Ex-10.35
Selling Agreement by and between the Company and
WMS Financial Planners, Inc. and Pacific West Securities, Inc.
dated March 8, 2000
EXHIBIT 10.35
SELLING AGREEMENT
TELEGEN CORPORATION
$4,000,000
500,000 Shares of Common Stock
March 8, 2000
Xx. Xxxxxxx X. Xxxxxx, XX, CFP
President
WMS Financial Planners, Inc.
0000 Xxxxxxxx Xxx Xxxx,
Xxxxxxx, XX 00000
Xx. Xxxxxxx Xxxxxxxx
President
Pacific West Securities, Inc.
0000 XX 0xx Xxxxxx, Xxxxx 000,
Xxxxxx, XX 00000
Ladies and Gentlemen:
Telegen Corporation, a California corporation, (the "Company") proposes to
offer, sell and issue (the "Offering") in a transaction complying with the
provisions of Regulation S ("Regulation S") under the Securities Act of 1933, as
amended (the "Act") in the aggregate up to 500,000 shares of Common Stock, no
par value, (the "Offering") at a price of $8.00 per share (the "Shares") for
total gross proceeds of up to $4,000,000. The Company hereby engages Pacific
West Securities, Inc. ("PW") as its managing broker-dealer (the "Managing
Dealer") and WMS Financial Planners, Inc. ("WMS") as its investment banker (the
"Advisor") and PW and WMS jointly as its agents (PW and WMS are referred to
herein as the "Selling Agents") to assist the Company in the Offering. Further,
the Offering shall be conducted on a "best efforts" basis.
(1) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Selling Agents that:
a. The Company will carefully and diligently prepare certain
Disclosure Documents (the "Disclosure Documents") with a view to
providing relevant disclosure to all persons to whom the Shares
are offered.
b. The Disclosure Documents, as of the date issued to the best of
the Company's knowledge, will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
c. From the effective date of the Disclosure Documents and until the
Termination Date (as defined below), and except as contemplated
in the Disclosure Documents, the Company shall promptly prepare a
supplement to the Disclosure Documents advising the Managing
Dealer and Selling Agents of any of the following events, if they
occur: If the Company incurs any material
liabilities or obligations, direct or contingent, not in the
ordinary course of its business, or if the Company enters into
any material transaction, not in the ordinary course of its
business, or sustains any loss or damage to its properties,
whether or not insured, which would be material and adverse to
the business of the Company; or if there occurs any material
adverse change in the capital stock or debt of the Company, or
any material adverse change (whether or not in the ordinary
course of business) in the condition, financial or otherwise, or
earnings, affairs, or business of the Company. Prior to the
Termination Date, the Company shall not declare any dividends or
distributions in respect of its capital stock or change its
Articles of Incorporation or bylaws in any way that adversely
affects the Shares.
d. The Shares shall be duly authorized and, upon receipt by the
Company of the consideration for the Shares, shall be validly
issued, fully paid and nonassessable Shares of the Company, and
shall conform to the description thereof contained in the
Disclosure Documents.
(2) EMPLOYMENT OF THE SELLING AGENT.
a. Subject to the terms and conditions herein set forth, the Company
hereby employs the Selling Agents, for the purpose of offering
and selling the Shares, as provided in this Agreement on a best
efforts basis. The Company employs the Selling Agents as its
agent commencing as of the date hereof and until the Termination
Date or June 30, 2000, whichever date is earliest, (which period
may be extended until September 30, 2000 by written agreement
between the Selling Agents and the Company) which date, or
shortened or extended date, is referred to herein as the
"Termination Date." The Selling Agents agree to use their best
efforts to sell the Shares as the Company's agent. It is
understood and agreed that there is no firm commitment on the
part of the Selling Agents to purchase any of the Shares.
