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Exhibit 10.15
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 17th day of February, 1998, by and between VENTURI TECHNOLOGY
ENTERPRISES, INC., a Nevada corporation ("Venturi"), and NORTHSTAR CAPITAL, LLC,
a Utah limited liability company ("Northstar"), individually, a "Party" and
collectively, the "Parties".
Recitals
A. Venturi and Northstar have entered into a Master Lease Agreement, dated as of
February 17, 1998 (the "Master Lease"), pursuant to which Northstar has agreed
to provide or arrange for funding of lease financing (the "Lease Financing") for
trucks and carpet-cleaning equipment, to be used by Venturi in its business, in
an amount up to Three Million Dollars ($3,000,000). Capitalized terms used but
not otherwise defined herein shall have the meanings given them in the Master
Lease.
B. The Master Lease provides for the funding of the Lease Financing in three
phases (each, a "Phase") of up to One Million Dollars ($1,000,000) each, subject
to certain conditions set forth in the Master Lease.
C. As consideration for Northstar's agreement to provide or arrange for the
Lease Financing, Venturi has agreed to issue to Northstar one or more warrants
(the "Warrants") to purchase shares of common stock in Venturi ("Shares").
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. WARRANTS. Subject to the terms and conditions of this Agreement, Venturi
hereby agrees to issue the Warrants, as follows;
a. Upon the date of the first Takedown in the first Phase of the Lease
Financing (the "Grant Date"), Venturi shall issue to Northstar a Warrant or
Warrants entitling Northstar to purchase Shares, the total number of which
shall be equal to six and one-quarter percent (6.25%) (or 388,820) of the
fully diluted shares, of common stock in Venturi, as set forth in the
capitalization table attached hereto as Exhibit B, at a strike price of $.50
per Share.
b. The Warrant shall provide that it may be exercised at any time prior to
and including the tenth (10th) anniversary of the Grant Date, and shall be in
substantially the form of Exhibit A, attached hereto and incorporated herein
by this reference.
c. At Northstar's option, a Warrant for a designated portion of the Warrant
Shares shall be issued to Franklin Leasing Company, an affiliate of Franklin
Funding, Inc., Northstar's assignee under the Master Lease.
2. REPRESENTATIONS OF VENTURI. Venturi represents and warrants that all
documents, information and data delivered by or on behalf of Venturi to
Northstar in connection with this Agreement, the Master Lease, any Equipment
Schedule or any other lease or financing documents or agreements are true and
complete in all material respects, Venturi further represents and warrants that
(i) no such document, information or data contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements made not misleading, and (ii) there is no fact
that Venturi has not disclosed to Northstar in writing that adversely affects
Venturi's condition or its ability to perform its obligations under this
Agreement or the Master Lease.
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Notwithstanding any right of Northstar to investigate fully the affairs of
Venturi and notwithstanding any knowledge of facts determined or determinable by
Northstar pursuant to such investigation or right of investigation, Northstar
may rely fully upon the representations, warranties and agreements of Venturi
contained in this Agreement and the Master Lease, and all such representations,
warranties and agreements shall survive the execution and delivery of this
Agreement, the closing hereof, and the exercise of the Warrant. Venturi further
represents and warrants that as of the closing of the transactions contemplated
herein and in the Master Lease, the fair market value of Venturi's common stock
is not less than $.50 per share.
3. REPRESENTATIONS OF NORTHSTAR. Northstar represents and warrants that it is
purchasing the Warrant and any Warrant Shares issued upon exercise thereof for
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), or applicable state securities
laws. Northstar further represents that it understands that the Warrant and
Warrant Shares have not been registered under the Securities Act or applicable
state securities laws by reason of specific exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of Northstar's
investment intent as expressed herein. Northstar represents that the Warrant and
any Warrant Shares purchased upon exercise thereof must be held indefinitely
unless such securities are subsequently registered under the Securities Act and
all applicable state securities laws and regulations or an exemption from such
registration or qualification is available, and that Venturi is under no
obligation to register or qualify such securities except as set forth in the
Warrant between Venturi and Northstar. Notwithstanding, Northstar may assign any
or all of its rights in the Warrant to another entity.
