EXHIBIT 4.1
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS SENIOR SECURED CONVERTIBLE PROMISSORY NOTE HAS AND/OR SHARES ISSUABLE UPON
ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (I) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS (II) PURSUANT TO RULE 144 OF THE SECURITIES ACT OR (III)
IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH TRANSFER.
OVATION PRODUCTS CORPORATION
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
$1,500,000 January 20, 2006
FOR VALUE RECEIVED, the undersigned, OVATION PRODUCTS CORPORATION, a
Delaware corporation (the "Company"), hereby promises to pay to the order of
Andlinger & Company, Inc., a Delaware corporation (the "Purchaser"), the
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) plus
any and all accrued and unpaid interest thereon on January 20, 2011 (the
"Maturity Date"), unless all such principal and accrued interest due hereunder
is converted into shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as provided for herein.
This Note is being issued pursuant to the terms of a Senior Secured
Convertible Note Purchase Agreement between the Company and Purchaser dated as
of even date hereof (the "Purchase Agreement") and certain obligations under
this Senior Secured Convertible Promissory Note are secured by a first priority
security interest in all of the assets of the Company pursuant to and to the
extent described in separate Security Agreements by and between the Company and
the Purchaser dated as of the date hereof. All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
1. Payments of Interest and Principal. Subject to the provisions of this
Note, payments of principal plus interest on the unpaid principal balance of
this Note outstanding from time to time, and any applicable additional payments
shall be payable in accordance with the following:
(a) Maturity. On the Maturity Date, the Company shall repay the
outstanding principal of this Note, all interest accrued and unpaid on this
Note, all fees and all other obligations due or accrued to the Purchaser
hereunder, if any, unless this Note is earlier repaid or converted in full
pursuant to the terms hereof. If the Maturity Date is a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, provided, however, that interest shall not accrue during such
extension. Contemporaneously with the repayment of this Note, the Purchaser
shall surrender this Note, duly endorsed, at the office of the Company. This
Note shall not be prepaid prior to April 20, 2006, and thereafter, this Note
shall not be prepaid unless (i) simultaneously with any such prepayment, the
Company issues to the Purchaser a 5-year warrant to purchase the number of
shares of the Company's Common Stock which this Note was convertible into
immediately prior to such prepayment with an exercise price equal to the
Conversion Price then in effect immediately prior to such prepayment with such
warrant to be in the form attached hereto as Exhibit A (the "Prepayment
Warrant"), or (ii) the Note is prepaid in accordance with the occurrence of a
Mandatory Prepayment Event described in Section 1(d)(i) below, or (iii) the Note
is prepaid at the election of the Purchaser in accordance with the occurrence of
a Mandatory Prepayment Event described in Section 1(d)(ii), or (iv) the Note is
converted upon the Subsequent Investment in accordance with Section 2(b).
(b) Interest. Interest shall accrue on the outstanding principal of this
Note during the period commencing on the date hereof and terminating on the
Maturity Date (unless this Note is earlier repaid or converted in full pursuant
to the terms hereof) at an annual interest rate (the "Interest Rate") equal to
10.00% per annum, and the interest accrued thereon will be payable by the
Company to the Purchaser annually on each annual anniversary of the date of this
Note. At the option of the Purchaser, any accrued and unpaid interest hereunder
may be paid in kind through issuance to the Purchaser of shares of the Company's
Common Stock valued at the then current Conversion Price, as may be adjusted
hereunder from time to time. So long as an Event of Default (as defined herein)
has occurred and is continuing, at the election of the Purchaser, interest shall
accrue on the then outstanding principal and accrued and unpaid interest at a
rate equal to 4% per annum above the Interest Rate (the "Default Rate").
Interest at the Default Rate shall accrue from the initial date of such Event of
Default until that Event of Default is cured or waived and shall be payable
within ten (10) Business Days thereafter and, if not paid when due, shall itself
bear interest at the Default Rate. Interest and fees shall be calculated on the
basis of a 360-day year times the actual number of days elapsed. In no event
shall interest payable hereunder (including the Default Rate) exceed the highest
rate permitted by applicable law. To the extent any interest received by
Purchaser (including the Default Rate) exceeds the maximum amount permitted by
law, such payment shall be credited to principal, and any excess remaining after
full payment of principal shall be refunded to the Company.
(c) Payments. Except as provided in Section 1(b), all payments of
principal, interest, fees and other amounts due hereunder shall be made by the
Company in Dollars by wire transfer or by any other method approved in advance
by the Purchaser to the account of the Purchaser at the address of the Purchaser
set forth in Section 10 of the Purchase Agreement or at such other place
designated by the Purchaser in writing to the Company.
