UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reportedly): December 6, 2005
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in charter)
Florida 2-70197 59-1564329
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
4041 S.W. 47 Avenue, Fort Lauderdale, Florida 33314
(Address of principal executive office Zip Code)
(954) 587-6280
Registrant's telephone number,
including area code:
Not Applicable
(Former name or former address, if changes since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry Into a Material Definitive Agreement
The Company previously was extended a subordinated revolving credit
facility by Peter G. Dornau, its President and certain affiliates of the
President, in the aggregate amount of One Million Dollars effective October 18,
2005. This subordinated revolving credit facility has been increased effective
December 6, 2005 to One Million Five Hundred Thousand Dollars. The facility will
continue to bear interest at the rate of prime plus two (2%) per cent for all
funds advanced and continues to have a term of five (5) years.
Additionally, the credit may be converted into shares of common stock of
the Company at any time to the extent of the outstanding loan at the rate of
$1.00 per share (a maximum of 1,500,000 shares). Such price represents a premium
over the market value and net book value of the underlying shares on the date it
was fixed.
In conjunction with the extension of such credit, the Company previously
issued to Mr. Dornau Warrants to purchase Five Hundred Thousand (500,000) shares
of common stock, par value one cent per share, of the Company at an exercise
price of One Dollar and 13/00 ($1.13) per share (the closing bid price on the
NASDAQ Exchange on October 17, 2005 plus ten (10%) per cent). An additional
Warrant to purchase Five Hundred Thousand (500,000) shares has been issued to
the president in conjunction with the increase in the credit facility. The
additional Warrants are exercisable at a purchase price of $.863 representing
the closing bid price on NASDAQ Exchange on December 5, 2005, $.76 plus ten
(10%) per cent.
The Warrants have been issued pursuant to an exemption from registration
provided in Section 4(2) of the Securities Act of 1933, as amended and the
common stock to be issued upon exercise of such Warrants or upon purchase in
exchange for debt, will also be issued pursuant to such exemption. The Warrants
and any shares of common stock issued by the Company pursuant to these
agreements will bear an investment legend indicating the absence of registration
and restrictions on transfer.
The new transaction, as well as the prior transaction, were approved
unanimously by the independent members of the Board of Directors of the Company.
Mr. Dornau has agreed that the warrants will not be exercised nor will any
shares of common stock be acquired by conversion of the loan into common stock
until the transaction has been approved by a shareholder vote at the Company's
Annual Meeting of Shareholders during June 2006 or at a specially convened
meeting prior thereto.
Item 3.02 Unregistered Sale of Equity Securities
The information included in Item 1.01 of the Current Report - Form 8-K is
incorporated by reference into this Item 3.02.
Item 9.01(d) Exhibits
1. Warrant to Purchase Common Stock dated October 18, 2005;
2. Second Warrant to Purchase Common Stock Dated December 6, 2005; and
3. Revolving Line of Credit Note, amended as of December 6, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
December 8, 2005 Ocean Bio-Chem, Inc.
/s/ Peter G. Dornau
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Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
Exhibit 1
WARRANT TO PURCHASE COMMON STOCK
Date of Issuance: October 18, 2005 Warrant to Purchase An Aggregate
of 500,000 shares of Common Stock
FOR VALUE RECEIVED, Ocean Bio-Chem, a Florida corporation (the
"Corporation"), pursuant to the terms and conditions of the Promissory Note
between the Corporation and Peter Dornau and/or Affiliates ("Holder") dated as
of October 18, 2005, promises to issue in the name of, and sell and deliver to
Peter Dornau, a certificate or certificates for an aggregate of 500,000 shares
(subject to the terms of Article 7.5 hereof), for $0.001 per share, of the
Corporation's common stock, par value $0.01 per share (the "Warrant Shares"),
upon payment by the Holder of $1.133 per share (the "Exercise Price"), with the
Exercise Price being subject to adjustment in the circumstances and subject to
the provisions set forth herein.
Section 1. Exercise of Warrant
1.1 Exercise Period. The Holder may exercise this Warrant, in whole or in
part (but not as to fractional shares), at any time and from time to time
commencing on the date hereof and ending at 5:00 p.m., Eastern Time, on the
fifth anniversary of the date hereof (the "Exercise Period"). If the last day of
the Exercise Period is a day on which federal or state chartered banking
institutions located in the State of Florida are authorized by law to close,
then the last day of the Exercise Period shall be deemed to be the next
succeeding day which shall not be such a day.
1.2 Exercise Procedure.
a. This Warrant may be exercised in whole or in part at any time during the
Exercise Period by presentation and surrender of this Warrant to the Corporation
accompanied by the form of Exercise Agreement (attached hereto as Exhibit 1)
signed by the Holder and accompanied by the Exercise Price for the Warrant
Shares being purchased. The Exercise Price may be paid by cashier's check, wire
transfer of immediately available funds or pursuant to the Cashless Exercise
provisions set forth in Section 7.4 hereof The date on which the Corporation
receives a signed Exercise Agreement and payment of the Exercise Price (by
Cashless Exercise or otherwise) shall hereinafter be referred to as the
"Exercise Date."
b. Certificates for the Warrant Shares purchased upon exercise of this
Warrant will be delivered by the Corporation to the Holder within five (5)
business days after the Exercise Date. Unless this Warrant has expired or all of
the purchase rights represented hereby have been exercised, the Corporation will
prepare a new Warrant representing the rights formerly represented by this
Warrant that have not expired or been exercised. The Corporation will, within
such five (5) day period, deliver such new Warrant to the Holder at the address
set forth in this Warrant.
c. The Warrant Shares issuable upon the exercise of this Warrant will be
deemed to have been transferred to the Holder on the Exercise Date, and the
Holder will be deemed for all purposes to have become the record holder of such
Warrant Shares on the Exercise Date.
d. The issuance of certificates representing the Warrant Shares will be
made without charge to the Holder of any issuance tax in respect thereof or any
other cost incurred by the Corporation in connection with such exercise and
related transfer of the shares; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any certificate or instrument in a name
other than that of the Holder of this Warrant and that the Corporation shall not
be required to issue or deliver any such certificate or instrument unless and
until the person or persons requiring the issue thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid.
e. Unless the Corporation shall have registered the Warrant Shares pursuant
to the provisions of Section 6 hereof, the Warrant Shares have not been
registered under the Securities Act of 1933, as amended (the "Act") and,
accordingly, will be "restricted securities" as that term is defined in the Act.
The Corporation may insert the following or similar legend on the face of the
certificates evidencing the Warrant Shares if required in compliance with state
securities laws:
"These securities have not been registered under any state securities laws
and may not be sold or otherwise transferred or disposed of except pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, or any applicable state securities laws, or an opinion of counsel
satisfactory to counsel to the Corporation that an exemption from registration
under the Securities Act of 1933, as amended, or any applicable state securities
laws is available."
1.3 Fractional Shares. If a fractional Warrant Share would, but for the
provisions of Subsection 1.1, be issuable upon exercise of the rights
represented. by this Warrant, the Corporation will, within 30 days after the
Exercise Date, deliver to the Holder a check payable to the Holder, in lieu of
such fractional share, in an amount equal to the market price of such fractional
share as determined by the last sale price of the Corporation's common stock as
reported on the exchange on which the Corporation's common stock is then traded,
as of the close of business on the Exercise Date.
1.4 Exercise Price. The exercise price of this Warrant is based upon he
closing bid price of the Shares on the NASDAQ Market on October 18, 2005, plus
ten (10%) per cent.
Section 2. Effect of Stock Dividends, Reorganization, Reclassification,
Consolidation, Merger or Sale
2.1 Stock Dividends, Recapitalization or Reclassification of Common Stock.
In case the Corporation shall at any time prior to the exercise or termination
of this Warrant (i) pay a dividend or make a distribution of its capital stock
in shares of common stock to all holders of shares of the Corporation's common
stock, or (ii) effect a recapitalization or reclassification of such character
that its common stock shall be changed into or become exchangeable for a larger
or smaller number of shares, then, upon the effective date thereof, the number
of Warrant Shares shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in such number of the Corporation's
common stock by reason of such stock dividend, recapitalization or
reclassification, and the Exercise Price of such dividend, recapitalized or
reclassified common stock shall, in the case of an increase in the number of
shares, be proportionately decreased and, in the case of a decrease in the
number of shares, be proportionately increased.