4. LEGENDS. Northstar acknowledges and understands that the instruments
evidencing the Warrant and any certificates evidencing the Warrant Shares shall
bear the legends as specified in the Warrant in the form attached hereto.
5. GENERAL PROVISIONS
a. This Agreement represents the entire agreement between Venturi and
Northstar regarding the subject matter hereof, supersedes all prior
agreements and understandings between the Parties regarding the subject
matter hereof and may be amended or modified only by a writing signed by both
Parties.
b. This Agreement shall bind and benefit the successors, assigns, heirs,
executors and administrators of the Parties. Neither this Agreement nor any
portion hereof may be assigned by Venturi without the prior written consent
of Northstar, which consent may be withheld for any reason or no reason.
Venturi understands and agrees that Northstar may assign its right to receive
all or part of the Warrants to other entities.
c. This Agreement shall be governed in all respects by the laws of the State
of Utah, except to the extent that Nevada corporate law governs as a result
of the incorporation of Venturi in the State of Nevada, and all suits or
legal actions related to or arising from this Agreement shall be brought in
the courts of the State of Utah. Venturi hereby accepts jurisdiction in Utah
and agrees to accept service of process as if it were personally present and
served within the State of Utah.
d. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
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e. This Agreement is the result of arm's-length negotiations between, and has
been reviewed by, each Party and its counsel. Accordingly, this Agreement
shall be deemed to be the product of both Parties, and no ambiguity shall be
construed in favor of or against either Party.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first set forth above.
NORTHSTAR CAPITAL, LLC, VENTURI TECHNOLOGY ENTERPRISES, INC.,
a Utah limited liability company a Nevada corporation
By /s/ By /s/ Xxxxxxx Xxxxxx
--------------------------------- ---------------------------------
Name: Name:
Title: Managing Partner Title: Chairman & CEO
(Signature illegible)
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NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE,
TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR
(iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
____________________
THIS CERTIFIES THAT, for value received, subject to the terms and conditions
set forth herein, NORTHSTAR CAPITAL, LLC, a Utah limited liability company, is
entitled to subscribe for and purchase from VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation (the "Company"), a number equal to 6.25% of the fully
diluted shares on the Grant Date, of Common Stock (the "Common Stock"), of the
Company at an exercise price of Fifty Cents ($.50) per share, subject to
adjustment as set forth herein (the "Exercise Price"). As used herein, the term
"Common Stock" shall mean the Company's presently authorized Common Stock, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, and the term "Grant Date" shall mean_____________________, 1998.
1. TERM. This Warrant is exercisable, in whole or in part, at any time and
from time to time from and after the Grant Date and prior to the tenth
anniversary date of the Grant Date.
2. METHOD OR EXERCISE; NET ISSUE EXERCISE.
2.1 METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. This Warrant may
be exercised by the holder hereof, in whole or in part and from time to time, by
either of the following, at the election of the holder hereof: (a) the surrender
of this Warrant (with the Notice of Exercise form attached hereto as Exhibit A-1
duly executed) at the principal office of the Company and by the payment to the
Company, by cash, check or cancellation of indebtedness, of an amount equal to
the Exercise Price per share multiplied by the number of Shares then being
purchased; or (b) if in connection with a sale of Shares pursuant to a
registered public offering of the Company's securities, the surrender of this
Warrant (with the Notice of Exercise form attached hereto as Exhibit A-2 duly
executed), which surrender may be made contingent upon the closing of such
offering, at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
from the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the Exercise Price per share multiplied by the
number of Shares then being purchased. The person or persons in whose name(s)
any certificate(s) representing Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the Shares represented
thereby (and such Shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised, in the event of any exercise of this Warrant, certificates for the
Shares so purchased shall be delivered to the holder hereof as soon as possible
and in any event within fifteen (15) days of receipt of such notice (or,
following, the Company's initial public offering, within three (3) days of
receipt of such notice) and, unless this
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Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible thereafter.
