Ex-10.34
Selling Agreement by and between the Company and
WMS Financial Planners, Inc. and Pacific West Securities, Inc.
dated November 9, 1999
EXHIBIT 10.34
SELLING AGREEMENT
TELEGEN CORPORATION
$ 500,000 Debt Offering
7,885,714 Shares of Common Stock
November 9, 1999
Xx. Xxxxxxx X. Xxxxxx, XX, CFP
President
WMS Financial Planners, Inc.
0000 Xxxxxxxx Xxx Xxxx,
Xxxxxxx, XX 00000
Xx. Xxxxxxxx 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 and sell up to $500,000 in convertible promissory notes (the "Notes")
pursuant to Section 364(b) of the U. S. Bankruptcy Code (the "Debt Offering")
and to issue and sell in the aggregate up to 7,885,714 shares of Common
Stock, no par value, (the "Offering") at a price of $1.75 per share (the
"Shares") for total gross proceeds of up to $13,800,000. 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
exclusive investment banker (the "Adviser") and PW and WMS jointly as its
non-exclusive agents (PW and WMS are referred to herein as the "Selling
Agents") to offer, offer for sale, and sell the Debt Offering and the
Offering, subject to all of the terms, provisions, and conditions of this
Agreement and, as to the Debt Offering, pursuant to all of the terms,
provisions, and conditions set forth in the Convertible Promissory Note (the
"Note"), attached hereto as Exhibit 1, and, as to the Offering, pursuant to
all of the terms, provisions, and conditions set forth in a confidential
Disclosure Memorandum of the Company to be issued on or about December 1,
1999 (the "Memorandum"). Further, the Offering shall be conducted on a "best
efforts, 1,971,429 Shares or none" basis in accordance with an Escrow
Agreement ("Escrow Agreement") to be entered into between the Company and
U.S. Bank as Escrow Agent substantially in the form attached hereto as
Exhibit 2.
(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 the
Memorandum and all exhibits thereto, all in compliance
with Rule 506 of Regulation D under the Securities Act
of 1933, as amended (the "Act"), and with applicable
provisions of the securities laws of the various states
in which it is contemplated that the Shares will be
offered.
b. The Memorandum, as of the date issued, will conform in
all material respects to the applicable provisions of
the Act and the rules and regulations promulgated
thereunder (the "Rules and Regulations"), and, 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 Memorandum and until the
Termination Date (as defined below), and except as
contemplated in the Memorandum, the Company shall
promptly prepare a supplement to the Memorandum 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 Company commenced a reorganization case under
Chapter 11 of the U. S. Bankruptcy Code on October 28,
1998 and expects to file a Plan of Reorganization (the
"Plan") by December 31, 1999. Upon the "Effective Date"
established under the Plan (the "Effective Date"), and
conditioned upon its confirmation by the U. S.
Bankruptcy Court for the Northern District of California
(the "Court"), there will be 6,057,143 validly issued,
fully paid and nonassessable outstanding shares of the
Company's capital stock, including the Shares to be sold
under this Offering upon minimum funding and 13,942,857
validly issued, fully paid and nonassessable outstanding
shares upon maximum funding (after giving effect to a
reverse stock split the Company intends to include as a
provision of the Plan.) The number of Shares covered by
the Offering is stated in post-split shares.
e. 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 Memorandum.
f. The Debt Offering will be made in compliance with
the Section 364(b) of the U. S. Bankruptcy Code and will
be authorized by the Court prior to receipt by the
Company of any proceeds thereof.
(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 Notes and the
Shares, as provided in this Agreement and the Escrow
Agreement, on a best efforts basis. The Company employs
the Selling Agents as its non-exclusive agent commencing
as of the date hereof and until the Effective Date or
June 30, 2000, whichever date is earliest, (which period
may be extended 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 Notes and 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 Notes or the Shares.
b. The Selling Agents shall offer and sell up to $500,000
in Notes for the Company, in accordance with all of the
terms, provisions, and conditions set forth in the Note.
