LOAN AGREEMENT
This loan agreement ("Agreement") is entered into as of March 21, 1997, by
and between ONTRO, INC. a California corporation (referred to herein as
"Borrower" or the "Company"), and XXXX XXXXXXX, (referred to herein as
"Lender"). Borrower and Lender agree as follows:
1. LOAN. Lender hereby lends to Borrower the sum of $110,000.00, (the
"Loan").
1.1 NOTE. The Loan shall be evidenced by a promissory note (the
"Note") (a copy of which is attached as Exhibit "A") executed by Borrower, dated
as of the date the Loan is made, providing for the payment of the principal
amount plus interest at the rate of ten percent (10%) per annum, compounded
annually, and computed on the basis of a 365-day year and actual days elapsed,
payable on the earlier to occur of: (i) the fifth business day after Borrowers
completion of the initial public offering of its common stock; or (ii) on the
date twenty-four (24) months from the date of the Note ("Maturity Date") at
which time all then unpaid principal and accrued interest shall be due and
payable.
1.2 WARRANT. Borrower shall as additional interest grant Lender a
Warrant to purchase twenty thousand (20,000) shares of Borrower's common stock
for every One Hundred Ten Thousand Dollars ($110,000) loaned to the Borrower by
the Lender pursuant to this Agreement (the "Warrant"). The exercise price of the
Warrant shall be One Dollar ($1.00) per share. The Warrant shall be exercisable
by the Lender at any time during the later to occur of: (i) Twenty-Four (24)
months from the date of the Note; or (ii) Thirty (30) days after the date there
is no longer any amount remaining due from the Borrower to the Lender pursuant
to this Agreement. The Warrant shall be substantially in the form of Exhibit
"B", attached hereto and incorporated herein. The Borrower shall reserve from
its authorized and unissued common stock the number of shares underlying the
Warrant.
2. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS. Lender's obligation to
disburse the Loan is subject to the condition that, on the date of disbursement
("Closing Date"), there shall have been delivered to Lender, in form and
substance satisfactory to Lender and its counsel:
2.1 AUTHORIZATION TO BORROW. A copy of a resolution or resolutions,
in form and substance satisfactory to Lender, passed by the board of directors
of Borrower, authorizing the borrowing provided for in this Agreement, and the
execution, delivery, and performance of this Agreement and the Note or other
instrument or agreement required under this Agreement;
2.2 NOTE. The Note substantially in the form attached hereto as
Exhibit "A", executed by the President of the Borrower.
2.3 AUTHORIZATION OF WARRANT. A copy of a resolution or
resolutions, in form and substance satisfactory to Lender, passed by the board
of directors of Borrower, authorizing the grant of and delivery to the Lender of
the Warrant and reserving the shares of common stock of the
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Borrower thereunder.
2.4 WARRANT. The Wan-ant substantially in the form as attached
hereto as Exhibit "B", executed by the President of the Borrower.
2.5 INCUMBENCY CERTIFICATE. A certificate, signed by the Secretary
or an Assistant Secretary of Borrower and dated the Closing Date, certifying the
incumbency of the person or persons authorized to execute and deliver on behalf
of Borrower this Agreement and the Warrant and the Note or other instrument or
agreement required under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants that:
3.1 ORGANIZATION. Borrower is a corporation duly organized and
existing under the laws of the State of California with its principal place of
business at 00000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxxxx 00000. It has
the power to own its property and to carry on its business as it is now being
conducted. It is duly qualified and authorized to do business and is in good
standing in every state, country, or other jurisdiction in which the nature of
its business and properties makes such qualification necessary;
3.2 SUBSIDIARIES AND AFFILIATES. Borrower does not own or control,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, association, partnership, business, trust or other entity;
3.3 AUTHORITY. Borrower has full power and authority (corporate and
other) to borrow the sums provided for in this Agreement to execute and deliver
this Agreement, to issue the Warrant, the Note and any other instrument or
agreement required under this Agreement, and to perform and observe the terms
and provisions of this Agreement and of all such other instruments and
agreements;
3.4 CORPORATE ACTION. All corporate action by Borrower, its
directors or stockholders, necessary for the authorization, execution, delivery,
and performance of this Agreement, issuance of the Warrant and the Note and any
other instrument or agreement required under this Agreement has been duly taken;
3.5 INCUMBENCY AND AUTHORITY OF SIGNATOR'S. The officers of
Borrower executing this Agreement, the Warrant, the Note and any other
instrument or agreement required under this Agreement are duly and properly in
office and fully authorized to execute them;
3.6 DUE AND VALID EXECUTION. This Agreement has been duly
authorized, executed, and delivered by Borrower, and is a legal, valid, and
binding agreement of Borrower, enforceable against Borrower in accordance with
its terms and the Warrant and the Note and any other instrument or agreement
required under this Agreement has been so authorized and, when
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executed and delivered, will be similarly valid, binding, and enforceable;
3.7 RESERVED SHARES. There are sufficient authorized shares of
common stock available for the Warrant to be exercised and such shares of common
stock underlying the Warrant have been reserved on the books of the Borrower.
3.8 NO VIOLATION. There is no charter, bylaw, or capital stock
provision of Borrower, and no provision of any indenture or agreement, written
or oral, to which Borrower is a party or under which Borrower is obligated, nor
is there any statute, rule, or regulation, or any judgment, decree, or order of
any court or agency binding on Borrower which would be contravened by the
execution and delivery of this Agreement, the Warrant, the Note or any other
instrument or agreement required under this Agreement, or by the performance of
any provision, condition, covenant, or other term of this Agreement, the
Warrant, the Note or any such other instrument or agreement;
3.9 LITIGATION PENDING. There is no litigation, tax claim,
proceeding or dispute pending, or, to the knowledge of Borrower, threatened,
against or affecting Borrower or its property, the adverse determination of
which might affect Borrower's financial condition or operations or impair
Borrower's ability to perform its obligations under this Agreement or under the
Warrant, the Note or any other instrument or agreement required by this
Agreement;
3.10 EVENTS OF DEFAULT. No event has occurred and is continuing or
would result from the making of the Loan which would constitute an Event of
Default as defined herein or which, on the lapse of time or notice or both,
would become such an Event of Default;
3.11 All financial statements, as well as all other information, and
data furnished by Borrower to Lender are correct, and accurately and fairly
represent the financial condition and results of operations of Borrower as of
that date. Since that date there has been no material adverse change in
Borrower's financial condition or results of operations sufficient to impact
Borrower's ability to repay the Loan in accordance with the terms of this
Agreement. Borrower has no contingent obligations, liabilities for taxes, or
other outstanding financial obligations which are material in the aggregate,
except as disclosed in such statements, information, and data;
4. REPRESENTATIONS AND WARRANTIES OF LENDER. This Agreement is made with
Lender in reliance upon Lender's representation and warranties to the Company,
which by Lender's execution of this Agreement Lender hereby confirms, that:
4.1 AUTHORIZATION. This Agreement constitutes Lender's valid and
legally binding obligation, enforceable in accordance with its terms.