2.2 AUTOMATIC EXERCISE. To the extent this Warrant is not previously
exercised, and if the fair market value of one share of the Company's Common
Stock is greater then the Exercise Price then in effect, this Warrant shall be
deemed automatically exercised pursuant to Section 2.3 below (even if not
surrendered) immediately before its expiration. For purposes of such automatic
exercise, the fair market value of one share of the Company's Common Stock upon
such expiration shall be determined pursuant to Section 2.3 (b) below. To the
extent this Warrant or any portion thereof is deemed automatically exercised
pursuant to this Section 2.2, the Company agrees to promptly notify the holder
hereof of the number of Shares, if any, the holder hereof is to receive by
reason of such automatic exercise.
2.3. RIGHT TO CONVERT WARRANT INTO STOCK; NET ISSUANCE.
(a) In addition to and without limiting the rights of the holder
under the terms of this Warrant, the holder may elect to convert this Warrant or
any portion thereof (the "Conversion Right") into shares of Common Stock, the
aggregate value of which shares shall be equal to the value of this Warrant or
the portion thereof being converted. The Conversion Right may be exercised by
the holder by surrender of this Warrant at the principal office of the Company
together with notice of the holder's intention to exercise the Conversion Right,
in which event the Company shall issue to the holder a number of shares of the
Company's Common Stock computed using the following formula:
Y(A-B)
X - -------
A
Where: X = The number of shares of Common Stock to be issued to the holder.
Y = The number of shares of Common Stock purchasable under this Warrant.
A = The fair market value of one share of the Company's Common Stock.
B = Exercise Price (as adjusted to the date of such calculation).
(b) For purposes of this Section 2.3, the "fair market value" per
share of the Common Stock shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(ii) If the Conversion Right is not exercised in connection with
and contingent upon the Company's initial public offering, then as follows:
(A) If the Common Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such an
exchange, or is listed on the National Market System (the "National
Market System") of The NASDAQ Stock Market
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("NASDAQ"), the fair market value shall be the last reported sale price
of the Common Stock on such exchange or on the National Market System
on the last business day before the effective date of exercise of the
Conversion Right or if no such sale is made on such day, the mean of
the closing bid and asked prices for such day on such exchange or on
the National Market System;
(B) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the fair market value shall be the mean of
the last bid and asked prices reported on the last business day before
the date of the election (1) by NASDAQ or (2) if reports are
unavailable under clause (1) above by the National Quotation Bureau
Incorporated; and
(C) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices are not reported,
the fair market value shall be, at the option of the holder hereof,
either (1) the price per share related to the most recent transaction
in which shares of the Common Stock were sold by the Company, or (2)
the price per share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued shares, as
such price shall be determined by mutual agreement of the Company and
the holder of this Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issue thereof. During the period
within which this Warrant may be exercised, the Company will at all times have
duly authorized and reserved, for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock. The Company shall pay
all documentary, stamp or other taxes that may be imposed with respect to the
issuance of this Warrant or any Shares acquired pursuant to the exercise hereof.
4. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as set forth in
Appendix I hereto upon the occurrence of certain events described therein. The
provisions of Appendix I are incorporated by reference herein with the same
effect as if set forth in full herein.
5. NOTICES OF RECORD DATE. In the event of any taking by the Company of
a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed merger or consolidation of the Company with or into any other
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, then, in connection with each such event, the Company
shall mail to the holder of this Warrant at least twenty (20) days prior written
notice of the date on which any such record is to be taken for the purpose of
such dividend, distribution, right(s) or vote of the shareholders. Each such
written notice shall specify the amount and character of any such dividend,
distribution or right(s), and shall set forth, in reasonable detail, the matter
requiring any such vote of the shareholders.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make
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a cash payment therefor based upon the per share fair market value of the Common
Stock on the date of exercise.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF
WARRANT OR SHARES OF COMMON STOCK.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant and the Shares to be
issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant or any Shares
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act. This Warrant and all Shares issued
upon exercise of this Warrant (unless registered under the Securities Act) shall
be stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.