b. The Selling Agents shall offer and sell the Shares hereunder at a
price of $8.00 per Share on the terms of sale set forth in this
Agreement. Subject to the receipt by the Company of the proceeds
from the sale thereof, the Selling Agents shall be entitled to
commissions and advisor fees as follows:
(i) A commission of two percent (2%) of the gross proceeds of
the sale of the Shares, payable by the Company to the
Selling Agents in cash or Shares priced at $8.00 per share,
or any combination thereof, at the option of the Selling
Agents; plus
(ii) An advisor fee of two and one half percent (2.5%) of the
gross proceeds of the sale of the Shares, payable by the
Company to WMS as Advisor, payable in Shares at a price of
$8.00 per share; plus
(iii) A commission of two and one half percent (2.5%) of the
gross proceeds of the sale of the Shares, payable by the
Company to PW as Managing Advisor, payable in Shares at a
price of $8.00 per share; plus
(iv) A commission payable by the Company to the Selling Agents in
three (3) year warrants substantially in the form attached
hereto as Exhibit 1 exercisable at $8.00 per Share, at the
rate of one (1) warrant for every twenty (20) Shares sold in
the Offering (a maximum of 25,000 warrants if the full
Offering is sold); plus
(v) A commission payable by the Company to PW as Managing Dealer
in three (3) year warrants substantially in the form
attached hereto as Exhibit 1 exercisable at $8.00 per Share,
at the rate of one (1) warrant for every forty (40) Shares
sold in the Offering (a maximum of 12,500 warrants if the
full Offering is sold); plus
(vi) An advisor fee payable by the Company to WMS as Advisor in
three (3) year warrants substantially in the form attached
hereto as Exhibit 1 exercisable at $8.00 per Share, at the
rate of one (1) warrant for forty (40) Shares sold in the
Offering (a maximum of 12,500 warrants if the full Offering
is sold).
Commissions payable hereunder shall be paid by the Company within
fifteen (15) days of receipt by the Company of such proceeds
following the confirmation of a Plan of Reorganization (the
"Plan") for the Company by the U. S. Bankruptcy Court for the
Northern District of California (the "Court"). All commissions
set forth in the preceding subsections shall be payable
regardless of which of the Selling Agents or their sub-agents
sells any particular Shares. Subject to the limitations of
Section 2(c) hereof, allocation of all commissions payable under
subparagraphs (i) and (iv) of this paragraph shall be at the
discretion of the Selling Agents, and the Company shall have no
interest or responsibility in determining such allocation.
It is understood and acknowledged by the Selling Agents that
receipt of the proceeds by the Company from sale of Shares and
payment of commissions are contingent upon an order of the Court
confirming the Plan. For all purposes of this Agreement, receipt
by the Company of the proceeds of sale shall mean actual receipt
by the Company (not deposit of proceeds into the escrow fund
pursuant to an Escrow Agreement), and availability of such
proceeds for use by the Company as described in the "Use of
Proceeds" section of the Disclosure Documents.
c. The Managing Dealer may appoint other licensed broker-dealers to
be employed as the non-exclusive agents of the Company to offer
and sell the Shares, upon fulfillment of the following
conditions:
(i) The receipt of the written consent of the Company, which
consent shall not be unreasonably withheld;
(ii) Delivery to the Company of a Verified Statement, executed
under penalty of perjury, (i) making the same
representations regarding its licensing status as made by
the Selling Agents in subparagraphs (5) a and (5) b hereof
and (ii) that such person is a disinterested person with
respect to the Debtor and does not hold or represent an
interest adverse to the estate within the meaning of
Section 327 of the U.S. Bankruptcy Code.
Except as set forth in this subparagraph (c), the Selling Agents
may not appoint or employ any person or other entity as their
agent or subagent or utilize the services of any other broker or
dealer to participate in the sale of the Shares as a soliciting
or participating dealer or otherwise.
Any such sub-agents or other broker-dealers appointed by the
Selling Agents shall be appointed solely at the expense of the
Selling Agents; the Company shall have no liability to such
persons, and the Selling Agents shall indemnify and hold the
Company harmless therefrom. Subject to the limitations in the
preceding sentence, the Selling Agents may assign any portion of
their commission payable under this Agreement to any subagent,
broker-dealer, finder or other party by providing the Company
with written notice of assignment stating the portion of the
commission to be paid and the name, address, phone number and tax
ID number of the party to whom the assignment is made.
d. All proceeds received from the sale of the Shares shall be placed
in an escrow, at Preferred Bank, Los Angeles, California, with
Xxxxx X. Xxxxx, Esq. as escrow holder, and shall be payable to
the Company upon the confirmation of the Plan by the Court. In
the event that the Company is unable to confirm the Plan by June
30, 2000 (or such extended date as is agreed upon between the
Company and the Selling Agents pursuant to Section 2(a) hereof),
all proceeds from this Offering shall be returned to the buyers
of the Shares and the Offering will terminate.
e. It is understood and agreed that the Company, in its sole
discretion, may (i) terminate the Offering at any time upon 30
days written notice, and (ii) reject any subscription for the
Shares presented to it by the Selling Agent with such objection,
if any, occurring within 30 days of receipt by Debtor.
