SOLIGEN TECHNOLOGIES, INC.
SERIES B PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT
CLOSING: NOVEMBER 24, 1999
TABLE OF CONTENTS
PAGE
1. Authorization and Sale of Shares and Warrants . . . . . . . . . . . . . . . . .1
1.1. Authorization of the Shares and Warrants . . . . . . . . . . . . . . . . .1
1.2 Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Issuance of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. Closing Date; Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Representations and Warranties of the Company . . . . . . . . . . . . . . . . .2
3.1 Organization and Standing; Articles and Bylaws . . . . . . . . . . . . . .2
3.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.5 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.7 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.10 Title to Properties; Liens and Encumbrances. . . . . . . . . . . . . . . .7
3.11 Proprietary Information and Other Rights . . . . . . . . . . . . . . . . .7
3.12 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.13 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . .8
3.14 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.15 Confidential Information and Invention Assignment Agreements . . . . . . .8
3.16 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.17 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.19 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . 10
3.20 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.21 Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.23 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . . . . 11
3.24 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . 11
3.25 Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.26 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . 11
3.27 Broker's or Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . 11
3.28 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Representations and Warranties of the Purchasers. . . . . . . . . . . . . . . 12
4.1 No Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Tax Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 Purchaser's Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Resale Under Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Residency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
i
5. Conditions to Closing of the Purchasers . . . . . . . . . . . . . . . . . . . 15
5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . 15
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Good Standing Certificate. . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Articles of Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 16
5.10 Minimum Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.11 Reservation of Conversion Shares . . . . . . . . . . . . . . . . . . . . 16
6. Conditions to Closing of the Company. . . . . . . . . . . . . . . . . . . . . 16
6.1 Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 16
7. Affirmative Covenants of the Company and the Purchasers . . . . . . . . . . . 16
7.1 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Transferees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Directors' Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Venue; Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Modifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.6 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.7 Rights; Separability; Severability . . . . . . . . . . . . . . . . . . . 18
8.8 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.9 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 18
8.10 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . . 19
8.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.12 Survival of Representations and Warranties . . . . . . . . . . . . . . . 19
8.13 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.14 Exculpation Among Purchasers . . . . . . . . . . . . . . . . . . . . . . 19
8.15 Like Treatment of Holders. . . . . . . . . . . . . . . . . . . . . . . . 19
8.16 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.17 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ii
EXHIBIT INDEX
Exhibit A - List of Purchasers (Schedule of Purchasers)
Exhibit B - Articles of Amendment
Exhibit C - Schedule of Exceptions
Exhibit D - Investors Rights Agreement
Exhibit E - Deleted
Exhibit F - Form of Warrant
iii
SOLIGEN TECHNOLOGIES, INC.
SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
CLOSING: NOVEMBER 24, 1999
THIS SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"AGREEMENT") is made and entered into as of the date written above (the
"EFFECTIVE DATE"), by and among Soligen Technologies, Inc., a Wyoming
corporation, (the "COMPANY"), and the purchasers listed on EXHIBIT A attached
hereto (the "SCHEDULE OF PURCHASERS"). The persons or entities listed on the
Schedule of Purchasers are hereinafter referred to collectively as the
"PURCHASERS" and individually as a "PURCHASER".
RECITALS
WHEREAS, the Purchasers desire to purchase, and the Company agrees to sell,
shares of the Company's Series B Preferred Stock (the "SERIES B PREFERRED") and
warrants to purchase shares of Common Stock of the Company (the "Warrants")
pursuant to the terms and conditions of this Agreement.
WHEREAS, in connection with the foregoing transactions, certain of the
parties hereto shall enter into the Investor Rights Agreement, attached hereto
as EXHIBIT D (the "RIGHTS AGREEMENT"), providing for certain registration
rights.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and made pursuant hereto, and good and available consideration, receipt of which
is hereby acknowledged, the parties hereto do hereby agree as follows:
1. AUTHORIZATION AND SALE OF SHARES AND WARRANTS
1.1. AUTHORIZATION OF THE SHARES AND WARRANTS. The Company has, or before
the Closing (as defined in SECTION 2.1 below) will have, authorized (i) the sale
and issuance of up to 8,425,000 shares of its Series B Preferred (the "SHARES");
(ii) the issuance of such shares of Common Stock to be issued upon conversion of
the Shares (the "CONVERSION SHARES"); (iii) the issuance of Warrants to purchase
3,622,750 shares of Common Stock of the Company and the underlying shares of
Common Stock to the Purchasers; and (iv) the issuance of 498,750 Warrants and
the underlying Common Stock to X.X. Xxxxxx & Co., Inc. and Xxxxx Xxxxxx. The
Shares shall have the rights, restrictions, privileges and preferences as set
forth in the Company's Articles of Amendment attached hereto as EXHIBIT B (the
"ARTICLES OF AMENDMENT").
1.2 SALE OF THE SHARES. Subject to the terms and conditions hereof and in
reliance upon the representations, warranties and agreements contained herein,
the Company will issue and sell to each Purchaser, severally and not jointly,
and each Purchaser will purchase from the Company, severally and not jointly, at
the applicable Closing, the number of Shares set forth
1
opposite the Purchaser's name on the Schedule of Purchasers, at a purchase
price of NINETEEN CENTS ($0.19) per Share.
1.3 ISSUANCE OF WARRANTS. The Company agrees to issue, at the Closing, to
each Purchaser 43 Warrants to purchase one share of Common Stock of the Company
for each 100 Shares purchased by the Purchaser. This price per Warrant shall be
$0.02325581395. The form of the Warrants is attached hereto as EXHIBIT F. At
the Closing the Company shall also issue an aggregate of 498,750 Warrants to
X.X. Xxxxxx & Co., Inc. and Xxxxx Xxxxxx as a finder's fee. The Warrants and
the Shares are separable immediately, meaning that a holder may transfer each
security independently.
2. CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall be held at the offices of the Company or their
counsel, on November 24, 1999 (the "CLOSING DATE"), or at such other time and
place as shall be mutually agreed upon by the Company and the Purchasers.
2.2 DELIVERY. At the Closing, and conditioned upon delivery to the
Company of a check or wire transfer payable to the order of the Company in the
amount of the purchase price of the Shares to be purchased by a Purchaser, the
Company shall deliver to such Purchaser a certificate, registered in the
Purchaser's name as set forth on the Schedule of Purchasers, representing the
number of Shares that the Purchaser is purchasing from the Company and Warrants
as required pursuant to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As used herein, the term: "to the best knowledge of the Company" (or words
to that effect) shall mean such knowledge and belief as may be acquired after
reasonable inquiry of the directors, officers, and employees of the Company.
Except as set forth in EXHIBIT C attached hereto (the "SCHEDULE OF EXCEPTIONS"),
the Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
corporation duly organized and validly existing under the laws of the State of
Wyoming and is in good standing under such laws. The Company has requisite
corporate power and authority to own and operate its properties and assets, and
to carry on its business as presently conducted and as proposed to be conducted.
The Company is duly qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the Company's business as presently conducted and as currently proposed to be
conducted. The Company has made available to the Purchasers copies of its
Secretary's Certificate, which includes true, correct and complete copies of its
Articles of Continuance and Bylaws, as presently in effect.
2
3.2 CORPORATE POWER. The Company has or will have at the Closing all
requisite legal corporate power to execute and deliver this Agreement, to sell
and issue the Shares hereunder, to issue the Conversion Shares and the Warrants
and the underlying Common Stock, to file the Articles of Amendment and to carry
out and perform its obligations under the terms of this Agreement, the Rights
Agreement and the Articles of Amendment and the Warrants.
3.3 SUBSIDIARIES. Other than the entities listed on paragraph 3.3 of the
Schedule of Exceptions, the Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
3.4 CAPITALIZATION.
i. Immediately prior to the Closing, the Company's authorized
capital stock will consist of (a) 90,000,000 shares of common
stock (the "COMMON STOCK"), of which 35,459,423 shares will be
issued and outstanding, and (b) 10,000,000 shares of preferred
stock, of which 0 shares of Series A Preferred Stock are
outstanding and 8,425,000 shares have been designated as "Series
B Preferred Stock", none of which will be issued or outstanding
immediately prior to the Closing. The Series B Preferred is
referred to herein as "PREFERRED STOCK" or the "SERIES B
PREFERRED STOCK". Of the authorized, but unissued, Common Stock,
0 shares are reserved for issuance upon the conversion of the
Series A Preferred Stock, 5,686,500 are reserved for issuance
upon exercise of outstanding warrants, and 4,990,000 shares are
reserved for issuance under the Company's 1993 Stock Option Plan
(the "Plan").
The issued and outstanding shares of Common Stock of the Company are duly
and validly issued, fully paid and nonassessable, and such shares, and all
outstanding options, warrants, convertible notes, and other securities of the
Company, have been issued in full compliance with the Securities Act of 1933, as
amended or exempt therefrom (the "ACT"), the registration and qualification
requirements of all applicable securities laws of states of the United States
and all other provisions of applicable securities laws of States of the United
States, including, without limitation, anti-fraud provisions. The Series B
Preferred Stock and the Common Stock issued upon conversion of the Series B
Preferred Stock and upon exercise of the Warrants will be duly and validly
issued, fully paid and nonassessable.
The Company has reserved Five Million 8,425,000 shares of Common Stock for
issuance upon conversion of the Series B Preferred Stock, 3,622,750 shares of
Common Stock upon exercise of the Warrants to be issued to the Purchasers, and
498,750 shares of Common Stock upon exercise of the Warrants to be issued to X.
X. Xxxxxx & Co., Inc., and Xx. Xxxxxx.
ii. Neither the offer nor the issuance or sale of the Shares or
Warrants (and the Common Stock issuable upon conversion or
exercise thereof) constitutes or will constitute an event, under
any capital stock or convertible security or any anti-dilution or
similar provision of any
3
agreement or instrument to which the Company is a party or by
which it is bound or affected, which shall either increase the
number of shares or units of capital stock issuable upon
conversion of any securities or upon exercise of any warrant or
right to subscribe to or purchase any stock or similar security,
or decrease the consideration per share or unit of capital stock
to be received by the Company upon such conversion or exercise.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors, officers and shareholders necessary for the authorization, execution,
delivery and performance by the Company of this Agreement, the Rights Agreement,
and the Articles of Amendment, the Warrants and the consummation of the
transactions contemplated herein and therein, and for the authorization,
issuance, sale and delivery of the Shares and the Conversion Shares and shares
of Common Stock to be issued upon exercise of the Warrants has been taken or
will be taken prior to the Closing. This Agreement and the Rights Agreement and
the Warrants constitute valid and binding obligations of the Company,
enforceable in accordance with each of their terms, subject to laws of general
application relating to bankruptcy, insolvency, and the relief of debtors; other
laws of general application affecting enforcement of creditors' rights
generally, including rules of law governing specific performance, injunctive
relief or other equitable remedies; and the effect of public policy on the
indemnification provisions set forth in the Rights Agreement. Except as set
forth in the Schedule of Exceptions, the Shares are not subject to any
preemptive rights or rights of first refusal. The Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable and issued in compliance with all applicable federal and
state securities laws (based in part upon the representation of the Purchasers
contained herein), will be free of any liens or encumbrances, and will be free
of restrictions on transfer other than under this Agreement, the Rights
Agreement and state and/or federal securities laws. The Conversion Shares and
the Shares underlying the Warrants have been duly and validly reserved and are
not subject to any preemptive rights or rights of first refusal and, upon
issuance, will be validly issued, fully paid and nonassessable and will have the
rights, preferences and privileges described in the Articles of Amendment and in
the form of the Warrant attached.
3.6 FINANCIAL STATEMENTS. The Company's financial statements (balance
sheet and profit and loss statement, statement of stockholders' equity and
statement of cash flows, including notes thereto) as included in the Disclosure
Documents (defined in Section 3.25) referred to in the Subscription Agreement
signed by each Purchaser, were provided to each Purchaser (the "FINANCIAL
STATEMENTS"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other (except as may be indicated
in the notes to such financial statements, or in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC). The Financial Statements
fairly present in all material respects the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount or effect. Except as set forth in the Financial
Statements, the Company has no material obligations or liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary
4
course of business subsequent to June 30, 1999 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results
of the Company. Except as disclosed in the Financial Statements, the Company
is not a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
generally accepted accounting principles.
3.7 CHANGES. Since March 31, 1999, there has not been:
i. any material change in the assets, liabilities, financial
condition or operating results of the Company from that
reflected in the Financial Statements, except changes in the
ordinary course of business, none of which individually or in
the aggregate has had or is expected to have a material adverse
effect on such assets, liabilities, financial condition,
operations or prospects of the Company;
ii. any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets,
properties, financial condition, operating results, prospects or
business of the Company (as such business is presently conducted
and as it is proposed to be conducted);
iii. any cancellation, compromise or waiver by the Company of a
valuable right or of a material debt owed to it;
iv. any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the
assets, properties, financial condition, operating results or
business of the Company (as such business is presently conducted
and as it is proposed to be conducted);
v. any material adverse change or amendment to a material contract
or arrangement by which the Company or any of its assets or
properties is bound or subject;
vi. any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
vii. any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
viii. any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its
knowledge, does not know
5
of the impending resignation or termination of employment of any
such officer;
ix. receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
x. any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its
material properties or assets, except liens for taxes not yet
due or payable;
xi. any loans or guarantees made by the Company to or for the
benefit of its shareholders, employees, officers or directors,
or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its
business;
xii. any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct
or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
xiii. to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely
affect the assets, properties, financial condition, operating
results of business of the Company (as such business is
presently conducted and as it is proposed to be conducted); or
xiv. any authorization, approval, agreement or commitment by the
Company to do any of the things described in this SECTION 3.7.
3.8 LITIGATION. There are no actions, suits, proceedings or
investigations pending or threatened against the Company or any of its
properties before any court or governmental agency or claims asserted, nor, to
the Company's knowledge, is there any basis therefor. The foregoing includes,
without limitation, actions pending or threatened (or any basis therefor known
to the Company) involving prior employment of any of the Company's employees or
former employees or their obligations under any agreements with prior employers.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or governmental agency or
instrumentality. There is no action, suit, proceeding, or investigation by the
Company currently pending or that the Company intends to initiate.
