EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the day of May, 1998, between
the entities listed on Schedule A attached hereto (referred to as a the
"Purchaser" or "Purchasers"), SETTONDOWN CAPITAL INTERNATIONAL LTD. (the
"Placement Agent" together with the Purchasers are also hereinafter referred to
as the "Holder" or "Holders") located at Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X.
Xxx X. 0000, Xxxxxx, Bahamas, a corporation organized under the laws of Bahamas,
and DYNATEC INTERNATIONAL, INC., a corporation incorporated under the laws of
the state of Utah, and having its principle place of business at 0000 Xxxx Xxxxx
Xxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000 (the "Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Purchasers are purchasing (and are agreeing to purchase upon the
satisfaction of each of the conditions as set forth in the Equity Line Agreement
(as defined below)) from the Company, pursuant to a Convertible Debenture and
Private Equity Line of Credit Agreement dated the date hereof (the "Equity Line
Agreement"), an aggregate of up to Ten Million ($10,000,000) Dollars principal
amount of shares of Common Stock, $0.01 par value per share, Two Million
($2,000,000) Dollars principal amount of Convertible Debentures (as defined in
the Equity Line Agreement) and Warrants to purchase an aggregate of 300,000
shares of the Company's Common Stock. All capitalized terms not hereinafter
defined shall have that meaning assigned to them in the Equity Line Agreement;
and
WHEREAS, the Company shall issue to the Placement Agent, in return for
services rendered (in addition to fees set forth in the Equity Line Agreement),
from time to time as provided herein, a Warrant A (as defined in the Equity Line
Agreement) to purchase 450,000 shares of Common Stock (as defined in the Equity
Line Agreement), and 80,000 shares of Common Stock; and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein with respect to the Put Shares, the shares of Common
Stock underlying the Convertible Debentures, the shares of Common Stock, and
Warrants (hereinafter referred to as the "Stock" or "Securities" of the
Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term "Registrable
Securities" means the Securities; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Securities Act of 1933, as amended (the "1933 Act") and
disposed of pursuant thereto, (ii) registration under the 1933 Act is no longer
required for the immediate public distribution of such security as a result of
the provisions of Rule 144 promulgated under the 1933 Act, or (iii) it has
ceased to be outstanding. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. RESTRICTIONS ON TRANSFER. The Holders acknowledge and
understand that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Holders understand that no disposition or transfer of the
II-25
Securities may be made by Holder in the absence of (i) an opinion of counsel to
the Holder that such transfer may be made without registration under the 1933
Act or (ii) such registration.
Section 3. REGISTRATION RIGHTS.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), as soon as possible after the
Closing Date for the $1,500,000 Convertible Debentures, a registration statement
(on Form SB-2, or other appropriate registration statement) under the 1933 Act
(the "Registration Statement"), or in the event more than one Registration
Statement is required to be filed to include such items as newly authorized
shares of Common Stock, such further Registration Statement shall be filed
within thirty (30) days after the issuance of such newly authorized shares of
Common Stock or other event, as the case may be. In the event that such
Registration Statement is not effective within ninety (90) days after its
filing, and/or the Registration Statement is not filed within thirty (30) days
after the aforementioned Closing Date, the liquidated damages in Section 3(e)
shall apply. All Registration Statements required to be filed hereunder shall
be prepared and filed, at the sole expense of the Company (except as provided in
Section 3(c) hereof), in respect of all holders of Registrable Securities, so as
to permit a public offering and sale of the Registrable Securities under the
Act. The Company shall use its best efforts to cause the Registration Statement
to become effective within ninety (90) days from the Closing Date for the
$1,500,000 Convertible Debentures. The number of shares of Common Stock
designated in the Registration Statement to be registered shall be two hundred
(200%) percent of the number of Securities that would be required if all the
Registrable Securities were issued on the day before the filing of the
Registration Statement.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144, or (iii) three and
one half years after the Closing Date for the $1,500,000 Convertible
Debentures.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement under subparagraph 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holder shall bear the cost of
underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall qualify any of the securities for sale in the states of Florida,
Connecticut, Delaware and New York, if requested by the Holder, and in such
additional states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the
Company shall not be required to qualify in any state which will require
an escrow, merit requirements,registration by qualification, or other
restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holder with copies of the Registration Statement
and the prospectus or offering circular included therein and other related
documents in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
II-26
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the 1933 Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the Commission within
thirty (30) days from the Closing Date for the $1,500,000 Convertible Debentures
and/or the Registration Statement is not declared effective by the Commission
within ninety (90) days from the Closing Date for the $1,500,000 Convertible
Debentures, then the Company will pay Holder (pro rated on a daily basis), as
liquidated damages for such failure and not as a penalty, two (2%) percent of
the Purchase Price of the then outstanding Securities for first thirty (30) day
period that the Registration Statement is not timely filed or timely declared
effective, and three (3%) percent of the Purchase Price of the then outstanding
Securities for each thirty (30) day period thereafter that the Registration
Statement is either not timely filed or not timely declared effective, which
liquidated damages shall continue to run until the Registration Statement has
been filed and/or declared effective. Such payment of the liquidated damages
shall be made to the Holder in cash, immediately upon demand, provided, however,
that the payment of such liquidated damages shall not relieve the Company from
its obligations to register the Securities pursuant to this Section.