2.2 Consolidation. Merger or Sale. In case the Corporation shall at any
time prior to the exercise of this Warrant, or the expiration of the Exercise
Period, whichever first occurs, consolidate or merge with any other corporation
(unless the Corporation shall be the surviving entity) or transfer all or
substantially all of its assets to any other corporation preparatory to a
dissolution, then the Corporation shall, as a condition precedent to such
transaction, cause effective provision to be made so that the Folder of this
Warrant, upon the exercise hereof after the effective date of such transaction,
shall be entitled to receive the kind and amount of shares, evidences of
indebtedness, and/or other property receivable on such transaction as if this
Warrant were exercised immediately prior to such transaction (without giving
effect to any restriction upon such exercise); and, in any such case,
appropriate provision shall be made with respect to the rights and interests of
the Holder hereof to the effect that the provisions of this Warrant shall
thereafter be applicable (as nearly as may be practicable) with respect to any
shares, evidences of indebtedness, or other securities or assets thereafter
deliverable upon exercise of this Warrant.
2.3 Adjustment. If at any time after the date hereof the Corporation shall
issue or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock ("Purchase Rights") or securities
convertible into Common Stock ("Convertible Securities"), and the consideration
per share for, or the price per share at which such Purchase Right or
Convertible Security is exercisable for or convertible into, such Common Stock
(the "Subsequent Issue Price") is less than the Exercise Price in effect
immediately prior to such issuance or sale, then, forthwith upon such issuance
or sale, the Exercise Price shall be reduced to the Subsequent Issue Price. In
the case of an adjustment pursuant to this Section 2.3 for a subsequent issuance
of Purchase Rights or Convertible Securities, the Subsequent Issue Price shall
be deemed to be the lowest possible price in any range or prices at which such
Purchase Rights or Convertible- Securities may be exercised or converted. No
further adjustments of the Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Purchase Rights or
Convertible Securities and, if any issue or sale of such Purchase Rights or
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Purchase Rights or Convertible Securities
for which adjustments of the Exercise Price have been or are to be made pursuant
to other provisions of this Section 2.3, no further adjustments of the Exercise
Price have been or are to be made pursuant to other provisions of this sale. For
the purposes of this Section 2.3, the date as of which the Exercise Price shall
be computed shall be the earlier of (i) the date on which the Company shall
enter into a firm contract for the issuance of such Purchase Rights or
Convertible Securities and (ii) the date of actual issuance of such Purchase
Rights or Convertible Securities. Such adjustments shall be made upon each
issuance of Purchase Rights or Convertible Securities and shall become effective
immediately after such issuance.
2.4 Notice of Adjustment. Whenever the number of Warrant Shares shall be
adjusted as provided herein, the Corporation shall file with its corporate
records a certificate of its Chief Financial Officer setting forth the
computation and the adjusted number of Warrant Shares purchasable hereunder
resulting from such adjustments, and a copy of such certificate shall be mailed
to the Holder. Any such certificate or letter shall be conclusive evidence as to
the correctness of the adjustment or adjustments referred to therein and shall
be available for inspection by the holders of the Warrants on any day during
normal business hours.
Section 3. Reservation of Common Stock
The Corporation will at all time reserve and keep available such number of
shares of its common stock as will be sufficient to permit the exercise in full
of this Warrant. Upon exercise of this Warrant pursuant to its terms, the Holder
will acquire fully paid and non-assessable shares of the Corporation's common
stock, free and clear of any liens, claims or encumbrances.
Section 4. No Shareholder Rights or Obligations
This Warrant will not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Corporation prior to the Exercise Date. No
provision of this Warrant, in the absence of affirmative action by the Holder to
purchase Warrant Shares, and no enumeration in this Warrant of the rights or
privileges of the Holder, will give rise to any obligation of such Holder for
the Exercise Price or as a shareholder of the Corporation.
Section 5. Transferability
Subject to the terms hereof; this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant with a
properly executed Assignment in the form of Exhibit 2 hereto at the principal
offices of the Corporation. This Warrant and the Warrant Shares may not be
offered, sold or transferred except in compliance with the Act, and any
applicable state securities laws, and then only against receipt of an agreement
of the person to whom such offer or sale or transfer is made to comply with the
provisions of this Warrant with respect to any resale or other disposition of
such securities; provided that no such agreement shall be required from any
person purchasing this Warrant or the Warrant Shares pursuant to a registration
statement effective under the Act. The Holder of this Warrant agrees that, prior
to the disposition of any security purchased on the exercise hereof other than
pursuant to a registration statement then effective under the Act, or any
similar statute then in effect, the Holder shall give written notice to the
Corporation, expressing his intention as to such disposition. Upon receiving
such notice, the Corporation shall present a copy thereof to its securities
counsel. If, in the sole opinion of such counsel, which such opinion shall not
be unreasonably withheld, the proposed disposition does not require registration
of such security under the Act, or any similar statute then in effect, the
Corporation shall, as promptly as practicable, notify the Holder of such
opinion, whereupon the Holder shall be entitled to dispose of such security in
accordance with the terms of the notice delivered by the Holder to the
Corporation.
Section 6. Registration Rights
a. In the event that the Corporation proposes to file a registration
statement on a general form of registration under the Act (other than a form S-8
or S-4) relating to securities issued or to be issued by it, then it shall give
written notice of such proposal to the record owner of this Warrant. If, within
15 days after the giving of such notice, the record owner hereof shall request
in writing that the Warrant Shares be included in such proposed registration,
the Corporation shall, at its own expense (except as set forth below), also
register such number of Warrant Shares as shall have been so requested in
writing; provided., however, that (i) the Holder shall cooperate with the
Corporation in the preparation of such registration statement to the extent
required to furnish information concerning such owners therein; and (ii) if any
underwriter or managing agent is purchasing or arranging for the sale of the
securities then being offered by the Corporation under such registration
statement, then the Holder (A) shall agree to have the Warrant Shares being
registered sold to or by such underwriter or managing agent on terms
substantially equivalent to the terms upon which the Corporation is selling the
securities so registered, or (B) shall delay the sale of the Warrant Shares for
the lesser of a 60 day period commencing with the effective date of the
registration statement or the date on which the underwriter agrees to permit the
sale of all or a portion of the Warrant Shares being registered; further, if the
number of Warrant Shares as to which such owner, and all other owners of
securities of the Company holding registration rights, has requested
registration is in the aggregate sufficient that such underwriter reasonably
believes in good faith that the inclusion of such Warrant Shares in the
registration statement may jeopardize the success of the offering, then such
underwriter may require that each such owner of securities reduce the number of
such Warrant Shares to be registered, with such reduction to be in proportion to
the number of shares as to which each respective owner has requested
registration which may be the entire number of securities thereof.
b. In connection with the filing of a registration statement pursuant to
Section 6, the Corporation shall: (i) notify the Holder as to the filing thereof
and of all amendments thereto filed prior to the effective date of said
registration statement; (ii) notify the Holder, promptly after it shall have
received notice thereof, of the time when the registration statement becomes
effective or any supplement to any prospectus fanning a part of the registration
statement has been filed; (in) prepare and file without expense to the Holder
any necessary amendment or supplement to such registration statement or
prospectus as may be necessary to comply with Section 10(a)(3) of the Act or
advisable in connection with the proposed distribution of the Warrant Shares by
the Holder; (iv) take all reasonable steps to qualify the Warrant Shares being
so registered for sale under the securities or blue sky laws in such states as
the Holder of the Warrant Shares being so registered may reasonably request; (v)
notify such registered owners of any stop order suspending the effectiveness of
the registration statement and use its reasonable best efforts to remove such
stop order; and (vi) undertake to keep said registration statement and
prospectus effective until the earlier of (A) two years from the effective date
thereof (provided, that if the Holders are required to delay the sale of the
securities, then such period shall be extended by the amount of such delay), or
(B) the date the Warrant Shares are sold or become available for public sale
without restriction under the Act; . provided, however, that such undertaking
shall apply only to the extent that the Corporation is permitted to register
such securities for continuous sale under Rule 415 of the General Rules
promulgated under the Act, under any successor provision, or under authoritative
interpretations of applicable law.