3.9 CONSENTS. Except as set forth in the Schedule of Exceptions, no
consent, approval, qualification, order or authorization of, or filing with, any
governmental authority or any third party is required in connection with the
Company's valid execution, delivery or performance of this Agreement, the
Articles of Amendment or the Rights Agreement, or the Warrants or the offer,
sale or issuance of the Shares by the Company, the conversion of the Shares, the
issuance of the Conversion Shares, or the Shares underlying the Warrants or the
consummation of any other transaction contemplated on the part of the Company
hereby or
6
thereby, except (a) the filing of the Articles of Amendment with the
Secretary of State of the State of Wyoming prior to the Closing, and (b)
filings required pursuant to applicable federal and state securities laws and
blue sky laws, which filings the Company shall complete within the lesser of
fifteen (15) days of the Closing Date or the required statutory period and
(c) as set forth on Schedule 3.9 of the Schedule of Exceptions.
3.10 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has good and
marketable title to its properties and assets and, with respect to the property
and assets leased by the Company, holds valid leasehold interests therein, in
each case subject to no mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance or charge, except (i) tax, materialmen's or like
liens for obligations not yet due or payable or being contested in good faith by
appropriate proceedings, or (ii) liens arising from equipment loans entered into
in the ordinary course of business.
3.11 PROPRIETARY INFORMATION AND OTHER RIGHTS. The Company owns or has the
right to use patents, patent applications, trademarks, service marks, trade
names, copyrights, mask works, trade secrets, information, proprietary rights
and processes (collectively, "PROPRIETARY INFORMATION") necessary for its
business as now conducted, and believes it can obtain, on commercially
reasonable terms, any additional rights necessary or required for its business
as presently proposed to be conducted without, except in the case of patents and
patent applications, any conflict with or infringement of the rights of others.
To the best of the Company's knowledge, it possesses no licenses, patents or
patent applications which conflict with or infringe the rights of others. There
are no outstanding options, licenses or agreements of any kind relating to its
Proprietary Information, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, patent
applications, trademarks, service marks, trade names, copyrights, trade secrets,
inventions, franchises, licenses, information, proprietary rights and processes
of any other person or entity other than shrink wrap or preinstalled software
licensed by the Company in the ordinary course of business. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade proprietary rights
of any other person or entity. To the best knowledge of the Company, none of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his or her best efforts to promote the interests of the Company or
that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, the Articles of Amendment
or the Rights Agreement or the Warrants nor the carrying on of the Company's
business by the employees of the Company nor the conduct of the Company's
business as proposed, will, to the best of the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such employees is now obligated. The Company does not believe nor does it
have any reason to believe it is or will be necessary to utilize any inventions
of any of its employees (or people they currently intend to hire) made prior to
the employment of any such person by the Company. Since its organization, the
Company has
7
taken reasonable security measures to protect the secrecy, confidentiality
and value of its Proprietary Information from not being generally known or
known by competitors.
3.12 OFFERING. Subject to the truth and accuracy of each Purchaser's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares and Warrants as contemplated by this Agreement are exempt from the
registration requirements of the Act, and from the qualification requirements of
the California Corporate Securities Law of 1968, as amended, and of such other
states as may have jurisdiction over these transactions.
3.13 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in any
violation or default of any term of the Articles of Amendment pertaining to its
Series A Preferred or the Series B Preferred Stock, its Articles of
Incorporation, or its Bylaws, any material term of any material agreement to
which the Company is a party, including its existing debt instruments, or any
judgment, decree, order, statute, rule or regulation to which the Company is
subject, that alone or in the aggregate would have a material adverse effect on
the condition, financial or otherwise, or operations of the Company. Except as
set forth in the Schedule of Exceptions, the issuance of the Shares does not
require the vote, approval or consent of the Company's shareholders or of the
Series A Preferred shareholders or of any other party. The execution, delivery
and performance of this Agreement, the Rights Agreement and the Articles of
Amendment, and Warrants and the consummation of the transactions contemplated
hereby and thereby have not resulted and will not result in any violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties. The Company has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's loss of any rights granted under any license, distribution or
other agreement.
3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or presently
proposed to be conducted by the Company.
3.15 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS. The
Company has entered into a confidentiality agreement in a form previously
provided to the Purchasers' legal counsel with each officer, director, and key
employee of the Company. All persons having access to the Company's Proprietary
Information have executed and are bound by confidentiality agreements. The
Company, after reasonable investigation, is not aware that any of its employees,
officers or consultants are in violation thereof, and the Company will use its
best efforts to prevent any such violation.
8
3.16 REGISTRATION RIGHTS. Except as set forth in the Rights Agreement and
the Schedule of Exceptions, the Company is not under any obligation to register
any of its currently outstanding securities or any of its securities which may
hereafter be issued.
3.17 AGREEMENTS; ACTION.
i. Except for agreements explicitly contemplated hereby or in the
Rights Agreement, and except as disclosed in the Company's
filings under the Securities Act of 1933, as amended (the "Act"),
and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since 1995 (the "Reports"), there are no
agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any
affiliate thereof.
ii. Other than as indicated on the Schedule of Exceptions, there are
no agreements, understandings, instruments, contracts or proposed
transactions to which the Company is a party or by which they are
bound that involve (i) obligations of, or payments to the Company
in excess of, $50,000, or (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the
Company or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's
products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights.
iii. Other than as disclosed on the Schedule of Exceptions or the
Reports, the Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to
any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any liabilities in
excess of $50,000, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv)
sold, exchanged or otherwise disposed of any of its assets or
rights other than the sale of their inventory in the ordinary
course of business.
iv. The Company is not a party to or bound by any contract, agreement
or instrument, or subject to any restriction under the Company's
Articles of Incorporation, Articles of Amendment or Bylaws, which
adversely affects its business as now conducted or as proposed to
be conducted, its properties or its financial condition.
v. The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company
with or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or
any individual regarding the sale, conveyance or disposition of
all or substantially all of the assets of the
9
Company or a transaction or series of related transactions in
which more than Fifty Percent (50%) of the voting power of the
Company is disposed of or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of the
Company.
3.18 DISCLOSURE. The Company has fully provided each Purchaser with all
the information which such Purchaser has requested for deciding whether to
acquire the Series B Preferred and the Warrants, including the Disclosure
Documents referenced in the Subscription Agreement (the "DISCLOSURE DOCUMENTS")
and all information that the Company believes is reasonably necessary to enable
such Purchaser to make the decision to acquire the Series B Preferred. None of
this Agreement, the Rights Agreement, the Warrants, the Disclosure Documents, or
any other written statements or certificates made or delivered in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
3.19 RELATED-PARTY TRANSACTIONS. Except as set forth in the Reports (a) no
employee, officer, director or shareholder of the Company or member of his or
her immediate family is indebted to the Company nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of them; (b) to
the best of the Company's knowledge, none of such persons has any direct or
indirect ownership in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers,
directors or shareholders of the Company and members of their immediate families
may own stock in publicly traded companies that may compete with the Company;
and (c) to the best of the Company's knowledge, no officer, director or
shareholder or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company.
3.20 ERISA PLANS. The Company does not have any Employee Pension Benefit
Plan as defined in Section 3 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
3.21 TAX ELECTIONS. The Company has filed all tax returns and reports as
required by law. These returns and reports are true and correct in all material
respects. The Company has paid all taxes and other assessments due, except
those contested by it in good faith that are listed in the Schedule of
Exceptions. The provision for taxes of the Company as shown in the Financial
Statements is adequate for taxes due or accrued as of the date thereof. The
Company has not made any elections pursuant to the Internal Revenue Code which
would have a material affect on the Company, its financial condition, its
business as presently conducted or presently proposed to be conducted or any of
its properties or material assets.
3.22 INSURANCE. As of the dates hereof, the Company does have in full
force and effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed and such other
liability insurance as is appropriate for its business.
10
3.23 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation
(individually or in the aggregate) would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Company. The Company has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company, and the Company
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
3.24 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
3.25 DISCLOSURE DOCUMENTS. The Form 8-K dated September 7, 1999, the
10-QSB dated June 30, 1999, Annual Report dated July 1999 and the 10-KSB
dated March 31, 1999 (herein the "DISCLOSURE DOCUMENTS"), previously
delivered to each Purchaser, has been prepared in good faith by the Company
and does not contain any untrue statement of a material fact nor does it omit
to state a material fact necessary to make the statements made therein not
misleading.
3.26 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or subject
to (and none of its assets or properties is bound by or subject to) any written
or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the best of the Company's
knowledge, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the best of the Company's knowledge, threatened, that
could have a material adverse effect on the assets, properties, financial
condition, operating results, or business of the Company (as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
aware of any labor organization activity involving its employees. The Company
is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of the Company is
terminable at the will of the Company. To the best of its knowledge, the
Company has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment.
3.27 BROKER'S OR FINDER'S FEE. The Company is not nor will it be obligated
for any brokers or finders' fee or commission in connection with this
transaction, except a finders fee of 7% of $1,425,000 of the gross proceeds of
the investment of the Purchasers and 498,750
11
Warrants which the Company shall pay and issue at the Closing to X.X. Xxxxxx
& Co., Inc., and Xxxxx Xxxxxx.
3.28 MINUTE BOOKS. The Minute Books of the Company contain a complete
summary of all meetings of Directors and Shareholders since the time of
incorporation, and fairly and accurately reflect, in all material respects, all
matters and transactions referred to in such Minute Books. Prior to the Closing
the Company will provide counsel to the Purchasers true, correct and accurate
summaries of the minutes of the Board of Directors for the last twelve (12)
months.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants, severally and not jointly,
to the Company as follows:
4.1 NO REGISTRATION. Purchaser understands that the Shares, Conversion
Shares, Warrants and the underlying shares of Common Stock have not been
registered under the Act (as defined in SECTION 3.4 above) and are being offered
and sold pursuant to an exemption from registration contained in the Act based
in part upon the representations of each Purchaser below or otherwise made
hereunder.
4.2 INVESTMENT EXPERIENCE. Purchaser or its professional advisor has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company, and is capable
of evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser is an Accredited Investor as
set forth in the Subscription Agreement. Purchaser represents that it has not
been organized for the purpose of acquiring the Shares, Common Shares, Warrants,
or underlying shares of Common Stock, unless the beneficial owners are
accredited investors.
4.3 ACCESS TO INFORMATION. Purchaser has had full opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of the Shares and the Warrants and has had full access to the Company's
officers and such other information concerning the Company as it has requested,
and has read the Disclosure Documents and understands the risk factors set forth
therein.
4.4 INVESTMENT. Purchaser is acquiring the Shares to be issued and sold
hereunder (and the Conversion Shares, Warrants and underlying shares of Common
Stock) for investment in its own account (or a trust account if Purchaser is a
trustee), and not as a nominee or agent (except in the case of a Custodian for a
minor), and not with a view to or for sale in connection with the distribution
thereof. Purchaser understands that it must bear the economic risk of this
investment indefinitely unless the Shares or the Conversion Shares or the shares
of Common Stock underlying the Warrants are registered pursuant to the Act, or
an exemption from such registration is available. Purchaser further understands
that there is no assurance that any exemption from the Act will be available or,
if available, that such exemption will allow Purchaser to dispose of or
otherwise transfer any or all of the Shares, the Conversion Shares or
12
the shares of Common Stock underlying the Warrants under the circumstances in
the amounts or at the times Purchaser might propose.
4.5 AUTHORIZATION. Purchaser has the full power, right and authority to
execute and deliver this Agreement and the Rights Agreement, and to perform its
obligations hereunder and thereunder. This Agreement and the Rights Agreement,
when executed by Purchaser, will constitute valid and legally binding
obligations of Purchaser, enforceable in accordance with their terms, subject to
laws of general application relating to bankruptcy, insolvency, and the relief
of debtors, and rules of law governing specific performance, injunctive relief
and other equitable remedies. No consent, approval, authorization, order,
filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by Purchaser in connection
with the execution and delivery of this Agreement and the Rights Agreement or
the performance of Purchaser's obligations hereunder. The execution, delivery
and performance of this Agreement and the Rights Agreement and the consummation
of the transactions contemplated herein and therein (including ownership of the
Shares, the Conversion Shares, the Warrants and the shares of Common Stock
underlying the Warrants) by the Purchaser do not violate any provision of, or
constitute, with or without the passage of time or the giving of notice, a
material breach of or default under, any term, condition or provision of any
agreement, indenture or other instrument to which the Purchaser is a party, or
by which it or its properties or assets are bound, or of any order, judgment or
decree against or binding upon the Purchaser.
4.6 TAX ADVISORS. Purchaser has reviewed with its own tax advisors the
federal, state and local tax consequences of this investment, where applicable,
and the transactions contemplated by this Agreement. Purchaser is relying
solely on such advisors and not on any statements or representations of the
Company or any of its agents and understands that Purchaser (and not the
Company) shall be responsible for Purchaser's own tax liability that may arise
as a result of this investment or the transactions contemplated by this
Agreement.
4.7 PURCHASER'S COUNSEL. Purchaser acknowledges that it has had the
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with its own legal
counsel.
4.8 RESALE UNDER RULE 144. Purchaser acknowledges that it is aware of
Rule 144 promulgated under the Act, which permits limited public resales of
securities acquired in a nonpublic offering, subject to the satisfaction of
certain conditions. Purchaser understands that under Rule 144, except as
otherwise provided by section (k) of that Rule, the conditions include, among
other things: the availability of certain current public information about the
issuer, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold, and limitations on the amount
of securities to be sold and the manner of sale. Purchaser acknowledges that,
in the event all of the requirements of Rule 144 are not met, registration under
the Act, compliance with the SEC's Regulation A or an exemption from
registration will be required for any disposition of the Shares and the Common
Stock issued on conversion thereof or the Warrants and shares underlying the
Warrants. Purchaser understands that, although Rule 144 is not exclusive, the
SEC has expressed its opinion that persons proposing
13
to sell restricted securities received in a private offering other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for
such offers or sales and that such persons do so at their own risk.
4.9 RESIDENCY. The residency of Purchaser (or, in the case of a
partnership or corporation, such entity's principal place of business) is
correctly set forth on EXHIBIT A.
