<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO SCHEDULE 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(AMENDMENT NO. ___)(1)
SEPRAGEN CORPORATION
------------------------------
(Name of Issuer)
Class A Common Stock
------------------------------
(Title of Class of Securities)
817316-110
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CUSIP Number
<TABLE>
<S> <C> <C>
Vinit Saxena K. Charles Janac With a copy to:
President c/o Smart Machines Inc. Kyle Guse, Esq.
Sepragen Corporation 651 River Oaks Parkway Heller Ehrman White & McAuliffe
30689 Huntwood Drive San Jose, CA 95134 2500 Sand Hill Road, Ste. 100
Hayward, CA 94544 (408) 324-1234 Menlo Park, CA 94025
(510) 476-0650 (650) 234-4215
</TABLE>
- --------------------------------------------------------------------------------
(Name, address and telephone number
of person authorized to receive
notices and communications)
August 18, 1998
------------------------------
(Date of Event which requires
filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(e), 13d-1(f) or 13d-1(g), check the following
box: / /
Note See Rule 13d-7(b) for other parties to whom copies are to be sent.
(Page 1 of 6 Pages)
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1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
Page 2 of 6 Pages
Cusip No.: 817316-110
1) Name of Reporting Persons and S.S. or I.R.S. Identification No.
K. CHARLES JANAC
Social Security No.: ###-##-####
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2) Check the Appropriate Box if a Member of a Group*
(a) / /
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(b) / /
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3) SEC Use Only
--------------------------------------------------------------
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4) Source of Funds: PF
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5) / / Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e)
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6) Citizenship or Place of Organization: United States of America
- --------------------------------------------------------------------------------
7) Sole Voting Power
Number of 1,445,816 shares of Class A Common Stock*
Shares -----------------------------------------------------
Beneficially 8) Shared Voting Power
Owned by None
Each -----------------------------------------------------
Reporting 9) Sole Dispositive Power
Person With 1,445,816 shares of Class A Common Stock*
-----------------------------------------------------
10) Shared Dispositive Power
None
- --------------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person:
1,445,816 shares of Class A Common Stock*
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12) / / Check if the Aggregate Amount in Row (11) Excludes Certain Shares
- --------------------------------------------------------------------------------
Percent of Class Represented by amount in Row (11):
40.1% of outstanding shares of Class A Common Stock, including for purposes of
calculating such percentage the number of shares issuable to the reporting
person.
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Type of Reporting Person IN
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* Consisting of 1,211,149 shares of Class A Common Stock issuable upon
conversion of principal and interest upon maturity of a secured promissory note
and 234,667 shares of Class A Common Stock issuable upon exercise of a warrant.
<PAGE> 3
Page 3 of 6 Pages
Cusip No.: 817316-110
Item 1. Security and Issuer.
This Statement on Schedule 13D (this "Statement") relates to the Class
A Common Stock of Sepragen Corporation, a California corporation (the "Issuer").
As of May 15, 1998 (the most recent practicable date), there were 2,155,254
shares of Class A Common Stock issued and outstanding. As of March 31, 1998 (the
most recent practicable date), there were approximately 102 holders of
record of the Common Stock. The address of the principal executive offices of
the Issuer is 30689 Huntwood Ave., Hayward, CA 94544.
Item 2. Identity and Background.
This Statement is being filed by K. Charles Janac, whose business
address is 651 River Oaks Parkway, San Jose, CA 95134. Mr. Janac is the Chief
Executive Officer and President of Smart Machines, Inc., a developer of high
technology equipment located at 651 River Oaks Parkway, San Jose, CA 95134.
Mr. Janac has not, during the last 5 years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any violation with
respect to such law.
Mr. Janac is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration.
The source of funds was the personal savings of Mr. Janac.
Item 4. Purpose of Transaction.
Securities of the Issuer were acquired for investment purposes. Except
for the effect of conversion of the Note or exercise of the Warrant (as defined
in Item 5), Mr. Janac has no plans or proposals that relate to or would result
in:
(a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer
or of any of its subsidiaries;
<PAGE> 4
Page 4 of 6 Pages
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure, including but not limited to, if the Issuer is a registered
closed-end investment company, any plans or proposals to make any changes in its
investment policy for which a vote is required by Section 13 of the Investment
Company Act of 1940;
(g) Changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
The aggregate number and percentage of the class of securities
identified pursuant to Item 1 beneficially owned by K. Charles Janac is
1,445,816 shares of Class A Common Stock (or 40.1% of the outstanding shares of
Class A Common Stock, including the shares issuable to Mr. Janac for purposes of
calculating such percentage) consisting of (i) 1,211,149 shares issuable upon
conversion of all outstanding principal and interest under the Secured
Promissory Note issued by the Issuer on August 18, 1998 (the "Note") and (ii)
234,667 shares issuable upon exercise of the Warrant issued to Mr. Janac on
August 18, 1998 (the "Warrant"). The principal and interest on Note are
convertible any time on or before December 15, 1998 and the Warrant is
exercisable any time on or before August 18, 2003. The number of shares as to
which there is sole power to vote or to direct the vote, and sole power to
dispose or to direct the disposition is 1,445,816 shares (or 40.1% of the
outstanding shares). Mr. Janac does not share power to vote or to direct the
vote or to dispose or direct the disposition of such shares, except with respect
to the effect, if any, of community property laws. There are no transactions by
K. Charles Janac in the class of securities reported or that are effected during
the past 60 days or since the most recent filing on Schedule 13D.