(b) DISPOSITION OF WARRANT AND SHARES. With respect to any
offer, sale or other disposition of this Warrant, in whole or in part, or any
Shares acquired pursuant to the exercise of this Warrant prior to registration
thereof, the holder hereof and each subsequent holder of this Warrant agrees to
give written notice thereof to the Company prior thereto, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Securities Act as then
in effect or any federal or state law then in effect) of this Warrant (or any
portion hereof) or such Shares and indicating whether or not under the
Securities Act certificates for this Warrant (or any portion hereof) or such
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act. Any assignment or transfer of this Warrant, in whole or in
part, shall include delivery to the Company of the Assignment Form attached
hereto as Exhibit A-3 duly endorsed. Each certificate representing this Warrant
(or any portion hereof) or the Shares thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act unless, in
the aforesaid opinion of counsel for the holder, such legend is not required in
order to insure compliance with the Securities Act. Nothing herein shall
restrict the transfer of this Warrant (or any portion hereof) by the initial
holder hereof to any person or entity affiliated with the initial holder,
provided such transfer may be made in compliance with applicable federal and
state securities laws. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. RIGHTS AS SHAREHOLDERS; INFORMATION.
8.1 SHAREHOLDER RIGHTS. Except as set forth herein, no holder
of this Warrant, as such, shall be entitled to vote upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or be
deemed the holder of Common Stock until this Warrant shall have been exercised
and the Shares purchasable upon such exercise shall have become deliverable, as
provided herein.
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8.2 FINANCIAL STATEMENTS AND INFORMATION. The Company shall
deliver to the holder hereof (i) within one-hundred-twenty (120) days after the
end of the fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of such year and a consolidated statement of income, cash
flows and shareholders' equity for such year, which year-end financial reports
shall be in reasonable detail and certified by independent public accountants of
nationally recognized standing selected by the Company, and (ii) within
forty-five (45) days after the end of each fiscal quarter (other than the last
fiscal quarter), unaudited consolidated statements of income and cash flows for
such quarter and a consolidated balance sheet as of the end of such quarter,
certified by the Company's chief financial officer. In addition, the Company
shall deliver on a timely basis to the holder hereof any and all other
information or data of any kind whatsoever provided generally to the
shareholders of the Company or reasonably requested by the holder hereof from
time to time.
9. REGISTRATION RIGHTS. The rights of the holder of this Warrant and
the obligations of the Company with respect to registration under the Securities
Act and the applicable rules and regulations thereunder shall be as set forth in
Appendix II hereto, the provisions of which are incorporated by reference herein
with the same effect as if set forth in full herein.
10. ADDITIONAL RIGHTS.
10.1 SECONDARY SALES. The Company agrees to assist the holder of
this Warrant in obtaining liquidity if opportunities to make secondary sales of
the Company's securities become available. To this end, the Company will
promptly provide the holder of this Warrant with notice of any offer to acquire
from the Company's security holders more than five percent (5%) of the total
voting power of the Company.
10.2 MERGERS. The Company agrees to provide the holder of this
Warrant with at least thirty (30) days' notice of the terms and conditions of
any proposed transaction, in which the Company would (i) sell, lease, exchange,
convey or otherwise dispose of all or substantially all of its property or
business, or (ii) merge into or consolidate with any other corporation (other
than a wholly-owned subsidiary of the Company), or effect any transaction
(including a merger or other reorganization) or series of related transactions,
in which more then fifty percent (50%) of the voting power of the Company is
disposed of.
11. REPRESENTATIONS AND WARRANTIES. This Warrant is issued and
delivered on the basis of the following representations and warranties made by
the Company:
(a) This Warrant has been duly authorized, executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the Shares and the holders thereof are as set forth in the
Company's Articles of Incorporation, as amended (the "Articles"), and the
Company's Bylaws, as amended (the "Bylaws"), true and complete copies of which
have been delivered to the original holder of this Warrant;
(d) As of the Grant Date, the capitalization of the Company is as
set forth in the Capitalization Schedule attached hereto as Appendix III, which
indicates the following: (i) the authorized capital stock of the Company
(including the authorized number of shares of Common Stock
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and each series of Preferred Stock, if any); (ii) the number of shares of Common
Stock and each series of Preferred Stock issued and outstanding; (iii) the
number of shares of Common Stock reserved for issuance upon conversion of any
Preferred Stock; (iv) the number of shares for which options have been granted
under any stock option plan or other similar plan maintained by the Company; and
(v) any other securities that are convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for Common Stock or such
convertible or exchangeable securities, and the number of shares of Common Stock
issuable upon any conversion, exchange or exercise of such securities, options
or rights. All issued and outstanding shares of the Company's Common Stock and
Preferred Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth in Appendix III, there are no outstanding
rights, options, warrants, conversion rights, preemptive rights, rights of first
refusal or similar rights for or understandings relating to the purchase or
acquisition from the Company of any securities of the Company.