c. The Holder agrees to pay all of the underwriting discounts and
commissions with respect to the Holder's Warrant Shares being registered. The
Corporation agrees that the costs and expenses which it is obligated to pay in
connection with a registration statement to be filed pursuant hereto include but
are not limited to, registration fees, the fees and expenses of counsel for the
Corporation, the fees and expenses of the Corporation's accountants and all
other costs and expenses incident to the preparation, printing and filing under
the Act of any such registration statement, each prospectus and all amendments
and supplements thereto, the costs incurred in connection with the qualification
of such securities for sale in a reasonable number of states, including fees and
disbursements of counsel for the Corporation, and the costs of supplying a
reasonable number of copies of the registration statement, each preliminary
prospectus, final prospectus and any supplements or amendments thereto to the
Holder.
Section 7. Miscellaneous
7.1 Notices. Any notices, requests or consents hereunder shall be deemed
given, and any instruments delivered, two days after they have been mailed by
first class mail, postage prepaid, or upon receipt if delivered personally or by
facsimile transmission, as follows:
If to the Corporation: Ocean Bio-Chem, Inc.
4041 S.W. 47 Avenue
Ft. Lauderdale, FL 33314
Attention: Edward Anchel, CFO
If to the Holder: Peter Dornau
c/o Ocean Bio-Chem, Inc.
4041 S.W. 47 Avenue
Ft. Lauderdale, FL 33314
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.
7.2 Entire Agreement. This Warrant, including the exhibits and documents
referred to herein which are a part hereof, contain the entire understanding of
the parties hereto with respect to the subject matter and may be amended only by
a written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.
7.3 Construction and Enforcement. This Warrant shall be governed by and
construed under the laws of the State of Florida, without regard to principles
of conflicts of laws and rules of such state. If it becomes necessary for any
party to institute legal action to enforce the terms and conditions of this
Warrant, and such legal action results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred, including, but not limited to, all
attorneys' fees, court costs and other expenses incurred throughout all
negotiations, trials or appeals undertaken in other to enforce the Prevailing
Party's rights hereunder. Any suit, action or proceeding with respect to this
Warrant shall be brought in the state or Federal courts located in Broward
County in the State of Florida. The parties hereto hereby accept the exclusive
jurisdiction and venue of those courts for the purpose of any such suit, action
or proceeding. The parties hereto hereby irrevocably waive, to the fullest
extent permitted by law, any objection that any of them may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Warrant or any judgment entered by any court in respect thereof
brought in Broward County, Florida, and hereby further irrevocably waive any
claim that any suit, action or proceeding brought in Broward County, Florida,
has been brought in an inconvenient forum.
7.4 Cashless Exercise Provision. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Corporation at its principal executive offices
with a written notice of the Holder's intention to effect a cashless exercise,
including a calculation of the number of Warrant Shares to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, and in lieu of paying the Exercise Price in cash,
check or other immediately available funds, the Holder shall surrender this
Warrant for that number of the Corporation's common stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Corporation's common stock on the
principal market for such common stock on the date preceding the Exercise Date
(provided such notice and designation of Exercise Date must take place
subsequent to the closing of the principal markets and prior to the opening of
the principal market in the following way) minus the exercise price in effect at
such time, divided by such closing price.
7.5 Limitation.
(a) The Warrant granted to Holder is additional consideration for a
revolving credit loan in the maximum amount of $1,500,000 to Corporation.
(b) This Warrant may not be exercised until the transaction pursuant to
which this Warrant was issued has been approved or ratified by the Shareholders
of Corporation (which may be at an Annual Meeting of Shareholders).
IN WITNESS WHEREOF, this Warrant has been duly executed and the corporate
seal affixed hereto, all as of the day and year first above written.
OCEAN BIO-CHEM, INC.
By: /s/ Edward Anchel
-----------------------------------------
Edward Anchel
Vice President - Finance, CFO
EXHIBIT 1
EXERCISE AGREEMENT
Dated:_______________________________
To:
--------------------------------
The undersigned record Holder, pursuant to the provisions set forth in the
within Wan-ant, hereby subscribed for and purchases _________ shares of Ocean
Bio-Chem, Inc. common stock covered by such Warrant and hereby (i) makes full
cash payment of $ for such shares at the Exercise Price or (ii) exercises this
Warrant pursuant to the Cashless Exercise provisions thereof.
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(Signature)
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(Print or type name)
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(Address)
IF THE RECORD HOLDER IS ELECTING A CASHLESS EXERCISE, THE NUMBER OF SHARES
OF COMMON STOCK TO BE ISSUED. IS _____________ (SEE FOLLOWING CALCULATION).
CALCULATION OF CASHLESS EXERCISE
X Y(A-B)
A
X THE NUMBER OF SHARES TO BE ISSUED TO HOLDER___________________________________
Y THE NUMBER OF SHARES FOR WHICH THE WARRANT IS BEING EXERCISED_________________
A THE CLOSING PRICE OF THE SHARES ON THE DATE PRECEDING EXERCISE________________
B THE EXERCISE PRICE ___________________________________________________________
NOTICE: The signature of this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
EXHIBIT 2
ASSIGNMENT
FOR VALUE RECEIVED, _________________, the undersigned Holder hereby sells,
assigns, and transfers all of the rights of the undersigned under the within
Warrant with respect to the number of shares of the Corporation's common stock
issuable upon the exercise of such Warrant set forth below, unto the Assignee
identified below, and does hereby irrevocably constitute and appoint
_________________ to effect such transfer of rights on the books of the
Corporation, with full power of substitution:
Name of Assignee
Address of Assignee
Number of Sharesof Common Stock
Dated:____________________
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(Signature of Holder)
(Print or type name)
NOTICE: The signature of this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
CONSENT OF ASSIGNEE
I HEREBY CONSENT to abide by the terms and conditions of the within
Warrant.
Dated:____________________
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(Signature of Assignee)
(Print or type name)
Exhibit 2
WARRANT TO PURCHASE COMMON STOCK
Date of Issuance: December 6, 2005 Warrant to Purchase An Aggregate
of 500,000 shares of Common Stock
FOR VALUE RECEIVED, Ocean Bio-Chem, a Florida corporation (the
"Corporation"), pursuant to the terms and conditions of the Promissory Note
between the Corporation and Peter Dornau and/or Affiliates ("Holder") dated as
of December 6, 2005, promises to issue in the name of, and sell and deliver to
Peter Dornau, a certificate or certificates for an aggregate of 500,000 shares
(subject to the terms of Article 7.5 hereof), for $0.001 per share, of the
Corporation's common stock, par value $0.01 per share (the "Warrant Shares"),
upon payment by the Holder of $.836 per share (the "Exercise Price"), with the
Exercise Price being subject to adjustment in the circumstances and subject to
the provisions set forth herein.
Section 1. Exercise of Warrant
1.1 Exercise Period. The Holder may exercise this Warrant, in whole or in
part (but not as to fractional shares), at any time and from time to time
commencing on the date hereof and ending at 5:00 p.m., Eastern Time, on the
fifth anniversary of the date hereof (the "Exercise Period"). If the last day of
the Exercise Period is a day on which federal or state chartered banking
institutions located in the State of Florida are authorized by law to close,
then the last day of the Exercise Period shall be deemed to be the next
succeeding day which shall not be such a day.