4.10 LEGEND. It is understood that the certificates evidencing the Shares,
Conversion Shares, Warrants, and the shares of Common Stock underlying the
Warrants may bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD,
DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION
INVOLVING SAID SECURITIES, (ii) THIS CORPORATION RECEIVES AN OPINION
OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION OR (iii) THIS CORPORATION
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION. AFTER THE PERIOD REQUIRED BY RULE 144 UNDER THE ACT,
THIS LEGEND WILL BE CANCELED, AND A CERTIFICATE FREE FROM SUCH LEGEND
ISSUED TO THE HOLDER HEREOF UPON COMPLIANCE WITH THE FOLLOWING
CONDITIONS: (a) SURRENDER OF THIS CERTIFICATE TO THIS CORPORATION IN
THE MANNER AND AT THE PLACE DESIGNATED FOR CANCELLATION, (b) A
REPRESENTATION BY THE HOLDER THAT IT HAS BENEFICIALLY HELD THE
SECURITIES EVIDENCED BY THIS CERTIFICATE FOR NOT LESS THAN THE PERIOD
REQUIRED BY RULE 144 UNDER THE ACT, AND THAT IT IS NOT, AND HAS NOT
WITHIN THE PRECEDING 90 DAYS BEEN, AN "AFFILIATE" (AS THAT TERM IS
DEFINED FOR PURPOSES OF RULE 144 UNDER THE ACT OR ANY SUCCESSOR RULE)
OF THIS CORPORATION, AND (c) AN UNDERTAKING THAT IF AT ANY TIME THE
HOLDER SHALL AGAIN BECOME AN AFFILIATE OR OTHERWISE CEASE TO ENJOY
FREE TRANSFERABILITY OF SUCH SECURITIES UNDER RULE 144 EITHER BY
REASON OF CHANGE OF CIRCUMSTANCE OR AMENDMENT OF RULE 144, IT SHALL
FORTHWITH SURRENDER ANY UNLEGENDED CERTIFICATE(S) RECEIVED BY IT IN
RESPECT OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE FOR IMPOSITION
OF ANY APPROPRIATE LEGEND. THE FULL STATEMENT OF THE POWERS,
DESIGNATIONS,
14
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER RESTRICTIONS
THEREOF (THE "STATEMENT OF RIGHTS AND PREFERENCES") OF THE SECURITIES IS
SET FORTH IN THE CERTIFICATE OF ANY EFFECTIVE STATEMENT OF RELATIVE
RIGHTS AND PREFERENCES OF PREFERRED STOCK, ON FILE IN THE OFFICE OF THE
SECRETARY OF STATE OF THE STATE OF WYOMING. THIS CORPORATION WILL FURNISH
COPIES OF THE STATEMENT OF RIGHTS AND PREFERENCES TO THE RECORD HOLDER OF
THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THIS CORPORATION AT
ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
5. CONDITIONS TO CLOSING OF THE PURCHASERS
Each Purchaser's obligation to purchase the Shares at the Closing is
subject to the fulfillment of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company pursuant to Article 3 hereof shall be true and
correct when made and shall be true and correct as of the Closing Date.
5.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3 RIGHTS AGREEMENT. The Company, the Purchasers and the other parties
thereto shall have entered into the Rights Agreement.
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a certificate of the Company, executed by an officer of the Company,
dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1, 5.2 and 5.10 of this Agreement.
5.5 SECRETARY'S CERTIFICATE. The Company shall have delivered to
Purchasers a certificate executed by the secretary of the Company, dated as of
the Closing Date, certifying the following: (a) resolutions adopted by the
Board approving the Articles of Amendment and the transactions contemplated by
this Agreement and the Rights Agreement; (b) the Articles of Amendment for the
Series B Preferred Stock; and (c) Bylaws of the Company.
5.6 GOOD STANDING CERTIFICATE. The Company shall have delivered to
Purchasers counsel a certificate dated within five (5) days as of the most
recent practicable date prior to the Closing Date issued by the Secretary of
State of Wyoming to the effect that the Company is qualified and in good
standing.
15
5.7 ARTICLES OF AMENDMENT. The Articles of Amendment for the Series B
Preferred Stock shall have been duly adopted by the Company and shall have been
filed with the Secretary of State of Wyoming.
5.8 AUTHORIZATIONS. All material governmental authorizations, consents,
approvals, exemptions, or other actions required to issue or purchase the Shares
and the Warrants pursuant to this Agreement, shall have been obtained and shall
be in full force and effect.
5.9 NO MATERIAL ADVERSE CHANGE. From March 31, 1999, there shall have
been no material adverse change in the business, affairs, prospects, operations,
properties, assets or condition of the Company.
5.10 MINIMUM CLOSING. At the Closing, the Purchasers shall have purchased
Shares having an aggregate purchase price of not less than EIGHT HUNDRED
THOUSAND DOLLARS ($800,000).
5.11 RESERVATION OF CONVERSION SHARES. The shares of the Conversion Shares
issuable upon conversion of the Shares and the shares underlying the Warrants
shall have been duly authorized and reserved for issuance upon such conversion.
6. CONDITIONS TO CLOSING OF THE COMPANY
The Company's obligation to sell the Shares at the Closing is subject to
the fulfillment to its satisfaction on or prior to the Closing Date of each of
the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers pursuant
to Article 4 hereof shall be true and correct when made and shall be true and
correct as of the Closing Date.
6.2 PAYMENT OF PURCHASE PRICE. Each and every Purchaser participating in
the Closing shall have delivered to the Company the purchase price and
Subscription Agreement for such Purchaser's Shares, in the amount set forth
opposite such Purchaser's name on the Schedule of Purchasers.
7. AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASERS
7.1 BROKERS OR FINDERS. The Company shall hold harmless and indemnify
each of the Purchasers from and against any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement for which the Company or any of its officers, employees or
representatives is responsible and each Purchaser shall hold harmless and
indemnify the Company and the other Purchasers from and against any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement for which such Purchaser or any of its officers,
partners, employees or representatives is responsible other than as disclosed in
the Schedule of Exceptions.
16
7.2 TRANSFEREES. The Purchasers covenant to cause any proposed purchaser,
assignee, transferee, or pledgee of any Series B Preferred held by the Purchaser
to take and hold such Shares subject to the provisions and upon the conditions
of this Agreement and the Rights Agreement.
7.3 DIRECTORS' EXPENSES. The Company shall pay the outside Directors'
reasonable expenses associated with attending meetings of the Company's Board of
Directors, including travel expenses, in accordance with the Company's policy
for employee expenses.
7.4 BOARD OF DIRECTORS. At the Closing the Company shall appoint a
director identified to it by Mr. Xxxxx Xxxxxx, provided that such director shall
be reasonably acceptable to the Company. At the annual meeting of shareholders
and otherwise if there is a vacancy, the holders of the Shares shall have the
right, as a class, to elect one member of the Company's Board of Directors
without duplication of the person selected by Xx. Xxxxxx, provided that such
person shall have a fiduciary obligation to all shareholders pursuant to the
Wyoming corporate law, as more particularly set forth in the Articles of
Amendment.
7.5 AFFILIATE TRANSACTIONS. The Company shall not enter into any
affiliate transactions unless such transaction is on terms at least as favorable
as those available to the Company from disinterested third parties, and unless
such transaction is approved by the director selected by Xx. Xxxxxx or
representing the holders of the Shares, as the case may be, (except where such
director is an interested party in such transaction).
8. MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement will be interpreted and governed by the
laws of the State of California, except that the Articles of Amendment shall
comply with Wyoming law.
8.2 VENUE; JURISDICTION. With respect to any disputes arising out of or
related to this Agreement, the parties consent to the non-exclusive personal
jurisdiction of, and venue in, the state courts of Los Angeles County,
California (or in the event of exclusive federal jurisdiction, the courts of the
Southern District of California).
8.3 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
8.4 MODIFICATIONS. No amendment or modification of this Agreement will be
effective unless assented to in writing by the Company and holders of fifty-one
percent (51%) or more of the Shares sold under this Agreement. Notwithstanding
the foregoing, in no event shall (i) the obligation of a Purchaser to purchase
Shares hereunder be increased or (ii) any obligation of a Purchaser amended or
otherwise modified in any way so as to adversely affect the rights of such
Purchaser in a manner differently than the other Purchasers except upon the
written consent of such Purchaser.
17
8.5 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered either by hand or by messenger, addressed (a) if to a
Purchaser, as indicated on the Schedule of Purchasers, or at such other address
as Purchaser shall have furnished to the Company in writing, or (b) if to any
other holder of any Shares or any Common Stock issued upon conversion of Shares,
or exercise of Warrants, at such address as such holder shall have furnished the
Company in writing or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder thereof who has so
furnished an address to the Company, or (c) if to the Company, at its address
set forth at the end of this Agreement or at such other address as the Company
shall have furnished to the Purchasers and each such other holder in writing.
8.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder, nor shall it be construed to be a waiver of any such breach or
default or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
8.7 RIGHTS; SEPARABILITY; SEVERABILITY. Unless otherwise expressly
provided herein, the rights of Purchasers hereunder are several rights, not
rights jointly held with any of the other Purchasers. In case any provision of
the Agreement shall be invalid, illegal or unenforceable by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, and the parties
agree to negotiate, in good faith, a legal and enforceable substitute provision
which most nearly effects the parties' intent in entering into this Agreement.
As a remedy at law will be inadequate, the Purchasers shall be entitled to
injunctive relief to enforce this Agreement and the ancillary agreements
executed pursuant hereto and the provisions of the Articles of Amendment.
8.8 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.9 CALIFORNIA QUALIFICATION. THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION OR THE AVAILABILITY OF AN EXEMPTION THEREFROM IS UNLAWFUL. THE
RIGHTS OF ALL PARTIES WITH RESPECT TO SUCH SECURITIES ARE EXPRESSLY
18
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING
AVAILABLE.
8.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including all exhibits
hereto), the Rights Agreement, and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts via facsimile, each of which shall be an original, but all of which
together shall constitute one instrument.
8.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants of the Company and the Purchasers contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement for 2 years and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of any of the
Purchasers, their counsel, or the Company, as the case may be.
8.13 PUBLICITY. Except as required by law or required to be included in
any registration statement (but in each case with prior notice to the
Purchasers), the Company shall not issue, publish or disseminate or cause to be
issued, published or disseminated any press release or public communication
relating to this Agreement or any of the transactions contemplated herein or
therein using the name or any trade xxxx, logo, trade name, trade dress or other
intellectual property or otherwise referring to any Purchaser, without the prior
written consent of such Purchaser.
8.14 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is
not relying upon any person, firm or corporation (including, without limitation,
any other Purchaser), other than the Company and its officers and directors
(acting in their capacity as representatives of the Company), in deciding to
invest and in making its investment in the Company. Each Purchaser agrees that
no other Purchaser nor the respective controlling persons, officers, directors,
partners, agents or employees of any other Purchaser shall be liable to such
Purchaser for any losses incurred by such Purchaser in connection with its
investment in the Company.
8.15 LIKE TREATMENT OF HOLDERS. Neither the Company nor any of its
affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for the redemptions or
exchange of the Shares, or otherwise, to any holder of Shares for or as an
inducement to, or in connection with solicitation of, any consent, waiver or
amendment of any terms or provisions of the Shares or this Agreement, the Rights
Agreement, unless such consideration is paid to all holders of the Shares bound
by such consent, waiver or amendment, whether or not such holders so consent,
waive or agree to amend and whether or not such holders tender their Shares for
redemption or exchange.
8.16 ATTORNEYS' FEES. If any party to this Agreement brings an action
against another party to this Agreement to enforce its rights under this
Agreement, the prevailing party shall be
19
entitled to recover its reasonable costs and expenses, including attorneys'
fees and costs, incurred in connection with such action, including any appeal
of such action.
8.17 EXPENSES. The Company agrees to pay on or prior to the Closing, up to
$10,000 for the legal fees of one counsel representing the Purchasers.
20
IN WITNESS WHEREOF, the undersigned, being duly authorized agents of the
parties, have executed this Agreement as of the Effective Date.
19408 Londelius St. SOLIGEN TECHNOLOGIES, INC.
Xxxxxxxxxx, XX 00000
Efax: (000) 000-0000
E-Mail: Xxxxxxx@xxxxxxxx.xxx By:
------------------------------------
Name: Xxxxxxx Xxxxx
Title: CEO
21
PURCHASER SIGNATURE PAGE
PURCHASER:
_____________________________
22
EXHIBIT A
TO SOLIGEN TECHNOLOGIES, INC.
SERIES B PREFERRED
PURCHASER SUBSCRIPTION PRICE PER TOTAL UNIT
FOR UNITS* UNIT PRICE
Xxxx X. Xxxxxxxx 750 $20.00 $15,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxx 5,750 $20.00 $115,000
----------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 5,750 $20.00 $115,000
----------------------------------------------------------------------------
Xx. Xxxxxxxx X. Brilliant 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Casting Technology Partnership 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Xxxx X. Xxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxx Xxxxx 1,000 $20.00 $20,000
----------------------------------------------------------------------------
Xxxx X. Xxxxxx 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Xxxxx Feteth, M.D. 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 1,500 $20.00 $30,000
----------------------------------------------------------------------------
Xxxx Xxxxxxx Xxxxxxxx 500 $20.00 $10,000
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 3,750 $20.00 $75,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxx 4,750 $20.00 $95,000
----------------------------------------------------------------------------
Xxxx X. Xxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
23
Xxxxxx Family Trust 1,250 $20.00 $25,000
----------------------------------------------------------------------------
X.X. Xxxxxxx, Inc. 12,500 $20.00 $250,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxx 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Koyah Leverage Partners, L.P. 5,500 $20.00 $110,000
----------------------------------------------------------------------------
Koyah Partners, L.P. 2,000 $20.00 $40,000
----------------------------------------------------------------------------
Xxxx and Xxxxxx Xxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxx 500 $20.00 $10,000
----------------------------------------------------------------------------
Xxxx Xxxx 1,000 $20.00 $20,000
----------------------------------------------------------------------------
Xxxxxxxxx X. Xxxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxx Xxxxxxx 500 $20.00 $10,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxx 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1,250 $20.00 $25,000
----------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 6,000 $20.00 $120,000
----------------------------------------------------------------------------
Summit Securities, Inc. 2,500 $20.00 $50,000
----------------------------------------------------------------------------
Western United Life Assurance, Inc. 2,500 $20.00 $50,000
----------------------------------------------------------------------------
TOTAL: $1,685,000.00
----------------------------------------------------------------------------
*Each UNIT consists of 100 shares of Series B Convertible Preferred Stock and 43
Warrants to purchase one share of Common Stock, as per form of Warrant in
Exhibit F.
24
Pursuant to the Agreement to which this Schedule is attached, X.X. Xxxxxx & Co.,
Inc. and Xxxxx Xxxxxx are acquiring from the Company as part of this transaction
an aggregate of 498,750 Warrants which are to be allocated as follows:
NAME AMOUNT OF WARRANTS
Xxxxx Xxxxxx 224,438
X.X. Xxxxxx & Co., Inc. 205,734
Xxxx X. Xxxxxx 68,578
The persons in the foregoing table and the Purchasers listed above are all
deemed and referred to as Warrant Holders.
25
EXHIBIT B
TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
ARTICLES OF AMENDMENT
SECRETARY OF STATE
STATE OF WYOMING
THE CAPITOL
CHEYENNE, WY 82002-0020
ARTICLES OF AMENDMENT
SOLIGEN TECHNOLOGIES, INC.