4.2 INVESTMENT INTENT. The Note and Warrant to be received by
Lender will be acquired for investment for Lender's or his designee's, own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Lender has no present
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intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, Lender further represents that Lender
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Note or the Warrant or any common stock underlying
the Warrant.
4.3 DISCLOSURE OF INFORMATION. Lender believes he/she/they have
received all the information he/she/they consider necessary or appropriate for
deciding whether to make the Loan, acquire the Note and the Warrant. Lender
further represents that he/she/they have had an opportunity to ask questions and
receive answers from officers of the Company regarding the Company, its business
and the terms and conditions of the Note and the Warrant.
4.4 CONFIDENTIALITY. Lender hereby represents, warrants and
covenants that he/she/they shall maintain in confidence, and shall not use or
disclose without the prior written consent of the Company, any information
identified as confidential that is furnished to him/her/them by the Company in
connection with this Agreement. This obligation of confidentiality shall not
apply, however, to any information (a) in the public domain through no
unauthorized act or failure to act by Lender, or (b) lawfully disclosed to
Lender by a third party who possessed such information without any obligation of
confidentiality. Lender further covenants that he/she/they shall return to the
Company all tangible materials containing such information upon request by the
Company.
4.5 INVESTMENT EXPERIENCE. Lender is a lender and investor in notes
and securities of companies in the development stage and acknowledges
he/she/they are able to fend for themselves, can bear the economic risk and
complete loss of his/her/their investment and has such knowledge and experience
in financial or business matters that he/she/they are capable of evaluating the
merits and risks of the investment in the Note and the Warrant.
4.6 RESTRICTED SECURITIES. Lender understands the Note, the Warrant
and the shares underlying the Warrant he/she/they are acquiring are
characterized as "restricted securities" under the federal securities laws in as
much as they are being acquired from the Company in a transaction not involving
a public offering and that under such laws and applicable regulations such
securities may not be resold without registration under the Securities Act of
1933, as amended (the "Securities Act"), except in certain limited
circumstances. In this connection Lender represents that he/she/they are
familiar with Securities and Exchange Commission ("SEC") Rule 144, as presently
in effect, and understand the resale limitations imposed thereby and by the
Securities Act.
4.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, Lender further agrees not to make any
disposition of all or any portion of the Note, the Warrant or the shares
underlying the Warrant unless and until:
4.7.1 There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
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4.7.2 Lender shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition and (ii) if reasonably
requested by the Company, Lender shall have furnished the Company with an
opinion of counsel, that such disposition will not require registration of such
shares under the Securities Act.
4.8 LEGENDS. It is understood the Note, the Warrant, or a
certificate for the Corporation's common stock evidencing the shares
underlying the Warrant ("Certificate") may bear one or more of the following
legends:
"These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of a registration statement in effect with respect to the
securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to
Rule 144 of such Act."
4.8.1 Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations and Sections 417 and 418 of the California
Corporations Code.
4.9 ACCREDITED INVESTOR. Lender is an "accredited investor" as that
term is defined in CFR Section 230. 501(a) (Regulation D), as amended, of the
SEC under the Securities Act.
4.10 REMOVAL OF LEGENDS; FURTHER COVENANTS.
4.10.1 Any legend placed on the Note, the Warrant or a
Certificate pursuant to Section 4.8 hereof shall be removed (i) if the Note, the
Warrant or the shares represented by such Certificates shall have been
effectively registered under the Securities Act or otherwise lawfully sold in a
public transaction, (ii) if the shares may be transferred in compliance with
Rule 144(k) promulgated under the Securities Act, or (iii) if Lender shall have
provided the Company with an opinion of counsel, in form and substance
acceptable to the Company and its counsel and from attorneys reasonably
acceptable to the Company and its counsel, stating that a public sale, transfer
or assignment of the Note, the Warrant or the shares underlying the Warrant may
be made without registration.
4.10.2 Any legend placed on the Note or a Certificate pursuant
to Section 4.8.2 hereof shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if Lender provides the
Company with an opinion of counsel, in form and substance acceptable to the
Company and its counsel and from attorneys reasonably acceptable to the Company
and its counsel, stating that such state legend may be removed.
4.10.3 Lender further covenants that Lender will not transfer
the Note or the
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Warrant, in violation of the Securities Act, the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), or the rules of the Commission
promulgated thereunder, including Rule 144 under the Securities Act. Further,
Lender agrees that, prior to the closing of the Company's initial public
offering, Lender will not transfer the Note, the Warrant or any shares
underlying the Warrant without the Company's prior consent, even if Lender is
otherwise permitted to transfer them pursuant to this Agreement and all
applicable law.
4.11. CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE NOTE AND
THE WARRANT WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH NOTE AND THE WARRANT OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF NOTE OR THE WARRANT IS EXEMPT FROM QUALIFICATION BY SECTIONS 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
5. BORROWER'S AFFIRMATIVE COVENANTS. Borrower covenants and agrees that
until the full and final payment of all indebtedness incurred under this
Agreement has been made, it will, unless Lender waives compliance in writing:
5.1 USE OF PROCEEDS. Use the proceeds of the Loan in connection
with the further financing of its operations and for general working capital;
5.2 PAYMENT. Repay principal of and interest on the Loan according
to the terms of this Agreement and the terms of the Note evidencing the Loan;
5.3 NOTICE. Promptly give written notice to Lender of:
5.3.1 all litigation affecting Borrower when the amount
claimed is $1,000,000 or more;
5.3.2 any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority;
5.3.3 any labor controversy resulting in or threatening to
result in a strike against Borrower;
5.3.4 any proposal by any public authority to acquire
Borrower's assets or business or to engage in activities competitive with
Borrower;
5.3.5 any Event of Default or any event which, on a lapse of
time or notice
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or both, would become an Event of Default; and
5.3.6 any other matter that has resulted or might result in a
material adverse change in Borrower's financial condition or operations;
5.4 DOCUMENTS. Deliver to Lender, in form and detail satisfactory
to Lender, and in the number of copies Lender may reasonably request:
5.4.1 as soon as available but no later than, seventy-five
(75) days after the close of each fiscal year of Borrower, a complete copy of
its audit report, which shall include at least its balance sheet as of the close
of such year, and its income statement, reconciliation of capital accounts, and
statement of sources and uses of funds for that year, certified by an
independent public accountant selected by Borrower and satisfactory to Lender.