1.2 Exercise Procedure.
a. This Warrant may be exercised in whole or in part at any time during the
Exercise Period by presentation and surrender of this Warrant to the Corporation
accompanied by the form of Exercise Agreement (attached hereto as Exhibit 1)
signed by the Holder and accompanied by the Exercise Price for the Warrant
Shares being purchased. The Exercise Price may be paid by cashier's check, wire
transfer of immediately available funds or pursuant to the Cashless Exercise
provisions set forth in Section 7.4 hereof The date on which the Corporation
receives a signed Exercise Agreement and payment of the Exercise Price (by
Cashless Exercise or otherwise) shall hereinafter be referred to as the
"Exercise Date."
b. Certificates for the Warrant Shares purchased upon exercise of this
Warrant will be delivered by the Corporation to the Holder within five (5)
business days after the Exercise Date. Unless this Warrant has expired or all of
the purchase rights represented hereby have been exercised, the Corporation will
prepare a new Warrant representing the rights formerly represented by this
Warrant that have not expired or been exercised. The Corporation will, within
such five (5) day period, deliver such new Warrant to the Holder at the address
set forth in this Warrant.
c. The Warrant Shares issuable upon the exercise of this Warrant will be
deemed to have been transferred to the Holder on the Exercise Date, and the
Holder will be deemed for all purposes to have become the record holder of such
Warrant Shares on the Exercise Date.
d. The issuance of certificates representing the Warrant Shares will be
made without charge to the Holder of any issuance tax in respect thereof or any
other cost incurred by the Corporation in connection with such exercise and
related transfer of the shares; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any certificate or instrument in a name
other than that of the Holder of this Warrant and that the Corporation shall not
be required to issue or deliver any such certificate or instrument unless and
until the person or persons requiring the issue thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid.
e. Unless the Corporation shall have registered the Warrant Shares pursuant
to the provisions of Section 6 hereof, the Warrant Shares have not been
registered under the Securities Act of 1933, as amended (the "Act") and,
accordingly, will be "restricted securities" as that term is defined in the Act.
The Corporation may insert the following or similar legend on the face of the
certificates evidencing the Warrant Shares if required in compliance with state
securities laws:
"These securities have not been registered under any state securities laws
and may not be sold or otherwise transferred or disposed of except pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, or any applicable state securities laws, or an opinion of counsel
satisfactory to counsel to the Corporation that an exemption from registration
under the Securities Act of 1933, as amended, or any applicable state securities
laws is available."
1.3 Fractional Shares. If a fractional Warrant Share would, but for the
provisions of Subsection 1.1, be issuable upon exercise of the rights
represented. by this Warrant, the Corporation will, within 30 days after the
Exercise Date, deliver to the Holder a check payable to the Holder, in lieu of
such fractional share, in an amount equal to the market price of such fractional
share as determined by the last sale price of the Corporation's common stock as
reported on the exchange on which the Corporation's common stock is then traded,
as of the close of business on the Exercise Date.
1.4 Exercise Price. The exercise price of this Warrant is based upon he
closing bid price of the Shares on the NASDAQ Market on October 18, 2005, plus
ten (10%) per cent.
Section 2. Effect of Stock Dividends, Reorganization, Reclassification,
Consolidation, Merger or Sale
2.1 Stock Dividends, Recapitalization or Reclassification of Common Stock.
In case the Corporation shall at any time prior to the exercise or termination
of this Warrant (i) pay a dividend or make a distribution of its capital stock
in shares of common stock to all holders of shares of the Corporation's common
stock, or (ii) effect a recapitalization or reclassification of such character
that its common stock shall be changed into or become exchangeable for a larger
or smaller number of shares, then, upon the effective date thereof, the number
of Warrant Shares shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in such number of the Corporation's
common stock by reason of such stock dividend, recapitalization or
reclassification, and the Exercise Price of such dividend, recapitalized or
reclassified common stock shall, in the case of an increase in the number of
shares, be proportionately decreased and, in the case of a decrease in the
number of shares, be proportionately increased.
2.2 Consolidation. Merger or Sale. In case the Corporation shall at any
time prior to the exercise of this Warrant, or the expiration of the Exercise
Period, whichever first occurs, consolidate or merge with any other corporation
(unless the Corporation shall be the surviving entity) or transfer all or
substantially all of its assets to any other corporation preparatory to a
dissolution, then the Corporation shall, as a condition precedent to such
transaction, cause effective provision to be made so that the Folder of this
Warrant, upon the exercise hereof after the effective date of such transaction,
shall be entitled to receive the kind and amount of shares, evidences of
indebtedness, and/or other property receivable on such transaction as if this
Warrant were exercised immediately prior to such transaction (without giving
effect to any restriction upon such exercise); and, in any such case,
appropriate provision shall be made with respect to the rights and interests of
the Holder hereof to the effect that the provisions of this Warrant shall
thereafter be applicable (as nearly as may be practicable) with respect to any
shares, evidences of indebtedness, or other securities or assets thereafter
deliverable upon exercise of this Warrant.
2.3 Adjustment. If at any time after the date hereof the Corporation shall
issue or sell any shares of Common Stock or any warrants, options or rights to
subscribe for or purchase Common Stock ("Purchase Rights") or securities
convertible into Common Stock ("Convertible Securities"), and the consideration
per share for, or the price per share at which such Purchase Right or
Convertible Security is exercisable for or convertible into, such Common Stock
(the "Subsequent Issue Price") is less than the Exercise Price in effect
immediately prior to such issuance or sale, then, forthwith upon such issuance
or sale, the Exercise Price shall be reduced to the Subsequent Issue Price. In
the case of an adjustment pursuant to this Section 2.3 for a subsequent issuance
of Purchase Rights or Convertible Securities, the Subsequent Issue Price shall
be deemed to be the lowest possible price in any range or prices at which such
Purchase Rights or Convertible- Securities may be exercised or converted. No
further adjustments of the Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Purchase Rights or
Convertible Securities and, if any issue or sale of such Purchase Rights or
Convertible Securities is made upon exercise of any warrant or other right to
subscribe for or to purchase any such Purchase Rights or Convertible Securities
for which adjustments of the Exercise Price have been or are to be made pursuant
to other provisions of this Section 2.3, no further adjustments of the Exercise
Price have been or are to be made pursuant to other provisions of this sale. For
the purposes of this Section 2.3, the date as of which the Exercise Price shall
be computed shall be the earlier of (i) the date on which the Company shall
enter into a firm contract for the issuance of such Purchase Rights or
Convertible Securities and (ii) the date of actual issuance of such Purchase
Rights or Convertible Securities. Such adjustments shall be made upon each
issuance of Purchase Rights or Convertible Securities and shall become effective
immediately after such issuance.
2.4 Notice of Adjustment. Whenever the number of Warrant Shares shall be
adjusted as provided herein, the Corporation shall file with its corporate
records a certificate of its Chief Financial Officer setting forth the
computation and the adjusted number of Warrant Shares purchasable hereunder
resulting from such adjustments, and a copy of such certificate shall be mailed
to the Holder. Any such certificate or letter shall be conclusive evidence as to
the correctness of the adjustment or adjustments referred to therein and shall
be available for inspection by the holders of the Warrants on any day during
normal business hours.
Section 3. Reservation of Common Stock
The Corporation will at all time reserve and keep available such number of
shares of its common stock as will be sufficient to permit the exercise in full
of this Warrant. Upon exercise of this Warrant pursuant to its terms, the Holder
will acquire fully paid and non-assessable shares of the Corporation's common
stock, free and clear of any liens, claims or encumbrances.
Section 4. No Shareholder Rights or Obligations
This Warrant will not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Corporation prior to the Exercise Date. No
provision of this Warrant, in the absence of affirmative action by the Holder to
purchase Warrant Shares, and no enumeration in this Warrant of the rights or
privileges of the Holder, will give rise to any obligation of such Holder for
the Exercise Price or as a shareholder of the Corporation.