Pursuant to Section 00-00-000 and other provisions of the Wyoming Business
Corporation Act ("Act"), the Board of Directors of Soligen Technologies, Inc. a
Wyoming corporation by continuation, hereby adopts these Articles of Amendment
on behalf of the Corporation, effective without shareholder action. The
Corporation's Articles of Continuance were filed with the Wyoming Secretary of
State on April 13, 1993 ("Articles of Continuance").
A. The name of the corporation is Soligen Technologies, Inc. (the
"Corporation").
B. Effective as of the date of filing of these Articles of Amendment with
the Wyoming Secretary of State, the Articles of Continuance are hereby amended
by adding a new Section 9(c) as indicated on EXHIBIT A, attached hereto and
incorporated herein by this reference.
C. The foregoing amendment was duly adopted by the Board of Directors of
the Corporation at a meeting held for such purpose on November 23, 1999.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment of the Corporation this 23rd day of November, 1999.
SOLIGEN TECHNOLOGIES, INC.
By:
----------------------------------------------
Xxxxx X. Xxxxxxxxx, Assistant Secretary
26
EXHIBIT A
RIGHTS AND PREFERENCES OF
SERIES B CONVERTIBLE
PREFERRED STOCK OF
SOLIGEN TECHNOLOGIES, INC.
9 (c) The Series B Convertible Preferred Stock ("Series B Preferred
Stock") shall consist of eight million four hundred twenty-five thousand
(8,425,000) shares having the following particular rights and preferences:
(i) DIVIDENDS. Holders of shares of Series B Preferred Stock shall not be
entitled to any fixed or guaranteed dividends, nor to any cumulative dividend
rights, but shall be entitled to receive out of the earnings and assets of the
Corporation only such dividends as may be lawfully declared on such dates or may
be determined in the discretion of the Board of Directors. No dividend or other
distribution whatsoever shall be declared or paid on Common Shares or Preferred
Shares ranking junior to the rights of the Series B Preferred Stock unless a
dividend or other distribution shall be simultaneously paid on each outstanding
share of Series B Preferred Stock which is equal to or greater than the product
of (i) the dividend or distribution proposed to be declared or paid on each
share of Common Shares or such junior Preferred Shares (on an as-converted to
Common Shares basis) times (ii) the number of Common Shares into which each such
share of Series B Preferred Stock is then convertible under Subsection 9(c)(iii)
below. In any event, no dividend or other distribution shall be paid at any
time on Series B Preferred Stock, on any other class or series of Preferred
Shares, or on Common Shares which would have the effect of reducing the net
assets of the Corporation below the aggregate preferential amount (determined in
accordance with Subsection 9(c)(ii) below) payable to holders of Series B
Preferred Stock upon liquidation or dissolution of the Corporation.
(ii) LIQUIDATION.
(a) LIQUIDATION PREFERENCES. Upon liquidation or dissolution of the
Corporation, whether voluntary or involuntary, each share of Series B Preferred
Stock shall entitle its holder to receive, out of the assets of the Corporation
available for distribution to shareholders, whether from capital, surplus or
earnings, and before any distribution of such assets to the holders of Common
Shares or Preferred Shares ranking junior to the rights of the Series B
Preferred Stock, a liquidation preference of twenty cents ($0.20) per share (as
adjusted for stock splits, dividends, consolidations, recapitalizations and
similar events), plus any unpaid dividends declared pursuant to Subsection
9(c)(i) above. If the assets of the Corporation available for distribution to
shareholders are insufficient to satisfy in full the liquidation preferences for
Series B Preferred Stock and all the other classes or series of Preferred Shares
entitled to a stated liquidation preference, then the holders of Series A and
Series B Preferred Stock shall share ratably in such distribution in proportion
to their respective stated liquidation preferences, and within each such series,
each holder shall be entitled to receive the same distribution for each share of
such series.
27
After setting apart or paying in full the liquidation preferences on Series A
and Series B Preferred Stock, further distribution of the remaining available
assets shall be made pro rata to the holders of any other classes or series
of Preferred Shares entitled to a stated preference on liquidation, and then
pro rata to the holders of Common Shares.
(b) DEEMED LIQUIDATIONS. The sale of all or substantially all of the
Corporation's assets, or the acquisition of the Corporation by another entity by
means of merger, consolidation, share exchange, reorganization or otherwise,
pursuant to which shares of the Corporation's capital stock are converted into
cash, securities or other property of the acquiring entity or any of its
affiliates, shall be regarded as a liquidation within the meaning of this
Subsection 9(c)(ii); PROVIDED, HOWEVER, that each holder of Series B Preferred
Stock shall have the right to elect the benefits of the provisions of Subsection
9(c)(iii) or other applicable conversion provisions in lieu of receiving payment
of the liquidation preference in the event of the liquidation, dissolution or
winding up of the Corporation pursuant to this Subsection 9(c)(ii); PROVIDED,
FURTHER, that this provision shall not apply if the holders of the Corporation's
voting capital stock immediately prior to such merger, consolidation, share
exchange or reorganization beneficially own, directly or indirectly, more than
fifty percent (50%) of the combined voting power of the capital stock of the
corporation resulting from such merger, consolidation, share exchange or
reorganization.
(c) NONCASH DISTRIBUTION. Whenever the distribution provided for in
this Subsection 9(c)(ii) shall be payable in property other than cash, the value
of such distribution shall be the fair market value of such property as
determined in good faith by the Corporation's Board of Directors.
(iii) CONVERSION.
(a) AUTOMATIC CONVERSIONS. At any time or times, part or all of any
holder's shares of Series B Preferred Stock may be converted into Common Shares
at the conversion price then in effect, in the manner specified below, and upon
delivery by the holder thereof of written notice of conversion, specifying the
number of such shares to be converted, to the Corporation at its principal
business offices (or at the office of any transfer agent for shares of Series B
Preferred Stock or Common Shares), accompanied by the certificate or
certificates for the shares to be converted, duly endorsed in blank or
accompanied by signed instruments appropriate for the transfer thereof. In
addition, all of the outstanding shares of Series B Preferred Stock shall, at
the election of the Corporation's Board of Directors, be automatically converted
into Common Shares in the manner specified below upon the occurrence of either
of the following events (an "Automatic Conversion Event"):
(1) Immediately prior to such time as the Corporation shall
close a firm commitment underwritten public offering of Common Shares pursuant
to a registration statement filed pursuant to the Securities Act of 1933, as
amended, ("Securities Act") in which the Corporation receives gross proceeds of
at least ten million dollars ($10,000,000) and at a price equal to or greater
than one dollar ($1.00) per share (adjusted for stock splits, dividends,
consolidations, recapitalizations, and similar events); or
28
(2) At any such time as (a) the Common Shares shall have
traded above one dollar ($1.00) per share (as adjusted for stock splits,
dividends, consolidations, recapitalizations and similar events) for sixty
(60) consecutive trading days on a national securities exchange or NASDAQ, or
(b) the closing bid price for the Common Shares quoted by an established
quotation service for over-the-counter securities shall be above one dollar
($1.00) per share (as adjusted for stock splits, dividends, consolidations,
recapitalizations and similar events) for sixty (60) consecutive trading
days; and the cumulative trading volume of the Common Shares during such
sixty (60) consecutive trading days is equal to or greater than one million
(1,000,000) Common Shares, if traded on a national securities exchange, or
one million five hundred thousand (1,500,000) Common Shares, if traded on
NASDAQ or traded over-the-counter.
(b) CONVERSION PROCEDURES. The Common Shares (or other shares,
securities or property) into which the outstanding shares of Series B
Preferred Stock are convertible as computed in this Subsection 9(c)(iii)
shall, promptly after delivery to the Corporation of written notice of any
conversion election, or promptly after the occurrence of any Automatic
Conversion Event, and upon surrender to the Corporation of the certificates
representing the Series B Preferred Stock to be converted, duly endorsed in
blank or accompanied by signed instruments appropriate for transfer, be
issued and delivered as soon as practicable to the holders of Series B
Preferred Stock in due and proper form, and shall be fully paid and
nonassessable; as to any portion of the shares so surrendered which are not
subject to such conversion election, the Corporation shall promptly issue to
the holder thereof a certificate in due and proper form representing the
shares of Series B Preferred Stock which have not been so converted.
Conversion shall be deemed to have been made at the close of business on the
date that notice of such written election was given by the holder, or on the
date that the Corporation's Board of Directors elected to declare an
Automatic Conversion Event, irrespective of the date on which such surrender
or issuance may occur, and as of such election date each such holder shall be
deemed to have become the record holder of such respective number of Common
Shares (or other shares, securities or property), and the Series B Preferred
Stock so converted shall be deemed forthwith cancelled and shall not
thereafter be deemed authorized or subject to reissuance. No adjustment
shall be made in the number of Common Shares issuable upon conversion to
reflect declared, but unpaid, dividends on Series B Preferred Stock, but such
dividends for which the payment date has passed shall be paid in cash as of
the date of conversion of the shares of Series B Preferred Stock as to which
they are owing. The Corporation shall not be required to issue any fraction
of Common Shares upon conversion of Series B Preferred Stock; if any fraction
of Common Shares would, except for the foregoing clause, be issuable to any
holder on the conversion of Series B Preferred Stock, the Corporation shall
pay to each holder of such converted Series B Preferred Stock an amount in
cash equal to the then current fair market value of such fractional interest.
(c) CONVERSION RATES. The number of Common Shares issuable with
respect to any share of Series B Preferred Stock shall be determined by dividing
twenty cents ($0.20) by the conversion price then in effect at the time of
conversion for such series (the "Series B Conversion Price"), which shall
initially be twenty cents ($0.20).
29
(d) ADJUSTMENT OF SERIES B CONVERSION PRICE UPON ISSUANCE OF COMMON
SHARES OR CONVERTIBLE SECURITIES. Except as provided in Subsection
9(c)(iii)(e), if, after the first date that a share of Series B Preferred Stock
is issued, the Corporation shall issue or sell, or, in accordance with
Subsections 9(c)(iii)(d)(1) through 9(c)(iii)(d)(5), is deemed to have issued or
sold, any Common Shares, or any stock or security convertible into or
exchangeable for Common Shares, without consideration or for a consideration per
share less than the per-share "Fair Market Value" of the Common Shares as of the
end of the day immediately preceding such issuance or sale, or deemed issuance
or sale in accordance with Subsections 9(c)(iii)(d)(1) through 9(c)(iii)(d)(5),
then, forthwith upon each such issue or sale or deemed issuance or sale, the
Series B Conversion Price shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (x) the number of Common Shares of the
Corporation outstanding immediately prior to such issue or sale (including the
number of Common Shares issuable pursuant to exercise of all outstanding options
and warrants and the conversion of all of the outstanding Preferred Shares at
the then existing conversion prices) multiplied by the then existing Series B
Conversion Price plus (y) the consideration, if any, received by the Corporation
upon such issue or sale, by (ii) the sum of the number of Common Shares
outstanding immediately after such issue or sale (including the Common Shares
issuable pursuant to conversion or exchange of the securities or stock issued or
sold in such issue or sale) plus the number of Common Shares issuable pursuant
to exercise of all outstanding options and warrants and the conversion of all of
the outstanding Preferred Shares at the conversion prices existing before such
issue or sale. "Fair Market Value" shall mean (i) if the Common Shares are
publicly traded, then (a) if the Common Shares are then traded on a national
securities exchange on the date in question, the average of the high and low
prices of the Common Shares on the principal national securities exchange on
which the Common Shares are traded; (b) if the Common Shares are then traded on
the NASDAQ National Market System on the date in question, the last reported
per-share sales price of the Common Shares on the NASDAQ National Market System;
or (c) if the Common Shares are then traded on the over-the-counter market on
the date in question, the last reported per-share sales price; PROVIDED THAT if
there have been no sales reported in the most recent two trading days at the
time of determination, then the closing bid price (or average of bid prices)
last quoted by an established quotation service for over-the-counter securities,
or (II) if the Common Shares are not publicly traded on the date in question,
then the per-share fair market value of the Common Shares as determined in good
faith by the Corporation's Board of Directors, after taking into consideration
all factors that it deems appropriate, including, without limitation, recent
sale and offer prices of the Common Shares in private transactions negotiated at
arm's length.
For purposes of this Subsection 9(c)(iii)(d), the following Subsections
9(c)(iii)(d)(1) to 9(c)(iii)(d)(5) shall also be applicable:
(1) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any options, warrants or other rights to subscribe for or
to purchase Common Shares or any stock or security convertible into or
exchangeable for Common Shares (such options, warrants and rights being called
"Options" and such convertible or exchangeable stock or securities being called
"Convertible Securities") whether or not such Options or the right to convert or
exchange any
30
such Convertible Securities are immediately exercisable, and the
price per share for which Common Shares is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the Common
Shares issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options) shall be less than the per-share Fair Market Value of the Common Shares
as of the end of the day immediately preceding the granting of such Options,
then the total maximum number of Common Shares issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities shall be deemed to have been issued for such price per
share as of the date of granting of such Options. Except as otherwise provided
in Subsection 9(c)(iii)(d)(3), no adjustment of the Series B Conversion Price
shall be made upon the actual issuance of the Common Shares or Convertible
Securities upon exercise of such Options or upon the actual issuance of such
Common Shares upon conversion or exchange of such Convertible Securities.
(2) ISSUANCE OF CONVERTIBLE SECURITIES. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which the Common Shares are issuable
upon such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issuance or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof, by (ii) the total maximum number of Common Shares issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the per-share Fair Market Value of the Common Shares as of the end of
the day immediately preceding such issuance or sale, then the Common Shares
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of the
issuance or sale of such Convertible Securities and thereafter shall be deemed
to be outstanding, PROVIDED that (a) except as otherwise provided in Subsection
9(c)(iii)(d)(3), no adjustment of the Series B Conversion Price shall be made
upon the actual issuance of such Common Shares upon conversion or exchange of
such Convertible Securities and (b) if any such issuance or sale of such
Convertible Securities is made upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Series B Conversion Price
have been or are to be made pursuant to other provisions of this Subsection
9(c)(iii)(d), no further adjustment of the Conversion Price shall be made by
reason of such issuance or sale.
(3) CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in Subsection 9(c)(iii)(d)(1), or the rate at
which Convertible Securities referred to in Subsection
31
9(c)(iii)(d)(2) are convertible into or exchangeable for Common Shares shall
change at any time (including, but not limited to, changes under or by reason
of provisions designed to protect against dilution), the Series B Conversion
Price in effect at the time of such event shall forthwith be readjusted to
the Series B Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for
such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold; and on the
expiration of any such Option or termination of any such right to convert or
exchange such Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which should
have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination, never been issued.