The certificate shall not be qualified or limited because of restricted or
limited examination by that accountant of any material portion of Borrower's
records;
5.4.2 such other statement or statements, lists of property
and accounts, budgets, forecasts or reports regarding Borrower as Lender may
reasonably request;
5.5 MAINTENANCE. Maintain and preserve its corporate existence and
all rights, privileges, and franchises now enjoyed, conduct its business in an
orderly, efficient, and customary manner, keep all its properties in good
working order and condition, and from time to time make all needed repairs to,
and renewals or replacements of, its properties so that the efficiency of those
properties shall be fully maintained and preserved;
5.6 OBLIGATIONS. Pay all obligations, including tax claims, at
maturity, unless the obligation to make such payment or payments is in good
faith being disputed or is being contested by appropriate proceedings with
due diligence;
5.7 INSURANCE. Maintain and keep in force in adequate amounts fire
(including use and occupancy), public liability, property damage, and workers'
compensation insurance;
5.8 BOOKS AND RECORDS. Maintain adequate books, accounts, and
records and prepare all financial statements required under this Agreement in
accordance with generally accepted accounting principles and practices
consistently applied, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over them; and permit employees or agents of
Lender at any reasonable time to inspect Borrower's properties, and to examine
or audit Borrower's books, accounts, and records and make copies and memoranda
of them;
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5.9 SALES PROCEEDS. Apply the proceeds of sales of its fixed or
capital assets in excess of a cumulative total of $500,000 at Lender's option,
to:
5.9.1 the most remote principal installments of the Loan;
5.9.2 replacement of the assets sold;
5.9.3 a reserve for future purchase of fixed or capital
assets; or
5.9.4 working capital purposes;
6. BORROWER'S NEGATIVE COVENANTS. Borrower covenants and agrees that
until full and final payment of all indebtedness incurred under this Agreement
has been made, it will not, without the prior written consent of Lender:
6.1 DIVIDENDS. Declare or pay any dividends on any of its shares
except dividends payable in Borrower's capital stock;
6.2 REDEMPTIONS. Purchase, redeem, or otherwise acquire for value,
any of its shares, or create any sinking fund in relation to any of its shares,
except as part of restricted compensation or similar awards or issuances to
employees or consultants;
6.3 LIQUIDATION OR DISSOLUTION. Liquidate or dissolve, or enter
into any consolidation, merger, pool, joint venture, syndicate, or other
combination, or sell, lease, or dispose of its business or assets as a whole or
such part as in the reasonable opinion of Lender constitutes a substantial
portion of its business or assets;
6.4 FURTHER INDEBTEDNESS. Except as provided in this Agreement,
create or incur any indebtedness for borrowed money which would be senior in
repayment to the Loan, or become liable as a surety, guarantor, accommodation
endorser, or otherwise, for or on the obligation of any other person, firm, or
corporation which would provide a priority of repayment to the Loan; provided,
however, that this section shall not prohibit:
6.4.1 the acquisition of equipment, goods, supplies, or
merchandise on normal credit;
6.4.2 the execution of bonds, undertakings, or contracts in
the usual course of Borrower's business; or
6.4.3 the endorsement of negotiable instruments received in
the usual course of Borrower's business;
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6.5 ENCUMBRANCES. Create, assume, or suffer to exist any mortgage,
encumbrance, or other lien (including a lien of attachment, judgment, or
execution), or security interest (including the interest of a conditional seller
of goods), securing a charge or obligation, on or of any of its property, real
or personal, whether now owned or hereafter acquired, except:
6.5.1 lien or charge for current tax, assessment, or other
govern. mental charge, which is not delinquent or remains payable without any
Penalty, or the validity of which is contested in good faith by appropriate
Proceedings on stay of execution of the enforcement of the lien or charge;
6.5.2 deposits or pledges to secure (i) statutory
obligations, (ii) surety or appeal bonds, (iii) bonds for release of attachment
stay of execution, or injunction, or (iv) performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or leases, or for
purposes of like general nature in the ordinary course of Borrower's business;
6.5.3 purchase-money security interests in personal property
acquired after the date of this Agreement when the obligation secured does not
exceed one hundred percent (100%) of the cost of the property purchased;
6.6 ASSET DISPOSITIONS. Dispose of any of its assets except for
full, fair, and reasonable consideration, or enter into any sale and leaseback
agreement covering any of its fixed or capital assets, or dispose of its assets
as a whole or such part of its assets except in the regular course of conducting
its business;
7. EVENTS OF DEFAULT. Regardless of the terms of any note issued under
this Agreement the occurrence of any of the events set out below ("Events of
Default") shall at the option of Lender, make all interest and principal
remaining on the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind, except as specified in this Agreement:
7.1 PAYMENTS Borrower shall fail to pay, within 10 days after the
date when due, any installment of interest or principal in accordance with the
terms of this Agreement or of the Note evidencing the Loan;
7.2 REPRESENTATIONS AND WARRANTIES. Any representation or warranty
by Borrower in this Agreement or in any agreement, instrument, or certificate
executed under this Agreement or in connection with any transaction contemplated
by this Agreement shall prove to have been false or misleading in any material
respect when made;
7.3 LIENS. An involuntary lien or liens in the aggregate sum of
$500,000 or more, of any kind, shall attach to the assets or property of
Borrower, except for taxes due but not in default, or for taxes that are being
contested; provided, however, that no lien shall be considered for the purpose
of this section if:
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7.3.1 such lien is removed without expenditure of funds by
Borrower other than the costs of appropriate proceedings; or
7.3.2 Borrower, in the reasonable opinion of its counsel, has
the right to and is diligently proceeding to have such lien removed without
unreasonable expenditure of funds by Borrower other than the costs of
appropriate proceedings, and such opinion of counsel is furnished to Lender
within ten days after written request for it;
7.4 JUDGMENTS. A judgment or judgments shall be entered against
Borrower in the aggregate amount of $500,000 or more on a claim or claims not
covered by insurance; provided, however, that no judgment shall be considered
for the purpose of this section if:
7.4.1 such judgment is vacated without unreasonable
expenditure of funds by Borrower other than the costs of appropriate
proceedings; or
7.4.2 Borrower, in the opinion of its counsel, has the right
to and is diligently proceeding to have such judgment vacated without
unreasonable expenditure of funds by Borrower other than the costs of
appropriate proceedings, and such opinion of counsel is furnished to Lender
within ten days after written request for it;
7.5 BANKRUPTCY. Borrower shall file any petition or action for
relief under any Bankruptcy, arrangement, reorganization, insolvency, or
moratorium law, or any other law or laws for the relief of or relating to
debtors, or shall, with respect to any involuntary petition or action for relief
under such law or laws, consent or fail to timely object to the relief requested
in such petition;
7.6 INVOLUNTARY BANKRUPTCY. An involuntary petition shall be filed
under any bankruptcy statute against Borrower, or a receiver, trustee,
custodian, or similar officer of the court shall be appointed to take possession
of all or any substantial part of Borrower's properties, unless such petition or
appointment is dismissed or withdrawn or ceases to be in effect within 90 days
from the date of the filing or appointment;
7.7 OTHER DEFAULT. Any material default shall occur under any other
agreement pertaining to the borrowing of money or the advance of credit to which
Borrower may be a party as borrower, if that default gives to the holder of the
obligation concerned the right to accelerate the indebtedness;
7.8 BREACH. Borrower shall breach or default under any term,
condition, provision, representation, or warranty in this Agreement if that
breach or default shall continue for ten days after its occurrence, or, if
Lender has received notice of the breach or default within that ten-day period,
after notice of the breach or default to Borrower from Lender, whichever is
later.
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8. MISCELLANEOUS.
8.1 NOTICES. Any communications between the parties or notices
provided for in this Agreement may be given by mailing them, first class,
postage prepaid, to Lender at:
Xxxx Xxxxxxx
X.X. Xxx 000000
Xxxx Xxxxx, XX 00000-0000
and to Borrower at:
Ontro, Inc.
00000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxx, Xx. 00000
Attn: Xxxxx X. Xxxxxxx
with a copy to:
Xxxxxx Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, XX. 92037-1483
Attn: Xxxxx X. Xxxxxx
or to such other address as either party may indicate to the other in writing
after the date of this Agreement.
8.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties and their respective successors and assigns;
provided, however, that Borrower shall not assign this Agreement or any of the
rights, duties, or obligations of Borrower under this Agreement without the
prior written consent of Lender.
8.3 DELAY AND WAIVERS. No delay or omission to exercise any right,
power, or remedy accruing to Lender on any breach or default of Borrower under
this Agreement shall impair any such right, power, or remedy of Lender, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence in such breach or default, or waiver of or acquiescence in any
similar breach or default occurring later; nor shall any waiver of any single
breach or default be considered a waiver of any other prior or subsequent breach
or default. Any waiver, permit, consent, or approval of any kind by Lender of
any breach or default under this Agreement, or any waiver by Lender of any
provision or condition of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in that writing. All
remedies, either under this Agreement or by law or otherwise afforded to
Lender, shall be cumulative and not alternative.
8.4 ATTORNEYS FEES. In the event of any legal action or suit in
relation to this Agreement or any note or other instrument or agreement required
under this Agreement, or in the event that Lender incurs any legal expense in
protecting its rights under this Agreement or under any security agreement in
any legal proceeding, Borrower, in addition to all other sums which Borrower may
be called on to pay, will pay to Lender the amount of such legal expense and
will, if Lender
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prevails in such action, pay to Lender a reasonable sum for its attorney's fees
and all other costs and expenses.
8.5 SEVERABILITY. In the event any sentence or paragraph of this
Agreement is declared void by a court of competent jurisdiction, said sentence
or paragraph shall be deemed severed from the remainder of this Agreement, and
the balance of this Agreement shall remain in effect.
8.6. TITLES, CAPTIONS AND PARAGRAPH HEADINGS. Paragraph and
subparagraph titles and captions contained in this Agreement are inserted only
as a matter of convenience for reference. Such titles, captions, and paragraph
headings in no way define, limit, extend or describe the scope of this Agreement
or the intent of any provisions hereof.
8.7 NUMBER AND GENDER. Whenever a singular number is used in this
Agreement or where required by context, the same shall include plural. Masculine
gender shall include feminine and neuter genders and the word "person" shall
include corporation, firm, partnership, or other forms of association.
8.8. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement between all parties herein and supersedes all prior Agreements and
understandings, oral or written, between the parties hereto with respect to
the subject matter hereof, and shall not be modified or amended except in
writing, executed by all parties herein.
8.9. COUNTERPARTS. This Agreement may be executed in several
counterparts, and as so executed shall constitute an Agreement, binding to all
parties herein.
8.10 NON-WAIVER. No delay or omission on the part of any party
herein in exercising any rights or remedies herein shall operate as a waiver of
such rights or remedies. No waiver of any default shall constitute a waiver of
any other default whether of the same or any other covenant or condition. No
waiver, benefit, privilege or service voluntarily given or performed by any
party herein shall give the other parties any contractual right by custom,
estoppel or otherwise. Any waiver by any party herein must be executed in
writing, expressly specifying the subject and extent of the waiver.
8.11 GOVERNING LAW AND VENUE. This Agreement and all amendments
thereto shall be governed, construed, and enforced in accordance with the laws
of the State of California, and venue for any legal action arising out of this
Agreement shall be in San Diego County, California.
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8.12. LEGAL REPRESENTATION. The law firm of Xxxxxx Xxxxxxx LLP has
prepared this Agreement solely on behalf of the Borrower based on instructions
received. The Lender has been advised to seek and obtain separate legal counsel
with respect to the preparation and execution of this Agreement, and he/she has
had an opportunity to do so, has access to qualified independent counsel and has
sought and obtained such advice and counsel to the extent desired.