Section 5. Transferability
Subject to the terms hereof; this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant with a
properly executed Assignment in the form of Exhibit 2 hereto at the principal
offices of the Corporation. This Warrant and the Warrant Shares may not be
offered, sold or transferred except in compliance with the Act, and any
applicable state securities laws, and then only against receipt of an agreement
of the person to whom such offer or sale or transfer is made to comply with the
provisions of this Warrant with respect to any resale or other disposition of
such securities; provided that no such agreement shall be required from any
person purchasing this Warrant or the Warrant Shares pursuant to a registration
statement effective under the Act. The Holder of this Warrant agrees that, prior
to the disposition of any security purchased on the exercise hereof other than
pursuant to a registration statement then effective under the Act, or any
similar statute then in effect, the Holder shall give written notice to the
Corporation, expressing his intention as to such disposition. Upon receiving
such notice, the Corporation shall present a copy thereof to its securities
counsel. If, in the sole opinion of such counsel, which such opinion shall not
be unreasonably withheld, the proposed disposition does not require registration
of such security under the Act, or any similar statute then in effect, the
Corporation shall, as promptly as practicable, notify the Holder of such
opinion, whereupon the Holder shall be entitled to dispose of such security in
accordance with the terms of the notice delivered by the Holder to the
Corporation.
Section 6. Registration Rights
a. In the event that the Corporation proposes to file a registration
statement on a general form of registration under the Act (other than a form S-8
or S-4) relating to securities issued or to be issued by it, then it shall give
written notice of such proposal to the record owner of this Warrant. If, within
15 days after the giving of such notice, the record owner hereof shall request
in writing that the Warrant Shares be included in such proposed registration,
the Corporation shall, at its own expense (except as set forth below), also
register such number of Warrant Shares as shall have been so requested in
writing; provided., however, that (i) the Holder shall cooperate with the
Corporation in the preparation of such registration statement to the extent
required to furnish information concerning such owners therein; and (ii) if any
underwriter or managing agent is purchasing or arranging for the sale of the
securities then being offered by the Corporation under such registration
statement, then the Holder (A) shall agree to have the Warrant Shares being
registered sold to or by such underwriter or managing agent on terms
substantially equivalent to the terms upon which the Corporation is selling the
securities so registered, or (B) shall delay the sale of the Warrant Shares for
the lesser of a 60 day period commencing with the effective date of the
registration statement or the date on which the underwriter agrees to permit the
sale of all or a portion of the Warrant Shares being registered; further, if the
number of Warrant Shares as to which such owner, and all other owners of
securities of the Company holding registration rights, has requested
registration is in the aggregate sufficient that such underwriter reasonably
believes in good faith that the inclusion of such Warrant Shares in the
registration statement may jeopardize the success of the offering, then such
underwriter may require that each such owner of securities reduce the number of
such Warrant Shares to be registered, with such reduction to be in proportion to
the number of shares as to which each respective owner has requested
registration which may be the entire number of securities thereof.
b. In connection with the filing of a registration statement pursuant to
Section 6, the Corporation shall: (i) notify the Holder as to the filing thereof
and of all amendments thereto filed prior to the effective date of said
registration statement; (ii) notify the Holder, promptly after it shall have
received notice thereof, of the time when the registration statement becomes
effective or any supplement to any prospectus fanning a part of the registration
statement has been filed; (in) prepare and file without expense to the Holder
any necessary amendment or supplement to such registration statement or
prospectus as may be necessary to comply with Section 10(a)(3) of the Act or
advisable in connection with the proposed distribution of the Warrant Shares by
the Holder; (iv) take all reasonable steps to qualify the Warrant Shares being
so registered for sale under the securities or blue sky laws in such states as
the Holder of the Warrant Shares being so registered may reasonably request; (v)
notify such registered owners of any stop order suspending the effectiveness of
the registration statement and use its reasonable best efforts to remove such
stop order; and (vi) undertake to keep said registration statement and
prospectus effective until the earlier of (A) two years from the effective date
thereof (provided, that if the Holders are required to delay the sale of the
securities, then such period shall be extended by the amount of such delay), or
(B) the date the Warrant Shares are sold or become available for public sale
without restriction under the Act; . provided, however, that such undertaking
shall apply only to the extent that the Corporation is permitted to register
such securities for continuous sale under Rule 415 of the General Rules
promulgated under the Act, under any successor provision, or under authoritative
interpretations of applicable law.
c. The Holder agrees to pay all of the underwriting discounts and
commissions with respect to the Holder's Warrant Shares being registered. The
Corporation agrees that the costs and expenses which it is obligated to pay in
connection with a registration statement to be filed pursuant hereto include but
are not limited to, registration fees, the fees and expenses of counsel for the
Corporation, the fees and expenses of the Corporation's accountants and all
other costs and expenses incident to the preparation, printing and filing under
the Act of any such registration statement, each prospectus and all amendments
and supplements thereto, the costs incurred in connection with the qualification
of such securities for sale in a reasonable number of states, including fees and
disbursements of counsel for the Corporation, and the costs of supplying a
reasonable number of copies of the registration statement, each preliminary
prospectus, final prospectus and any supplements or amendments thereto to the
Holder.
Section 7. Miscellaneous
7.1 Notices. Any notices, requests or consents hereunder shall be deemed
given, and any instruments delivered, two days after they have been mailed by
first class mail, postage prepaid, or upon receipt if delivered personally or by
facsimile transmission, as follows:
If to the Corporation: Ocean Bio-Chem, Inc.
4041 S.W. 47 Avenue
Ft. Lauderdale, FL 33314
Attention: Edward Anchel, CFO
If to the Holder: Peter Dornau
c/o Ocean Bio-Chem, Inc.
4041 S.W. 47 Avenue
Ft. Lauderdale, FL 33314
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.
7.2 Entire Agreement. This Warrant, including the exhibits and documents
referred to herein which are a part hereof, contain the entire understanding of
the parties hereto with respect to the subject matter and may be amended only by
a written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.
7.3 Construction and Enforcement. This Warrant shall be governed by and
construed under the laws of the State of Florida, without regard to principles
of conflicts of laws and rules of such state. If it becomes necessary for any
party to institute legal action to enforce the terms and conditions of this
Warrant, and such legal action results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred, including, but not limited to, all
attorneys' fees, court costs and other expenses incurred throughout all
negotiations, trials or appeals undertaken in other to enforce the Prevailing
Party's rights hereunder. Any suit, action or proceeding with respect to this
Warrant shall be brought in the state or Federal courts located in Broward
County in the State of Florida. The parties hereto hereby accept the exclusive
jurisdiction and venue of those courts for the purpose of any such suit, action
or proceeding. The parties hereto hereby irrevocably waive, to the fullest
extent permitted by law, any objection that any of them may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Warrant or any judgment entered by any court in respect thereof
brought in Broward County, Florida, and hereby further irrevocably waive any
claim that any suit, action or proceeding brought in Broward County, Florida,
has been brought in an inconvenient forum.
7.4 Cashless Exercise Provision. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Corporation at its principal executive offices
with a written notice of the Holder's intention to effect a cashless exercise,
including a calculation of the number of Warrant Shares to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, and in lieu of paying the Exercise Price in cash,
check or other immediately available funds, the Holder shall surrender this
Warrant for that number of the Corporation's common stock determined by
multiplying the number of Warrant Shares for which this Warrant is being
exercised by the closing price for the Corporation's common stock on the
principal market for such common stock on the date preceding the Exercise Date
(provided such notice and designation of Exercise Date must take place
subsequent to the closing of the principal markets and prior to the opening of
the principal market in the following way) minus the exercise price in effect at
such time, divided by such closing price.
7.5 Limitation.
(a) The Warrant granted to Holder is additional consideration for a
revolving credit loan in the maximum amount of $1,500,000 to Corporation.
(b) This Warrant may not be exercised until the transaction pursuant to
which this Warrant was issued has been approved or ratified by the Shareholders
of Corporation (which may be at an Annual Meeting of Shareholders).
IN WITNESS WHEREOF, this Warrant has been duly executed and the corporate
seal affixed hereto, all as of the day and year first above written.
OCEAN BIO-CHEM, INC.
By:
-----------------------------------------
Edward Anchel
Vice President - Finance, CFO
EXHIBIT 1
EXERCISE AGREEMENT
Dated:_______________________________
To:
--------------------------------
The undersigned record Holder, pursuant to the provisions set forth in the
within Wan-ant, hereby subscribed for and purchases _________ shares of Ocean
Bio-Chem, Inc. common stock covered by such Warrant and hereby (i) makes full
cash payment of $ for such shares at the Exercise Price or (ii) exercises this
Warrant pursuant to the Cashless Exercise provisions thereof.