f. Each potential investor in the Offering shall be required to
complete a Suitability Questionnaire in a form acceptable to the
Company, which shall be provided to the Company upon the sale of
the Shares to the investor. The Company shall determine, in its
sole discretion, whether the potential investor qualifies as a
non-U.S. person as defined in Regulation S. If a potential
investor does not qualify as a non-U.S. person, his investment
will be promptly refunded. The Company may also reject any
investor in the Offering for any reason whatsoever.
g. Certificates for Shares, registered in such names as shall be
provided for in the Subscription Agreements executed by the
purchasers thereof, sold by the Selling Agents, shall be
delivered to the purchasers as promptly as practicable after
receipt by the Company of the proceeds of such sales.
h. The Company shall have the right, subject to the approval of the
Selling Agents, to compensate finders who refer potential
investors in the Offering to the Company or the Selling Agents.
Any fees or commissions paid by the Company to such finders shall
reduce the fees and commissions due and payable to the Selling
Agents pursuant to this Section 2 by an equal amount, such that
the total fees and commissions payable to the finder and the
Selling Agents shall together equal the amount payable under this
Section 2.
(3) COVENANTS OF THE COMPANY. The Company covenants as follows:
a. To make no amendment or supplement to the Disclosure Documents of
which the Selling Agents have not been furnished with a copy
prior to the use thereof; and to advise the Selling Agents
promptly of the issuance of any stop order or any similar order
by the Securities and Exchange Commission or any state securities
commission or agency.
b. To furnish to the Selling Agents without charge copies of the
Disclosure Documents, including all exhibits thereto, and all
amendments and supplements to any such documents, in each case as
soon as available and in such reasonable quantities as the
Selling Agents may from time to time request.
c. If any event shall have occurred as a result of which the
Disclosure Documents, as then amended or supplemented, would
include any untrue statement of a material fact, or omit to state
any material fact necessary in order to make the statements
therein not misleading, to notify the Selling Agents and, upon
the request of the Selling Agents, to prepare and furnish without
charge to the Selling Agents as many copies of a supplement or
amendment to the Disclosure Documents which will correct such
statement or omission as the Selling Agents may from time to time
reasonably request.
(4) EXPENSES. Whether or not the transactions contemplated hereby are
consummated or if this Agreement is terminated, the Company shall pay
all costs and expenses incurred by it incident to the performance of
the obligations of the Company hereunder, including the fees and
expenses of the Company's counsel and the costs and expenses incident
to the preparation and duplication of the Disclosure Documents. The
Selling Agents shall bear their own expenses in connection with the
Offering.
(5) REPRESENTATIONS AND WARRANTIES OF THE SELLING AGENTS. The Selling
Agents hereby represent and warrant that:
a. PW is a member in good standing of the National Association of
Securities Dealers, Inc.
b. PW is a registered broker-dealer with the Securities and Exchange
Commission and licensed and in good standing under the laws of
each jurisdiction in which it will offer or sell Shares or is
exempt from licensure in each such jurisdiction.
c. Each person employed or appointed by the Selling Agents to offer
or sell the Shares is duly registered with the Securities and
Exchange Commission, a member in good standing of the NASD, and
is licensed and in good standing under the laws of each
jurisdiction in which it will offer or sell the Shares.
d. Prior to the date of the Disclosure Documents, the Selling Agents
have not made any offers for sale of the Shares.
(6) COVENANTS OF SELLING AGENTS. The Selling Agents covenant that:
a. Each person to whom the Selling Agents will sell the Shares shall
be a non-U.S. person as defined in Regulation S. The Selling
Agents shall require that each potential investor shall fill out
a Suitability Questionnaire, which shall be promptly provided to
the Company.
b. The Selling Agents will offer the Shares in compliance with
Regulation S under the Act.
c. The Selling Agents will conduct the Offering in compliance with
all relevant provisions of securities laws of the subscriber's
jurisdiction.
d. The Selling Agents will promptly furnish the Company with a
complete list of all persons or entities to whom the Shares have
been offered or sold together with the completed and executed
Subscription Agreements and Suitability Questionnaires for each
purchaser of the Shares.
e. Neither the Selling Agents nor any officer or other person
employed by them will provide any information or make any
representations to offerees of the Shares, other than such
information and representations as are either contained in the
Disclosure Documents or are not inconsistent with information set
forth in the Disclosure Documents.
f. In the event either of them learns of any circumstances or facts
which it believes would make the Disclosure Documents inaccurate
or misleading as to any material fact, such Selling Agent shall
immediately bring such circumstances or facts to the attention of
the Company.