(e) The execution and delivery of this Warrant, the issuance of
the Shares upon exercise of this Warrant in accordance with the terms hereof and
the compliance by the Company with the provisions hereof (i) are not and will
not be inconsistent with the Company's Articles or Bylaws, (ii) do not and will
not contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and (iii) do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or any other person or entity.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or sent to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the signature
page of this Warrant and shall be deemed recalled by the holder upon the earlier
of actual receipt or, if sent by certified mail (postage pre-paid), five (5)
days after deposit in the U.S. mail.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation, acquisition of
all or substantially all of the Company's assets or otherwise. All of the
obligations of the Company relating to the Shares shall survive the exercise and
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the holder hereof.
The Company will, at the time of the exercise of this Warrant, in whole or in
part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in respect
of any rights (including, without limitation, any right to registration of the
Shares in accordance with Appendix II) to which the holder hereof shall continue
to be entitled after such exercise in accordance with this Warrant; provided,
that the failure of the holder hereof to make any such request shall not affect
the continuing obligation of the Company to the holder hereof in respect of such
rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate issued upon exercise hereof and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate,
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the Company shall make and deliver a new Warrant or stock certificate, or like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
18. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Utah.
Date: February 17, 1998 VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation
By_____________________________________
Name:
Title:
Address:
0000 Xxxxx Xxxxx Xxxxxx
Xxxx, Xxxx 00000
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EXHIBIT A-1
NOTICE OF EXERCISE
To:__________________________
(COMPANY NAME)
1. The undersigned hereby:
[ ] elects to purchase ______ shares of Common Stock of the
Company pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such
shares in full; or
[ ] elects to exercise its net issuance rights pursuant to
Section 2.3 of the attached Warrant with respect to _______
shares of Common Stock.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or
names as are specified below:
_______________________
(NAME)
_______________________
(ADDRESS)
_______________________
(ADDRESS)
3. The undersigned represents that the aforesaid shares being
acquired for the account of the undersigned are for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
________________________
(Date)
______________________________
(SIGNATURE)
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EXHIBIT A-2
NOTICE OF EXERCISE
To:____________________________
(COMPANY NAME)
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S-___, filed on ______________, 19__, the
undersigned hereby:
[ ] elects to purchase ______ shares of Common Stock of the
Company (or such lesser number of shares as may be sold on
behalf of the undersigned at the Closing) pursuant to the
terms of the attached Warrant; or
[ ] elects to exercise its net issuance rights pursuant to
Section 2.3 of the attached Warrant with respect to _______
shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such ______ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
________________________
(Date)
___________________________________
(SIGNATURE)
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EXHIBIT A-3
ASSIGNMENT FORM
To Be Executed by the Holder in order
to Assign or Transfer Warrant
FOR VALUE RECEIVED, the undersigned holder of the attached Warrant
hereby sells, assigns and transfers unto:
__________________________________
__________________________________
__________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
Please insert social security or other identifying number:
__________________________________
the right represented by such Warrant to purchase _______ shares of Common Stock
of the Company, represented by the attached Warrant, and hereby irrevocably
constitutes and appoints __________ Attorney to make such transfer on the books
of the Company, with full power of substitution in the premises.
________________________
(Date)
___________________________________
(SIGNATURE)
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APPENDIX I
ADJUSTMENT PROVISIONS
1. CAPITALIZED TERMS. Capitalized terms used in this Appendix I that
are not otherwise defined herein shall have the respective meanings assigned to
them in the Warrant, dated as of _____________, 199__, to which this Appendix I
is attached, if therein defined.
2. ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL STOCK.