------------------------------
(Signature)
------------------------------
(Print or type name)
------------------------------
------------------------------
(Address)
IF THE RECORD HOLDER IS ELECTING A CASHLESS EXERCISE, THE NUMBER OF SHARES
OF COMMON STOCK TO BE ISSUED. IS _____________ (SEE FOLLOWING CALCULATION).
CALCULATION OF CASHLESS EXERCISE
X Y(A-B)
A
X THE NUMBER OF SHARES TO BE ISSUED TO HOLDER___________________________________
Y THE NUMBER OF SHARES FOR WHICH THE WARRANT IS BEING EXERCISED_________________
A THE CLOSING PRICE OF THE SHARES ON THE DATE PRECEDING EXERCISE________________
B THE EXERCISE PRICE ___________________________________________________________
NOTICE: The signature of this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
EXHIBIT 2
ASSIGNMENT
FOR VALUE RECEIVED, _________________, the undersigned Holder hereby sells,
assigns, and transfers all of the rights of the undersigned under the within
Warrant with respect to the number of shares of the Corporation's common stock
issuable upon the exercise of such Warrant set forth below, unto the Assignee
identified below, and does hereby irrevocably constitute and appoint
_________________ to effect such transfer of rights on the books of the
Corporation, with full power of substitution:
Name of Assignee
Address of Assignee
Number of Sharesof Common Stock
Dated:____________________
------------------------------
(Signature of Holder)
(Print or type name)
NOTICE: The signature of this Exercise Agreement must correspond with the
name as written upon the face of the within Warrant, or upon the Assignment
thereof, if applicable, in every particular, without alteration, enlargement or
any change whatsoever.
CONSENT OF ASSIGNEE
I HEREBY CONSENT to abide by the terms and conditions of the within
Warrant.
Dated:____________________
------------------------------
(Signature of Assignee)
(Print or type name)
Exhibit 3
AMENDED
REVOLVING LINE OF CREDIT NOTE
(Subordinated)
$1,500,000 December 6, 2005
Fort Lauderdale, Florida
FOR VALUE RECEIVED, OCEAN BIO CHEM., a Florida corporation (the
"Borrower"), with an address of 4041 S.W. 47th Avenue, Fort Lauderdale FL 33314,
hereby promises to pay to the order of Peter Dornau (the "Lender"), at offices
at Ocean Bio-Chem, Inc., 4041 S.W. 47th Avenue, Fort Lauderdale FL 33314, or
such other place as Lender shall designate in writing from time to time, the
principal sum of ONE MILLION FIVE HUNDRED THOUSAND ($1,500,000.00) Dollars (the
"Loan"), or so much thereof as shall be advanced in United States Dollars,
together with interest thereon as hereinafter provided. This Note evidences a
revolving credit facility whereby Borrower may borrow, pay and repay in whole or
in part, and reborrow on a revolving basis up to a maximum principal sum of
$1,500,000 at any one time outstanding.
1. INTEREST RATE.
This Note shall bear interest on the entire disbursed and unpaid principal
balance from time to time outstanding at a rate equal to the "Prime Rate" plus
2% per annum as the Prime Rate may change from day to day as hereinafter set
forth. Interest shall be computed on the outstanding principal balance for the
actual number of days which have elapsed from the date of each advance,
calculated on the basis of a three hundred sixty (360) day year. Upon the
occurrence of any default by Borrower; this Note shall bear interest at the
maximum non-usurious rate allowed by law ("Default Rate").
"Prime Rate" means for any day, the rate (rounded to the next higher 1/100
of 1%) published in the Wall Street Journal as the "Prime Rate".
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.1 Monthly Payments of Interest Only. Commencing on the 6th day of
January, 2006 and continuing on the 6th day of each month thereafter until the
Maturity Date, interest only on the outstanding principal balance of this Note
shall be due and payable by Borrower to Lender.
2.2 Maturity Date. The entire unpaid principal amount hereof, together with
accrued and unpaid interest thereon and all other amounts payable under the Loan
Documents shall be due and payable by Borrower to Lender on October 17, 2010
(the "Maturity Date").
2.3 Conversion
(a) At any time that a balance shall be due on this Note, this Note shall
be convertible into shares of Common Stock of Borrower, at the option of the
Lender, in whole or in part at any time and from time to time at a price of One
Dollar $1.00 per share. The Lender shall effect conversions by delivering to the
Company the form of Notice of Conversion attached hereto as Annex A (a "Notice
of Conversion"), specifying therein the principal amount of Note to be
converted. Conversions hereunder shall have the effect of reducing the
outstanding principal amount of this Note. The Lender and the Company shall
maintain records showing the principal amount converted and the date of such
conversions. All stock certificates issued for shares acquired upon conversion
of this Note shall bear a legend stating that such shares have not been
registered for sale to the public and may not be transferred in the absence of
an effective registration statement or an opinion of Borrower's counsel that an
exemption from registration permits such transfer.
(b) Anti-dilution. In case the Borrower shall at any time prior to the
conversion of this Note into common stock (i) pay a dividend or make a
distribution in shares of common stock to all holders of shares of the
Borrower's common stock, or (ii) effect a recapitalization or reclassification
of such character that its common stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then, upon the effective
date thereof, the price of the shares which may be acquired upon conversion of
this Note shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in such number of the Borrower's common
stock by reason of such stock dividend, recapitalization or reclassification.
3. APPLICATION OF PAYMENTS. Except as otherwise specified herein, each
payment or prepayment, if any, made under this Note shall be applied to pay late
charges, accrued and unpaid interest, principal, escrows (if any), and any other
fees, costs and expenses which Borrower is obligated to pay under this Note, in
such order as Lender may elect from time to time in its sole discretion.
4. TENDER OF PAYMENT. All payments on this Note are payable on or before
2:00 p.m. on the due date thereof, at the office of Lender specified above and
shall be credited on the date the funds become available lawful money of the
United States. All sums payable to Lender which are due on a day on which Lender
is not open for business shall be paid on the next succeeding business day and
such extended time shall be included in the computation of interest.
5. LATE CHARGE. In the event that any installment of principal or interest
required to be made by Borrower under this Note shall not be received by Lender
within five (5) days after its due date, Borrower shall pay to Lender, on
demand, a late charge of five percent (5%) of such delinquent payment. The
foregoing right is in addition to, and not in limitation of, any other rights
which Lender may have upon Borrower's failure to make timely payment of any
amount due hereunder.
6. PREPAYMENT. Borrower may prepay this Note in full or in part at any
time. Any prepayment shall include accrued and unpaid interest to the date of
prepayment on the principal amount repaid and all other sums due and payable
under this Note. All payments received on this Note may be applied in such order
as Lender, in its sole discretion, shall determine.
7. SUBORDINATION OF THE NOTE.
7.1 Agreement of Subordination.
The Borrower covenants and agrees by its acceptance that the Note shall
be issued subject to the provisions of this Article 7.
The Note shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full of all
Superior Indebtedness.
7.2 Payments to Lender
No payment on account of principal or interest on the Note shall be made
unless full payment of all amounts then due on Superior Indebtedness has been
made or duly provided for in money or money's worth in accordance with its
terms. No payment on account of principal or interest on the Note shall be made
if, at the time of such payment or immediately after giving effect thereto, (1)
there shall exist a default in any payment with respect to any Superior
Indebtedness or (2) there shall have occurred an event of default (other than a
default in the payment of amounts due thereon) with respect to any Superior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holders thereof to accelerate the maturity thereof,
and such event of default shall not have been cured or waived or shall not have
ceased to exist.