8.13 CONSTRUCTION. This Agreement has been negotiated between the
parties and their advisors, and shall not be construed against the party
preparing it, but shall be construed as if all parties jointly prepared this
Agreement and any uncertainty and ambiguity shall not be interpreted against any
one party.
8.14 NO OTHER INDUCEMENT. The making, execution and delivery of this
Agreement by the parties hereto has been induced by no representations,
statements, warranties or agreements other than those expressed herein.
8.15 CONFLICTS. In the event of any inconsistency in the terms of
the Note or the Warrant and this Loan Agreement, the terms and conditions of the
Loan Agreement shall control.
IN WITNESS WHEREOF, the parties to this Agreement have executed this Loan
Agreement by their duly authorized officers effective as of the day and year
first above written.
BORROWER:
ONTRO, INC.
a California corporation
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxx, President
LENDER:
/s/ XXXX XXXXXXX
----------------------------------------
Xxxx Xxxxxxx
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
13
EXHIBIT A
NOTE
PROMISSORY NOTE
$110,000.00 POWAY, CALIFORNIA MARCH 21, 1997
ONTRO, INC., a California corporation (the "Company" or "Borrower"), for
value received, hereby promises to pay to XXXX XXXXXXX ("Lender"), on the
Maturity Date (as hereinafter defined), the principal amount of One Hundred Ten
Thousand Dollars ($110,000.00) and to pay interest (computed on the basis of a
365-day year and actual days elapsed) on the principal amount from time to time
remaining unpaid hereon at the rate of Ten Percent (10%) per annum, compounded
annually, from the date hereof until the Maturity Date. All sums due pursuant to
this Note shall be due and payable on the earlier to occur of: (i) the fifth
business day after the Company's completion of an initial public offering of its
common stock; or (ii) the date which is twenty-four (24) months from the date of
this Note (the "Maturity Date.") Both the principal hereof and any accrued but
unpaid interest hereon are due on the Maturity Date, payable at the principal
office of the Company in Poway, California in currency of the United States of
America which at the time of payment shall be legal tender for payment of public
and private debts.
This Note is made pursuant to a Loan Agreement of even date herewith. All
capitalized terms not otherwise defined herein shall have the meaning attributed
to them in the Loan Agreement. In the event of any inconsistencies or conflicts
between the terms and conditions of this Note and the Loan Agreement, the terms
and conditions of the Loan Agreement shall control.
The unpaid principal amount of this Note, together with accrued interest
hereon, and any other sum due or to become due hereunder, shall, at the election
of the Lender hereof, mature and become immediately due and payable without
presentment or demand for payment, dishonor or notice of dishonor, protest or
notice of protest or other formality, all of which are hereby expressly waived,
upon the happening of any one or more of the Events of Default as defined in the
Loan Agreement.
The Borrower hereby consents to renewals and extensions of time before or
after the maturity hereof, and agrees that no failure on the part of the Lender
to exercise any power, right or privilege hereunder, or to insist upon prompt
compliance with the terms hereof, shall constitute a waiver thereof.
Borrower promises to pay costs of collection, including attorney's fees,
whether or not suit is filed, upon the non-performance by Borrower of any
obligation arising out of this Note.
The Lender shall not be deemed, by any act of omission or commission, to
have waived any of their rights or remedies hereunder unless such waiver is in
writing and signed by the Lender, and then only to the extent specifically set
forth in writing. A waiver with reference to one event shall not be construed
and continuing or as a bar to or waiver of any right or remedy as to a
subsequent event. No delay or omission of the Lender to exercise any right,
whether before or after an event of default or a default thereunder, shall
impair any such right or shall be construed to be a waiver of any right or
default, and the acceptance at any time by the Lender of any past due amounts
shall not be deemed to be a waiver of the right to require prompt payment when
due of any other amounts then or thereafter due and payable.
The remedies of the Lender in this Note or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
at the sole discretion of the Lender, and may be exercised as often as occasion
therefor shall occur; and the failure to exercise any such right or remedy shall
in no event be construed as a waiver or release thereof.
Lender shall not become or be deemed a partner or joint venturer with the
Borrower by reason of any provisions of this Note.
If any amount of principal or interest on or in respect of this Note
becomes due and payable on any date which is not a Business Day, such amount
shall be payable on the next preceding Business Day. "Business Day" means any
day other than a Saturday, Sunday, statutory holiday or other day on which banks
in the State of California are required by law to close or are customarily
closed.
If any of the provisions of this Note or the application thereof to any
persons or circumstances shall, to any extent, be held to be invalid or
unenforceable, the remainder of this Note by the application of such provision
or provisions to persons or circumstances other than those as for whom or of
which it is held invalid or unenforceable shall not be affected thereby, and
every provision of this Note shall be valid and enforceable to the fullest
extent permitted by law.
The terms of this Note shall apply to, inure to the benefit of, and bind
all parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns.
Time is of the essence of this Note and the performance of all provisions
hereof.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered Lender of this Note or its attorney duly authorized in writing.
Payment of or on account of principal and interest on this Note shall be made
only to or upon the order in writing of the registered Lender.
This Note and said Loan Agreement is governed by and construed in
accordance with the laws of the State of California.
BORROWER:
ONTRO, INC.
a California corporation
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx, President
THE SECURITIES REPRESENTED IN PART BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES
REPRESENTED BY THIS NOTE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND
CONDITIONS WHICH ARE SET FORTH IN THE LOAN AGREEMENT.
EXHIBIT B
WARRANT
NEITHER THIS WARRANT NOR THE WARRANT SHARES HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS WARRANT OR THE
WARRANT SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH
WARRANT OR SUCH WARRANT SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM
AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS AND ITS AGENTS, STATING THAT
IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF
1933.
ONTRO, INC.
No. W-009 Warrant to Subscribe for
20,000 Shares of Common Stock
COMMON STOCK PURCHASE WARRANT
March 21, 1997
NOT TRANSFERABLE OR EXERCISABLE
EXCEPT UPON CONDITIONS HEREIN SPECIFIED
---------------------------
THIS CERTIFIES that, for value received, XXXX XXXXXXX ("Holder") is
entitled to subscribe for and purchase from ONTRO, INC., a California
corporation (hereinafter called the "Corporation"), Twenty Thousand (20,000)
shares of Common Stock, (the "Common Stock"), of the Corporation (such shares
to be subject to adjustment in accordance with Section 3 hereof, hereinafter
sometimes called the ("Warrant Shares") at an exercise price of One Dollar
($1.00) per share (the "Exercise Price"), at any time or from time to time
during the Exercise Period (as defined in Section 1 hereof).