Subject to the receipt by the Company of the proceeds
from the sale thereof, the Selling Agents shall be
entitled to a commission as follows:
(i) A commission of eight percent (8%) of the gross
proceeds of the Debt Offering, payable by the
Company to the Selling Agents in cash or Shares
priced at $1.75 per share, or any combination
thereof, at the option of the Selling Agents;
plus
(ii) An adviser fee of two and one half (2.5%) of the
gross proceeds of the Debt Offering, payable by
the Company to WMS as Advisor. This commission
shall be payable as follows: one percent (1%) in
cash or Shares priced at $1.75 per share, or any
combination thereof, at the option of WMS, and
one and one-half percent (1.5%) in Shares at a
price of $1.75 per share; plus
(iii) A commission of two and one half percent (2.5%)
of the gross proceeds of the Debt Offering,
payable by the Company to PW as Managing Dealer.
This commission shall be payable as follows: one
percent (1%) in cash or Shares priced at $1.75
per share, or any combination thereof, at the
option of PW, and one and one half percent
(1.5%) in Shares at a price of $1.75 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 3 exercisable at $1.75 per Share, at the
rate of one (1) warrant for every thirty-five
dollars ($35.00) in gross proceeds from the Debt
Offering (a maximum of 14,286 warrants if the
full Debt 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 3 exercisable at $1.75 per Share, at the
rate of one (1) warrant for every seventy
dollars ($70.00) in gross proceeds from the Debt
Offering (a maximum of 7,143 warrants if the
full Debt Offering is sold); plus
(vi) An adviser fee payable by the Company to WMS as
Advisor in three (3) year warrants substantially
in the form attached hereto as Exhibit 3
exercisable at $1.75 per Share, at the rate of
one (1) warrant for every seventy dollars
($70.00) in gross proceeds from the Debt
Offering (a maximum of 7,143 warrants if the
full Debt Offering is sold).
Commissions payable hereunder shall be paid by the
Company within fifteen (15) days of receipt by the
Company of the proceeds and an executed Subscription
Agreement and Suitability Questionnaire from any
purchaser(s) of the Notes. 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 Notes. Subject to the limitations of
Section 2(d) 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.
c. The Selling Agents shall offer and sell the Shares
hereunder at a price of $1.75 per Share on the terms of
sale set forth in the Memorandum and the Escrow
Agreement. Subject to the receipt by the Company of the
proceeds from the sale thereof, the Selling Agents shall
be entitled to a commission as follows:
(i) A commission of eight percent (8%) of the gross
proceeds of the sale of the Shares, payable by
the Company to the Selling Agents in cash or
Shares priced at $1.75 per share, or any
combination thereof, at the option of the
Selling Agents.
(ii) An adviser 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. This commission shall be payable as
follows: one percent (1%) in cash or Shares
priced at $1.75 per share, or any combination
thereof, at the option of WMS, and one and one
half percent (1.5%) in Shares at a price of
$1.75 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 Dealer.
This commission shall be payable as follows: one
percent (1%) in cash or Shares priced at $1.75
per share, or any combination thereof, at the
option of PW and one and one half percent (1.5%)
in Shares at a price of $1.75 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 3 exercisable at $1.75 per Share, at the
rate of one (1) warrant for every twenty (20)
Shares sold in the Offering (a maximum of
197,143 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 3 exercisable at $1.75 per Share, at the
rate of one (1) warrant for every forty (40)
Shares sold in the Offering (a maximum of 98,572
warrants if the full Offering is sold); plus
(vi) An adviser fee payable by the Company to WMS as
Advisor in three (3) year warrants substantially
in the form attached hereto as Exhibit 3
exercisable at $1.75 per Share, at the rate of
one (1) warrant for forty (40) Shares sold in
the Offering (a maximum of 98,572 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 and an executed Subscription
Agreement and Suitability Questionnaire from the
purchaser(s) thereof. 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(d) 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 (as to the Shares, not deposit of proceeds into
the escrow fund pursuant to the Escrow Agreement), and
availability of such proceeds for use by the Company as
described in the "Use of Proceeds" section of the
Memorandum.