(4) CONSIDERATION FOR SHARES. In case any Common Shares,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case Common Shares, Options or Convertible
Securities shall be issued or sold for a consideration in whole or in part other
than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair market value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issuance or sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
(5) RECORD DATE. In case the Corporation shall take a record
of the holders of its Common Shares for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Shares, Options or
Convertible Securities, or (ii) to subscribe for or purchase Common Shares,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issuance or sale of the Common Shares deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be, and, in each such case, the number of Common
Shares into which shares of Series B Preferred Stock may be converted shall be
increased in proportion to the increase (through such dividend or distribution)
in the number of outstanding Common Shares, by reducing the Series B Conversion
Price in the same proportion.
(e) CERTAIN ISSUES OF COMMON SHARES EXCEPTED. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Series B Conversion Price pursuant to Subsection 9(c)(iii)(d)
in the case of the issuance of: (i) up to an aggregate of four million nine
hundred and ninety thousand (4,990,000) Common Shares (appropriately adjusted
for stock splits, dividends, consolidations, recapitalizations and similar
events), pursuant to the Corporation's 1993 Stock Option Plan, as amended; (ii)
up to an
32
aggregate of five million six hundred eighty-six thousand, five hundred
(5,686,500) Common Shares (appropriately adjusted for stock splits, dividends,
consolidations, recapitalizations and similar events) pursuant to the exercise
of outstanding warrants; and (iii) such other securities as the holders of
sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares of
Series B Preferred Stock shall agree in writing may be issued without causing an
adjustment in the Series B Conversion Price.
(f) SUBDIVISION OR COMBINATION OF COMMON SHARES. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding Common Shares into a greater number of shares,
without making a corresponding subdivision of the outstanding shares of Series B
Preferred Stock, then the Series B Conversion Price in effect immediately prior
to such subdivision shall be proportionately reduced. Conversely, in case the
outstanding Common Shares shall be combined into a smaller number of shares
without a corresponding adjustment to the number of outstanding shares of Series
B Preferred Stock, then the Series B Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(g) OTHER DISTRIBUTIONS. If the Corporation shall declare a
distribution payable in securities of other persons (including, but not limited
to, spin-offs of a business whereby, for example, an asset of the Corporation is
contributed to a subsidiary which is spun-off to the Corporation's
shareholders), evidences of indebtedness issued by this Corporation or other
persons, assets (excluding cash dividends) or options or rights not referred to
in Subsection 9(c)(iii)(h), then, in each such case for the purpose of this
Subsection 9(c)(iii)(g), the holders of the Series B Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of Common Shares into which their shares of Series B
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Shares entitled to receive such
distribution.
(h) REORGANIZATION OR RECLASSIFICATION. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Shares shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Shares, then, as
a condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Series B
Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the Common Shares
immediately theretofore receivable upon the conversion of such shares of Series
B Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Series B Preferred Stock equal to the number of Common Shares immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such holder to the
end that the provisions hereof shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
33
(i) NOTICE OF ADJUSTMENT. Upon any adjustment of the Series B
Conversion Price, then, and in each such case, the Corporation shall give
written notice thereof as soon as practicable thereafter, by first class,
registered or certified mail, postage prepaid, return receipt requested, or by
telecopier (to be promptly followed by notice sent by registered or certified
mail, return receipt requested, as set forth above), addressed to each holder of
shares of Series B Preferred Stock, as the case may be, at the address of such
holder as shown on the books of the Corporation, which notice shall state the
conversion rate resulting from such adjustment and the manner in which such
calculation was made.
(j) SHARES TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized, but unissued, Common Shares, solely
for the purpose of issuance upon the conversion of Series B Preferred Stock as
herein provided, such number of Common Shares as shall then be issuable upon the
conversion of all outstanding shares of Series B Preferred Stock. The
Corporation covenants that all Common Shares which shall be so issued shall be
duly and validly issued, fully paid, nonassessable and free from all taxes,
liens and charges with respect to the issue thereof. The Corporation will take
such action as may be necessary to assure that all Common Shares may be so
issued without violation of any applicable law or regulation, or of any
requirement of any securities exchange upon which the Common Shares may be
listed.
(k) ISSUE TAX. The issuance of certificates for Common Shares upon
conversion of Series B Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder (or its affiliate) of the Series B Preferred
Stock.
(iv) VOTING.
(a) SHAREHOLDER VOTING. Holders of the outstanding Series B Preferred
Stock shall be entitled to cast, on all matters submitted to a vote of all of
the shareholders of the Corporation (including in the election of directors,
except as set forth in Subsections 9(b)(iv) and 9(b)(v)) and on which
shareholders are entitled to vote under the provisions of the Wyoming Business
Corporation Act, that number of votes equal to the number of Common Shares into
which such outstanding Series B Preferred Stock is then convertible under
Subsection 9(c)(iii) at the record date for the determination of shareholders
entitled to vote on such matter, and with respect to such vote, shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the Bylaws of this Corporation. Fractional votes
shall not, however, be permitted and any fractional voting rights resulting from
the aforementioned formula (after aggregating all shares into which shares of
Series B Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half rounded upward to one). In
addition to their right to elect the Series B Director, as provided below, and
except as set forth in Subsections 9(b)(iv) and 9(b)(v), holders of Series B
Preferred Stock shall vote together with the holders of Series A Preferred Stock
and Common Shares on all such matters except as otherwise provided herein.
34
(b) SERIES B DIRECTOR.
(1) Upon the issuance of Series B Preferred Stock, the
Corporation shall name to its Board of Directors a director identified to it by
Xxxxx Xxxxxx, the Series B Preferred Stock representative; provided that such
director is reasonably acceptable to the Corporation. Thereafter, and for so
long as more than fifty percent (50%) of all shares of Series B Preferred Stock
issued by the Corporation shall be outstanding, the holders of the Series B
Preferred Stock, voting as a separate voting group, shall be entitled to elect
one (1) director to the Corporation's Board of Directors ("Series B Director")
at the annual meeting of the Corporation's shareholders and otherwise if there
is a vacancy of the directorship held by the Series B Director. If the
aforementioned minimum outstanding shares requirement has been met, then at any
meeting held for the purpose of electing directors, the presence in person or by
proxy of the holders of a majority of the outstanding shares of Series B
Preferred Stock shall constitute a quorum of such shares for the election of the
director to be elected.
(2) Except as otherwise provided by law, the Series B Director
shall be elected by a majority of the votes cast by the Series B Preferred Stock
at a meeting of shareholders at which a quorum is present. Provided that the
minimum outstanding shares requirement in Subsection 9(c)(iv)(b)(1) is met, any
vacancy in any directorship elected by the holders of Series B Preferred Stock
shall be filled only by the vote or written consent of the holders of a majority
of the then outstanding shares of Series B Preferred Stock. Any director who
shall have been elected by the holders of Series B Preferred Stock may be
removed from office, whether with or without cause, only by the vote or written
consent of the holders of a majority of the then outstanding shares of Series B
Preferred Stock.
(c) NONCOMPLIANCE. If the Corporation fails to comply with
Subsections 9(c)(iv)(b), then, in addition to any other legal remedies available
to the holders of the Series B Preferred Stock, the number of directors that the
holders of the then outstanding shares of Series B Preferred Stock shall be
entitled to elect under Subsection 9(c)(iv)(b) shall be increased to a total of
three (3) directors, effective immediately upon such noncompliance and for as
long as such noncompliance exists.
(v) RESTRICTIONS. For so long as more than fifty percent (50%) of all shares
of Series B Preferred Stock issued by the Corporation shall be outstanding,
except where the vote or written consent of the holders of a greater number of
shares of the Corporation is required by law or by the Articles of
Incorporation, and in addition to any other vote required by law or the Articles
of Incorporation, the Corporation will not take any of the following actions
without the approval of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the then outstanding shares of Series B Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be) as a
separate voting group:
(a) Engage in any transaction resulting in a "Change of Control
("Change in Control" shall mean and occur when (i) any "person" as such term is
defined in Section 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, is
35
or becomes a beneficial owner (within the meaning of rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the
Corporation, representing fifty-one percent (51%) or more of the combined
voting power of the Corporation's then outstanding securities; or (ii) the
shareholders of the Corporation approve a reorganization, merger or
consolidation of the Corporation with any other corporation or entity, other
than a reorganization, merger or consolidation which would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty-one
percent (51%) of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
reorganization, merger or consolidation; or (iii) the shareholders of the
Corporation approve a plan of complete liquidation, dissolution or winding up
of the Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all of its assets);
(b) Pay or declare any dividends or make any distribution with respect
to any holder of Common or Preferred Shares junior to the Series B Preferred
Stock;
(c) Redeem or otherwise repurchase any shares of Common or Preferred
Shares junior to the Series B Preferred Stock; or
(d) Enter into any transactions with any of its affiliates, unless
each such transaction is on terms at least as favorable as those available to
the Corporation from disinterested third parties and such transaction is
approved by the Board of Directors, including the Series B Director (provided
that the Series B Director is not an interested party in such transaction); or
(e) Unless approved by the Board of Directors and the Series B
Director, (i) increase the number of Common Shares available under the
Corporation's 1993 Stock Option Plan, as amended, by more than an aggregate of
three million (3,000,000) Common Shares (appropriately adjusted for stock
splits, dividends, consolidations, recapitalizations and similar events); (ii)
issue or grant more than an aggregate of five million six hundred eighty-five
thousand, five hundred (5,685,500) Common Shares (appropriately adjusted for
stock splits, dividends, consolidations, recapitalizations and similar events)
pursuant to the exercise of outstanding warrants; and (iii) issue or grant other
rights to purchase Common Shares, pursuant to an employment compensation plan.
(vi) SINKING FUND. There shall be no sinking fund provision for the payment
of dividends, liquidation preferences, or redemption of the shares of Series B
Preferred Stock.
(vii) REDEMPTION OF SERIES B PREFERRED STOCK.
(a) MANDATORY REDEMPTION. If a Change of Control (as defined in
Subsection 9(c)(v)(a)) has occurred, the Corporation shall offer to redeem all
of the outstanding shares of Series B Preferred Stock for cash, at a price per
share equal to one hundred and fifty percent (150%) of the liquidation
preference for Series B Preferred Stock under Subsection 9(c)(ii)(a), plus any
declared, but unpaid, dividends under Subsection 9(c)(i), by providing each
holder of Series B Preferred Stock with written notice of such redemption
("Redemption Offer Notice")
36
within thirty (30) days of such Change of Control. If any holder of Series B
Preferred Stock does not elect in writing within twenty (20) days of the date
of the Redemption Offer Notice ("Election Period") to have all of such
holder's shares of Series B Preferred Stock redeemed, then, with respect to
the holder's unredeemed shares of Series B Preferred Stock, such holder's
mandatory redemption rights hereunder shall terminate as to such Change of
Control event. If any of the holders of the outstanding shares of Series B
Preferred Stock elects redemption before the expiration of the Election
Period, then the Corporation shall notify such holder of the redemption
within ten (10) days following the end of the Election Period ("Mandatory
Redemption Notice"). Within ten (10) days of the receipt of the Mandatory
Redemption Notice, such holder shall surrender to the Corporation the
certificate(s) representing such shares of Series B Preferred Stock to be
redeemed duly endorsed for transfer to this Corporation, and upon receipt of
such certificates, the Corporation shall pay the redemption price for such
shares to the order of the person whose name appears on such certificate(s)
as the owner thereof, and each surrendered certificate shall be cancelled.
As to any portion of the shares of Series B Preferred Stock so surrendered
which are not subject to such holder's redemption election, the Corporation
shall promptly issue to the person whose name appears on such certificate(s)
a certificate in due and proper form representing the shares of Series B
Preferred Stock which have not been redeemed. When the redemption price is
paid, all rights in respect of the redeemed shares of Series B Preferred
Stock shall cease and terminate, and such shares shall no longer be deemed to
be outstanding, whether or not the certificates representing such shares have
been received by the Corporation.
(b) OPTIONAL REDEMPTION. If from and after one year of the date the
first share of Series B Preferred Stock is sold and issued by the Corporation,
the Common Shares shall have traded above seventy-five cents ($0.75) per share
(as adjusted for stock splits, dividends, consolidations, recapitalizations and
similar events) for sixty (60) consecutive days on a national securities
exchange or NASDAQ, or the closing bid price quoted by an established quotation
service for over-the-counter securities shall be above seventy-five cents
($0.75) for sixty (60) consecutive days, then the Corporation shall have the
right, but not the obligation, to redeem all of the outstanding shares of Series
B Preferred Stock for cash, at a price per share equal to one hundred and fifty
percent (150%) of the liquidation preference for Series B Preferred Stock under
Subsection 9(c)(ii)(a), plus any declared, but unpaid, dividends under
Subsection 9(c)(i), by providing each holder of Series B Preferred Stock with
written notice of such redemption not less than thirty (30) days prior to the
scheduled date of redemption ("Optional Redemption Notice"). In the event of
such redemption, and prior to the scheduled date of redemption, holders of
Series B Preferred Stock shall surrender to the Corporation the certificate(s)
representing such shares of Series B Preferred Stock to be redeemed duly
endorsed for transfer to this Corporation, and upon receipt of such
certificates, the Corporation shall pay the redemption price for such shares to
the order of the person whose name appears on such certificate(s) as the owner
thereof, and each surrendered certificate shall be cancelled. When the
redemption price is paid, all rights in respect of redeemed shares of Series B
Preferred Stock shall cease and terminate, and such shares shall no longer be
deemed to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation. Nothing herein contained in this
Subsection 9(c)(vii)(b) shall prohibit any holder of Series B Preferred Stock
from electing the benefits of the provisions
37
of Subsection 9(c)(iii) or other applicable conversion provisions prior to
the scheduled date of redemption.
(c) NONCOMPLIANCE/CONVERSION PRICE ADJUSTMENT. If (i) any of the
holders of Series B Preferred Stock elects redemption under Subsection
9(c)(vii)(a) and complies with the provisions therein; and (ii) the Corporation
fails to redeem any of such holder's shares of Series B Preferred Stock as
required therein, then the Series B Conversion Price for those unredeemed shares
of Series B Preferred Stock shall be reduced by one percent (1%) on the seventh
(7th) day following such noncompliance and by an additional one percent (1%)
every seven (7) days thereafter until the redemption has been made.