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(d) Acceleration of the Maturity Date. Notwithstanding anything to the
contrary contained herein, upon the occurrence of any Mandatory Prepayment
Event, the principal amount of and accrued and unpaid interest on this Note may
be declared by the Purchaser (by giving written notice to the Company) to be
immediately due and payable by the Company or may be paid in full at the
election of the Company. For purposes of the foregoing, "Mandatory Prepayment
Event" shall mean a (i) Sale of the Company or (ii) the consummation by the
Company of any equity financing resulting in net proceeds to the Company of at
least $10,000,000 (including cancellation of the indebtedness represented by
this Note and otherwise). The Company shall give written notice to the Purchaser
of any Mandatory Prepayment Event (to the extent possible) at least twenty (20)
Business Days and not more than sixty (60) Business Days prior to the
consummation of the same. Such notice shall be given in the manner specified in
Section 10 hereof. Nothing contained in this Section 1(d) shall be deemed a
consent by the Purchaser to the consummation of any Mandatory Prepayment Event.
The Purchaser may elect to convert this Note upon or prior to the occurrence of
a Mandatory Prepayment Event in accordance with the applicable provisions of
Section 2 below in which case the Purchaser shall not be entitled to receive the
Prepayment Warrant. All prepayments under this Section 1(d) shall include
payment of accrued and unpaid interest on the principal amount of this Note so
prepaid and shall be applied first to the payment of default interest, if any,
then to payment of accrued and unpaid interest and thereafter to principal.
2. Conversion.
(a) For purposes of this Section 2 the following definitions shall apply:
"Conversion Amount" shall mean the amount of principal and interest then
due under this Note to be converted by the Purchaser into Note Shares.
"Conversion Price" shall initially be determined as of the earlier to
occur of (i) the date upon which the Purchaser consummates the Subsequent
Investment and (ii) April 20, 2006 and shall initially be determined by dividing
$12 million by the fully diluted number of shares of Common Stock of the Company
outstanding as of immediately prior to the consummation of the Subsequent
Investment in the case of (i) above or as of April 20, 2006 in the case of (ii)
above. For purposes of the foregoing calculation, "fully-diluted number of
shares" shall include all then outstanding shares of Common Stock, all then
outstanding shares of preferred stock convertible into shares of Common Stock on
an as-converted basis, all options granted between the date hereof and April 20,
2006 unless exercised prior to April 20, 2006 (collectively, the "New Options"),
all then outstanding options (excluding any New Options), warrants or other
securities convertible into shares of the Company's Common Stock (excluding the
Note and the Note Shares) which have an exercise price of $1.00 per share or
less (subject to adjustment in the case of any stock split, recapitalization or
the like) on an as-exercised basis, and assuming such shares have not then been
issued and otherwise included in the calculation of fully diluted shares, 45,000
shares of Common Stock issuable by the Company to Peter Coker and Randy Rock and
55,000 shares of Common Stock issuable to WMS Family I, LLC. The Conversion
Price shall be subject to adjustment from time to time in accordance with this
Section 2.
"Original Issue Date" shall mean the date on which this Note was first
issued by the Company to the Purchaser.
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(b) Conversion of Note. The outstanding principal amount of this Note,
plus all accrued interest thereon shall be converted into a number of fully paid
and nonassessable shares of Common Stock (the "Note Shares") as determined
pursuant to this Section 2 without any further action on the part of the
Purchaser upon the consummation by the Purchaser (or an Affiliate thereof) of an
equity investment in the capital stock of the Company in an amount of at least
$5,000,000 (the "Subsequent Investment"). Additionally, at any time and from
time to time on or after April __, 2006, the Purchaser may elect to convert all
or any part of the outstanding principal amount of this Note, plus all accrued
and unpaid interest thereon into a number of fully paid and nonassessable Note
Shares as determined pursuant to this Section 2, upon surrender of this Note.
The number of shares of Common Stock issuable upon surrender of this Note shall
be determined in accordance with the following formula:
Conversion Amount
-----------------
Conversion Price
(c) Mechanics of Conversion. In order to effect a voluntary conversion
pursuant to this Section 2, the Purchaser shall: (a) fax (or otherwise deliver)
a copy of a fully executed notice of conversion setting forth the Conversion
Amount of the Note to be converted (the "Notice of Conversion"), to the Company
and (b) surrender or cause to be surrendered this Note, duly endorsed, along
with a copy of the Notice of Conversion as soon as practicable thereafter to the
Company. Upon receipt by the Company of a facsimile copy of a Notice of
Conversion from a Purchaser, the Company shall within two (2) Business Days
send, via facsimile, a confirmation to such Purchaser stating that the Notice of
Conversion has been received, advising the Purchaser of any additional
documentation reasonably required by the transfer agent for the Common Stock to
issue the Conversion Shares in the manner provided in the Notice of Conversion
(the "Additional Documentation") and the name and telephone number of a contact
person at the Company regarding the conversion. The Company shall not be
obligated to issue Conversion Shares upon a conversion unless either this Note
is delivered to the Company as provided above, or the Purchaser notifies the
Company that the Note has been lost, stolen or destroyed and delivers
appropriate documentation evidencing the documentation to the Company required
by Section 7.