d. 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 Notes and/or
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 (d), 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.
e. All proceeds received from the sale of the Shares shall
be placed in an escrow, pursuant to the Escrow
Agreement, 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, all
proceeds from this Offering shall be returned to the
buyers of the Shares and the Offering will terminate.
f. It is understood and agreed that the Company, in its
sole discretion, may (i) terminate the Debt Offering
and/or the Offering at any time upon 30 days written
notice, and (ii) reject any subscription for the Notes
or the Shares presented to it by the Selling Agent with
such objection, if any, occurring within 15 days of
receipt by Debtor.
g. Each potential investor in the Debt Offering and 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
Notes or the Shares to the investor. The Company shall
determine, in its sole discretion, whether the potential
investor qualifies as an Accredited Investor as defined
in Rule 501(a) of Regulation D under the Act. If a
potential investor does not qualify as an Accredited
Investor as defined in Rule 501(a) of Regulation D under
the Act, his investment will be promptly refunded. The
Company may also reject any investor in the Offering for
any reason whatsoever.
h. Notes or 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 Selling
Agents as promptly as practicable after receipt by the
Company of the proceeds of such sales.
i. The Company shall have the right, subject to the
approval of the Selling Agents, to compensate finders
who refer potential investors in the Debt Offering
and/or 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 Memorandum 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 Memorandum, 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 Memorandum, 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 Memorandum 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 Memorandum. 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 represents and warrants 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 state in which it will offer or
sell Notes or Shares or is exempt from registration in
each such state.
c. Each person employed or appointed by the Selling Agents
to offer or sell the Notes or 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 state in which it will offer or sell the
Notes or the Shares.
d. Prior to the date of the Memorandum, the Selling Agents
have not made any offers for sale of the Notes or the
Shares.
(6) COVENANTS OF SELLING AGENTS. The Selling Agents covenant that:
a. Each person to whom the Selling Agents will sell the
Notes or the Shares shall be an Accredited Investor (as
defined in Rule 501(a) of Regulation D under the Act).
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 Notes and the Shares
in compliance with Rule 501(c) and 506 of Regulation D
under the Act.
c. The Selling Agents will conduct the Debt Offering and
the Offering in compliance with all relevant provisions
of state securities laws.
d. The Selling Agents will promptly advise the Company of
the states into which they intend to offer the Notes or
the Shares and they shall not offer the Notes or the
Shares in those states unless and until the Company has
determined that the Debt Offering or the Offering, as
applicable, complies with all applicable state
securities laws.
e. The Selling Agents will promptly furnish the Company
with a complete list of all persons or entities to whom
the Notes or the Shares have been offered or sold
together with the completed and executed Subscription
Agreements and Suitability Questionnaires for each
purchaser of the Notes or the Shares.
f. 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 Notes or the
Shares, other than such information and representations
as are either contained in the Memorandum or are not
inconsistent with information set forth in the
Memorandum.
g. In the event either of them learns of any circumstances
or facts which it believes would make the Memorandum
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
Memorandum, 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 Memorandum 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 Agent's 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 Notes and 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 (206)
726-1613 for the Adviser 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.
(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 Notes or 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 NOVEMBER 7, 1999
----------------------------- -----------------------------
Xx. Xxxxxxx X. Xxxxxx, XX, CFP Date
President
Pacific West Securities, Inc.