If the Company does not remit the damages to the Holder as
set forth above,the Company will pay the Holder reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Holder's other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. COOPERATION WITH COMPANY. Holder will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company and executing
and returning all documents reasonably requested in connection with the
registration and sale of the Registrable Securities.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
and to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder of such securities shall desire to sell or otherwise dispose of the
same (including prospectus supplements with respect to the sales of securities
from time to time in connection with a registration statement pursuant to Rule
415 promulgated under the Act);
(b) furnish to each Holder such numbers of copies of a
summary prospectus or other prospectus, including a preliminary prospectus
or any amendment or supplement to any prospectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may
II-27
reasonably request in order to facilitate the public sale or other disposition
of the securities owned by such Holder;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable each Holder
to consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) list such securities on the NASDAQ Small Cap Stock Market
or other national securities exchange on which any securities of the Company
are then listed, if the listing of such securities is then permitted under the
rules of such exchange or NASDAQ;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each Holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto covered
by the Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the 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.
Section 6. INFORMATION BY HOLDER. Each Holder of Registrable Securities
included in any registration shall furnished to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 6.
Section 7. ASSIGNMENT. The rights granted the Holders under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding
upon and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 8. TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to this Agreement shall terminate as to each Investor (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement have
been registered;
(b) all of such Holder's securities subject to this Agreement may
be sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the Securities Act;
II-28
(c) all of such Holder's securities subject to this Agreement
can be sold pursuant to Rule 144(k) without limitation; or
(d) three and one half years from the issuance of the
Registrable Securities.
Section 9. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the
Company agrees to indemnify and hold harmless the Holder and each officer,
director of the Holder, and each person, if any, who controls the Holder within
the meaning of the Securities Act ("Distributing Holders") against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders may
become subject, underthe Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make thestatements therein not misleading; PROVIDED, HOWEVER,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by the
Distributing Holders, specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or
any such officer,director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses claims, damages or
liabilities (or actions in respect thereof; arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in a Registration Statement requested by such Distributing Holder, or any
related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by such Distributing Holder, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement contained in this
Section 9(b) shall not inure to the benefit of the Company with respect to any
person asserting such loss, claim, damage or liability who purchased the
Registrable Securities which are the subject thereof if the Company failed to
send or give (in violation of the Securities Act or the rules and regulations
promulgated thereunder) a copy of the prospectus contained in such Registration
Statement to such person at or prior to the written confirmation to such person
of the sale of such Registrable Securities, where the Company was obligated to
do so under the Securities Act or the rules and regulations promulgated
thereunder. This indemnity agreement will be in addition to any liability which
the Distributing Holders may otherwise have.
11-29
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 10. CONTRIBUTION. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 9 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to
II-30
information supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Section 11. "PIGGY-BACK" REGISTRATION. The Holders shall have the right
to include all of the Registrable Securities as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8)
and must be notified in writing of such filing; PROVIDED, HOWEVER, that the
Holders agree they shall not have any piggy-back registration rights pursuant
to this Section if the Registrable Securities may be sold in the United
States pursuant to the provisions of Rule 144. The Holders shall have five
(5) business days to notify the Company in writing as to whether the Company
is to include the Holder(s) or not include the Holder(s) as part of the
registration; PROVIDED, HOWEVER, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require
that the Registrable Securities requested for inclusion pursuant to this
Section be included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters. If in the good
faith judgment of the underwriter evidenced in writing of such offering only
a limited number of Registrable Securities should be included in such
offering, or no such shares should be included, the Holder(s), and all other
selling stockholders, shall be limited to registering such proportion of
their respective shares as shall equal the proportion that the number of
shares of selling stockholders permitted to be registered by the underwriter
in such offering bears to the total number of all shares then held by all
selling stockholders desiring to participate in such offering. Those
Registrable Securities which are excluded from an underwritten offering
pursuant to the foregoing provisions of this Section (and all other
Registrable Securities held by the selling stockholders) shall be withheld
from the market by the holders thereof for a period, not to exceed one
hundred eighty (180) days, which the underwriter may reasonably determine is
necessary in order to effect such underwritten offering. The Company shall
have the right to terminate or withdraw any registration initiated by it
under this Section prior to the effectiveness of such registration whether or
not any Holder elected to include securities in such registration. All
registration expenses incurred by the Company in complying with this Section
shall be paid by the Company, exclusive of underwriting discounts,
commissions and legal fees and expenses for counsel to the Holders.