(d) Delivery of Note Shares Upon Conversion. Upon the surrender of this
Note accompanied by a Notice of Conversion and any Additional Documentation, the
Company shall, no later than the fifth Business Day following the date of such
surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of indemnity pursuant to Section 7), issue and deliver to the
Purchaser or its nominee (x) stock certificates representing that number of Note
Shares issuable upon conversion of the portion of this Note being converted and
(y) a new Note in the form hereof representing the balance of the principal
amount hereof not being converted, if any.
(e) Adjustment to Conversion Price.
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(i) Adjustment for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Original Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price in effect immediately
before that subdivision shall be proportionately decreased so that the number of
shares of Common Stock issuable on conversion of the Note shall be increased in
proportion to such increase in the aggregate number of shares of Common Stock
outstanding. If the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price in effect immediately before the combination shall be
proportionately increased so that the number of shares of Common Stock issuable
on conversion of the Note shall be decreased in proportion to such decrease in
the aggregate number of shares of Common Stock outstanding. Any adjustment under
this subsection shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(ii) Adjustment for Certain Dividends and Distributions. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable on the
Common Stock in additional shares of Common Stock, then and in each such event
the Conversion Price in effect immediately before such event shall be decreased
as of the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction: (A) the numerator of which shall
be the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date,
and (B) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is not fully made on
the date fixed therefor, the Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion Price
shall be adjusted pursuant to this subsection as of the time of actual payment
of such dividends or distributions.
(iii) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the Company at its expense shall, as promptly as reasonably practicable but in
any event not later than 10 Business Days thereafter, compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Purchaser a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, as promptly as reasonably practicable after the written request of the
Purchaser at any time (but in any event not later than 10 Business Days
thereafter), furnish or cause to be furnished to such holder a certificate
setting forth (i) the Conversion Price then in effect, and (ii) the number of
shares of Common Stock which then would be received upon the conversion of this
Note.
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(iv) Notice of Record Date. In the event: (A) the Company shall take a
record of the holders of its Common Stock for the purpose of entitling or
enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of capital stock of any class or
any other securities, or to receive any other security; or (B) of any capital
reorganization of the Company, any reclassification of the Common Stock of the
Company, or any Sale of the Company; or (C) of the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, then, and in each such
case, the Company will send or cause to be sent to the Purchaser a notice
specifying, as the case may be, (i) the record date for such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is proposed to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock (or such other capital stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up, and the amount per share and character of such exchange applicable
to the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice.
(v) Fractional Shares. Upon a conversion hereunder, the Company shall not
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share. If the Company elects not, or is unable, to make
such a cash payment, the Purchaser shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
(vi) Antidilution Rights. The Company hereby agrees that if, after the
date hereof, it shall issue any securities (other than securities issued to the
Purchaser) which contain anti-dilution or any other provisions which have the
same economic benefit as anti-dilution provisions (each an "Applicable
Subsequent Issuance"), it will notify the Purchaser of such issuance and
thereafter, if the Purchaser shall request, it will take all actions necessary
to amend the terms of this Note in order to apply to the conversion provisions
contained in Section 2 of this Note anti-dilution provisions that provide for an
anti-dilution standard as similar as possible to the one applied to the
Applicable Subsequent Issuance. For example, if the Applicable Subsequent
Issuance provides for a weighted average anti-dilution standard upon the
occurrence of certain circumstances, then this Note will be amended to provide
for a weighted average anti-dilution standard with respect to the Conversion
Price upon the occurrence of similar circumstances. In the event that there are
multiple Applicable Subsequent Issuances or that there are multiple
anti-dilution provisions applicable to a specific Applicable Subsequent
Issuance, the provisions to be included herein shall be the provisions that the
Purchaser determines are most favorable to the Purchaser.
3. Ranking. This Note shall be senior indebtedness of the Company, ranking
senior in all respects to all other indebtedness and future indebtedness of the
Company (except for Permitted Liens), including in right of payment in full in
cash.