/s/ XXXXXXXX XXXXXXXX NOVEMBER 7, 1999
----------------------------- -----------------------------
Xx. Xxxxxxxx Xxxxxxxx Date
President
EXHIBIT 1
Form of the Convertible Promissory Note
(See Exhibit 10.39 to this Form 10-KSB)
EXHIBIT 2
ESCROW AGREEMENT
Between
U. S. Bank
and
Telegen Corporation
A California Corporation
This Agreement is entered into as of the ____ day of ______________ ,
1999 among U. S. Bank (the "Escrow Agent") and Telegen Corporation , a
California corporation ("Telegen") with reference to the following:
Whereas, Telegen proposes to offer up to 7,885,714 shares of common
stock (the "Shares") of Telegen, pursuant to a Disclosure Memorandum to be dated
on or about December 1, 1999, as amended or supplemented from time to time (the
"Memorandum"), on a "best efforts, 1,971,429 Shares or more basis"; and
Whereas, Pacific West Securities, Inc., (the "Managing Dealer"), WMS
Financial Planners, Inc. and others (collectively, the "Selling Agents") have
been named as selling agents in connection with the proposed offering of the
Shares and are entitled to certain commissions and selling expense allowances
set forth in that certain selling agreement (the "Selling Agreement") among
Telegen and the Selling Agents dated November 9, 1999; and
Whereas, in compliance with the Memorandum and the Selling Agreement,
Telegen proposes to establish an escrow fund with the Escrow Agent; and
Whereas, the offering of Shares will terminate no later than June 30 ,
2000 (the "Offering Termination Date") and, if subscriptions for at least
1,971,429 Shares are not accepted by Telegen prior to the Offering Termination
Date, no Shares will be sold; and
Whereas, the Escrow Agent has agreed to act as escrow agent in
connection with the proposed offering;
Now, Therefore, it is agreed as follows:
1. Escrow. For a period commencing on the date hereof and terminating 15
days after the Offering Termination Date, the Escrow Agent shall act as escrow
agent and shall receive and disburse the proceeds from the sale of the Shares in
accordance with the terms of this Agreement and the Selling Agreement. The
Escrow Agent hereby represents and warrants to Telegen and to each Selling Agent
that it is a "Bank" as such term is defined by Section 3(a)(6) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
2. Escrow Deposits. Proceeds from the sale of Shares (the "Funds") shall
be received by the Escrow Agent from the Selling Agents and deposited promptly
in the form received by the Escrow Agent into an escrow account to be
established hereunder by the Escrow Agent; provided, however, that Funds
received by the Escrow Agent within 48 hours prior to a scheduled Initial or
Additional Closing Date (as hereinafter defined) may be held by the Escrow Agent
until such closing (but not longer than 48 hours) and, upon joint instruction of
Telegen and the Managing Dealer, deposited directly into Telegen's account or
returned to the subscriber(s).
3. Subscriber Information. Each Selling Agent shall provide the Escrow
Agent with the name, address, social security number or taxpayer identification
number, and the amount to be deposited for each subscriber whose funds are
deposited with the Escrow Agent pursuant to Section 2 hereof. Each Selling Agent
shall also notify the Escrow Agent if a properly executed U.S. Treasury
Department Form W-9 has not been received from any subscriber whose funds are
deposited with the Escrow Agent.
4. Investment of Funds. The Escrow Agent shall invest all Funds
deposited with it hereunder as directed by Telegen, in United States government
securities or securities guaranteed by the United States, certificates of
deposit of banks located in the United States having a net worth of at least
$100 million, or any other investment, provided that any such government
securities, government-guaranteed securities, certificates of deposit or other
investments are permitted by SEC Rule 15c2-4 and the National Association of
Securities, Inc.'s Notice to Members
84-7. Such investments shall be made in a manner consistent with the requirement
that the Funds be available for delivery by the Escrow Agent at the times
described herein. After any deductions made in accordance with Section 10
hereof, income received from investment of the Funds shall be credited to
Telegen. Pursuant to the provisions of this Agreement, the Escrow Agent shall
disburse all income earned (less any amounts required to be withheld by the
Escrow Agent under the federal income tax provisions governing backup
withholding) directly to Telegen.