(7) INDEMNIFICATION.
a. The Company shall indemnify and hold harmless the Selling Agents
and each person, if any, who controls the Selling Agents within
the meaning of the Act, jointly and severally, against any and
all losses, claims, damages, liabilities, costs, and expenses
(including reasonable attorneys' and experts' fees), to which the
Selling Agents or such controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages, liabilities, costs, and expenses (including reasonable
attorneys' or experts' fees), or actions in respect thereto,
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure
Documents, or any 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 the statements therein not misleading; and
shall reimburse the Selling Agents and each such controlling
person for any reasonable legal or other expenses incurred by
such Selling Agents or such controlling person in connection with
investigating or defending any such loss, claim, damage,
liability, cost, expense, or action; provided, however, that the
Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability, or expense arises out of
or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Disclosure Documents
or such amendment or such supplement in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Selling Agents.
b. Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against
an indemnifying party under this Section 7, notify the
indemnifying party of the commencement thereof; but the omission
to so notify the indemnifying party shall not relieve it from any
liability under this Section 7. In case any such action is
brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, with counsel who
shall be to the reasonable satisfaction of such indemnified
party, and notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(8) EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective
on the date this Agreement is approved by the Court or upon such later
date as the Selling Agents and the Company shall agree in writing.
This Agreement may be terminated by the Selling Agents, at the Selling
Agents' option by giving 30 days written notice to the Company and by
the Company, at its option, by giving 30 days written notice to the
Selling Agents.
(9) REPRESENTATION AND INDEMNITIES TO SURVIVE DELIVERY. The respective
indemnities, agreements, representations, and covenants of the Company
and the Selling Agents set forth in this Agreement shall remain in
full force and effect, and shall survive delivery of and payment for,
the Shares.
(10) EFFECT OF TERMINATION OF AGREEMENT. If this Agreement shall be
terminated pursuant to the provisions of Section 2 or Section 8
hereof, the Company shall then be under no liability to the Selling
Agents, except for the payment of commissions as provided in Section 2
and the indemnities provided for in Section 7 hereof. Upon termination
hereof, the Selling Agents shall immediately cease and desist in all
selling efforts relating to the Shares.
(11) NOTICES. All requests, notices, and consents required or permitted to
be given hereby shall be in writing, and shall be delivered either
personally, by facsimile, or by courier service. Such notices, etc.,
given by facsimile shall be deemed delivered at the time shown on the
confirmation report of the sender's facsimile machine, and shall be
deemed given when received by the intended recipient if sent by either
other method. Unless a party's delivery address or facsimile number is
changed by written notice given as set forth in this section, notices,
etc. shall be delivered to the Selling Agents at the addresses set
forth at the head of this Agreement or (000) 000-0000 for the Advisor
and (000) 000-0000 for the Managing Dealer, and, shall be sent to the
Company at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxxxx
00000, or (000) 000-0000 with copies to Xxxxx X. Xxxxx, Esq., 0000
Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 and (310)
553-9009.
(12) ARBITRATION. Any and all claims or disputes arising out of or under
this Agreement shall be determined and settled by arbitration to be
conducted in San Francisco, California by and under the auspices of
the American Arbitration Association. The award of the arbitrators may
be entered as a judgment in accordance with California law.
(13) SUCCESSORS, ET CETERA. This Agreement shall be binding upon and inure
solely to the benefit of the Selling Agents and the Company; neither
party may assign its rights or responsibilities under this Agreement
without the prior written consent of the other party. No purchaser of
any of the Shares shall be construed a beneficiary, successor or
assign by reason merely of such purchase, and this Agreement shall not
be construed to be for the benefit of any third party.
(14) APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California as applied to
contracts made and performed wholly within the State of California.
(15) COURT APPROVAL. This Agreement is subject to approval by the US
Bankruptcy Court for the Northern District of California. Upon
execution of this Agreement, the Company will promptly seek the
approval of the Court to employ the Selling Agents according to the
terms of this Agreement. The Selling Agents shall not offer the Shares
for sale until receipt of such Court approval.
(16) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and no amendment, change, modification, or
alteration of this Agreement shall be valid unless it is in writing
and signed by the parties hereto.
(17) CONSTRUCTION. As provided herein and as the context requires, the
masculine gender shall be deemed to include the feminine and the
neuter genders and vice versa; and the singular shall be deemed to
include the plural and vice versa. This Agreement may be executed in
one or more counterparts, each of which shall be deemed a duplicate
original and all of which, taken together, shall be deemed a single
agreement.