4. Events of Default. The occurrence of one or more of the following
events (whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall constitute an Event of Default:
(i) default in the payment of any interest upon the Note as and when the
same shall become due and payable if the default is not cured within five (5)
Business Days after receipt by the Company of notice of such default from the
Purchaser;
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(ii) default in the payment of all or any part of the principal or any
installment of the principal of the Note(s), as and when the same shall become
due and payable if the default is not cured within five (5) Business Days after
receipt by the Company of notice of such default from the Purchaser;
(iii) an involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with respect to
it or its debts under any applicable bankruptcy, insolvency or other similar
law, now or hereafter in effect, or seeking the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or for any substantial part of the property of the Company or the
winding up or liquidation of the affairs of the Company, and such case or
proceeding shall remain unstayed and undismissed for a period of forty five (45)
days, or an order for relief shall be entered against the Company under the
federal bankruptcy laws as now of hereafter in effect;
(iv) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law, now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or for any substantial part of the property of the Company, or the
Company shall make any general assignment for the benefit of creditors, or shall
become insolvent as a result of its failure generally to pay its debts as they
come due, or shall take any corporate action to affirmatively authorize any of
the foregoing (without contingency);
(v) the Company fails, for ten (10) Business Days after written notice, to
comply with any of the covenants contained in Section 8(a)(ii), (iii), (v),
(vii), (ix), (xvi), (xvii), (xviii), (xix), (xxi), (xxii) or 8(b) in the
Purchase Agreement provided that with respect to the Company's failure to comply
with the covenant set forth in Section 8(b), such non compliance shall only
constitute an Event of Default if such failure to adequately reserve shares of
Common Stock is not corrected within thirty days after the first instance of
such failure;
(vi) (x) the Company fails to pay any principal of or interest on any
indebtedness having an outstanding principal amount of $50,000 or more
("Material Indebtedness") (including without limitation any such indebtedness
assumed or guaranteed) for a period longer than the grace period, if any,
provided for such payment; or defaults under any instrument or agreement
evidencing, creating, securing or otherwise relating to Material Indebtedness or
other event occurs and continues beyond any applicable grace period, and (y) the
effect of such failure, default or other event is that the holder or holders of
such Material Indebtedness (or their representative) cause such Material
Indebtedness (or the obligations under any such guaranty or assumption
agreement) to become due and payable prior to the stated maturity thereof;
(vii) WMS Family I, LLC shall give written notice to the Company of its
intention to seek indemnification pursuant to the terms of that certain Restated
License Agreement dated as of June 30, 2004 by and between WMS Family I, LLC and
the Company;
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(viii) any judgment (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) is rendered
against the Company which could reasonably be expected to result in a Collateral
Material Adverse Effect;
(ix) any Lien (other than Permitted Liens) shall exist against any of the
Collateral (as such term is defined in the Security Agreement) which could
reasonably be expected to result in a Collateral Material Adverse Effect;
(x) any injunction, attachment, garnishment or execution (other than
Permitted Liens) is rendered against the Company which could reasonably be
expected to result in a Collateral Material Adverse Effect; or
(xi) any failure of the Company in the performance in any material respect
of any of the terms or conditions of, or any breach of any material
representation, covenant or warranty under, or any other material default under
the Security Agreement.
Notwithstanding the foregoing, the incurrence by the Company of a
Permitted Lien shall not trigger an Event of Default hereunder.
5. Remedies Upon Default. Upon the occurrence of any Event of Default, the
principal amount of and accrued and unpaid interest on this Note may be declared
by the Purchaser (by giving written notice to the Company) to be immediately due
and payable by the Company. Thereafter, the Purchaser shall be entitled to all
rights and remedies provided by the Security Agreements and applicable law.
Notwithstanding the foregoing, if an Event of Default specified in Section
4(iii) or (iv) occurs with respect to the Company, the principal of, and accrued
interest on, the Note(s) shall become and be immediately due and payable without
any declaration or other act on the part of the Purchaser. The Company shall pay
the costs and expenses of collection, including, without limitation, reasonable
attorneys' fees and disbursements if any action, suit or proceeding is brought
by the holder hereof to collect this Note, unless any such action, suit or
proceeding is brought as a result of a difference of opinions between the
Purchaser and the Company regarding the occurrence of an Event of Default, in
which case the Company shall not be responsible for the payment of any of the
costs and expenses, including, without limitation, reasonable attorneys' fees
and disbursements relating to such action, suit or proceeding if the Company
prevails in a finally adjudicated decision.
6. Amendments. This Note may be amended by one or more written instruments
signed by the Company and by the Purchaser.