5. Initial Closing Date. "Qualifying Subscriptions" as used herein shall
mean all subscriptions which have been received by Telegen and which Telegen
intends to accept. If Qualifying Subscriptions have been received for at least
1,971,429 Shares on or before the Offering Termination Date, Telegen shall
notify the Escrow Agent and by instructions (which may accompany such notice or
be provided subsequently) given at least 2 business days in advance, shall
specify the "Initial Closing Date" (which must be not more than 10 days after
the Offering Termination Date), the approximate amount of Qualifying
Subscriptions for Telegen to be accepted as of such Initial Closing Date, the
identity of the subscribers whose subscriptions are anticipated to be accepted
as of the Initial Closing Date, and the approximate amount of the Funds to be
paid to Telegen and to each Selling Agent, respectively. On the Initial Closing
Date, the Escrow Agent, upon telephonic notice from Telegen and the Managing
Dealer that all contingencies for payment have been satisfied as required by SEC
Rule 15c2-4 and NASD Notices to Members 84-64 and 84-7 (which notice Telegen
shall promptly confirm in writing) shall pay to Telegen and each Selling Agent
the amounts specified by such notice, and shall additionally pay to Telegen the
interest earned on such Funds pursuant to Section 4 hereof.
6. Additional Closing Dates. Thereafter, from time to time, Telegen may
notify the Escrow Agent and, by instructions given at least 2 business days in
advance of each, specify Additional Closing Dates, the approximate amount of
Qualifying Subscriptions for such Shares to be accepted as of each Additional
Closing Date, the identity of the Subscribers whose subscriptions are
anticipated to be accepted as of each Additional Closing Date, and the
approximate amount of the Funds to be paid to Telegen and to the Selling Agents,
respectively. On each such Additional Closing Date, the Escrow Agent, upon
telephonic notice from Telegen and the Managing Dealer that all contingencies
for payment have been satisfied as required by SEC Rule 15c2-4 and NASD Notices
to Members 84-64 and 84-7 (which notice Telegen promptly shall confirm in
writing) shall pay to Telegen and each Selling Agent the amounts specified by
such notice, and shall additionally pay to Telegen the interest earned on such
Funds pursuant to Section 4 hereof.
7. Rejected Subscriptions. From time to time, upon instructions from
Telegen identifying those subscribers whose subscriptions have been rejected,
the Escrow Agent shall return such funds to the subscribers so identified
without interest or deduction.
8. Failure to Meet Minimum Subscription. If Qualifying Subscriptions for
at least 1,971,429 Shares have not been received by the Offering Termination
Date, then the Escrow Agent, upon instructions from Telegen, shall promptly
return all collected funds and uncollected checks and other instruments to the
subscribers without interest or deduction.
9. Notice of Extension or Termination of Offering. Upon final
termination of the offering, Telegen shall instruct Escrow Agent pursuant to
Section 5 as to the disposition of any remaining funds and interest thereon.
10. Fees. The Escrow Agent, for services rendered under this Agreement,
shall receive fees as provided below:
The fees of the Escrow Agent shall be deducted from the
aggregate interest earned on the Funds of the subscribers
whose subscriptions are accepted by the Telegen prior to
crediting the interest earned to Telegen pursuant to Section
4, and Telegen shall pay on demand any unpaid portion of the
Escrow Agent's fees. In no event shall the fees of the Escrow
Agent be deducted from or otherwise offset against the Funds
(or interest earned thereon) of subscribers whose
subscriptions are not accepted by Telegen.
11. Resignation. The Escrow Agent shall have the right to resign at any
time and be discharged from its duties as escrow agent hereunder by giving
Telegen at least 30 days prior written notice thereof; provided, however, that
if the Escrow Agent shall exercise its right of resignation hereunder, it shall
receive as its fee for services rendered as escrow agent a fee as provided in
Section 10 hereof.