If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart thereof, whereupon this letter and your acceptance
thereof shall constitute a binding agreement between you and the Company.
Very truly yours,
TELEGEN CORPORATION
/s/ XXXXXXX X XXXXXXX
Xxxxxxx X. Xxxxxxx
President/CEO
ACCEPTED:
WMS Financial Planners, Inc.
/s/ XXXXXXX X. XXXXXX MARCH 8, 2000
----------------------------------------- ------------------------------------
Xx. Xxxxxxx X. Xxxxxx, XX, CFP Date
President
Pacific West Securities, Inc.
/s/ XXXXXXXX XXXXXXXX MARCH 8, 2000
----------------------------------------- ------------------------------------
Xx. Xxxxxxxx Xxxxxxxx Date
President
EXHIBIT 1
Form of Warrant
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE
OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, OR (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
TELEGEN CORPORATION
WARRANT FOR COMMON STOCK
VOID AFTER ___________________
Dated: __________________
Subject to the terms and conditions set forth herein, ________________________
(the "Holder"), or registered assigns, is entitled to purchase from TELEGEN
CORPORATION, a California corporation (the "Company"), at any time from date
hereof and on or before the date of termination of this Warrant, up to
_________________ fully paid and non-assessable shares of the Company's Common
Stock, without par value, at the price of US$8.00 per share. The initial
purchase price of US$8.00 per share, and the number of shares purchasable
hereunder, are subject to adjustment in certain events, all as more fully set
forth under Section 4 herein.
1. DEFINITIONS
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Act and the Securities Exchange
Act of 1934.
"COMMON STOCK" means the Company's post reorganization Common Stock, any
stock into which such stock shall have been changed or any stock resulting from
any reclassification of such stock, and any other capital stock of the Company
of any class or series now or hereafter authorized having the right to share in
distributions either of earnings or assets of the Company without limit as to
amount or percentage.
"COMPANY" means Telegen Corporation, a California corporation, and any
successor corporation.
"EXERCISE PERIOD" means, subject to Section 5 herein, the period commencing
immediately from date hereof and terminating at the earliest to occur of: (i)
5:00 p.m., Pacific Time, three (3) years from the date hereof, or (ii) the time
immediately prior to the closing of (x) a merger or consolidation of the Company
with or into another entity in which the shareholders of the Company immediately
before such merger or consolidation own less than a majority of the surviving or
resulting entity's outstanding voting stock immediately thereafter, or (y) a
sale of all or substantially all of the Company's assets.
"EXERCISE PRICE" means the price per share of Common Stock set forth in the
preamble paragraph to this Warrant, as such price may be adjusted pursuant to
Section 4 hereof.
"FAIR MARKET VALUE" means the closing sale price or, if not available, then
the closing bid price on a given trading day of the Company's Common Stock as
reported on the electronic bulletin board under the symbol TLGNQ or successor
symbol or as determined by the Company's Board of Directors in good faith, as
applicable.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, government entities and authorities and other organizations, whether or
not legal entities.
"PRINCIPAL EXECUTIVE OFFICE" means the Company's office at 0000 Xxxxxxx
Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx, 00000, or such other office as
designated in writing to the Holder by the Company.
"RULE 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"SHAREHOLDER" means a holder of one or more Warrant Shares or shares of
Common Stock acquired upon conversion of Warrant Shares.
"WARRANT" means this Warrant and all warrants issued upon the partial
exercise, transfer or division of or in substitution for this Warrant or any
such warrant.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of this Warrant, provided that if under the terms hereof there shall be
a change such that the securities purchasable hereunder shall be issued by an
entity other than the Company or there shall be a change in the type or class of
securities purchasable hereunder, then the term shall mean the securities
issuable upon the exercise of the rights granted hereunder.
2. EXERCISE
2.1 EXERCISE RIGHT; MANNER OF EXERCISE. The purchase rights represented by
this Warrant may be exercised by the Holder, in whole or in part, at any time
and from time to time during the Exercise Period upon (i) surrender of this
Warrant, together with an executed Notice of Exercise, substantially in the form
of EXHIBIT A attached hereto, at the Principal Executive Office, and (ii)
payment to the Company of the aggregate Exercise Price for the number of Warrant
Shares specified in the Notice of Exercise (such aggregate Exercise Price the
"Total Exercise Price"). The Total Exercise Price shall be paid by check or wire
transfer. The Person or Person(s) in whose name(s) any certificate(s)
representing the Warrant Shares which are issuable upon exercise of this Warrant
shall be deemed to become the holder(s) of, and shall be treated for all
purposes as the record holder(s) of, such Warrant Shares, and such Warrant
Shares shall be deemed to have been issued, immediately prior to the close of
business on the date on which this Warrant and Notice of Exercise are presented
and payment made for such Warrant Shares, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to such
Person or Person(s). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time. If this Warrant is exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, deliver the certificate(s) representing the Warrant Shares and a
new Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax (as opposed to any income tax on the Holder with
respect to such issuance) with respect thereto or any other cost incurred by the
Company in connection with the exercise of this Warrant and the related issuance
of Warrant Shares.
