by the Securities
and Exchange Commission on or before June 28, 2002, the Holders may exercise
their rights under Sections 9.1(c), 9.2, 9.5, and 10.4 of the Subscription
Agreement and such rights shall be reinstated as of the date on which they would
otherwise have been imposed.
3. Upon the payment of the one hundred ten thousand dollars ($110,000)
described in paragraph 1. above, the Company shall have no further obligation to
make the payments to the Holders under the Redemption Agreement, and the Holders
shall have no further rights under the Redemption Agreement; provided, however,
the Company, may, in its sole discretion, but shall have no obligation to, make
the payments set forth in paragraphs 4. and 5. below. Except as otherwise
described in this Amendment to the Redemption Agreement, the conditions and
terms of this Subscription Agreement are reinstated.
4. The Company shall, however, have the right, but not the obligation,
to repay the remaining outstanding balance due under the Notes, after giving
effect to the payment described in paragraph 1. above, in three (3) installments
which shall be made as follows:
(a) on or before July 1, 2002, $325,000;
(b) on or before September 30, 2002, fifty percent (50%)
of the remaining outstanding balance, principal and
interest, due under the Notes; and
(c) on or before December 30, 2002, the remaining
balance, principal and interest, due under the Notes.
5. With each payment described in paragraph 4. above, the Company shall
repay an additional amount under the Notes, which shall be equal to twenty-five
percent (25%) of such installment in cash or in shares ("Conversion Shares" as
defined in the Notes and Subscription Agreements) of the Company's common stock
(the "Election Amount") (except such additional amount shall be $90,000 with
respect to the July 1, 2002, installment), in the Company's sole discretion,
such Conversion Shares to be valued at the average closing price of the
Company'`s shares for the five (5) trading days immediately preceding a date
which is three (3) days prior to each of the three payment dates described in
paragraph 4. hereof. The balances due under the Notes shall be reduced by (i)
the amounts repaid pursuant to paragraph 4. above and (ii) the concomitant
Election Amount paid, whether in cash and/or Conversion Shares. The Company will
make all repayments under the Notes, whether in cash or in Conversion Shares, in
proportion to each Subscriber's outstanding balance under each Subscriber's
Note. In the event the Company elects to make a portion of the repayment amount
in Conversion Shares, it will notify the holders in writing of its election to
do so prior to any such repayment. The holders shall then convert a portion of
their Notes into the number of Conversion Shares specified in the Company's
written notice. Any amount paid in excess of the aggregate outstanding principal
and interest due under the Notes (whether such Notes are repaid in cash or in
cash and Conversion Shares), shall be deemed the payment to the holders of
additional consideration for entering into this amendment.
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6. Provided the payments described in paragraphs 4. and 5. above are
made on or before their respective due dates, commencing July 1, 2002 (or such
earlier date that the Company may make any of such payments), and so long as an
Event of Default has not occurred under the Notes and Subscription Agreements,
except such Events of Default as have been expressly waived in this amendment,
the Holders agree from and after such date of payment, commencing July 1, 2002
(or such earlier date that the Company may make the first payment), not to
convert any amounts outstanding, principal and/or interest, under the Notes or
to engage in any short selling of the Company's common stock. In addition, so
long as such payments are made, interest shall cease to accrue on the Notes from
and after July 1, 2002 (or such earlier date that the first payment is made). If
the Company fails to make any payment provided for in paragraph 4 on or before
the date specified herein, then all interest that would otherwise have accrued
to any outstanding balance due under the Notes shall be restored. In addition,
if an Event of Default occurs under the Notes and is not cured during any
applicable cure period, the holders of the Notes shall have the right, in each
of their sole discretion, to convert any amounts outstanding, principal and/or
interest, under the Notes and to engage in any short selling of the Company's
common stock.
7. Notwithstanding anything to the contrary in this Agreement, if the
payment described in paragraph 4(a) is not made on or before July 1, 2002, the
reduction in the Notes, principal and/or interest, resulting from the payment of
$110,000 described in paragraph 1., shall be restored PRO RATA to the
outstanding balances due under the Notes, and such payment shall be deemed
consideration for the waiver of the Event of Default and those other defaults
described herein, and the termination of the parties' rights and obligations
under the Redemption Agreement.
8. In the event the payment described in paragraph 4(b) is timely made,
the maturity date of the Notes shall be automatically extended to December 30,
2002.
9. Notwithstanding anything to the contrary contained in this
amendment, in the event the closing price of the shares of the Company's common
stock is at or above $1.25 per share for any five (5) out of ten (10) trading
days, the Holders shall have the right to convert all or any portion of the then
outstanding amounts from time to time due under the Notes and the outstanding
balances due under the Notes shall be correspondingly reduced. The Holders
shall, however, continue to be prohibited from engaging in any short selling,
provided, however, the Holders may sell a number of shares equal to an amount
not to exceed the number of shares specified in a Notice of Conversion given by
such Holder, in anticipation of delivery of certificates representing such
shares.