Upon any acceleration of the principal of the Note or any payment by the
Borrower, or distribution of assets of the Borrower of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or total or partial liquidation or reorganization of the Borrower,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Superior
Indebtedness shall first be paid in full, or payment thereof provided for in
money or money's worth in accordance with its terms, before any payment is made
on account of the principal or interest on the Note; and upon any such
dissolution or winding-up or liquidation or reorganization any payment by the
Borrower, or distribution of assets of the Borrower of any kind or character,
whether in cash, property or securities, to which the Lender would be entitled,
except for the provisions of this Article 7, shall be paid by the Borrower or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution directly to the holders of Superior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Superior Indebtedness held by such holders) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Superior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Superior Indebtedness in full, in money or money's worth in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Superior Indebtedness, before any payment or distribution is made
in respect of the note to the Lender.
In the event that, notwithstanding the forgoing, any payment by or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Lender before all Superior Indebtedness is paid in full, or provision is made
for such payment in money or money's worth in accordance with its terms, such
payment or distribution shall be paid over or delivered to the holders of
Superior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Superior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Superior
Indebtedness remaining unpaid to the extent necessary to pay all Superior
Indebtedness in full in money or money's worth in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Superior Indebtedness.
For purposes of this Article 7, the words "cash, property or securities"
shall not be deemed to include securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this Article
7 with respect to the Note to the payment of all Superior Indebtedness which may
at the time be outstanding; provided that (1) the Superior Indebtedness is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (2) the rights of the holders of Superior Indebtedness
hereunder are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this ss. 7.2. Notwithstanding the foregoing, the Borrower may pay at
any time or from time to time interest on the Note and principal payments on the
Note if such payment will not take place when the Superior Indebtedness is in
default and such payment will not cause the Superior Indebtedness to become in
default or to violate any covenants.
7.3 "Superior Indebtedness" means (a) all debt incurred, assumed or
guaranteed by the Borrower, either before or after the date hereof, for money
borrowed from Regions Bank or obligations incurred in connection with the
Industrial Development Revenue Bonds issued by the Industrial Development Board
of the City of Montgomery; and (b) any renewals or extensions or refundings of
any such Superior Indebtedness, or evidences of indebtedness issued in exchange
for such Superior Indebtedness, unless in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
indebtedness, or such renewal, extension or refunding thereof, is subordinated
to any other indebtedness of the Company or is not superior in right of payment
to the Note.
7.4 The Note shall be secured by a Security Agreement and Financing
Statement on all tangible and intangible assets of the Borrower, subordinate
however to the Superior Indebtedness.
8. DEFAULT RATE. From and after the Maturity Date and during the
continuation of any default, this Note shall, at Lender's option, bear interest
at the maximum non-usurious rate allowed by law.
9. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender as follows:
9.1 Organization, Powers. Borrower is now and will continue to be duly
organized, validly existing and in good standing and has the power and authority
to own its properties and to carry on its business as now being conducted and to
enter into and perform its obligations under the Loan; and Borrower has not
amended or modified its organizational documents except as previously disclosed
to Lender in writing prior to the execution hereof and that no amendment, change
or modification thereto shall be binding upon Lender or affect the Loan unless
said amendment, change or modification has been agreed to in writing by Lender.
Borrower further represents and warrants to Lender that all documents in
connection with the Loan when executed and delivered by Borrower will constitute
the legal, valid and binding obligations of Borrower enforceable in accordance
with the terms thereof; that the execution, delivery and performance by Borrower
of the documents in connection with the Loan will not violate any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its property is bound, or be in conflict with, result in a breach of or
constitute (with due notice or the lapse of time, or both) a default under any
such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of its property or assets, except as contemplated by the provisions of the
documents; that, the execution, delivery and performance by Borrower of the
documents in connection with the Loan has been duly authorized by all requisite
Borrower action; that there are no judgments outstanding against Borrower and
there is no action, suit, proceeding, or investigation now pending (or to the
best of Borrower's knowledge, after diligent inquiry, threatened) against,
involving or affecting Borrower, at law, in equity or before any government
authority that if adversely determined as to Borrower, would result in a
material adverse change in the business or financial condition of Borrower; and
that the Borrower is not insolvent and will not be rendered insolvent by the
execution, delivery, payment and performance of the documents.
9.2 Execution of Documents. Each of the documents to which Borrower is a
party has been duly executed and delivered by Borrower. Execution, delivery and
performance of each of the agreements to which Borrower is a party will not: (i)
violate any of its organizational documents, provision of law, order of any
court, agency or other instrumentality of government, or any provision of any
indenture, agreement or other instrument to which it is a party or by which it
or any of its properties is bound; (ii) result in the creation or imposition of
any lien, charge or encumbrance of any nature, and (iii) require any
authorization, consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
9.3 Obligations of Borrower. Each of the documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower, enforceable
against it in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws or equitable principles
relating to or affecting the enforcement of creditors' rights generally.
Borrower is obtaining the Loan for commercial purposes.
9.4 Litigation. There is no action, suit or proceeding at law or in equity
or by or before any governmental authority, agency or other instrumentality now
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or any of its properties or right which, if adversely determined, would
materially impair or affect: (i) the value of any collateral securing this Note;
(ii) Borrower's right to carry on its business substantially as now conducted
(and as now contemplated); (iii) its financial condition; or (iv) its capacity
to consummate and perform its obligations under any documents to which Borrower
is a party.
9.5 No Defaults. Borrower is not in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained
herein or in any material agreement or instrument to which it is a party or by
which it or any of its properties is bound.
9.6 No Untrue Statements. No document, certificate or statement furnished
to Lender by or on behalf of Borrower contains any untrue statement of a
material factor omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. Borrower acknowledges
that all such statements, representations and warranties shall be deemed to have
been relied upon by Lender as an inducement to make the Loan to Borrower.
10. COVENANTS
10.1 Indemnification
10.1.1 Borrower hereby indemnifies and agrees to defend and hold harmless
Lender , its officers, employees and agents any and all losses, damages, or
liabilities and from any suits, claims or demands, including reasonable
attorneys' fees incurred in investigating or defending such claim, suffered by
any of them and caused by, arising out of, or in any way connected with the
transactions contemplated herein (unless determined by a final judgment of a
court of competent jurisdiction to have been caused solely by the gross
negligence or willful misconduct of any of the indemnified parties) including,
without limitation: (i) any untrue statement of a material fact contained in
information submitted to Lender by Borrower or the omission of any material,
fact necessary to be stated therein in order to make such statement not
misleading or incomplete; and (ii) the failure of Borrower to perform any
obligations herein required to be performed by Borrower.
10.1.2 In case any action shall be brought against Lender-, its officers,
employees or agents, in respect to which indemnity may be sought against
Borrower, Lender or such other party shall promptly notify Borrower and Borrower
shall assume the defense thereof, including the employment of counsel selected
by Borrower and satisfactory to Lender, the payment of all costs and expenses
and the right to negotiate and consent to settlement. Lender shall have the
right, at its sole option, to employ separate counsel in any such action and to
participate in the defense thereof, all at Borrower's sole cost and expense.
Borrower shall not be liable for any settlement of any such action effected
without its consent (unless Borrower fails to defend such claim), but if settled
with Borrower's consent, or if there be a final judgment for the claimant in any
such action, Borrower agrees to indemnify and hold harmless Lender from and
against any loss or liability by reason of such settlement or judgment.
10.1.3 The provisions of this Section 11.4 shall survive the repayment or
other satisfaction of the Liabilities.
10.2 Documentary and Intangible Taxes. Borrower shall be liable for all
documentary stamp and intangible taxes (including any penalties and interest
charged for the late payment of any such taxes) assessed upon execution of this
Note or as renewed from time to time during the life of the Loan.
11. EVENTS OF DEFAULT. Each of the following shall constitute an event of
default hereunder (an "Event of Default"): (a) the failure of Borrower to pay
any amount of principal or interest when due and payable hereunder when due and
payable; or (b) the occurrence of any other default in any term, covenant or
condition hereunder or any Default under any Loan to which this Loan is
subordinated.
12. REMEDIES. If an Event of Default exists, Lender may exercise any right,
power or remedy permitted by law including, without limitation, the right to
declare the entire unpaid principal amount hereof and all interest accrued
hereon to be, and such principal, interest and other sums shall thereupon
become, immediately due and payable.