2.2 FRACTIONAL SHARES. The Company shall not issue fractional shares of
Common Stock upon any exercise or conversion of this Warrant. As to any
fractional share of Common Stock which the Holder would otherwise be entitled to
purchase from the Company upon such exercise, the Company shall purchase from
the Holder such fractional share at a price equal to an amount calculated by
multiplying such fractional share (calculated to the nearest 1/100th of a share)
by the Fair Market Value of a share of Common Stock on the date of the Notice of
Exercise. Payment of such amount shall be made in cash or by check payable to
the order of the Holder at the time of delivery of any certificate or
certificates arising upon such exercise or conversion.
2.3 RESERVATION OF SHARES; VALIDITY OF SHARES. The Company will reserve
and keep available for issuance upon exercise of this Warrant such number of
shares of Common Stock as shall be sufficient to permit the exercise in whole or
in part of this Warrant. Upon an exercise of this Warrant by the Holder in
compliance with Section 2.1 above, all of the shares issued upon exercise of
this Warrant shall be duly and validly issued, fully paid and non-assessable,
and free and clear of any liens.
3. WARRANT RECORDS AND TRANSFER
3.1 MAINTENANCE OF RECORD BOOKS. The Company shall keep at the Principal
Executive Office a record in which, subject to such reasonable regulations as it
may prescribe, it shall provide for the registration and transfer of this
Warrant. The Company and any Company agent may treat the Person in whose name
this Warrant is registered as the owner of this Warrant for all purposes
whatsoever and neither the Company nor any Company agent shall be affected by
any notice to the contrary.
3.2 RESTRICTIONS ON TRANSFERS.
(a) COMPLIANCE WITH SECURITIES ACT. Upon exercise of this Warrant,
and unless a registration statement covering the issuance of the underlying
Common Stock is on file with the Commission and currently effective, the Holder
shall confirm in writing, by executing the form attached hereto as EXHIBIT B,
that the shares of Common Stock purchased thereby are being acquired for
investment, solely for the Holder's own account and not as a nominee for any
other Person, and not with a view toward distribution or resale.
(b) CERTIFICATE LEGENDS. This Warrant, all shares of Common Stock
issued upon exercise of this Warrant (unless registered under the Securities
Act), shall be stamped or imprinted with a legend in substantially the following
form (in addition to any legends required by applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE
OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, OR (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) DISPOSITION OF WARRANT OR SHARES. With respect to any offer, sale
or other disposition of this Warrant or any shares of Common Stock issued upon
exercise of this Warrant prior to registration under the Securities Act of such
shares, the Holder or the Shareholder, as the case may be, agrees to give
written notice to the Company prior thereto, describing briefly the
circumstances thereof, together with a written opinion of the Holder's or
Shareholder's counsel, to the effect that such offer, sale or other disposition
may be effected without registration under the Securities Act or qualification
under any applicable state securities laws of this Warrant or such shares, as
the case may be, and indicating whether or not under the Securities Act
certificates for this Warrant or such shares, as the case may be, to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the
Securities Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify the Holder or the Shareholder, as the case may be, that it may sell
or otherwise dispose of this Warrant or such shares, as the case may be, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 3.2(c) that the opinion of
counsel for the Holder or the Shareholder, as the case may be, is not reasonably
satisfactory to the Company, the Company shall so notify the Holder or the
Shareholder, as the case may be, promptly after such determination has been made
and shall specify the legal analysis supporting any such conclusion.