7. Replacement of Note. Upon the loss, theft, destruction or mutilation of
this Note, and upon the execution and delivery by the Purchaser to the Company
of an affidavit in form and substance reasonably acceptable to the Company
attesting to such loss, theft, destruction or mutilation, as the case may be,
and an agreement, in form and substance reasonably acceptable to the Company
indemnifying and holding the Company harmless from and against any liability or
damages arising therefrom, the Company shall execute and deliver in lieu thereof
a new Note, dated the date of the Note being replaced, in the same principal
amount.
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8. Governing Law. This Note shall, pursuant to Sections 5-1401 and 5-1402
of the General Obligations Law of the State of New York, be construed and
interpreted in accordance with the law of the State of New York.
9. Jurisdiction. (a) The parties irrevocably submit to the jurisdiction of
the courts of the State of New York and of the United States sitting in the
State of New York in respect of any action or Proceeding relating in any way to
this Note (a "Proceeding"). If any party hereto fails to maintain a duly
appointed agent in New York for the service of process or summons any such
process or summons may be served on it by mailing a copy thereof by registered
mail, or a form of mail substantially equivalent thereto, addressed to the
Company at its address for notices hereunder.
(b) The parties irrevocably waive, to the fullest extent permitted by
applicable law, any objection that they may now or hereafter have to the laying
of venue of any Proceeding in the Supreme Court of the State of New York, County
of New York, or the United States District Court for the Southern District of
New York and any claim that any Proceeding brought in any such court has been
brought in an inconvenient forum.
(c) The Company further irrevocably waives, to the fullest extent
permitted by applicable law, any claim that any Proceeding should be dismissed
or stayed by reason, or pending the resolution, of any action or proceeding
commenced by the Company relating in any way to this Note or any other
Transaction Document, whether or not commenced earlier. To the fullest extent
permitted by applicable law, the Company shall take all measures necessary for
the Proceeding to proceed to judgment prior to the entry of judgment in any such
action or proceeding commenced by the Company.
(d) The parties irrevocably waive any and all right to trial by jury in
any legal proceeding arising out of or relating to this Note or the transactions
contemplated hereby.
10. Notices. All notices and other communications required or permitted
hereunder must be in writing and, except as otherwise noted herein, must be
addressed as follows:
(i) if to the Company, to:
Ovation Products Corporation
395 East Dunstable Road
Nashua, New Hampshire 03062
Attention Robert MacDonald
Fax: (603) 891-4957
with a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
Attention: Anna T. Pinedo, Esq.
Fax: (212) 468-7900
(ii) if to the Purchaser, to:
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Andlinger & Company, Inc.
303 South Broadway
Tarrytown, New York 10591
Fax: (914) 332-4977
with a copy to:
Brown Rudnick Berlack Israels LLP
7 Times Square
New York, NY 10036
Attention: Alan Forman
Fax: (212) 704-0196
or to such other address as the party to whom notice is to be given may have
furnished to the other in writing in accordance with the provisions of this
Section 10. Any such notice or communication will be deemed to have been
received: (A) in the case of telecopy or personal delivery, on the date of such
delivery; (B) in the case of nationally-recognized overnight courier, on the
next Business Day after such notice is timely delivered to such courier; and (C)
if by registered or certified mail, on the Business Day actually received by the
intended recipient.
11. Waivers. No failure or delay on the part of the Purchaser in
exercising any right hereunder shall operate as a waiver of, or impair, any such
right. No single or partial exercise of any such right shall preclude any other
or further exercise thereof or the exercise of any other right. No waiver of any
such right or of any obligation of the Company shall be effective unless given
in writing and executed by the Purchaser. No waiver of any such right shall be
deemed a waiver of any other right hereunder. Subject to the provisions of
Section 5 above, the Company hereby waives presentment, demand, notice, protest,
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, and assents to extensions of the time
of payment or forbearance or other indulgence without notice.
12. Further Assurances. The parties 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 Note and the consummation of the transactions
contemplated hereby.
13. Successors and Assigns. This Note shall be assignable by Purchaser
without the Company's consent and shall be binding upon and shall inure to the
benefit of the Company and the Purchaser and their respective successors and
assigns; provided, however, that the Purchaser shall not assign or transfer this
Note and/or any rights or obligations hereunder without Company's prior written
consent unless such assignment or transfer is to a transferee which directly or
indirectly controls, is controlled by or is under common control with the
Purchaser.
14. Headings. The headings of the sections of this Note are inserted for
convenience only and do not constitute a part of this Note.
OVATION PRODUCTS CORPORATION
By: /s/ William E. Lockwood
-----------------------
Name: William E. Lockwood
Title: President
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EXHIBIT A
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT.