Section 12. NOTICES. All notices, demands, requests, consents,
APPROVALS, and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such
party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be received) or
(b) on the second business day following the date of
II-31
mailing by reputable courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to Dynatec International, Inc.:
Dynatec International, Inc.
0000 Xxxx Xxxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Placement Agent:
Settondown Capital International Ltd.
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
P.O. Box N. 9204
Nassau, Bahamas
Attn: Xxxxxxx X. X. Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Purchasers, at the address listed on Schedule A.
Either party hereto may from time to time change its address or
facsimile number for notices under this Section by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 13. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 14. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 15. JURISDICTION/VENUE. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State of New York,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of New York or
the state courts of the State of New York in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions.
Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such
judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained,
and each party hereby waives any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to such party at its address set forth herein. Nothing herein shall affect
the right of any party to serve process in any other manner permitted by law.
Each of the parties
II-32
agrees that it hereby waives its right to a trial by jury with the litigation
of any dispute in connection with this Agreement and all Exhibits annexed
hereto.
Section 16. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
II-33
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
DYNATEC INTERNATIONAL, INC.
By:
-----------------------------
Name: Xxx Xxxx
Title: CEO
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By:
-----------------------------
Its:
XXXXX ENTERPRISES
By:
-----------------------------
Its:
TLG REALTY
By:
-----------------------------
Its:
BALMLORE FUNDS S.A.
By:
-----------------------------
Its:
AUSTOST ANSTALT XXXXXX
By:
-----------------------------
Its:
HEWLETTE FUND
By:
-----------------------------
Its:
EXHIBIT F
II-34
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE STATE SECURITIES
LAWS AND HAS BEEN ISSUED IN RELIANCE UPON REGULATION D PROMULGATED UNDER THE
SECURITIES ACT. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE WARRANT IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. THIS WARRANT MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF THE WARRANT, WHICH OPINION AND WHICH COUNSEL SHALL BE
SATISFACTORY TO THE COMPANY IN ITS SOLE DISCRETION.
COMMON STOCK PURCHASE WARRANT B
No. __
To Purchase ______ Shares of Common Stock of
DYNATEC INTERNATIONAL, INC.
THIS CERTIFIES that, for value received, ___________________ (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or
prior to April __, 2001 (the "Termination Date") but not thereafter, to
subscribe for and purchase from DYNATEC INTERNATIONAL, INC., a Utah
corporation (the "Company"), ___________________ ( ) shares of Common Stock
(the "Warrant Shares"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to one hundred ten (110%)
percent of the closing bid price of the Common Stock on the NASDAQ Small Cap
Stock Market on the Trading Day immediately preceding the Closing Date for
the $1,500,000 Convertible Debentures, as defined in the Convertible
Debenture and Private Equity Line of Credit Agreement (the "Agreement")
between the Company and Investor and is subject to its terms. The Exercise
Price and the number of shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. This Warrant is being issued in
connection with the Agreement. In the event of any conflict between the
terms of this Warrant and the Agreement, the Agreement shall control.
II-35
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. AUTHORIZATION OF SHARES. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously with such issue).
3. EXERCISE OF WARRANT. Exercise of the purchase rights represented by
this Warrant may be made at any time or times, in whole, before the close of
business on the Termination Date, or such earlier date on which this Warrant
may terminate as provided in paragraph 11 below, by the surrender of this
Warrant and the Subscription Form annexed hereto duly executed, at the office
of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address
of such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares
of Common Stock so purchased. Certificates for shares purchased hereunder
shall be delivered to the holder hereof within five business days after the
date on which this Warrant shall have been exercised as aforesaid. Payment
of the Exercise Price of the shares may be by certified check or cashier's
check or by wire transfer to an account designated by the Company in an
amount equal to the Exercise Price multiplied by the number of shares being
purchased.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes
and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names as
may be directed by the holder of this Warrant; PROVIDED, HOWEVER, that in the
event certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof; and PROVIDED FURTHER, that upon
any transfer involved in the issuance or delivery of any certificates for
shares of Common Stock, the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
6. CLOSING OF BOOKS. The Company will at no time close its shareholder
books or records in any manner which interferes with the timely exercise of
this Warrant.