The Exercise Price shall be subject to adjustment from time to time as follows:
(a) Upon each issuance by the Company of any Additional Stock
without consideration or for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance of such Additional Stock, the
Exercise Price in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this Section 2) be adjusted to a price
determined by multiplying the Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding or deemed to be
outstanding immediately prior to such issuance plus the number of shares of
Additional Stock which could be purchased were the then Exercise Price used
instead (calculated by dividing the total consideration to be received by the
Company in such issuance by the then Exercise Price) and the denominator of
which shall be the number of shares of Common Stock outstanding or deemed to be
outstanding immediately prior to such issuance plus the number of Shares of such
Additional Stock issued in such issuance. For purposes of this Section 2, the
number of shares of Common Stock outstanding or deemed to be outstanding shall
include the aggregate number of shares of Common Stock and Common Stock actually
outstanding.
(b) No adjustment of the Exercise Price shall be made in an amount
less then one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
one (1) year from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of one (1) year from the date of
the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections 2(d)(iii) and 2(d)(iv) below, no
adjustment of the Exercise Price pursuant to subsection 2(a) of this Appendix I
shall have the effect of increasing the Exercise Price above the Exercise Price
in effect immediately prior to such adjustment.
(c) In the case of issuance by the Company of Additional Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors of the Company.
(d) In the case of the issuance (whether before, on or after the
Grant Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
Section 2:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in a manner consistent with subsection
2(c) of this Appendix I), if any, received by the Company upon issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
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(ii) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for (to the extent then
convertible or exchangeable) convertible or exchangeable securities or upon
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in a manner consistent with subsection 2(c) of this Appendix I).
(iii) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to the Company upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to, a change
resulting from antidilution provisions thereof, the Exercise Price, to the
extent in any way affected by or computed using such options, rights or
securities, shall be adjusted based upon the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(iv) Upon the expiration of any such options or rights,
the termination of any such options or rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Exercise Price, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities.
(v) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 2(d)(i) and
2(d)(ii) of this Appendix I shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either subsection
2(d)(iii) or 2(d)(iv) hereof.
(e) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 2(d) of this
Appendix I) by the Company after the Grant Date other than:
(i) Shares of Common Stock issued pursuant to a
transaction described in Sections 3, 4 and 5 of this Appendix I, or
(ii) Shares of Common Stock issuable or issued to
officers, employees, consultants, directors of the Company pursuant to a written
compensatory benefit plan.
(f) Upon each adjustment of the Exercise Price pursuant to this
Section 2, the number of Shares issuable upon exercise hereof shall be equal to
(x) the product of the number of shares of Common Stock the holder was entitled
to purchase immediately before such adjustment times the Exercise Price in
effect immediately before such adjustment divided by (y) the Exercise Price in
effect after giving effect to such adjustment.
3. RECLASSIFICATION OR MERGER. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or
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from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any merger of the Company
with or into another corporation or entity (other then a merger with another
corporation in which the Company is a continuing corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), or in case of any sale of all or substantially all of
the assets of the Company, the Company, or such successor or purchasing
corporation or entity, as the case may be, shall execute a new Warrant (in form
and substance satisfactory to the holder of this Warrant) providing that the
holder of this Warrant shall have the right to exercise such new Warrant and
upon such exercise to receive, in lieu of each share of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of one share of Common Stock, such new Warrant
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Appendix I. The provisions
of this Section 3 shall similarly apply to successive reclassifications,
changes, mergers and transfers.
4. SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
5. STOCK DIVIDENDS. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common
Stock, then the Exercise Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution, and the number of Shares subject to this Warrant shall
be proportionately adjusted.
6. OTHER DISTRIBUTIONS. In the event the Company shall declare a
dividend or distribution payable in cash, securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets or options or
rights not referred to in Sections 3, 4 or 5 of this Appendix I, then, in each
such case, provision shall be made by the Company such that the holder of this
Warrant shall receive upon exercise of this Warrant a proportionate share of any
such dividend or distribution as though it were the holder of the Shares as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
7. NO IMPAIRMENT. The Company will not, by amendment of its Articles or
Bylaws or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Appendix I 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.
8. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the holder hereof setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Exercise Price after giving effect to such adjustment.
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APPENDIX II
REGISTRATION RIGHTS PROVISIONS
1. CERTAIN DEFINITIONS. Capitalized terms used in this Appendix II
that are not otherwise defined herein shall have the respective meanings
assigned to them in the Warrant, dated as of ______________, 199__, to which
this Appendix II is attached, if therein defined. For the purposes of this
Appendix II, the following terms shall have the following meanings:
(a) "Registrable Securities" shall mean the Shares issued or
issuable upon exercise of the Warrant (when and if issued in accordance
therewith).