No. W-1
OVATION PRODUCTS CORPORATION
FORM OF COMMON STOCK PURCHASE WARRANT
Expiration Date: January ____, 2011
Ovation Products Corporation, a Delaware corporation (the "Company"),
hereby certifies that, for value received, Andlinger & Company, Inc.orp. or any
transferee or assignee of this Warrant (the "Warrantholder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 p.m. Eastern time, on the Expiration Date (as
hereinafter defined), that number of fully paid and nonassessable shares of
common stock, $.01 par value per share, of the Company (the "Warrant Shares") as
is equal to the Warrant Number (as hereinafter defined), at a purchase price per
share as shall be equal to the Purchase Price (as hereinafter defined) in effect
at the time of the exercise of this Warrant. The Warrant Number and the Purchase
Price are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Ovation Products Corporation and
any corporation that shall succeed to or assume the obligations of Ovation
Products Corporation hereunder.
(b) The term "Warrant Shares" includes the Company's common stock, $.01
par value per share (the "Common Stock"), and any other securities or
property of the Company or of any other person (corporate or otherwise)
which the Warrantholder at any time shall be entitled to receive on the
exercise hereof in lieu of or in addition to such Common Stock, or which
at any time shall be issuable in exchange for or in replacement of such
Common Stock.
(c) The term "Expiration Date" refers to January __, 2011.
(d) The term "Purchase Price" shall mean [ ]. [To be inserted upon
issuance and to be equal to the Conversion Price under the Senior Secured
Convertible Promissory Note immediately prior to the issuance of this
Warrant.]
(e) The term "Warrant Number" shall mean [ ] [To be inserted upon
issuance and to be equal to the number of shares of the Company's Common
Stock which the Senior Secured Convertible Promissory Note was convertible
into immediately prior to the issuance of this Warrant.]
1. Initial Exercise Date; Expiration. This Warrant may be exercised at any
time or from time to time until 5:00 p.m., Eastern time, on the Expiration Date.
2. Exercise of Warrant. (a) This Warrant may be exercised in full or in
part by the holder hereof by surrender of this Warrant, with the form of "cash
exercise" subscription attached hereto (the "Exercise Notice") duly executed by
such holder, to the Company at its principal office, accompanied by payment, in
cash or by certified or official bank check payable to the order of the Company,
of the purchase price of the Warrant Shares to be purchased hereunder.
(b) By submitting to the Company a duly executed "net issuance" notice in
the form attached hereto (the "Net Issue Notice"), the Warrantholder may elect
to exercise this Warrant by surrender of a number Warrant Shares which have a
fair market value ("FMV") equal to the aggregate Purchase Price of the Warrant
Shares being purchased ("Net Issuance") as determined below. Thereupon, the
Company shall issue to the Warrantholder such number of fully paid and
nonassessable Warrant Shares as is computed using the following formula:
X = Y (A-B)
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A
where X = the number of Warrant Shares to be issued to the Warrantholder
pursuant to this Section 2(b).
Y = the number of Warrant Shares covered by this Warrant in
respect of which the net issue election is made pursuant to
this Section 2(b).
A = the FMV of one share of Common Stock, as determined below, as
at the time the net issue election is made pursuant to this
Section 2(b).
B = the Purchase Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 2(b).
For the purposes of this Section 2(b), FMV shall be determined at the time
of exercise and shall mean: (A) if the Common Stock is then publicly traded, the
average closing price in the over-the-counter market as reported by NASDAQ or as
quoted in the NASDAQ National Market System or on any national securities
exchange on which the Common Stock is traded for the thirty (30) prior trading
days, or (B) if the Common
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Stock is not then publicly traded, the price per share of Common Stock or Common
Stock equivalent paid by investors to purchase the Common Stock or Common Stock
equivalent of the Company (taking into account any consideration paid separately
to acquire any security which is exercisable for or convertible into Common
Stock) in any arm's length equity financing completed within the preceding six
(6) months, or, if no such equity financing has so occurred, a fair value as
determined in good faith by the Board of Directors of the Company (the "Board")
or (C) in the case of a Business Combination, the price per share of Common
Stock paid in the Business Combination or, if such payment is made by property
other than cash, the fair value of such property paid per share of Common Stock
in the Business Combination as determined in good faith by the Board. In the
event the Common Stock is not publicly traded, the Board of Directors of the
Company shall promptly respond in writing to a reasonable inquiry by the holder
hereof as to the fair market value of the Common Stock for purposes of this
Section 2(b).
(c) For any partial exercise pursuant to Section 2(a) or 2(b) hereof, the
Warrantholder shall designate in the Exercise Notice or Net Issue Notice (as the
case may be) the number of Warrant Shares that it wishes to purchase. On any
such partial exercise, the Company at its expense shall forthwith issue and
deliver to the Warrantholder a new warrant of like tenor, in the name of the
Warrantholder, which shall be exercisable for such number of Warrant Shares
represented by this Warrant which have not been purchased upon such exercise.