Section 1. EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by the
holder hereof, in whole at any time or in part from time to time during the
Exercise Period, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the
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Corporation, at 00000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, XX 00000 (or at such
other agency or office of the Corporation in the United States of America as the
Corporation may designate by notice in writing to the holder hereof at the
address of such holder appearing on the books of the Corporation), and by
payment to the Corporation of the Exercise Price in cash or by certified or
official bank check in United States Dollars for each share being purchased.
(b) In the event of any exercise of the rights represented by this
Warrant, (i) a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the person entitled to receive the same,
shall be mailed to the Holder within a reasonable time after the rights
represented by this Warrant shall have been so exercised; provided, however,
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 such
certificate in a name other than that of the registered Holder thereof, and the
Corporation shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid; and (ii) unless
this Warrant has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder
hereof within such time. The person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant, shall for all purposes be
deemed to have become the Holder of record of such shares on the date on which
this Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Corporation are closed, such person shall be deemed to have become the
Holder of record of such shares at the close of business on the next succeeding
date on which the stock transfer books are open. The issuance of any shares of
Common Stock pursuant to the terms of this Warrant shall at all times be subject
to compliance with all requirements of the Securities Act of 1933, as amended,
and with all applicable foreign and state securities and blue sky laws then in
effect.
(c) As used herein, the following terms shall have the following
meanings:
(i) "CLOSING PRICE" on any Trading Day shall mean the reported
last sales price of a share of Common Stock, regular way, on such Trading Day,
or in case no sale takes place on such Trading Day, the average of the last
reported closing bid and asked prices, regular way, in each case on the
principal national securities exchange on which the Common Stock is then listed
or admitted to trading or, if the Common Stock is not then listed or admitted to
trading on any national securities exchange, the highest closing sales price or,
if no sale takes place on such Trading Day, the average of the closing bid and
asked prices of a share of Common Stock in the over-the-counter market as shown
on NASDAQ or, if the Common Stock is not then quoted in such system, as reported
on the OTC Bulletin Board or as published by the National Quotation Bureau,
Incorporated or any similar successor organization, and in either case as
reported by any member firm of the New York Stock Exchange selected by the
Corporation.
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(ii) "EXERCISE PERIOD" shall mean the period beginning on the
date hereof and ending on the 24th monthly anniversary of the date hereof,
subject to earlier termination in accordance with the following provisions. If,
at any time after the date hereof, the Closing Price of the Corporation's Common
Stock exceeds $8.00 per share for any 20 out of any 30 consecutive Trading Days,
the Corporation may, upon giving written notice to the Holders of the Warrants,
no later than 10 days after the end of any such 30-day period, notify the
Holders of outstanding Warrants that the Exercise Period will terminate on a
date specified by the Corporation in such notice which shall not be earlier than
the 45th day after the end of such 30-day period. Notwithstanding the foregoing
sentence, the Corporation will not be permitted to accelerate the termination of
the Exercise Period as set forth above unless the Corporation has an effective
registration statement covering all of the Warrant Shares at the time the
Corporation provides notice of the acceleration of the termination of the
Exercise Period and the Corporation has reason to believe, and in good faith
does believe, such registration statement shall remain in effect throughout the
Exercise Period, as accelerated.
The Corporation shall: (A) take all action reasonably
necessary to keep such registration statement effective for a period of not less
than six months after the termination of the accelerated exercise period,
including, without limitation the filing of all such amendments and supplements
as may be necessary to keep such registration statement effective; and (B) use
its best efforts to register or qualify the Warrant Shares covered by the
aforesaid registration statement under the securities or blue sky laws of such
jurisdiction as any Holders of the Warrants and Warrant Shares shall reasonably
request (provided, the Company shall not be required to consent to general
service of process for all purposes of any jurisdiction where it is not then
qualified) and do any and all other acts or things which may be reasonably
necessary or advisable to enable such seller to consummate the public sale or
other disposition in such jurisdictions of such securities.
(iii) "TRADING DAY" shall mean any day on which the principal
national securities exchange or over-the-counter market in which the Common
Stock is traded is open for business and in which there is no restriction on
trading in the Common Stock.
SECTION 2. COVENANTS AS TO COMMON STOCK. The Corporation covenants and
agrees all Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The Corporation further covenants and agrees the Corporation will
at all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of its common stock to provide for the exercise of
the rights represented by this Warrant. If and so long as the Common Stock
issuable upon the exercise of this Warrant is listed on any national securities
exchange, the Corporation will, if permitted by the rules of such exchange, list
and keep listed on such exchange, upon official notice of issuance, all of the
Warrant Shares.
Section 3. TRANSFER.
(a) SECURITIES LAWS. Neither this Warrant nor the Warrant Shares have
been registered under the Securities Act of 1933. The Corporation will not
transfer this Warrant or the Warrant
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Shares unless (i) there is an effective registration covering such Warrant or
such shares, as the case may be, under the Securities Act of 1933 and applicable
states securities laws, (ii) it first receives a letter from an attorney,
acceptable to the Corporation's board of directors or its agents, stating that
in the opinion of the attorney the proposed transfer is exempt from registration
under the Securities Act of 1933 and under all applicable state securities laws,
or (iii) the transfer is made pursuant to Rule 144 under the Securities Act of
1933.
(b) COMPLIANCE WITH BLUE SKY LAW. The Corporation will be able to
issue the Warrant Shares upon exercise of the Warrant only if there is a then
current Offering Memorandum or registration statement available for and
distributed to the Warrant Holders relating to such Common Stock, and only if
such Warrant and Common Stock is qualified for sale or exempt from qualification
under applicable state securities laws of the jurisdiction in which the Holders
of the Warrants reside. The Corporation reserves the right in its sole
discretion to determine not to apply for exemptions or to register such Common
Stock in any jurisdiction where the time and expense do not justify the costs of
such exemption filing or registration. The Warrants may be deprived of any value
in the event the Corporation does not satisfy or the Corporation chooses not to
satisfy any such requirements. Although it is the present intention of the
Corporation to satisfy such requirements, there can be no assurance the
Corporation will be able to do so; provided, however, the Corporation will not
be permitted to accelerate the termination of the Exercise Period of these
Warrants unless such acceleration is accomplished in full compliance with
Section 1(c)(ii) hereof.