(viii) NONCOMPLIANCE WITH REGISTRATION RIGHTS/CONVERSION PRICE ADJUSTMENT. If
all of the conditions set forth in Section 5.1 of that certain Investor Rights
Agreement between the Corporation and the holders of Series B Preferred Stock
have been met and the Corporation fails to comply with the registration rights
provisions set forth in such Section 5.1, then the Series B Conversion Price for
those shares of Series B Preferred Stock which the Corporation has failed to
register shall be reduced by one percent (1%) on the seventh (7th) day following
such noncompliance and by an additional one percent (1%) every seven (7) days
thereafter until the registration of such shares has been made.
38
EXHIBIT C
TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SCHEDULE OF EXCEPTIONS
Any disclosures made under the heading of one section of this Exhibit may
apply to and/or qualify disclosures made under one or more other sections.
Section headings are provided for convenience only. Unless otherwise defined,
any capitalized terms in this Exhibit shall have the same meanings assigned to
such terms in the Series B Preferred Stock and Warrant Purchase Agreement to
which this schedule is an exhibit. Nothing in this Schedule of Exceptions
constitutes an admission of any liability or obligation of the Company to any
third party, nor an admission against the Company's interests.
3.3 SUBSIDIARIES:
Soligen, Inc., a Delaware corporation, is a wholly-owned subsidiary of
the Company. The Company also acquired 3,125 shares of the capital stock of
Specific Surface Corporation having a value of $25,000, in partial payment for a
piece of equipment.
3.4 CAPITALIZATION:
The capitalization of the Company set forth in Section 3.4 of the
Agreement reflects the conversion of the outstanding shares of Series A
Preferred Stock, and the issuance of additional shares of Common Stock in
connection therewith, pursuant to that certain Conversion Agreement by and
between the Company and the holders of the outstanding shares of Series A
Preferred Stock, dated November 24, 1999.
3.5 AUTHORIZATION:
On April 24, 1998, the Company entered into that certain Investor Rights
Agreement (the "IR Agreement") with holders of the Company's Series A Preferred
Stock (the "Series A Holders"). Under the IR Agreement, each of the Series A
Holders has a right of first refusal to purchase up to its pro rata share of
certain proposed issuances of the Company's capital stock, including, without
limitation, the proposed issuance of the Shares. The Series A Holders either
will purchase all or part of their pro rata share of the Shares or waive their
right to do so.
3.7 CHANGES:
(i) Since March 31, 1999, the Company's cash position has decreased
from approximately $429,000 to approximately $172,000 as of November 16, 1999.
39
3.10 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES:
Soligen, Inc. has entered into a Loan Agreement with Finova Capital
Corporation, dated August 20, 1999, and a related Security Agreement, whereby
Finova Capital Corporation is granted a security interest in accounts,
inventory, equipment and other assets described therein.
3.11 PROPRIETARY INFORMATION AND OTHER RIGHTS:
The Company licenses certain technology from MIT pursuant to a license
agreement, dated August 8, 1996.
3.13 COMPLIANCE WITH OTHER INSTRUMENTS:
Because some of the proposed rights and preferences for the Shares differ
from the rights and preferences for Series A Preferred Stock, the approval of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
the Company's Series A Preferred Stock is required for the adoption of the
Articles of Amendment. See also Paragraph 3.5 of this Schedule of Exceptions.
3.16 REGISTRATION RIGHTS:
Pursuant to the IR Agreement, the Series A Holders have been granted
certain rights to participate in certain registrations by the Company of its
Common Stock. In addition, the Company has granted "piggyback" registration
rights in connection with certain other debt and equity financings.
3.17 AGREEMENTS/ACTION:
(i) The Company is a party to the Escrow Agreement, dated November 4,
1992, pursuant to which certain shares of the Company's Common Stock owned by
certain officers, directors or affiliates thereof, are held in escrow. Certain
officers and directors of the Company are parties to agreements entered into by
the Company in connection with certain debt and equity financings. Xxxxxxxx
Enterprises, an affiliate of Xxxxxxx Xxxxxxxx, a director of the Company, has
entered into a consulting agreement with the Company.
(ii) See also Paragraph 3.11 of this Schedule of Exceptions.
(iii) The Company has deferred payment of salaries to members of its
management in the amount of approximately $125,000. Following the Closing, the
Company will issue warrants exercisable for approximately 270,000 Shares of
Common Stock as additional compensation to these employees. Also upon the
Closing, the Company will pay the $170,000 in outstanding bridge loans and issue
an additional 60,000 Shares of Common Stock to the holders thereof.
40
EXHIBIT D
TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is made as of this 24th
day of November 1999, by and among Soligen Technologies, Inc., a Wyoming
corporation (the "COMPANY"), and the parties named on Exhibit A hereto.
A. The Company proposes to enter into a Series B Preferred
Stock and Warrant Purchase Agreement to be dated the date hereof (the "SERIES B
PURCHASE AGREEMENT") pursuant to which the Company shall sell up to Eight
Million Four Hundred and Twenty-five Thousand (8,425,000) shares of its Series B
Convertible Preferred Stock ("Series B Preferred") to the purchasers named
therein (the "Series B Purchasers") in one or more closings and issue to the
Series B Purchasers 3,622,750 Warrants and to X.X. Xxxxxx & Co., Inc., and Xxxxx
Xxxxxx 498,750 Warrants, in such closings ("WARRANTS"); and
B. In order to induce the Series B Purchasers to enter into
the Series B Purchase Agreement, the Company has agreed to this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, all parties hereto agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used and not
otherwise defined herein shall have the meanings given them in the Series B
Purchase Agreement. As used in this Agreement, the following terms shall have
the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"COMPANY REGISTRATION STATEMENT" shall have the meaning set forth
in SECTION 5.1(a)(ii)(C).
"CONVERSION STOCK" means the Series A Common Stock and Common
Stock issued or issuable pursuant to conversion of the Preferred Stock.
"HOLDER" shall mean (i) any of the Preferred Stockholders, Warrant
Holders or Series A Common Stockholders holding Registrable Securities, and (ii)
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with SECTION 5.9 hereof.
"INITIATING HOLDERS" shall mean any Holders who in the aggregate
hold not less than Fifty-One Percent (51%) of the Registrable Securities.
41
"PREFERRED STOCK" shall mean the Series B Preferred Stock.
"PREFERRED STOCKHOLDERS" shall mean the Series B Purchasers.
"WARRANT HOLDER" shall mean any Holder who holds a Warrant issued
pursuant to the Series B Purchase Agreement, including X. X. Xxxxxx & Co., Inc.,
Xx. Xxxxxx and Xxxx X. Xxxxxx.
"REGISTRABLE SECURITIES" means the Conversion Stock and any Common
Stock issuable to a Warrant Holder upon exercise of the Warrant and any Common
Stock of the Company issued or issuable in respect of the Conversion Stock or
Warrant upon any stock split, stock dividend, recapitalization, or similar
event, or any Common Stock otherwise issuable with respect to the Conversion
Stock or Warrant; PROVIDED, HOWEVER, that shares of Conversion Stock or shares
of Common Stock underlying the Warrants that are eligible for sale under Rule
144 in a single three-month period shall not be treated as Registrable
Securities; and PROVIDED, FURTHER, that shares of Conversion Stock or shares
underlying the Warrants or other securities shall only be treated as Registrable
Securities if and so long as they have not been sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, as hereinafter defined, and the declaration
or ordering of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as stated
in SECTION 5.4 hereof, incurred by the Company in complying with SECTIONS 5.1,
5.2 and 5.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding (i) the compensation of regular employees of the Company which
shall be paid in any event by the Company and (ii) underwriting discounts and
commissions) and fees and expenses of one counsel for all Holders as appointed
by the Holders and reasonably acceptable to the Company.
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in SECTION 3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth under "Registration Expenses", all
reasonable fees and disbursements of counsel for any Holder.
42
"SERIES A COMMON STOCK" shall mean the 404,697 additional shares
of Common Stock issued to the Series A Preferred Stockholders pursuant to that
certain Conversion Agreement, by and among the Company and the holders of the
Series A Preferred Stock, in connection with, and as a condition to, the
conversion of the Series A Preferred Stock.
"SERIES A COMMON STOCKHOLDER" shall mean any person holding Series
A Common Stock.
2. RESTRICTIONS ON TRANSFERABILITY. The Conversion Stock and
any Common Stock issuable to a Warrant Holder upon exercise of the Warrant and
any other securities issued in respect of the Conversion Stock or Warrants upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Each Holder will
cause any proposed purchaser, assignee, transferee, or pledgee of any such
shares held by the Holder to agree to take and hold such securities subject to
the provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the
Conversion Stock and the Warrants and the underlying stock and (ii) any other
securities issued in respect of the Conversion Stock and the Warrants and the
underlying stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of SECTION 4 below) be stamped or otherwise imprinted with a legend
in substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE
OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
43
Each Holder consents to the Company's making a notation on its
records and giving instructions to any transfer agent in order to implement the
restrictions on transfer established in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The Holder of each
certificate representing Restricted Securities by acceptance thereof agrees to
comply in all respects with the provisions of this SECTION 4. Prior to any
proposed sale, assignment, transfer or pledge of any Restricted Securities
(other than (i) a transfer not involving a change in beneficial ownership, (ii)
in transactions involving the distribution without consideration of Restricted
Securities to any partners or members, or retired partners or members, or to the
estate of a transferor (iii) any transfer to any affiliate controlled by or
under common control with any transferor or (iv) in transactions in compliance
with Rule 144), unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense by either
(i) written opinion of legal counsel who shall be, and whose legal opinion shall
be, reasonably satisfactory to the Company addressed to the Company, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. It is agreed that the Company will not request an opinion of counsel
for the holder for transactions made in reliance on Rule 144 under the
Securities Act except in unusual circumstances, the existence of which shall be
promptly determined in good faith by the Board of Directors of the Company.
Each certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in SECTION 3 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder (if required above) and the Company such legend is not required
in order to establish compliance with any provision of the Securities Act.
5. REGISTRATION.
5.1 REQUESTED REGISTRATION.
(i) REQUEST FOR REGISTRATION. If the Company shall
receive from Initiating Holders a written request
that the Company effect any registration,
qualification or compliance with respect to at least
Fifty-One Percent (51%) of the Registrable
Securities, the Company will:
(1) promptly give written notice of the proposed
registration, qualification or compliance to
all other Holders; and
44
(2) will file a registration statement with the
Commission not later than 90 days following
such request and, use its reasonable best
efforts to promptly effect such registration,
qualification or compliance (including,
without limitation, appropriate qualification
under applicable blue sky or other state
securities laws and appropriate compliance
with applicable regulations issued under the
Securities Act and any other governmental
requirements or regulations) as may be so
requested and as would permit or facilitate
the sale and distribution of all or such
portion of such Registrable Securities as are
specified in such request, together with all
or such portion of the Registrable Securities
of any Holder or Holders joining in such
request as are specified in a written request
received by the Company within fifteen (15)
days after receipt of such written notice
from the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
SECTION 5.1:
(a) In any particular jurisdiction in
which the Company would be required to
execute a general consent to service
of process in effecting such
registration, qualification or
compliance unless the Company is
already subject to service in such
jurisdiction and except as may be
required by the Securities Act;
(b) Prior to nine months from the date
hereof;
(c) After the Company has effected one
such registration pursuant to this
SUBPARAGRAPH 5.1, and such
registration has been declared or
ordered effective and has remained
effective until the earlier to occur
of ninety (90) days or the sale of all
of the securities offered pursuant to
such registration;
(d) If the Company shall furnish to such
Initiating Holders a certificate
signed by the Chief Executive Officer
of the Company stating that in the
good faith judgment of the Board of
Directors, it would be seriously
detrimental to the Company or its
stockholders for a registration
statement to be filed in the near
future, then the Company's obligation
to use its best efforts to register,
qualify or comply
45
under this SECTION 5.1 shall be
deferred for a period not to exceed
ninety (90) days from the date of
receipt of written request from the
Initiating Holders, provided that the
Company may not exercise this deferral
right more than once per twelve (12)
month period. Subject to the
foregoing clauses, the Company shall
file a registration statement covering
the Registrable Securities so
requested to be registered as soon as
practicable after receipt of the
request or requests of the Initiating
Holders;
(ii) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by
their request by means of an underwriting, they
shall so advise the Company as a part of their
request made pursuant to SECTION 5.1(i), and the
Company shall include such information in the
written notice given pursuant to SECTION 5.1(i).
The managing underwriter will be selected by a
majority in interest of the Initiating Holders,
provided that such managing underwriter is
reasonably acceptable to the Company. In such
event, the right of any Holder to include his or her
Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest
of the Initiating Holders and such Holder) to the
extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter.
Notwithstanding any other provision of this SECTION 5.1, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. Neither the Company
nor any other holders of Company securities may participate in the proposed
offering if any Holders have been cut back pursuant to this SECTION 5.1(ii). No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other
46
securities so withdrawn shall also be withdrawn from registration, and such
Registrable Securities shall continue to be subject to the terms of this
Agreement including SECTION 6 hereof.
5.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time, or from
time to time, the Company shall determine to register any of its equity
securities, either for its own account or the account of a security holder or
holders, other than (i) a registration relating solely to employee benefit
plans, (ii) a registration relating solely to a Rule 145 transaction, the
Company will:
(1) promptly give to each Holder written notice
thereof; and
(2) include in such registration (and any related
qualification under blue sky laws or other
compliance), and in any underwriting involved
therein, all the Registrable Securities
specified in a written request or requests,
made within twenty (20) days after receipt of
such written notice from the Company, by any
Holder.
(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 Holders as a part of the written
notice given pursuant to SECTION 5.2(a)(i). In such event the right of any
Holder to registration pursuant to this SECTION 5.2 shall be conditioned upon
such Holder's participation in such underwriting, and the inclusion of
Registrable Securities in the underwriting shall be limited to the extent
provided herein.
All Holders 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 SECTION 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may exclude
some or all of the Registrable Securities, or securities of other holders of
registration rights other than persons exercising demand registration rights,
from such registration. The Company shall advise all Holders, and other holders
distributing their securities through such underwriting of any limits imposed on
their participation in the underwriting as provided in this SECTION 5.2(b). The
number of shares of Registrable Securities, or securities of other holders of
registration rights other than persons exercising demand registration rights,
that may be included in the registration and underwriting in accordance with
this SECTION 5.2(b) shall be allocated among all the Holders and such other
holders of securities not exercising demand registration rights pro rata.
If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
47
from such underwriting shall be withdrawn from such registration, and shall
continue to be subject to the terms of this Agreement, including SECTION 6
hereof. Furthermore,
(i) No shareholder of the Company shall be
granted any rights superior to those granted
to the Preferred Stockholders pursuant to
this SECTION 5.2 without the prior consent of
more than Fifty-One Percent (51%) of (i) the
then outstanding shares of Preferred Stock
plus (ii) if some or all of the Preferred has
been converted into Common Stock, the
Conversion Stock issued pursuant to such
conversion and Shares underlying the
Warrants.