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(c) "Warrantholder" shall mean any registered holder of this
Warrant or any registered transferee thereof pursuant to Section 7 of the
Warrant.
2. INCIDENTAL REGISTRATION.
(a) Whenever the Company proposes to register any of its Common
Stock under the Securities Act for a public offering for cash, whether as a
primary or secondary offering or pursuant to registration rights granted to
holders of other securities of the Company (other than a registration relating
to employee benefit plans or to a transaction under Rule 145 of the Securities
Act), the Company shall, each such time, give the Warrantholder(s) advance
written notice thereof. Upon the written request of the Warrantholder(s) within
twenty (20) days after the Warrantholder's receipt of such notice, the Company
shall use its best efforts to cause to be included in such registration all of
the Registrable Securities which the Warrantholder(s) requests to be registered;
provided, however, that the Warrantholder agrees to sell such Registrable
Securities in the same manner and on the same terms and conditions as the other
holders of Common Stock which the Company proposes to register.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Warrantholder(s) as a part of the written notice
given pursuant to subsection 2(a) of this Appendix II. In such event the right
of the Warrantholder(s) to registration shall be conditioned upon the
participation by such holder in such underwriting and the inclusion of the
Registrable Securities of such holder in the underwriting to the extent provided
herein. All Warrantholders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this subsection, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration. The Company shall so
advise all Warrantholders and the other holders distributing their securities
through such underwriting, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated among all Warrantholders and other holders thereof in
proportion, as nearly as practicable, to the respective number of Registrable
Securities or other securities entitled to inclusion in such registration held
by the Warrantholder(s) and other selling shareholders participating in such
underwriting. If any Holder or other holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
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3. OBLIGATIONS OF THE COMPANY. Whenever required under Section 2 of
this Appendix II to use its best efforts to effect the registration of any of
the Registrable Securities, the Company shall, as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain
effective;
(b) Prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to each Warrantholder participating in such
registration such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the Warrantholder may reasonably request in order to
facilitate the disposition of Registrable Securities owned by it; and
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
4. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Appendix II that
the Warrantholder shall furnish to the Company such information regarding it and
the Registrable Securities hold by it as the Company shall reasonably request
and as shall be required in connection with the action to be taken by the
Company.
5. EXPENSES OF REGISTRATION. All expenses incurred in connection with
a registration pursuant to Section 2 of this Appendix II (excluding underwriting
commissions and discounts), including without limitation all registration and
qualification fees, printing and accounting fees and reasonable fees and
disbursements of counsel for the Company and of counsel to the Warrantholder,
shall be borne by the Company.
6. UNDERWRITING REQUIREMENTS. In connection with any underwritten
public offering in which the Warrantholder has a right to participate under
Section 2 of this Appendix II, and subject to the agreement of the underwriters,
the Warrantholder may sell to the underwriters, in lieu of all or any part of
the shares of Registrable Securities to be included by the Warrantholder in the
offering, Warrants to purchase such shares of Registrable Securities.
7. DELAY OF REGISTRATION. So long as the Company has given any notice
required by Section 2 of this Appendix II, the Warrantholder shall not have any
right to take any action to restrain, enjoin or otherwise delay any registration
as the result of any controversy which might arise with respect to the
interpretation or implementation of this Appendix II; but nothing in this
Section 7 shall be construed as limiting the Warrantholder's right to damages
for breach hereof.
8. INDEMNIFICATION. In the event any of the Registrable Securities
are included in a registration statement under this Appendix II:
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(a) The Company will indemnify and hold harmless the
Warrantholder, each officer, director, shareholder or partner of the
Warrantholder, any underwriter (as defined in the Securities Act) for the
Warrantholder, and each person, if any, who controls the Warrantholder, or such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which they may become
subject under the Securities Art, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; and will reimburse the Warrantholder, each such officer,
director, shareholder or partner of the Warrantholder, and such underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 8 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld)
nor shall the Company be liable in any such case for any such loss, claim,
damage liability or action to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Warrantholder or any such underwriter or
controlling person.