Notwithstanding the foregoing, this Warrant or such shares, as the case may be,
may be offered, sold or otherwise disposed of in accordance with Rule 144,
provided that the Company shall have been furnished with such information as the
Company may reasonable request to provide reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing this
Warrant or the shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act, unless in the aforesaid
reasonably satisfactory opinion of counsel for the Holder or the Shareholder, as
the case may be, such legend is not necessary in order to insure compliance with
the Securities Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
(d) WARRANT TRANSFER PROCEDURE. Transfer of this Warrant to a third
party, following compliance with the preceding subsections of this Section 3.2,
shall be effected by execution of the Assignment Form attached hereto as EXHIBIT
C, and surrender of this Warrant at the Principal Executive Office, together
with funds sufficient to pay any applicable transfer tax. Upon receipt of the
duly executed Assignment Form and the necessary transfer tax funds, if any, the
Company, at its expense, shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Warrants representing the
right to purchase a like aggregate number of shares of Common Stock.
(e) TERMINATION OF RESTRICTIONS. The restrictions imposed under this
Section 3.2 upon the transferability of the Warrant and the shares of Common
Stock acquired upon the exercise of this Warrant shall cease (i) with respect to
the Common Shares acquired pursuant to the exercise of this Warrant only, if a
registration statement covering the shares of Common Stock to be issued
effective under the Securities Act at the time of such exercise, or (ii) if the
Company is presented with an opinion of counsel reasonably satisfactory to the
Company that such restrictions are no longer required in order to insure
compliance with the Securities Act, or (iii) if such securities may be
transferred in accordance with Rule 144(k). When such restrictions terminate,
the Company shall, or shall instruct its transfer agent to, promptly and without
expense to the Holder or the Shareholder, as the case may be, issue new
securities in the name of the Holder and/or the Shareholder, as the case may be,
not bearing the legends required under Section 3.2(b). In addition, new
securities shall be issued without such legends if such legends may be properly
removed under the terms of Rule 144(k).
4. ANTIDILUTION PROVISIONS
4.1 SPLITS AND COMBINATIONS. If the Company at any time subdivides any of
its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.2, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
4.2 RECLASSIFICATIONS. If the Company changes any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted.
4.3 LIQUIDATION; DISSOLUTION. If the Company shall dissolve, liquidate or
wind up its affairs, the Holder shall have the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up. If any such dissolution, liquidation or winding up results in any
cash distribution to the Holder in excess of the aggregate Exercise Price for
the shares of Common Stock for which this Warrant is exercised, then the Holder
may, at its option, exercise this Warrant without making payment of such
aggregate Exercise Price and, in such case, the Company shall, upon distribution
to the Holder, consider such aggregate Exercise Price to have been paid in full,
and in making such settlement to the Holder, shall deduct an amount equal to
such aggregate Exercise Price from the amount payable to the Holder.
5. MISCELLANEOUS
5.1 HOLDER NOT A SHAREHOLDER. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) to receive (x) dividends or any other distributions made to shareholders,
(y) notice of or attend any meetings of shareholders of the Company, or (z)
notice of any other proceedings of the Company.
5.2 ENFORCEMENT COSTS. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees (including the allocable costs of in-house counsel).
5.3 NONWAIVER; CUMULATIVE REMEDIES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder and/or any
Shareholder shall operate as a waiver of such right or otherwise
prejudice the rights, powers or remedies of the Holder or such Shareholder. No
single or partial waiver by the Holder and/or any Shareholder of any provision
of this Warrant or of any breach or default hereunder or of any right or remedy
shall operate as a waiver of any other provision, breach, default right or
remedy or of the same provision, breach, default, right or remedy on a future
occasion. The rights and remedies provided in this Warrant are cumulative and
are in addition to all rights and remedies which the Holder and each Shareholder
may have in law or in equity or by statute or otherwise.
5.4 NOTICES. Any notice, request, or other communications required or
permitted hereunder shall be in writing and shall deemed to have been duly given
if sent by facsimile, or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery, addressed (a)
if to the Holder or a Shareholder, to it at the last known address appearing on
the books of the Company maintained for such purpose, or (b) if to the Company,
to it at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, attention:
Chief Executive Officer, telephone (000) 000-0000, facsimile (000) 000-0000,
with a copy (which will not constitute notice) to Xxxxx X. Xxxxx, Esq., 0000
Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, telephone (310)
000-0000, facsimile (000) 000-0000. Any party hereto may by notice so given
change its address for future notice hereunder. All such notices will be deemed
to have been given (i) upon confirmation of delivery, if sent by facsimile, or
(ii) upon delivery, if sent by courier or personal delivery.
5.5 SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon, the
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant, shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the Holder, each Shareholder and their
respective successors and assigns.
5.6 SEVERABILITY.
(a) If, in any action before any court or agency legally empowered to
enforce any term, any term is found to be unenforceable, then such term shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.