(ii) RIGHT TO TERMINATE REGISTRATION. The Company
shall have the right to terminate or withdraw
any registration initiated by it under this
SECTION 5.2 prior to the effectiveness of
such registration whether or not any Holder
has elected to include securities in such
registration.
5.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders of at least Five Percent
(5%) of the then outstanding Registrable Securities request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of all or some of the shares of the Registrable Securities
held by such Holder or Holders and the reasonably anticipated aggregate price to
the public of which, net of underwriting discounts and commissions, would exceed
FIVE HUNDRED THOUSAND DOLLARS ($500,000), and the Company is a registrant
entitled to use Form S-3 to register the Registrable Securities for such an
offering, the Company shall use its best efforts to cause such Registrable
Securities to be registered for the offering on such form and to cause such
Registrable Securities to be qualified in such jurisdictions as such Holder or
Holders may reasonably request. The Company shall inform other Holders of the
proposed registration and offer them the opportunity to participate. In the
event the registration is proposed to be part of a firm commitment underwritten
public offering, the substantive provisions of SECTION 5.1(ii) shall be
applicable to each such registration initiated under this SECTION 5.3. The
Company may include other shares of Common Stock in any of the registrations
provided for in this SECTION 5.3, provided that such inclusion will not
interfere with the marketing (including the price to the public) of the
Registrable Securities to be registered by the Holders.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this SECTION 5.3 if any of the
conditions in Section 5.1(a), (b) or (d) exist or to Blue-Sky in a jurisdiction
where in the good faith judgment of the Board of Directors, it would be
unreasonably burdensome to qualify.
5.4 EXPENSES OF REGISTRATION. Registration Expenses incurred
in connection with (i) up to one requested registrations pursuant to SECTION
5.1, (ii) all company registrations
48
pursuant to SECTION 5.2, and (iii) all Form S-3 registrations pursuant to
SECTION 5.3 shall be borne by the Company. Selling Expenses shall be borne by
the selling shareholders incurring such expenses.
5.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety (90)
days or until the distribution described in the registration statement has been
completed, whichever first occurs; PROVIDED, HOWEVER, that (i) such 90-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 90-day
period shall be extended up to a maximum total period of one year, if necessary,
to keep the registration statement effective until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule under the
Securities Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15 (d) of the Securities Exchange Act of 1934 (the "1934 ACT") in the
registration statement.
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents (including amendments or
supplements thereto) as such Holders or underwriters may reasonably request in
order to facilitate the public offering of such securities.
(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 requested by the
Holders; 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
49
consent to service of process in any such states or jurisdiction, unless the
Company is already subject to service in such jurisdiction. Furthermore,
(i) In the event of any underwritten public
offering, enter into and perform its
obligations under an underwriting agreement,
in usual and customary form, with the
managing underwriter of such offering. Each
Holder participating in such underwriting
shall also enter into and perform its
obligations under such an agreement.
(ii) Notify each Holder of Registrable Securities
covered by such registration statement at any
time when a prospectus relating thereto is
required to be delivered under the Act of the
happening of any event as a result of which
the prospectus included in such registration
statement, as then in effect, includes an
untrue statement of a material fact or omits
to state a material fact required to be
stated therein or necessary to make the
statements therein not misleading in the
light of the circumstances then existing and
as promptly as practicable amend or
supplement the prospectus to correct such
misstatement or omission.
(iii) Cause all such Registrable Securities
registered pursuant hereunder to be listed on
each securities exchange on which similar
securities issued by the Company are then
listed.
(iv) Provide a transfer agent and registrar for
all Registrable Securities registered
pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not
later than the effective date of such
registration.
(v) Furnish, at the request of any Holder
requesting registration of Registrable
Securities pursuant to this SECTION 5.5, on
the date that such Registrable Securities are
delivered to the underwriters for sale in
connection with a registration pursuant to
this SECTION 5.5, if such securities are
being sold through underwriters, (i) an
opinion, dated such date, of the counsel
representing the Company for the purposes of
such registration, in form and substance as
is customarily given to underwriters in an
underwritten public offering, addressed to
the underwriters, and (ii) a letter dated
such date, from the independent certified
public accountants of the Company, in form
and substance as is customarily given by
independent certified public accountants to
50
underwriters in an underwritten public
offering, addressed to the underwriters.
(vi) In the event of any underwritten public
offering, cooperate with the Holders
requesting registration pursuant to this
Section, the underwriters participating in
the offering and their counsel in any due
diligence investigation reasonably requested
by the Holders or the underwriters in
connection therewith, and participate, to the
extent reasonably requested by the managing
underwriter for the offering or the Holders,
in efforts to sell the Registrable Securities
under the offering (including without
limitation, participating in "roadshow"
meetings with prospective investors) that
would be customary for underwritten primary
offerings of a comparable amount of equity
securities by the Company.
5.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of such
Holder's officers, directors, members, partners, legal counsel and agent, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation by the
Company of the Securities Act of 1933, the Securities Exchange Act of 1934,
state securities law or any rule or regulation promulgated under such laws
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of such Holder's officers and directors, and members, partners, legal
counsel, agents and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending of any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged utrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein.
51
(b) Each Holder severally, and not jointly will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of such
Holder's officers and directors and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any 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 Company, such Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Not withstanding the foregoing, the
liability of each Holder under this SUBSECTION 5.6(B) shall be limited in an
amount equal to the net proceeds received from the sale of the shares sold by
such Holder.
(c) Each party entitled to indemnification under this
SECTION 5.6 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation or which includes an admission of fault on behalf of
the Indemnified Party.
(d) If the indemnification provided for in this SECTION
5.6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of
52
indemnifying such Indemnified Party hereunder, shall to the extent permitted
by applicable law contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the Indemnified Party shall be determined by a court of law by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to the
information supplied by the Indemnifying Party or by the Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount to be contributed by any Holder
under this SECTION 5.6(D) shall be limited to an amount equal to the net
proceeds received from the sale of the shares sold by such Holder.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and the Holders under
this SECTION 5.6 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this Agreement.
No Indemnifying Party shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each Indemnified Party of a release from all liability in respect to such
claim or litigation; provided, that no Indemnified Party shall consent to entry
of any judgment or enter into any settlement without the consent of Indemnifying
Party. No person guilty of fraudulent misrepresentations (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation.
5.7 INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
5.8 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, the Company agrees to use all reasonable efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date
53
that the Company becomes subject to the reporting requirements of the
Securities Act or the 1934 Act;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the 1934 Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as the Holder owns any Restricted Securities
to furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
5.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted to the Holders under SECTIONS 5.1, 5.2
and 5.3 may be assigned to a transferee or assignee in connection with (a) any
transfer or assignment of Fifty Thousand (50,000) (as adjusted for stock splits,
stock dividends, recapitalizations and the like) or more shares of Registrable
Securities by the Holder to one or more persons in a single transaction or
series of related transactions, provided that (i) the Company is given notice
thereof and the transferee covenants to be bound by the provisions of this
Agreement and (ii) such transfer may otherwise be affected in accordance with
applicable securities laws or (b) any transfer or assignment of Registrable
Securities by the Holder to partners, members or affiliates of such Holder.
5.10 SUBSEQUENT REGISTRATION RIGHTS. From and after the date of
this Agreement, the Company shall not grant any registration rights to
subsequent purchasers of the Company's equity securities that are, in the good
faith judgment of the Company's Board of Directors, superior to the registration
rights granted to the Preferred Stockholders hereunder without the prior written
consent of the holders of at least Fifty One Percent (51%) of the Registrable
Securities.
6. AMENDMENT. Any provision of this Agreement may be amended
or the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of not less than a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this SECTION 6 shall be binding upon each Preferred Stockholder
and each Holder of Registrable Securities at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
54
7. GOVERNING LAW. This Agreement and the legal relations
between the parties arising hereunder shall be governed by and interpreted in
accordance with the laws of the State of California, without respect to rules
concerning the conflict of laws which would otherwise require application of the
substantive law of another jurisdiction. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California
matters with respect to the breach or interpretation of this Agreement or the
enforcement of any and all rights, duties, liabilities, obligations, powers, and
other relations between the parties arising under this Agreement.
8. ENTIRE AGREEMENT. This Agreement, together with all
Exhibits hereto, constitute the full and entire understanding and agreement
between the parties regarding the matters set forth herein. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon the successors, assigns, heirs, executors and administrators
of the parties hereto.
9. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, addressed (a) if to a Preferred Stockholder, at such Preferred
Stockholder's address as set forth on the Schedule of Preferred Stockholders
attached hereto, or at such other address as such Preferred Stockholder shall
have furnished to the Company in writing in accordance with this SECTION 9, (b)
if to any other holder of Conversion Stock or Warrant Holder, at such address as
such holder shall have furnished the Company in writing in accordance with this
SECTION 9 or to the address set forth in the Series B Purchase Agreement, or,
until any such holder so furnishes an address to the Company, then to and at the
address of the last holder thereof who has so furnished an address to the
Company, or (c) if to the Company, at its principal office.
10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
55
The foregoing agreement is hereby executed as of the date first
above written.
"COMPANY"
SOLIGEN TECHNOLOGIES, INC.
By
----------------------------------
Xxxxxxx Xxxxx
Chief Executive Officer
56
SIGNATURE PAGE
"SERIES B PURCHASERS"
------------------------------------
Name of Purchaser
By
----------------------------------
Name:
-------------------------------
Title:
------------------------------
57
SIGNATURE PAGE
"SERIES A COMMON STOCKHOLDER"
------------------------------------
Name of Series A Common Stockholder
58
EXHIBIT A
TO INVESTOR RIGHTS AGREEMENT
PURCHASER SUBSCRIPTION PRICE PER TOTAL UNIT
FOR UNITS* UNIT PRICE
Xxxx X. Xxxxxxxx 750 $20.00 $15,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxx 5,750 $20.00 $115,000
--------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 5,750 $20.00 $115,000
--------------------------------------------------------------------------
Xx. Xxxxxxxx X. Brilliant 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Casting Technology Partnership 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Xxxx X. Xxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxx Xxxxx 1,000 $20.00 $20,000
--------------------------------------------------------------------------
Xxxx X. Xxxxxx 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Xxxxx Feteth, M.D. 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 1,500 $20.00 $30,000
--------------------------------------------------------------------------
Xxxx Xxxxxxx Xxxxxxxx 500 $20.00 $10,000
--------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 3,750 $20.00 $75,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxx 4,750 $20.00 $95,000
--------------------------------------------------------------------------
Xxxx X. Xxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxx Family Trust 1,250 $20.00 $25,000
--------------------------------------------------------------------------
59
X.X. Xxxxxxx, Inc. 12,500 $20.00 $250,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxx 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Koyah Leverage Partners, L.P. 5,500 $20.00 $110,000
--------------------------------------------------------------------------
Koyah Partners, L.P. 2,000 $20.00 $40,000
--------------------------------------------------------------------------
Xxxx and Xxxxxx Xxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxx 500 $20.00 $10,000
--------------------------------------------------------------------------
Xxxx Xxxx 1,000 $20.00 $20,000
--------------------------------------------------------------------------
Xxxxxxxxx X. Xxxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxx Xxxxxxx 500 $20.00 $10,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxx 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1,250 $20.00 $25,000
--------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 6,000 $20.00 $120,000
--------------------------------------------------------------------------
Summit Securities, Inc. 2,500 $20.00 $50,000
--------------------------------------------------------------------------
Western United Life Assurance, Inc. 2,500 $20.00 $50,000
--------------------------------------------------------------------------
TOTAL: $1,685,000.00
--------------------------------------------------------------------------
*Each UNIT consists of 100 shares of Series B Convertible Preferred Stock and 43
Warrants to purchase one share of Common Stock, as per form of Warrant in
Exhibit F.
Pursuant to the Agreement to which this Schedule is attached, X.X. Xxxxxx & Co.,
Inc. and Xxxxx Xxxxxx are acquiring from the Company as part of this transaction
an aggregate of 498,750 Warrants which are to be allocated as follows:
60
NAME AMOUNT OF WARRANTS
Xxxxx Xxxxxx 224,438
X.X. Xxxxxx & Co., Inc. 205,734
Xxxx X. Xxxxxx 68,578
The persons in the foregoing table and the Purchasers listed above are all
deemed and referred to as Warrant Holders.
Pursuant to the Conversion Agreement, 404,697 shares of Common Stock are to be
allocated as follows:
NAME NUMBER OF SHARES
ICM Asset Management, Inc. 46,059
Koyah Partners, L.P. 64,755
Koyah Leverage Partners, L.P. 293,883
-------
404,697
61
EXHIBIT B
TO INVESTOR RIGHTS AGREEMENT
STOCKHOLDERS AND WARRANT HOLDERS
The following table lists the number of shares of capital stock
(including Warrants) of the Company subject to the provisions of this Agreement
as of the date hereof.
NAME WARRANT SHARES SERIES B SHARES
Xxxx X. Xxxxxxxx 32,250 75,000
----------------------------------------------------------------------
Xxxxx X. Xxxxx 247,250 575,000
----------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 247,250 575,000
----------------------------------------------------------------------
Xx. Xxxxxxxx X. Brilliant 53,750 125,000
----------------------------------------------------------------------
Xxxxxxx X. Xxxxx 107,500 250,000
----------------------------------------------------------------------
Casting Technology Partnership 107,500 250,000
----------------------------------------------------------------------
Xxxx X. Xxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxx Xxxxxx 43,000 100,000
----------------------------------------------------------------------
Xxxx X. Xxxxxx 107,500 250,000
----------------------------------------------------------------------
Xxxxx Feteth, M.D. 107,500 250,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 64,500 150,000
----------------------------------------------------------------------
Xxxx Xxxxxxx Xxxxxxxx 21,500 50,000
----------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 161,250 375,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxx 204,250 475,000
----------------------------------------------------------------------
Xxxx X. Xxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxx Family Trust 53,750 125,000
----------------------------------------------------------------------
X.X. Xxxxxxx, Inc. 537,500 1,250,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxx 107,500 250,000
----------------------------------------------------------------------
Koyah Leverage Partners, L.P. 236,500 550,000
----------------------------------------------------------------------
Koyah Partners, L.P. 86,000 200,000
----------------------------------------------------------------------
Xxxx and Xxxxxx Xxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxx 21,500 50,000
----------------------------------------------------------------------
Xxxxxxx X. Xxxx 43,000 100,000
----------------------------------------------------------------------
Xxxxxxxxx X. Xxxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxx Xxxxxxx 21,500 50,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxx 107,500 250,000
----------------------------------------------------------------------
Xxxxx X. Xxxxxxx 53,750 125,000
----------------------------------------------------------------------
Xxxxxx X. Xxxxxx 258,000 600,000
----------------------------------------------------------------------
Summit Securities, Inc. 107,500 250,000
----------------------------------------------------------------------
62
Western United Life Assurance, Inc. 107,500 250,000
----------------------------------------------------------------------
Xxxxx Xxxxxx 224,438 0
----------------------------------------------------------------------
X.X. Xxxxxx & Co., Inc. 205,734 0
----------------------------------------------------------------------
Xxxx X. Xxxxxx 68,578 0
----------------------------------------------------------------------
TOTALS 4,121,500 8,425,000
----------------------------------------------------------------------
63
EXHIBIT E
TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
FORM OF CONFIDENTIAL INFORMATION
AND
INVENTION ASSIGNMENT AGREEMENT
DELETED
64
EXHIBIT F
TO SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
FORM OF WARRANT
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, OR (ii) THE ISSUER
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF SAID SECURITIES
SATISFACTORY TO THE ISSUER STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION OR THE ISSUER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE [Shares]
SHARES OF COMMON STOCK
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
SOLIGEN TECHNOLOGIES, INC.