3. Effectiveness of Exercise. The exercise of this Warrant shall be deemed
to have been effected immediately prior to the close of business on the business
day on which this Warrant is surrendered to the Company as provided in Section
2(a) or 2(b) (as the case may be).
4. Delivery on Exercise. As soon as practicable after the exercise of this
Warrant in full or in part pursuant to Section 2(a) or 2(b), as the case may be,
and in any event within five (5) business days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes but excluding
the payment of taxes to which the Warrantholder is subject as a result of the
conduct of its business activity) will cause to be issued in the name of and
delivered to the Warrantholder, or as such Warrantholder may direct, a
certificate or certificates for the number of fully paid and nonassessable full
Warrant Shares to which such holder shall be entitled on such exercise, together
with cash, in lieu of any fraction of a share, equal to such fraction of the
then FMV of one full share as determined in accordance with Section 2(b).
5. Adjustment for Reorganization, Consolidation, Merger, etc.
(a) General. In case at any time or from time to time, the Company shall
(a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company (each of the foregoing, a "Business Combination"), and such Business
Combination shall be effected in such a way that holders of shares of the
Company's Common Stock (or any shares of stock or other securities at the time
issuable upon exercise of this Warrant ) shall be entitled to receive stock,
securities or assets, with respect to or in exchange for such shares, then, in
each such case, the holder of this Warrant, on the exercise hereof as
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provided in Section 2 at any time after the consummation of such Business
Combination or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Warrant Shares issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 6.
(b) Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered to the Warrantholder the stock and other securities and property
(including cash, where applicable) receivable by the Warrantholder after the
effective date of such dissolution pursuant to this Section 5 provided, however,
that the Warrantholder may request that such securities or property be delivered
to a trustee for the holder or holders of the Warrants and the Company shall
bear reasonable expenses for such delivery.
(c) Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 5, this Warrant, to the extent not yet exercised in full, shall continue
in full force and effect and the terms hereof shall be applicable to the shares
of stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant.
6. Adjustment of Purchase Price and Number of Shares. The number of the
Warrant Shares issuable upon exercise of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) and the
purchase price therefor, are subject to adjustment upon the occurrence of the
following events:
(a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.
The exercise price of this Warrant and the number of Shares issuable upon
exercise of this Warrant (or any shares of stock or other securities at the time
issuable upon exercise of this Warrant) shall be appropriately adjusted to
reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Common Stock (or other stock or securities if the
Warrantholder is then entitled to receive such stock or securities upon exercise
of this Warrant). For example, if there should be a 2-for-1 stock split of the
Common Stock, the exercise price would be divided by two and such number of
shares would be doubled.
(b) Adjustment for Other Dividends and Distributions. In case the Company
shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution after
[INSERT DATE OF ISSUANCE OF WARRANT] with respect to the Warrant Shares (or any
shares of stock or other securities at the time issuable upon exercise of the
Warrant) payable in (i) securities of the Company (other than shares of Stock)
or (ii) assets (excluding cash
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dividends paid or payable solely out of current or retained earnings), then, in
each case, the holder of this Warrant on exercise hereof at any time after the
consummation or record date of such event (provided the event is later
consummated), shall receive, in addition to the Warrant Shares (or such other
stock or securities) issuable on such exercise prior to such date, the
securities or such other assets of the Company to which such holder would have
been entitled upon such date if such holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in this
Warrant).
(c) Anti-Dilution Protection. The Company hereby agrees that if, after the
date hereof, it shall issue any securities (other than securities issued to the
Warrantholder) which contain anti-dilution or any other provisions which have
the same economic benefit as anti-dilution provisions (each an "Applicable
Subsequent Issuance"), it will notify the Warrantholder of such issuance and
thereafter, if the Warrantholder shall request, it will take all actions
necessary to amend the terms of the adjustment of purchase price and number of
shares provisions contained in Section 6 of this Warrant in order to apply an
anti-dilution provisions that provide for an anti-dilution standard as similar
as possible to the one applied to the Applicable Subsequent Issuance. For
example, if the Applicable Subsequent Issuance provides for a weighted average
anti-dilution standard upon the occurrence of certain circumstances, then this
Warrant will be amended to provide for a weighted average anti-dilution standard
upon the occurrence of similar circumstances. In the event that there are
multiple Applicable Subsequent Issuances or that there are multiple
anti-dilution provisions applicable to a specific Applicable Subsequent
Issuance, the provisions to be included herein shall be the provisions that the
Warrantholder determines are most favorable to the Warrantholder.