<PAGE> 5
Page 5 of 6 Pages
Item 6. Contracts, Arrangements, Understanding or Relationships With Respect
to Securities of the Issuer.
There are no contracts, arrangements, understandings or relationships
between Mr. Janac and any other person with respect to the securities of the
Issuer.
Item 7. Material to be filed as Exhibits.
1. Convertible Secured Promissory Note.
2. Warrant to Purchase Class A Common Stock.
<PAGE> 6
Page 6 of 6 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: August 28, 1998
By: /s/ K. CHARLES JANAC
-------------------------------------
K. Charles Janac
<PAGE> 7
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 Convertible Secured Promissory Note
2 Warrant to Purchase Class A Common Stock
<PAGE> 1
EXHIBIT 1
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED THE "ACT" SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II)
RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN
EXCHANGE FOR THIS NOTE.
SEPRAGEN CORPORATION
NO. 1 $550,000
DATED: AUGUST 18, 1998
CONVERTIBLE SECURED PROMISSORY NOTE
SEPRAGEN CORPORATION, a California corporation (the "Company"), for value
received, hereby promises to pay to K. Charles Janac or registered assigns (the
"Payee") on December 15, 1998 (the "Maturity Date") at the offices of the
Company, 30689 Huntwood Avenue, Hayward, California 94544, the principal amount
of Five Hundred Fifty Thousand Dollars ($550,000), including interest at the
rate of nine point seventy-five percent (9.75%) per annum accrued through the
Maturity Date, in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts, unless converted earlier into Class A Common Stock of the Company.
This Note is issued pursuant to a Subscription Agreement dated as of August
18, 1998 between the Company and the Payee (the "Subscription Agreement"), a
copy of which agreement is available for inspection at the Company's principal
office. Notwithstanding any provision to the contrary contained herein, this
Note is subject and entitled to certain terms, conditions, covenants and
agreements contained in the Subscription Agreement. Any transferee or
transferees of the Note, by their acceptance hereof, assume the obligations of
the Payee in the Subscription Agreement with respect to
<PAGE> 2
the conditions and procedures for transfer of the Note. Reference to the
Subscription Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both principal and interest hereon as provided
herein.
On or before the Maturity Date, the Payee may elect to receive payment of
the principal amount of this Note or any part thereof and accrued interest (the
"Conversion Amount") in the form of Class A Common Stock (the "Equity
Conversion"). In an Equity Conversion, the Payee shall receive such number of
fully paid and non-assessable shares of the Class A Common Stock as is obtained
by dividing the Conversion Amount by $0.46875 (the "Conversion Price").
Upon the conversion of all principal and interest hereunder, Payee shall
have no further rights under this Note except to surrender the same for a
certificate or certificates representing the securities into which this Note
shall have automatically converted. As soon as practicable thereafter, the
Company shall, at its expense, cause to be issued in the name of the Payee, a
certificate or certificates for the number of shares of the securities to which
Payee shall be entitled to receive (bearing such legends as may be required by
applicable securities laws). No fractional shares shall be issued on conversion
of this Note; if any fractional shares would result from such conversion, the
Company shall pay the cash value thereof to Payee based on the Equity Conversion
Price.
1. Prepayment. The principal amount of this Note may be prepaid by the
Company in whole or in part, without penalty, at any time, unless the Holder
elects an Equity Conversion.
2. Covenants of Company. The Company covenants and agrees that, so long
as this Note shall be outstanding, it will:
(a) Do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and comply with all laws applicable to the Company, except where the
failure to comply would not have a material adverse effect on the Company.
(b) At all times reasonably maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good repair, working
order and condition, excluding normal wear and tear and Act of God, and from
time to time make all needful and proper repairs, renewals, replacements,
betterments and improvements thereto as shall be reasonably required in the
conduct of its business.
(c) To the extent necessary for the operation of its business, keep
adequately insured by all financially sound reputable insurers, all property of
a character usually insured by similar corporations and carry such other
insurance as is usually carried by similar corporations.
2
<PAGE> 3
(d) At all times keep true and correct books, records and accounts.