(b) If any term is not curable as set forth in subsection (a) above,
the unenforceability of such term shall not affect the other provisions of this
Warrant but this Warrant shall be construed as if such unenforceable term had
never been contained herein.
5.7 WAIVER AND AMENDMENT. Any provision of this Warrant may be amended,
waived, modified or verified, including by way of settlements or otherwise, upon
the written consent of the Company and the holders of at least a
majority-in-interest of all outstanding Warrants issued pursuant to the Note
Agreement with the same terms hereof.
5.8 GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
5.9 EXPRESS NOTICE OF EXERCISE PERIOD. To the extent the Exercise
Period shall be determined under subsection (ii) of such definition hereof,
the Company will provide the Holder 15 days prior written notice, and
thereafter the Holder's right to exercise this Warrant shall continue until
the termination of the Exercise Period.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer on _______________________.
TELEGEN CORPORATION
By:
-------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
SCHEDULE OF EXHIBITS
EXHIBIT A - Notice of Exercise (Section 2.1)
EXHIBIT B - Investment Representation Certificate (Section 3.2(a))
EXHIBIT C - Assignment Form (Section 3.2(d))
EXHIBIT A
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the attached Warrant)
The undersigned registered Holder of the attached Warrant hereby
irrevocably exercises the attached Warrant for and purchases shares of Common
Stock of Telegen Corporation and herewith makes payment therefore in the amount
of US$ _____________, all at the price and on the terms and conditions specified
in the attached Warrant.
The undersigned requests that a certificate (or ___________ certificates in
denominations of ______________shares) for the shares of Common Stock of Telegen
Corporation hereby purchased be issued in the name of and delivered to (circle
one) (a) the undersigned or (b) ___________________, whose address is__________
__________________________ and, if such shares of Common Stock shall not include
all the shares of Common Stock issuable as provided in the attached Warrant,
that a new Warrant of like tenor for the number of shares of Common Stock of
Telegen Corporation not being purchased hereunder be issued in the name of and
delivered to (circle one) (a) the undersigned or (b) ________________________,
whose address is _________________________________________.
Dated:
----------------------------
Signature Guaranteed
------------------------------------------
------------------------------------------
By:
------------------------------------------
(Signature of Registered Holder)
Title:
--------------------------------------
NOTICE: The signature to this Notice of Exercise must correspond with
the name as written upon the face of the attached Warrant in
every particular, without alteration or enlargement or any
change whatever.
EXHIBIT B
INVESTMENT REPRESENTATION CERTIFICATE
Holder:
-----------------------------------------------------------
Company: Telegen Corporation, a California corporation
Security: Common Stock
Amount:
------------------
Date:
------------------
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Holder") represents to the Company as
follows:
(a) The Holder is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Holder is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act");
(b) The Holder understands that the Securities may have not been
registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of the Holder's investment intent as expressed herein. In this connection, the
Holder understands that, in the view of the Securities and Exchange Commission
(the "Commission"), the statutory basis for such exemption may be unavailable if
the Holder's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future;
(c) The Holder further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the Holder
understands that the certificate evidencing the Securities will be imprinted
with the legend referred to in the Warrant under which the Securities are being
purchased unless there exists an effective registration statement for such
securities;
(d) The Holder is aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein;
(e) The Holder further understands that at the time it wishes to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
the Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Holder may be precluded from selling the
Securities under Rule 144 even if the one-year minimum holding period had been
satisfied; and
(f) The Holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Date:
-------------------------------
HOLDER:
------------------------------------
EXHIBIT C
ASSIGNMENT FORM
(To be executed only upon the assignment of the attached Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the attached
Warrant hereby sells, assigns and transfers unto _______________________, whose
address is _____________________________________________all of the rights of the
undersigned under the attached Warrant, with respect to _______________shares of
Common Stock of Telegen Corporation and, if such shares of Common Stock shall
not include all the shares of Common Stock issuable as provided in the attached
Warrant, then a new Warrant of like tenor for the number of shares of Common
Stock of Telegen Corporation not being transferred hereunder be issued in the
name of and delivered to the undersigned, and does hereby irrevocably constitute
and appoint _________________ attorney to register such transfer on the books of
Telegen Corporation maintained for the purpose, with full power of substitution
in the premises.
Dated:
---------------------
Signature Guaranteed
-----------------------------------------
-----------------------------------------
By:
------------------------------------
(Signature of Registered Holder)
Title:
----------------------------------
NOTICE: The signature to this Assignment must correspond with the name
upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatever.