(c) INVESTMENT REPRESENTATIONS. The Holder of the Warrant agrees and
acknowledges the Warrant is being purchased for his own account, for investment
purposes only, that he either has a prior personal or business relationship with
the officers, directors or controlling persons, or by reason of his business or
financial experience, or the business or financial experience of he and his
professional advisors who are unaffiliated with and not compensated by the
Corporation, could be reasonably assumed to have the capacity to protect his own
interests in connection with the purchase of and the exercise of the Warrants,
and not for the account of any other person, and not with a view to
distribution, assignment or resale to others or to fractionalization in whole or
in part, and the Holder further represents, warrants and agrees as follows: no
other person has or will have a direct or indirect beneficial interest in this
Warrant and the Holder will not sell, hypothecate or otherwise transfer his
Warrant except in accordance with the Act and applicable state securities laws
or unless, in the opinion of counsel for the Holder acceptable to the
Corporation, an exemption from the registration requirements of the Act and such
state laws is available.
(d) CONDITIONS TO TRANSFER. Prior to any such proposed transfer, and
as a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Corporation, deliver to the Corporation (i) an investment covenant signed
by the proposed transferee, (ii) an agreement by such transferee that the
restrictive investment legend set forth above be placed on the certificate or
certificates representing the securities acquired by such transferee, (iii) an
agreement by such transferee that the Corporation may place a "stop transfer
order" with its transfer agent or registrar, and (iv) an
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agreement by the transferee to indemnify the Corporation to the same extent as
set forth in the next succeeding paragraph.
(e) INDEMNITY. The Holder acknowledges the Holder understands the
meaning and legal consequences of this Section, and the Holder hereby agrees to
indemnify and hold harmless the Corporation, its representatives and each
officer, director, agent, and legal counsel thereof from and against any and all
loss, damage or liability (including all attorneys' fees and costs incurred in
enforcing this indemnity provision) due to or arising out of (a) the inaccuracy
of any representation or the breach of any warranty of the Holder contained in,
or any other breach of, this Warrant, (b) any transfer of any of this Warrant or
the Warrant Shares in violation of the Securities Act of 1933, the Securities
Exchange Act of 1934, as amended, or the rules and regulations promulgated under
either of such acts, (c) any transfer of this Warrant or any of the Warrant
Shares not in accordance with this Warrant or (d) any untrue statement or
omission to state any material fact in connection with the investment
representations or with respect to the facts and representations supplied by the
Holder to counsel to the Corporation upon which its opinion as to a proposed
transfer shall have been based.
(f) HOLDBACK PERIOD AND TRANSFER. Except as specifically restricted
hereby, this Warrant and the Warrant Shares issued may be transferred by the
Holder in whole or in part at any time or from time to time. In the event the
Corporation publicly offers shares of its Common Stock, the Warrant Shares may
not be sold from the date of the Corporation's initial public offering of
securities for the period set forth in any agreement between the Company and any
underwriter or managing broker of such public offering. Upon surrender of this
Warrant certificate to the Corporation or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Corporation shall, without charge, execute and deliver a new
Warrant certificate in the name of the assignee named in such instrument of
assignment, and this Warrant certificate shall promptly be canceled. Any
assignment, transfer, pledge, hypothecation or other disposition of this Warrant
attempted contrary to the provisions of this Warrant, or any levy of execution,
attachment or other process attempted upon this Warrant, shall be null and void
and without effect.
Section 4. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Corporation, either at law or
in equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 5. ANTI-DILUTION PROVISIONS.
(a) STOCK SPLITS; DIVIDENDS, ETC.
(i) If the Corporation shall at any time after the date hereof
subdivide its outstanding shares of Common Stock (or other securities at the
time receivable upon the exercise of the Warrant) by recapitalization,
reclassification or split-up thereof, or if the Corporation shall declare a
stock dividend or distribute shares of Common Stock to its stockholders, the
number of shares
B-5
of Common Stock subject to this Warrant immediately prior to such subdivision
shall be proportionately increased, and if the Corporation shall at any time
combine the outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
subject to this Warrant immediately prior to such combination shall be
proportionately decreased. Any such adjustment and adjustment to the Exercise
Price pursuant to this Section shall be effective at the close of business on
the effective date of such subdivision or combination or if any adjustment is
the result of a stock dividend or distribution then the effective date for such
adjustment based thereon shall be the record date therefor.
(ii) Whenever the number of shares of Common Stock purchasable
upon the exercise of this Warrant is adjusted, as provided in this Section, the
Exercise Price shall be adjusted to the nearest cent by multiplying such
Exercise Price immediately prior to such adjustment by a fraction (x) the
numerator of which shall be the number of shares of Common Stock purchasable
upon the exercise immediately prior to such adjustment, and (y) the denominator
of which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. ETC. In case
of any reorganization of the Corporation (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the date hereof, or in case after such date the Corporation (or any such
other corporation) shall consolidate with or merge into another corporation or
convey all or substantially all of its assets to another corporation, then, and
in each such case, the Holder of this Warrant upon the exercise as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property received upon the exercise of this
Warrant after such consummation.
(c) CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in
the number of shares of Common Stock receivable on the exercise of this Warrant,
the Corporation at its expense shall promptly compute such adjustment in
accordance with the terms of the Warrant and prepare a certificate executed by
an officer of the Corporation setting forth such adjustment and showing the
facts upon which such adjustment is based. The Corporation shall forthwith mail
a copy of each such certificate to each Holder.
(d) NOTICES OF RECORD DATE, ETC. In case:
(i) the Corporation shall take a record of the holders of its
Common Stock (or other securities at the time receivable upon the exercise of
the Warrant) for the purpose of entitling them to receive any dividend (other
than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities,
or to receive any other right; or
B-6
(ii) of any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, then, and in each such case, the Corporation
shall mail or cause to be mailed to each Holder a notice specifying, as the case
may be, (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (B) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, to be fixed, as to which the
holders of record of Common Stock (or such other securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least twenty (20) days prior to the date therein specified, and this
Warrant may be exercised prior to said date during the term of the Warrant.