3. Events of Default.
(a) If one or more of the events listed in this Section 3, herein
called events of default, shall happen and be continuing, the holder of this
Note may send a Notice of Default to Company. Company shall have thirty (30)
days from the date of receipt of the Notice of Default to cure the default;
provided however, if an event of default was caused by an Act of God, Company
shall have sixty (60) days from the date of receipt of the Notice of Default to
cure the default (the "Cure Period"). If Company fails to completely cure the
default during the Cure Period, this Note shall become and be due and payable
upon written demand made by the holder hereof.
(1) Default in the payment of the principal and accrued interest
on this Note or any of the Notes issued pursuant to 5(a) hereof when and as the
same shall become due and payable, whether by acceleration or otherwise.
(2) Application for, or consent to, the appointment of a
receiver, trustee, or liquidator of the Company or of its property.
(3) General assignment by the Company for the benefit of
creditors.
(4) Filing by the Company of a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization, or an arrangement with
creditors or the failure by the Company generally to pay debts, as they become
due.
(5) Entering against the Company of a court order approving a
petition filed against it under the Federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within sixty (60)
days.
(6) Any representation or warranty of the Company contained in
the Subscription Agreement, Security Agreement, Form UCC-1 related to the
obligations hereunder, Patent Mortgage related to the obligations hereunder or
any related documents (collectively, the "Loan Documents") is false or
misleading in any material respect on the date made.
(7) Default by the Company in any obligation under the Loan
Documents the effect of which is reasonably likely to reduce the Company's
ability to repay principal or interest under the Note when due.
(8) The Company voluntarily or involuntarily dissolves or is
dissolved.
3
<PAGE> 4
(9) The Company is enjoined, restrained, or in any way prevented
by the order of any court or any administrative or regulatory agency from
conducting all or any material part of its business affairs the effect of which
is reasonably likely to reduce the Company's ability to repay principal or
interest under the Note when due.
(10) The violation by the Company of any material order,
regulation, writ, injunction, or decrees of any government, governmental
instrumentality or court, domestic or foreign, the effect of which is reasonably
likely to reduce the Company's ability to repay principal or interest under the
Note when due.
(b) The Company agrees that notice of the occurrence of any of event
of default will be promptly given to the holder at his or her registered address
by certified mail.
(c) In case any one or more of the events of default specified above
shall happen and be continuing, the holder of this Note may proceed to protect
and enforce his rights by suit in the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power granted
in this Note or may proceed to enforce the payment of this Note or to enforce
any other legal or equitable rights as such holder.
4. Amendments. This Note may only be amended with the written consent of
the holder.
5. Miscellaneous.
(a) This Note has been issued by the Company pursuant to
authorization of the Board of Directors of the Company.
(b) The Company may consider and treat the person in whose name this
Note shall be registered as the absolute owner thereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. The registered owner of this Note
shall have the right to transfer it by assignment (subject to the limitations on
transfer contained in the Subscription Agreement) and the transferee thereof
shall upon his registration as owner of this Note, become vested with all the
powers and rights of the transferor. Registration of any new owner shall take
place upon presentation of this Note to the Company at its offices, 30689
Huntwood Avenue, Hayward, California 94544, together with a duly authenticated
assignment. In case of transfer by operation of law, the transferee agrees to
notify the Company of such transfer and of his address and to submit appropriate
evidence regarding the transfer so that this Note may be registered in the name
of the transferee. This Note is transferable only on the books of the Company by
the holder hereof, in person or by attorney, on the surrender hereof, duly
endorsed. Communications sent to any registered owner shall be effective as
against all holders or transferees of the Note not registered at the time of
sending the Communication.
4
<PAGE> 5
(c) Payments of interest shall be made as specified above to the
registered owner of this Note. Payment of principal and interest shall be made
to the registered owner of this Note upon presentation of this Note upon or
after maturity.
(d) This Note shall be construed and enforced in accordance with the
laws of the State of California.
IN WITNESS WHEREOF the Company has caused this Note to be signed in its
name by its President.
SEPRAGEN CORPORATION
By: /s/ VINIT SAXENA
-------------------------------------
Title: President
----------------------------------
5
<PAGE> 1
EXHIBIT 2
THE SECURITY EVIDENCED BY THIS WARRANT OR THE SECURITIES TO BE PURCHASED UNDER
THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES.
THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENT UNDER SUCH ACT.
VOID AFTER 5 P.M., CALIFORNIA TIME ON AUGUST 18, 2003
WARRANT TO PURCHASE
CLASS A COMMON STOCK
SEPRAGEN CORPORATION, a California corporation (the "Company"), hereby
certifies that K. CHARLES JANAC or his registered assign(s) (collectively
referred to as the "Holder") is entitled, subject to the terms set forth below,
to purchase from the Company Two Hundred Thirty Four Thousand Six Hundred and
Sixty Seven (234,667) fully paid and nonassessable shares of the Class A Common
Stock of the Company (the "Shares") at the purchase price of $0.46875 per share
(the "Purchase Price"). Both the Purchase Price and such number of Shares are
subject to adjustments as described below.