10. The Company shall have the right at any time and from time to time
to prepay without penalty all or any portion of any of the amounts due under the
Notes, including, but not limited to, any payments described in paragraphs 4.
and 5., but not in connection with any Note portion for which a Notice of
Conversion has been given and further provided that the payments described in
paragraph 5. are made therewith. Except as otherwise described in paragraph 9,
above, the holders of the Notes shall have no right to convert any portion of
the Notes after any such prepayment provided the Company has timely made any
payment or payments, as described in paragraphs 4. and 5. hereof at the time of
such prepayment.
11. Upon timely payment of the funds and Conversion Shares, as the case
may be, to the holders of the Notes, the corresponding aggregate Note principal
and interest will be deemed satisfied whether or not an original or reissued
Note is surrendered to the Company.
12. In the event a Holder does not surrender the Note on or after
receipt of any payment of cash and Conversion Shares, as the case may be, then
such Holder hereby indemnifies the Company against any and all loss or damages
attributable to such non-surrender arising from a third party claim.
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13. The failure of the Company to make any or all of the payments
described in paragraph 4. above, shall not in any way be deemed a default or
breach under the Subscription Agreements, the Redemption Agreement, this
amendment to the Redemption Agreement or any other agreement, or an Event of
Default under the Notes. If the Company fails to make any payment described in
paragraphs 4. or 5. hereof, the Company will have no further obligations and the
Holders no further rights under the Redemption Agreement and this amendment.
Thereafter, the parties' rights and obligations shall be governed by the terms
of the Subscription Agreements and the Notes and the Holders' conversion rights
are immediately reinstated.
14. The Company reaffirms that the registration provisions of the
Subscription Agreements remain in full force and effect, and that such
provisions apply to the Conversion Shares, it being understood and agreed to by
the parties hereto that such Conversion Shares, if elected as a form of payment
by the Company, shall be deemed a conversion by each of the holders in
proportion to their respective balances under the Notes.
15. This agreement may be executed by facsimile transmission and in one
or more counterparts, each of which will be deemed an original.
HOLDER
TECH LABORATORIES, INC. CELESTE TRUST REG.
By: /s/ Bernard M. Ciongoli By: /s/
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Bernard M. Ciongoli, President
ESQUIRE TRADE & FINANCE, INC.
By: /s/
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THE ENDEAVOUR CAPITAL
INVESTMENT FUND, S.A.
By: /s/
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SCHEDULE A
PRIOR TO GIVING EFFECT TO THE GIVING EFFECT TO THE
$110,000 PAYMENT $110,000 PAYMENT
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HOLDERS NOTE INTEREST AGGREGATE INTEREST AGGREGATE
PRINCIPAL ACCRUED PRINCIPAL ACCRUED PRINCIPAL
TRHOUGH AND INTEREST THROUGH AND INTEREST
APRIL 19, 2002 APRIL 19, 2002
CELESTE TRUSTE REG. $360,000 $37,091.43 $397,091.43 $714.43 $367,714.43
" Trevisa-Treuhand-Anstalt
Landstrasse 8
Furstentums 9496
Balzers, Liechtenstein
Fax: 011-431-534-532895
ESQUIRE TRADE & FINANCE, INC. $360,000 $37,091.43 $397,091.43 $714.43 $367,714.43
Trident Chambers
P.O. Box 146
Road Town, Tortola, B.V.I.
Fax: 011-41-41-760-1031
THE ENDEAVOUR CAPITAL $366,270 $40,211.92 $406,481.92 $2,965.92 $369,235.92
INVESTMENT FUND, S.A.
Cumberland House
27 Cumberland Street, Nassau
New Providence, The Bahamas
Fax: 1-284-494-3917
TOTALS: $1,086,270 $114,394.78 $1,200,664.78 $4,394.78 $1,090,664.78
EXHIBIT A1
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NOTICE OF CONVERSION
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(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $15,000 of the principal and
$1,269.93 of the interest due on the Note issued by TECH LABORATORIES, INC. on
October ___, 2000, into Shares of Common Stock of TECH LABORATORIES, INC. (the
"Company") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion: 2/7/02
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Conversion Price: .1547
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Shares To Be Delivered: 105,171
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Signature: /s/
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Print Name: Celeste Trust Reg.
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Address:
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EXHIBIT A2
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NOTICE OF CONVERSION
--------------------
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $15,000 of the principal and
$1,269.93 of the interest due on the Note issued by TECH LABORATORIES, INC. on
October ___, 2000, into Shares of Common Stock of TECH LABORATORIES, INC. (the
"Company") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion: 2/7/02
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Conversion Price: .1547
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Shares To Be Delivered: 105,171
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Signature: /s/
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Print Name: Esquire Trade and Finance
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Address:
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EXHIBIT A3
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NOTICE OF CONVERSION
--------------------
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $5,000 of the principal and
$438.75 of the interest due on the Note issued by TECH LABORATORIES, INC. on
October ___, 2000, into Shares of Common Stock of TECH LABORATORIES, INC. (the
"Company") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion: February 11, 2002
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Conversion Price: $.1547
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Shares To Be Delivered: 35,157
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Signature: /s/
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Print Name: Shmuli Margulies The Endeavour Capital Investment Fund
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Address:
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