(e) THRESHOLD FOR ADJUSTMENTS. Anything in this Section to the
contrary notwithstanding, the Corporation shall not be required to give effect
to any adjustment until the cumulative resulting adjustment in the Exercise
Price pursuant to this Section shall have required a change of the Exercise
Price by at least $.20, but when the cumulative net effect of more than one
adjustment so determined shall be to change the Exercise Price by at least $.40,
such full change in the Exercise Price shall thereupon be given effect. No
adjustment shall be made by reason of the issuance of shares upon conversion
rights, stock issuance rights or similar rights currently outstanding or any
change in the number of treasury shares held by the Corporation.
Section 6. LEGEND AND STOP TRANSFER ORDERS. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any of this
Warrant and the issuance of any of the Warrant Shares, the Corporation shall
instruct its transfer agent, if any, to enter stop transfer orders with respect
to such shares, and all certificates representing shares of Warrant Shares shall
bear on the face thereof substantially the following legend:
This certificate has not been registered under the Securities Act
of 1933. The Corporation will not transfer this certificate unless
(i) there is an effective registration covering the shares
represented by this certificate under the Securities Act of 1933
and all applicable state securities laws, (ii) it first receives a
letter from an attorney, acceptable to the board of directors or
its agents, stating that in the opinion of the attorney the
proposed transfer is exempt from registration under the Securities
Act of 1933 and under all applicable state securities laws, (iii)
the transfer is made pursuant to Rule 144 under the Securities Act
of 1933.
Section 7. OFFICER'S CERTIFICATE. Whenever the number or kind of
securities purchasable upon exercise of this Warrant or the Exercise Price shall
be adjusted as required by the provisions hereof, the Corporation shall
forthwith file with its Secretary or Assistant Secretary at its principal office
and with its stock transfer agent, if any, an officer's certificate showing the
adjusted number
B-7
of kind of securities purchasable upon exercise of this Warrant and the adjusted
Exercise Price determined as herein provided and setting forth in reasonable
detail such facts as shall be necessary to show the reason for and the manner of
computing such adjustments. Each such officer's certificate shall be made
available at all reasonable times for inspection by the Holder and the
Corporation shall, forthwith after each such adjustment, mail by certified mail
a copy of such certificate to the Holder.
Section 8. TRANSFER OF WARRANT. Subject to Section 3 hereof, this
Warrant and all rights hereunder are transferable in whole (or in part), at the
agency of office of the Corporation referred to in Section 1 hereof by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant properly endorsed. Each taker and Holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed, in
blank, shall be deemed negotiable, and, when so endorsed the Holder hereof may
be treated by the Corporation and all other persons dealing with this Warrant as
the absolute owner hereof for all purposes and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Corporation, any notice to the contrary notwithstanding; but
until each transfer on such books, the Corporation may treat the registered
Holder hereof as the owner hereof for all purposes.
Section 9. ELIMINATION OF FRACTIONAL INTERESTS. The Corporation shall not
be required to issue stock certificates representing fractions of shares of
Common Stock, nor shall it be required to issue script or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated.
Section 10. EXCHANGE OF WARRANT. Subject to the limitations set forth
herein this Warrant is exchangeable, upon the surrender hereof by the Holder
hereof at the office or agency of the Corporation designated in Section 1
hereof, for a new Warrant of like tenor representing the right to subscribe for
and purchase the number of Warrant Shares which may be subscribed for and
purchased hereunder.
Section 11. NOTICES TO WARRANT HOLDERS. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof the right to vote or to
consent to or receive notice as a shareholder in respect of any meetings of
shareholders for the election of Directors or any other matter, or as having any
rights whatsoever as a shareholder of the Corporation. If, however, at any time
prior to the expiration of the Warrant and prior to its exercise, any of the
following events shall occur:
(a) The Corporation shall offer to all of the holders of its Common
Stock any additional shares of stock of the Corporation or securities
convertible into or exchangeable for shares of stock of the Corporation, or any
option, right or warrant to subscribe therefor; or
(b) A dissolution, liquidation or winding up of the Corporation (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety (whether
by merger, consolidation or sale of assets) shall be proposed;
B-8
then, in any one or more of said events, the Corporation shall give written
notice of such events at least fifteen (15) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to such convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action taken
in connection with the issuance of any convertible or exchangeable securities,
or subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
Section 12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. Upon surrender
by the Holder of this Warrant to the Corporation, the Corporation at its expense
will issue in exchange therefor, and deliver to such Holder, a new Warrant. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of this Warrant, and in the case of any such loss,
theft or destruction, upon delivery by such Holder of an indemnity agreement or
security satisfactory to the Corporation, and in case of any such mutilation,
upon surrender and cancellation of this Warrant, the Corporation, upon
reimbursement of all reasonable expenses incident thereto, will issue and
deliver to such Holder a new Warrant of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant delivered to such Holder in
accordance with this Section 12 shall bear the same securities legends as the
Warrant which it replaced.
Section 13. GOVERNING LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts made therein.
Section 14. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Corporation; or
(b) If the Corporation, at 00000 Xxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxx, Xx. 00000 Attn: Xxxxx X. Xxxxxxx.
Section 15. SUCCESSORS. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
Section 16. HEADINGS. The Article and Section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
B-9
IN WITNESS WHEREOF, ONTRO, INC. has caused this Warrant to be executed by a
duly authorized officer under its corporate seal and to be dated as of the date
first above written.
ONTRO, INC.
a California corporation
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx, President
[CORPORATE SEAL]
B-10
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto__________________, all of the rights represented by the within Warrant to
purchasc___________ shares of Common Stock of ONTRO, INC. to which the within
Warrant relates, and appoints _______________________, Attorney to transfer such
rights on the books of ONTRO, INC. with full power of substitution in the
premises.
Dated:
------------------------- -------------------------
(Signature)
-------------------------
-------------------------
(Address)
Signed in the presence of:
-----------------------------------
Name:
------------------------------
B-11
FORM OF EXERCISE
[To be signed only upon exercise of the Warrant]
THE UNDERSIGNED, the Holder of the within Warrant, hereby irrevocably
elects to purchase________________ shares of Common Stock of ONTRO, INC. and
herewith tenders payment of $__________ in full payment of the exercise price
for such shares, and requests that the certificates for such shares be issued
in the name of, and delivered to, ________________________whose address
is ______________________________________________________________
Dated:
------------------------- -------------------------
(Signature)
-------------------------
-------------------------
(Address)
B-12