(d) Certificate as to Adjustments. In case of any adjustment or
readjustment in the price or kind of securities issuable on the exercise of this
Warrant, the Company will promptly give written notice thereof to the holder of
this Warrant in the form of a certificate, certified and confirmed by the
President of the Company, setting forth such adjustment or readjustment and
showing in reasonable detail the facts upon which such adjustment or
readjustment is based.
7. No Impairment. The Company will not, by amendment of its Certificate of
Incorporation 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 of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment. Without limiting the generality of the foregoing the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefore on such exercise,
(b) will at all times reserve and keep available a number of its authorized
shares of Common Stock, free from all preemptive rights therein, which will be
sufficient to permit the exercise of this Warrant by the Warrantholder, and (c)
shall take all such action as may be necessary or appropriate in order that all
Warrant Shares as may be issued pursuant to the exercise of this Warrant will,
upon issuance in accordance with the terms hereof, be duly and validly issued,
fully paid and nonassessable and free from all liens and charges with respect to
the issue thereof.
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8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of Common Stock
(or shares of stock or other securities at the time issuable upon exercise of
this Warrant) for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any Common Stock (or shares of stock or other securities at the time
issuable upon exercise of this Warrant), or any transfer of all or substantially
all the assets of the Company to or consolidation or merger of the Company with
or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
then and in each such event the Company will mail to the holder hereof a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date on which any such
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or any shares of
stock or other securities at the time issuable upon the exercise of this
Warrant) shall be entitled to exchange their shares for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date therein specified.
9. [RESERVERD].
10. Replacement of Warrant. On receipt by the Company 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 of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
11. Investment Intent. Unless a current registration statement under the
Securities Act of 1933, as amended, shall be in effect with respect to the
issuance of the securities to be issued upon exercise of this Warrant, the
holder thereof, by accepting this Warrant, covenants and agrees that, at the
time of exercise hereof, and at the time of any proposed transfer of securities
acquired upon exercise hereof, such holder will deliver to the Company a written
statement that the securities acquired by the holder upon exercise hereof are
for the own account of the holder for investment and are not acquire with a view
to, or for sale in connection with, any distribution thereof (or any portion
thereof) and with no present intention (at any such time) of offering and
distributing such securities (or any person thereof).
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12. Transfer. Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Warrantholder with
respect to any or all of the shares purchasable hereunder. Upon surrender of
this Warrant to the Company, together with the assignment hereof properly
endorsed, for transfer of this Warrant as an entirety by the Warrantholder, the
Company shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Warrantholder for transfer with respect to a portion
of the shares of Common Stock purchasable hereunder, the Company shall issue a
new warrant to the assignee, in such denomination as shall be requested by the
Warrantholder, and shall issue to such Warrantholder a new warrant covering the
number of shares in respect of which this Warrant shall not have been
transferred.
13. No Rights or Liability as a Stockholder. This Warrant does not entitle
the Warrantholder to any voting rights or other rights as a stockholder of the
Company. No provisions hereof, in the absence of affirmative action by the
Warrantholder to purchase Warrant Shares, and no enumeration herein of the
rights or privileges of the Warrantholder shall give rise to any liability of
such Warrantholder as a stockholder of the Company.
14. Damages. The Company recognizes and agrees that the Warrantholder will
not have an adequate remedy if the Company fails to comply with the terms of
this Warrant and that damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not oppose an
application by the holder of this Warrant or any other person entitled to the
benefits of this Warrant requiring specific performance of any and all
provisions hereof or enjoining the Company from continuing to commit any such
breach on the terms hereof.
15. Notices. All notices referred to in this Warrant shall be in writing
and shall be delivered personally or by certified or registered mail, return
receipt requested, postage prepaid and will be deemed to have been given when so
delivered or mailed (i) to the Company, at its principal executive offices and
(ii) to the Warrantholder, at such Warrantholder's address as it appears in the
records of the Company (unless otherwise indicated in accordance with the
provisions of this Section 15 by such holder).
16. Payment of Taxes. All Warrant Shares issued upon the exercise of this
Warrant in accordance with its terms shall be validly issued, fully paid and
nonassessable, and the Company shall pay taxes and other governmental charges
that may be imposed in respect to the issue or delivery thereof, excluding taxes
to which the Warrantholder and/or any other person receiving the Warrant Shares
is subject as a result of the conduct of its business activity.
17. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
Warrantholder and the Company. This Warrant shall be governed by and construed
and enforced in accordance with the general corporation law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by, and construed in accordance with, the internal laws of the
State of New York. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof.
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DATED: [____________]
OVATION PRODUCTS CORPORATION
By: __________________________
Title:
[Corporate Seal]
Attest:
__________________________________________
Secretary
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