13. MISCELLANEOUS.
13.1 Disclosure of Financial Information. Lender is hereby authorized to
disclose any financial or other information about Borrower to any regulatory
body or agency having jurisdiction over Lender and to any present, future or
prospective participant or successor in interest in any loan or other financial
accommodation made by Lender to Borrower.
13.2 Attorneys' Fees and Expenses. If Lender retains the services of
counsel by reason of a claim of a default or an Event of Default hereunder or
under any other documents, or on account of any matter involving this Note, all
costs of(,) suit and all reasonable attorneys' fees and such other reasonable
expenses so incurred by Lender shall be paid by Borrower, on demand, and shall
be deemed part of the obligations evidenced hereby.
13.3 No Implied Waiver. Lender shall not be deemed to have modified or
waived any of its rights or remedies hereunder unless such modification or
waiver is in writing and signed by Lender, and then only to the extent
specifically set forth therein. A waiver in one event shall not be construed as
continuing or as a waiver of or bar to such right or remedy in a subsequent
event. After any acceleration of, or the entry of any judgment on, this Note,
the acceptance by Lender of any payments by or on behalf of Borrower on account
of the indebtedness evidenced by this Note shall not cure or be deemed to cure
any Event of Default or reinstate or be deemed to reinstate the terms of this
Note absent an express written agreement duly executed by Lender and Borrower.
13.4 Waiver. Borrower, jointly and severally, waives demand, notice,
presentment, protest, demand for payment, notice of dishonor, notice of protest
and diligence of collection of this Note. Borrower consents to any and all
extensions of time, renewals, waivers, or modifications that may be granted by
Lender with respect to the payment or other provisions of this Note, and to the
release of any collateral, with or without substitution. Borrower agrees that
makers, endorsers, guarantors and sureties may be added or released without
notice and without affecting Borrower's liability hereunder. The liability of
Borrower shall not be affected by the failure of Lender to perfect or otherwise
obtain or maintain the priority or validity of any security interest in any
collateral. The liability of Borrower shall be absolute and unconditional and
without regard to the liability of any other party hereto.
13.5 No Usurious Amounts. Anything herein contained to the contrary
notwithstanding, it is the intent of the parties that Borrower shall not be
obligated to pay interest hereunder at a rate which is in excess of the maximum
non-usurious rate permitted by law. If, by the terms of this Note, Borrower is
at any time required to pay interest at a rate in excess of such maximum
non-usurious rate, the rate of interest under this Note shall be deemed to be
immediately reduced to such maximum non-usurious legal rate and the portion of
all prior interest payment in excess of such maximum non-usurious legal rate
shall be applied to and shall be deemed to have been payments in reduction of
the outstanding principal balance, unless Borrower shall notify Lender, in
writing, that Borrower elects to have such excess sum returned to it forthwith.
Borrower agrees that in determining whether or not any interest payable under
this Note exceeds the highest non-usurious rate permitted by law, any
non-principal payment, including without limitation, late charges hall be deemed
to the extent permitted by law to be an expense, fee or premium rather than
interest.
13.6 Partial Invalidity. The invalidity or unenforceability of any one or
more provisions of this Note shall not render any other provision invalid or
unenforceable. In lieu of any invalid or unenforceable provision, there shall be
added automatically a valid and enforceable provision as similar in terms to
such invalid or unenforceable provision as may be possible.
13.7 Binding Effect. The covenants, conditions, waivers, releases and
agreements contained in this Note shall bind, and the benefits thereof shall
inure to, the parties hereto and their respective heirs, executors,
administrators, successors and assigns; provided, however, that this Note cannot
be assigned by Borrower without the prior written consent of Lender, and any
such assignment or attempted assignment by Borrower shall be void and of no
effect with respect to Lender.
13.8 Modifications. This Note may not be supplemented, extended, modified
or terminated except by an agreement in writing signed by the party against whom
enforcement of any such waiver, change, modification or discharge is sought.
13.9 Sales or Participations. Lender may from time to time sell or assign,
in whole or in part, this Note and/or the obligations evidenced thereby. The
holder of any such sale, assignment or participation, if the applicable
agreement between Lender and such holder so provides, shall be: (a) entitled to
all of the rights, obligations and benefits of Lender may in its discretion give
notice to Borrower of such sale, assignment or participation; however, the
failure to give such notice shall not affect any of Lender's or such holder's
rights hereunder.
13.10 Jurisdiction. Borrower irrevocably appoints each and every owner,
partner and/or officer of Borrower as its attorneys upon whom may be served, by
regular or certified mail at the address set forth below, any notice, process or
pleading in any action or proceeding against it arising out of or in connection
with this Note or any other document; and Borrower hereby consents that any
action or proceeding against it be commenced and maintained in any court within
the State of Florida by service of process on any such owner, partner and/or
officer; and Borrower agrees that the courts of such State shall have
jurisdiction with respect to the subject matter hereof and the person of
Borrower. Borrower agrees not to assert any defense to any action or proceeding
initiated by Lender based upon improper venue or inconvenient forum.
13.11 Notices. All notices and communications under this Note shall be in
writing and shall be given by either (a) hand-delivery, (b) first class mail
(postage prepaid), or (c) reliable overnight commercial courier (charges
prepaid), to the addresses listed above. Notice shall be deemed to have been
given and received: (i) if by hand delivery, upon delivery; (ii) if by mail,
three (3) calendar days after the date first deposited in the United States
mail; and (iii) if by overnight courier, on the date scheduled for delivery. A
party may change its address by giving written notice to the other party as
specified herein.
13.12 Governing Law. This Note shall be governed by and construed in
accordance with the substantive laws of the State of Florida without reference
to conflict of laws principles.
13.13 Continuing Enforcement. If, after receipt of any payment of all or
any pad of this Note, Lender is compelled or agrees, for settlement purposes, to
surrender such payment to any person or entity for any reason (including,
without limitation, a determination that such payment is void or voidable as a
preference or fraudulent conveyance, an impermissible setoff, or a diversion of
trust funds), then this Note and the other Loan Documents shall continue in full
force and effect or be reinstated, as the case may be, and Borrower shall be
liable for, and shall indemnify, defend and hold harmless Lender with respect
to, the full amount so surrendered. The provisions of this Section shall survive
the cancellation or termination of this Note and shall remain effective
notwithstanding the payment of the obligations evidenced hereby, the release of
any security interest, lien or encumbrance securing this Note or any other
action which Lender may have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action shall be deemed to have been
conditioned upon any payment of the obligations evidenced hereby having become
final and irrevocable.
13.14 Borrower Shareholder Approval This transaction must be approved or
ratified by Shareholder vote at a meeting called for such purpose (which may be
an annual meeting of shareholders) prior to the exercise of the conversion right
provided for in Section 3(a) or the Warrant issued in conjunction with this
Loan.
14. Waiver of Jury Trial. BORROWER AND LENDER AGREE THAT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY LENDER OR BORROWER, ON OR WITH RESPECT TO THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR
THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY. LENDER AND BORROWER
EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY, AND WITH
THE ADVICE OF THEIR RESPECTIVE COUNSEL, WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. FURTHER, BORROWER WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE,
CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS NOTE AND THAT LENDER WOULD NOT EXTEND CREDIT TO BORROWER IF THE
WAIVERS SET FORTH IN THIS SECTION WERE
15. NOT A PART OF THIS NOTE.
IN WITNESS WHEREOF, Borrower, intending to be legally bound, has duly
executed and delivered this Revolving Line of Credit Promissory Note as of the
day and year first above written.
BORROWER:
OCEAN BIO-CHEM, a Florida corporation
By: /s/ Edward Anchel
----------------------------------------
Edward Anchel
Vice President - Finance, CFO
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby exercises his right to convert ___________________
dollars of his Revolving Line of Credit Note dated December __, 2005 to
___________ shares of common stock of the Company based on the closing bid price
of shares of common stock of the Company as of this date. Dated: _______________
----------------------------
PETER DORNAU