(b) The Warrantholder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed such
registration statement, each person, if any, who controls the Company within the
meaning of the Securities Act and any underwriter for the Company (within the
meaning of the Securities Act) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by the Warrantholder expressly for use in connection with such
registration; and the Warrantholder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the liability
of the Warrantholder under this Section 8 shall be limited to the amount of
proceeds received by the Warrantholder from the sale of the Registrable
Securities (or the Warrant with respect thereto). It is agreed that the
indemnity agreement contained in this Section 8 shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is affected without the consent of the Warrantholder (which consent
shall not be unreasonably withheld).
(c) Promptly after receipt by a party indemnified under this
Section 8 of notice of commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and
to the extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to
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assume the defense thereof with counsel mutually satisfactory to the parties.
The failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to his ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 8, but the omission so to notify the indemnifying party will not relieve
him of any liability which he may have to any indemnified party other than under
this Section 8.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Warrantholder under this Appendix II may be transferred to any transferee of the
Warrantholder provided that the Company is given written notice by the
Warrantholder at the time of such transfer stating the name and address of the
transferee and identifying the Registrable Securities with respect to which the
rights under this Appendix II are being assigned.
10. REPORTING REQUIREMENTS. With a view toward making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission that may at any time permit the sale of the Registrable Securities
with or without registration, the Company hereafter agrees to:
(a) Timely file and keep available such information, documents and
reports as may be required or prescribed by the Securities and Exchange
Commission under Section 13 or 15(d) (whichever is applicable) of the Exchange
Act as well as any other information, reports and documents required of the
Company under the Securities Act or Exchange Act;
(b) Use its best efforts to qualify for the use of Form S-3 to
register the Registrable Securities in a Secondary Offering; and
(c) Furnish to the Warrantholder or any of its transferees,
forthwith upon request, a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, the "Eligibility Requirements for
Use of Form S-3", the Securities Act and the Exchange Act, as well as a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents of the Company as the Warrantholder or any of its transferees may
reasonably request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing the Warrantholder or any of its
transferees to sell such securities with or without registration.
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APPENDIX III
CAPITALIZATION SCHEDULE
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VENTURI TECHNOLOGY ENTERPRISES, INC.
CAPITALIZATION TABLE
As of January 15, 1998
--------------------------------------------------------------------------------
Number of Shares
--------------------------------------------------------------------------------
COMMON STOCK, no par value, 20,000,000 shares authorized
Issued and Outstanding (1) 4,451,550
Reserved for Issuance under Dual Stock Option Plan 2,000,000
Reserved for Issuance pursuant to warrant rights 277,150
Reserved for Issuance pursuant to conversion rights (2) 1,089,410
--------------------------------------------------------------------------------
PREFERRED STOCK, no par value,
5,000,000 shares authorized:
Series A 150,000 shares authorized 64,410
Series B 315,000 shares authorized (2) 205,000
--------------------------------------------------------------------------------
WARRANTS to purchase Common Stock:
Sentry Financial Corporation
(expire 06/18/06) 83,333
Series A Preferred Stock Investors
(expire 2002) 64,410
Dominion Capital Corporation
(expire 2002) 5,000
Investors under June 1997 Private Placement
(expire 12/31/2000) 124,407
--------------------------------------------------------------------------------
OPTIONS
Options granted under Dual Stock Option Plan 828,007
Options granted to Series B Placement Agent (2) 50,000
--------------------------------------------------------------------------------
(1) The Series B Preferred Stock is entitled to a 6% cumulative dividend
that is to be paid quarterly by the issuance of Common Stock to the
holders thereof. Because the number of shares to be issued in payment
of the dividend is to be determined according to the market price of
the Company's Common Stock at the time the dividend is paid, it is
impossible to determine how many shares of the Company's Common Stock
will be issued in payment of the Series B dividends.
(2) The Company is contractually obligated to issue and sell an additional
110,000 shares of Series B Preferred Stock (convertible into 550,000
shares of Common Stock), half on or before March 31, 1998 and half on
or before June 30, 1998. The Company is also required to issue options
to the Placement Agent in connection with the future placements of
Series B Preferred Stock to purchase an additional 100,000 shares of
Common Stock.