12. Duties and Responsibilities of Escrow Agent. The Escrow Agent shall
have no duties or responsibilities other than those set forth herein and shall:
(a) Be under no duty to enforce payment of any subscription which is to
be paid to and held by it hereunder;
(b) Be under no duty to accept funds, checks, drafts or instruments for
the payment of money from anyone other than the Selling Agents or Telegen or to
give any receipt therefor except to the Selling Agents or Telegen;
(c) Be protected in acting upon any notice, request, certificate,
approval, consent or other paper believed by it to be genuine, signed by the
proper party or parties and in accordance with the terms of this Agreement and
the Selling Agreement;
(d) Be deemed conclusively to have given and delivered any notice
required to be given or delivered hereunder if the same is in writing, signed by
any one of its authorized officers and mailed, by registered or certified mail,
in a sealed postpaid wrapper, addressed to Telegen at the following address:
Telegen Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, President
(e) Be indemnified and held harmless by Telegen from any and all claims
made against it (including claims regarding the disbursement of funds), or any
and all expenses incurred by it (including reasonable attorneys' fees), by
reason of its acting or failing to act in connection with any of the
transactions contemplated hereby and against any loss it may sustain in carrying
out the terms of this Agreement, except such claims, expenses or losses which
are occasioned by its bad faith, negligence or willful misconduct;
(f) Not be liable for any forgeries or impersonations concerning any
documents to be handled by it.
13. Disputes. If Telegen, the Selling Agents, or anyone else, disagree
on any matter connected with this escrow, (i) Escrow Agent will not have to
settle the matter, (ii) Escrow Agent may wait for a settlement by appropriate
legal proceedings or other means Escrow Agent may require, and in such event
Escrow Agent will not be liable for interest or damage, (iii) Escrow Agent will
be entitled to such reasonable compensation for services, costs and attorneys'
fees as a court may award if Escrow Agent intervenes in or is made a party to
any legal proceedings, (iv) Escrow Agent shall be entitled to hold documents and
funds deposited in this escrow pending settlement of the disagreement by any of
the above means, and (v) Escrow Agent shall be entitled to file an interpleader
action and deposit any Funds or property with an appropriate court.
14. No Legal Advice. This transaction is an escrow and Escrow Agent is
an escrow holder only and as escrow holder Escrow Agent may not give legal
advice as to any conditions or requirements in this escrow.
15. Notices to Escrow Agent. Any written notice required to be given or
delivered to the Escrow Agent shall be deemed conclusively given and delivered
hereunder if the written notice is mailed, by registered or certified mail, in a
sealed postpaid wrapper, addressed as follows:
U. S. Bank
-----------------------------------------
-----------------------------------------
Attention:
-------------------------------
16. Instructions; Copies of Notices. Any instructions or other
communications to the Escrow Agent provided for herein shall be in writing, but
may be in telegraphic or fax form if promptly confirmed in writing. A copy of
this Agreement, or any amendment or addendum hereto, or closing statement or
document deposited in this escrow shall be furnished by Escrow Agent to those
persons outside of this escrow designated from time to time by Telegen.
17. Payments. All disbursements from the escrow account shall be made to
the party concerned, by wire transfer in accordance with the party's direction,
Escrow Agent's cashier's check to such party's order or to deposit to
such party's bank account. All checks, documents and correspondence shall be
mailed to such party at the address given by Telegen.
18. Miscellaneous. Nothing in this Agreement is intended to or shall
confer upon anyone other than the parties hereto any legal or equitable right,
remedy or claim. This Agreement shall be construed in accordance with the laws
of the State of California and may be modified only in writing.
Escrow Agent
By:
-------------------------------
Title:
----------------------------
Telegen Corporation
By:
-------------------------------
Title: President
----------------------------
EXHIBIT 3
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$1.75 per share. The initial
purchase price of US$1.75 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:
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Signature Guaranteed
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By:
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(Signature of Registered Holder)
Title:
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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:
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Company: Telegen Corporation, a California corporation
Security: Common Stock
Amount:
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Date:
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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:
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HOLDER:
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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:
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Signature Guaranteed
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By:
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(Signature of Registered Holder)
Title:
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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.