FOR VALUE RECEIVED, SOLIGEN TECHNOLOGIES, INC. (the "Company)
hereby grants to [Name] (the "Initial Warrant Holder") the right, subject to
the terms of this Warrant, to purchase at any time and from time to time
during the period commencing on the "Initial Exercise Date" (as defined
below) and ending on the "Expiration Date" (as defined below) up to [Number]
([Shares]) fully-paid and nonassessable shares of Common Stock of the
Company. The exercise price per share shall be $0.20 per share (the "Basic
Exercise Price"). The Basic Exercise Price and the number of shares that may
be purchased are subject to adjustment under the terms of this Warrant. This
Warrant is issued in connection with that certain Series B Preferred Stock
and Warrant Purchase Agreement, that certain Amendment to Articles setting
forth the Rights and Preferences of the Series B Convertible Preferred Stock
("Amendment to Articles") to be filed with the Secretary of State of Wyoming
pursuant thereto and that certain Investor Rights Agreement, dated
concurrently herewith.
SECTION 1. DEFINITIONS
As used in this Warrant, unless the context otherwise requires:
65
"Basic Exercise Price" means the price at which each Warrant Share
may be purchased upon exercise of this Warrant, as stated in the introductory
paragraph.
"Common Stock" means the Common Stock of the Company.
"Exercise Date" means any date when this Warrant is exercised, in
whole or in part, in the manner indicated in Sections 2.1 and 2.2 below.
"Exercise Price" means the Basic Exercise Price; provided,
however, that if an adjustment is required under Section 7.1 of this Warrant,
then the "Exercise Price" means, after such adjustment, the price at which each
Warrant Share may be purchased upon exercise of this Warrant immediately after
the last such adjustment.
"Expiration Date" means 5:00 p.m. (Los Angeles time) one year from
the date hereof; provided, however, that to the extent that the Initiating
Holders, as defined in the Investor Rights Agreement, have submitted a demand
registration request pursuant to the Investor Rights Agreement, within one year
from the date hereof, the Expiration Date shall be extended to a date thirty
(30) days after the effectiveness of the demand registration statement pursuant
to the Investor Rights Agreement, provided however that the Expiration Date
shall be further extended to such date as the Warrant Holders are free to sell
the underlying shares of Common Stock without cutbacks.
"Fair Market Value" shall mean the then most recent closing price
of the Common Stock as reported on the trading exchange at which the Company's
Common Stock is traded, or if not so traded, as determined in good faith by the
Company's board of directors including its outside board members.
"Initial Exercise Date" means the date of this Warrant.
"Initial Warrant Holder" has the meaning specified in the
introductory paragraph.
"Person" means an individual, corporation, partnership, trust,
joint venture or other form of business entity.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and all rules and regulations promulgated thereunder, or any act,
rules or regulations which replace the Securities Act or any such rules and
regulations.
"Subsequent Warrant" has the meaning specified in Section 2.3
below.
"Warrant Holder" means the Initial Warrant Holder or, upon
assignment of this Warrant by the Initial Warrant Holder (or a subsequent
Warrant Holder), such assignee.
66
"Warrant Share(s)" means any share(s) of Common Stock, or other
securities, issued or issuable upon exercise of this Warrant.
SECTION 2. DURATION AND EXERCISE OF WARRANT
2.1 EXERCISE PERIOD
Subject to the provisions hereof, this Warrant may be exercised at
any time and from time to time during the period commencing on the Initial
Exercise Date and ending on the Expiration Date. After the Expiration Date,
this Warrant shall become void and all rights to purchase Warrant Shares
hereunder shall thereupon cease.
2.2 METHOD OF EXERCISE AND PAYMENT
(a) METHOD OF EXERCISE. Subject to Section 2.1 hereof and
compliance with all applicable Federal and state securities laws, the purchase
right represented by this Warrant may be exercised, in whole or in part, by the
Warrant Holder by (i) surrender of this Warrant and delivery of an exercise form
specifying the number of shares to be purchased, duly executed, at the principal
office of the Company and (ii) payment to the Company of an amount equal to the
product of the then applicable Exercise Price multiplied by the number of
Warrant Shares then being purchased. At the election of the Warrant holder, the
purchase price may be paid by surrender of this Warrant for the full number of
shares for which this Warrant is then exercisable less that number of shares
having a fair market value equal to the aggregate exercise price. For purposes
of this Section, fair market value shall be determined as follows: if the Common
Shares are then traded on the over-the-counter market on the date in question,
the last reported per-share sales price; provided that if there have been no
sales reported in the most recent two trading days at the time of determination,
then the closing bid price (or average of bid prices) last quoted on such date
by an established quotation service for over-the-counter securities.
(b) METHOD OF PAYMENT. Payment shall be made either by check
drawn on a United States bank and for United States funds made payable to the
Company, or by wire transfer of United States funds for the account of the
Company, or by the cashless exercise provided above.
(c) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Warrant
Shares so purchased shall be delivered to the Warrant Holder within thirty (30)
days of delivery of the Exercise Form and, unless this Warrant has been fully
exercised or has expired, a new warrant representing the portion of the Warrant
Shares with respect to which this Warrant shall not then have been exercised
shall also be issued to the Warrant Holder within such thirty (30) day period.
2.3 SECURITIES ACT COMPLIANCE/RESTRICTIONS UPON TRANSFER
Reference is made to Sections 2, 3 and 4 of the Investor
Rights Agreement which by this reference are incorporated herein.
67
SECTION 3. VALIDITY AND RESERVATION OF WARRANT SHARES
The Company represents and warrants that all Warrant Shares issued
upon exercise of this Warrant will be validly issued, fully paid, nonassessable
and not subject to preemptive or similar rights. The Company agrees that, as
long as this Warrant may be exercised, the Company will have authorized and
reserved for issuance upon exercise of this Warrant a sufficient number of
shares of Common Stock to provide for exercise in full of this Warrant.
SECTION 4. FRACTIONAL SHARES
No fractional Warrant Shares shall be issued upon the exercise of
this Warrant, and the number of Warrant shares to be issued shall be rounded to
the nearest whole number.
SECTION 5. LIMITED RIGHTS OF WARRANT HOLDER
The Warrant Holder shall not, solely by virtue of being the
Warrant Holder of this Warrant, have any of the rights of a stockholder of the
Company, either at law or equity, until this Warrant shall have been exercised.
SECTION 6. LOSS OF WARRANT
Upon receipt by the Company of satisfactory evidence of the loss,
theft, destruction or mutilation of this Warrant and either (in the case of
loss, theft or destruction) reasonable indemnification and a bond satisfactory
to the Company if requested by the Company or (in the case of mutilation) the
surrender of this Warrant for cancellation, the Company will execute and deliver
to the Warrant Holder, without charge, a new warrant of like denomination.
SECTION 7. CERTAIN ADJUSTMENTS OF EXERCISE PRICE
7.1 ADJUSTMENT OF EXERCISE PRICE
The number, class and Exercise Price of securities for which this
Warrant may be exercised are subject to adjustment from time to time upon the
happening of certain events as hereinafter provided:
(a) RECAPITALIZATION. If the outstanding shares of the
Company's Common Stock are divided into a greater number of shares or the
Company issues a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately increased and the Exercise Price shall be proportionately
reduced and, conversely, if the outstanding shares of Common Stock are combined
into a smaller number of shares of Common Stock, the number of shares of Common
Stock purchasable upon the exercise of this Warrant shall be proportionately
reduced and the Exercise Price shall be proportionately increased. The
increases and reductions provided for in
68
this Section 7.1.(a) shall be made with the intent and, as nearly as
practicable, the effect that neither the percentage of the total equity of
the Company obtainable on exercise of this Warrant nor the price payable for
such percentage shall be affected by any event described in this Section 7.1
(a).
(b) MERGER OR REORGANIZATION, ETC. In the event of any
change in the Common Stock through merger, consolidation, reclassification,
reorganization (such as, but not limited to, spin-offs of a business whereby,
for example, a Company asset is contributed to a subsidiary which is then
spun-off to the Company's shareholders), partial or complete liquidation or
other change in the capital structure of the Company (not including the
issuance of additional shares of capital stock other than by stock dividend
or stock split), then, as a condition of such change in the capital structure
of the Company, appropriate and adequate provision shall be made so that the
Warrant Holder of this Warrant will have the right thereafter to receive upon
the exercise of this Warrant the kind and amount of shares of stock or other
securities or property to which it would have been entitled if immediately
prior to such merger, consolidation, reclassification, reorganization,
recapitalization or other change in the capital structure, it had held the
number of shares of Common Stock then obtainable upon the exercise of this
Warrant. In any such case appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the rights and
interest thereafter of the Warrant Holder, to the end that the provisions set
forth herein shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares of stock or other property thereafter deliverable
upon the exercise of this Warrant.
(c) Reference is made to Section 9 (c) (iii) (d) of the
Amendment to Articles. It is agreed that if pursuant to said section of the
Amendment to Articles, the Series B Conversion ratio is required to be
adjusted, this Warrant shall likewise be adjusted on a proportional and
similar basis as the Series B Preferred Stock is adjusted.
7.2 NOTICE OF ADJUSTMENT
Whenever an event occurs requiring any adjustment to be made
pursuant to Section 7.1(a), 7.1(b) or (c), the Company shall promptly file
with its Secretary or an Assistant Secretary at its principal office and with
its stock transfer agent, if any, a certificate of its chief executive
officer specifying such adjustment, setting forth in reasonable detail the
acts requiring such adjustment, and stating such other facts as shall be
necessary to show the manner and figures used to compute such adjustment.
Such chief executive officer's certificate shall be made available at all
reasonable times for inspection by the Warrant Holder. Promptly (but in no
event more than 30 days) after each such adjustment, the Company shall give a
copy of such certificate by certified mail to the Warrant Holder.
69
SECTION 8. SUBDIVISION OF WARRANT
At the request of the Warrant Holder in connection with a
transfer of a portion of this Warrant upon surrender of this Warrant for such
purpose to the Company at its principal office, the Company at its expense
(except for any transfer tax payable) will issue and exchange therefor new
Warrants of like tenor and date representing in the aggregate the amount of
the Warrant Shares.
SECTION 9. REGISTRATION RIGHTS
The Initial Warrant Holder shall have all the registration
rights provided in that certain Investor Rights Agreement entered into
concurrently herewith pursuant to the Series B Stock and Warrant Purchase
Agreement, including the right to transfer such rights to a subsequent Holder
subject to the terms and conditions set forth in the Investor Rights
Agreement.
SECTION 10. REPRESENTATIONS AND WARRANTIES
10.1 BY WARRANT HOLDER
The Warrant Holder represents and warrants to the Company as
follows:
(a) This Warrant and the Warrant Shares issuable upon
exercise thereof are being acquired for the Warrant Holder's own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act. Upon exercise of this Warrant, the Warrant Holder shall, if so
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the securities issuable upon exercise of this Warrant are being
acquired for investment and not with a view toward distribution or resale.
(b) The Warrant Holder understands that the Warrant and the
Warrant Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Act pursuant to Section 4(2) or Section 4(6)
thereof, and that they must be held by the Warrant Holder indefinitely, and
that the Warrant Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempted from such registration.
(c) The Warrant Holder has such knowledge and experience in
financial and business matters that the Warrant Holder is capable of
evaluating the merits and risks of the purchase of this Warrant and the
Warrant Shares purchasable pursuant to the terms of this Warrant and of
protecting the Warrant Holder's interests in connection therewith. The
Warrant Holder is an accredited investor, as such term is defined in Rule 501
of Regulation D promulgated pursuant to the 1984 Act.
70
(d) The Warrant Holder is able to bear the economic risk of the
purchase of the Warrant Shares pursuant to the terms of this Warrant.
SECTION 11. MISCELLANEOUS
11.1 SUCCESSORS AND ASSIGNS
The provisions of this Warrant shall be binding upon and inure to
the benefit of the Company, the Warrant Holder and their respective permitted
successors and assigns hereunder. If the Company changes its name, it shall
promptly provide Warrant Holder with a replacement Warrant in its new name and
Warrant Holder shall simultaneously return this Warrant for destruction.
11.2 NOTICES
All notices and other communications required or permitted under
this Agreement shall be in writing and shall be sent by facsimile transmission
(FAX) to the number set forth below (such notice shall be deemed given on the
date of transmission) or by overnight air courier service (in which case notice
shall be deemed given when received by addressee or on the second (2nd) day
after the date of delivery to the courier, whichever is earlier), or by
registered or certified mail, return receipt requested, postage prepaid and
properly addressed (in which case notice shall be deemed given when received by
the addressee or on the fifth (5th) day after the date of mailing, whichever is
earlier), to the addresses set forth below, or such other address as a party may
hereafter provide notice of to the other:
If to the Company: Soligen Technologies, Inc.
00000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
FAX: (000) 000-0000
If to the Warrant Holder: [Address1]
[Address2]
[City], [State] [Postal Code]
OR
The Warrant Holder's last known FAX number or address as it
appears on the books of the Company.
11.3 APPLICABLE LAW
The validity, interpretation and performance of this Warrant
shall be governed by the laws of the State of California.
71
11.4 HEADINGS
The headings herein are for convenience only and are not part of
this Warrant and shall not affect the interpretation thereof.
Dated: November 24, 1999
SOLIGEN TECHNOLOGIES, INC.
By ________________________
Xxxxxxx Xxxxx
CEO
72