7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise thereof. If, however, at
the time of the surrender of this Warrant and purchase the holder hereof
shall be entitled to exercise this Warrant, the shares so purchased shall be
and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
exercised.
II-36
8. ASSIGNMENT AND TRANSFER OF WARRANT. This Warrant may be assigned
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company);
PROVIDED, HOWEVER, that this Warrant may not be resold or otherwise
transferred except (i) in a transaction registered under the Securities Act,
or (ii) in a transaction pursuant to an exemption, if available, from such
registration and whereby, if requested by the Company, an opinion of counsel
reasonably satisfactory to the Company is obtained by the holder of this
Warrant to the effect that the transaction is so exempt.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of any Warrant or stock certificate, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of this
Warrant or stock certificate.
10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
11. EFFECT OF CERTAIN EVENTS.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in
which the consideration to be received by the Company or its shareholders
consists solely of cash, the Company shall give the holder of this Warrant
thirty (30) days' notice of the proposed effective date of the transaction
specifying that the Warrant shall terminate if the Warrant has not been
exercised by the effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately
prior to such action, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
happening of such transaction had this Warrant been exercised immediately
prior thereto.
(c) REGISTRATION RIGHTS. The holder of this Warrant shall be
granted registration rights for the Warrant Shares pursuant to a Registration
Rights Agreement dated May __, 1998.
12. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of
its outstanding Common Stock, (ii) subdivide its
II-37
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue
any shares of its capital stock in a reclassification of the Common Stock,
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this
Warrant shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been
entitled to receive had such Warrant been exercised in advance thereof. An
adjustment made pursuant to this paragraph shall become effective immediately
after the effective date of such event retroactive to the record date, if
any, for such event.
13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may, at any time
during the term of this Warrant, reduce the then current Exchange Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant shares or
number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
15. AUTHORIZED SHARES. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of
Common Stock upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of the Company's Common Stock upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action
as may be necessary to assure that such shares of Common Stock may be issued
as provided herein without violation of any applicable law or regulation, or
of any requirements of the NASDAQ Small Cap Stock Market or any domestic
securities exchange upon which the Common Stock may be listed.
16. MISCELLANEOUS.
(a) ISSUE DATE; JURISDICTION. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had
been issued and delivered by the Company on the date hereof. This Warrant
shall be binding upon any successors or assigns of the Company. This Warrant
shall constitute a contract under the laws and jurisdictions of New York and
for all purposes shall be construed in accordance with and governed by the
laws of said state without regard to its conflict of law, principles or rules
and be subject to the arbitration provisions as set forth in the Agreement,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each party consents to the jurisdiction of the U.S.
District Court sitting in the Southern District of the State of New York or
the state courts of the State of New York sitting in Manhattan in connection
with any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any objection based
on FORUM NON CONVENIENS, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this
Warrant obtains a judgment against it in such a proceeding, the party which
obtained
II-38
such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under
local law and agrees to the enforcement of such a judgment. Each party to
this Warrant irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at its address set forth herein. Nothing
herein shall affect the right of any party to serve process in any other
manner permitted by law.
(b) RESTRICTIONS. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) MODIFICATION AND WAIVER. This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is
sought.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall
be delivered or shall be sent by certified or registered mail, postage
prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address set forth in the Agreement.
II-39
IN WITNESS WHEREOF, the Company has caused this Warrant B to be executed
by its officers hereunto duly authorized.
Dated: May __, 1998
DYNATEC INTERNATIONAL, INC.
By
--------------------------------------
Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
II-40
NOTICE OF EXERCISE
To: DYNATEC INTERNATIONAL, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock
of DYNATEC INTERNATIONAL, INC. pursuant to the terms of the attached Warrant B,
and tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
(Name)
-----------------------------
-----------------------------(Address)
-----------------------------
Dated:
Signature
-----------------------------
II-41
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: _______________
Holder's Signature: ________________________________
Holder's Address: ________________________________
________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
II-42