1. EXERCISE OF WARRANT; RESERVATION OF SHARES. Subject to the
restrictions herein, this warrant may be exercised in whole or in part by the
Holder at any time before 5 p.m., California local time, on August 18, 2003 by
the surrender of this Warrant, together with the Notice of Exercise attached
hereto as Attachment 1, duly completed and executed, at the principal office of
the Company, accompanied by payment in cash or by check in full with respect to
the Shares being purchased. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. The Company shall at all times after the date of
this Warrant and until expiration of this Warrant reserve for issuance and
delivery upon
<PAGE> 2
issuance of this Warrant the number of Shares of Common Stock required for
exercise of this Warrant.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within thirty
(30) days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of, and
delivered to, the Holder hereof, or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct, (i) a certificate or certificates
for the number of Shares to which such Holder shall be entitled upon such
exercise and (ii) if this Warrant is not exercised in full, a warrant containing
terms identical to herein, provided the number of Shares subject to this Warrant
shall be reduced by the number of Shares exercised by delivery of the Notice of
Exercise pursuant to Section 1.
3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price
and the total number of Warrant Shares shall be subject to adjustment from time
to time upon the occurrence of certain events described in this Section 3. Upon
each adjustment of the Exercise Price, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Exercise Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of any class of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
issuable hereunder proportionately increased, and conversely, in case the
outstanding shares of any class of the Common Stock of the Company shall be
combined into a smaller number of shares,
2
<PAGE> 3
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares issuable hereunder
proportionately decreased.
3.2 RECLASSIFICATION. If any reclassification of the capital stock of
the Company or any reorganization, consolidation, merger, or any sale, lease,
license, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all, of the business and/or assets of the
Company (the "Reclassification Events") shall be effected in such a way that
holders of any class of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
Reclassification Event lawful and adequate provisions shall be made whereby the
Holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of Common Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby) such shares
of stock, securities, or other assets or property as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby.
In any Reclassification Event, appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Exercise Price and of the number of Warrant Shares), shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities,
or assets thereafter deliverable upon the exercise hereof.
3.3 ADJUSTMENTS UPON ISSUANCE OF ADDITIONAL STOCK. If the Company
shall issue "Additional Stock" (as defined below) for a consideration per share
less than the Exercise Price then in effect on the date and immediately prior to
such issue, then and in such event, such Exercise Price shall be reduced
concurrently with such issue, to a price equal to the price per share for such
Additional Stock.
3
<PAGE> 4
For purposes of this subsection "Additional Stock" shall mean all common
stock issued by the Corporation after the date hereof other than common stock
issued or issuable at any time (1) upon conversion of any preferred stock; (2)
upon exercise of options issued to officers, directors, and employees of, and
consultants to, the Company after the date hereof and approved by the Board of
Directors pursuant to an employee stock option plan; or (3) upon exercise of
Warrants outstanding on the date hereof; (4) after August 18 1999; (5) provided,
however, that the company shall not be deemed to have issued additional stock
until after the Company has issued securities with aggregate proceeds to the
Company of $500,000.
For the purpose of making any adjustment in the Exercise Price as provided
above, the consideration received by the Company for any issue or sale of
Additional Stock will be computed:
(a) to the extent it consists of cash, as the amount of cash
received by the Company before deduction of any offering expenses payable by the
Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issue or
sale;
(b) to the extent it consists of property other than cash, at
the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(c) if common stock is issued or sold together with other stock
or securities or other assets of the Company for a consideration which covers
both, as the portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to such
common stock.
If the Company (1) grants any rights or options to subscribe for, purchase,
or otherwise acquires common stock, or (2) issues or sells any security
convertible into common stock, then, in each case, the price per share of common
stock issuable on the
4
<PAGE> 5
exercise of the rights or options or the conversion of the securities will be
determined by dividing the total amount, if any, received or receivable by the
Company as consideration for the granting of the rights or options or the issue
or sale of the convertible securities, plus the minimum aggregate amount of
additional consideration payable to the Company on exercise or conversion of the
securities, by the maximum number of shares of common stock issuable on the
exercise of conversion. Such granting or issue or sale will be considered to be
an issue or sale for cash of the maximum number of shares of common stock
issuable on exercise or conversion at the price per share determined under this
subsection, and the Exercise Price will be adjusted as above provided to reflect
(on the basis of that determination) the issue or sale. No further adjustment of
the Exercise Price will be made as a result of the actual issuance of common
stock on the exercise of any such rights or options or the conversion of any
such convertible securities.
Upon the redemption or repurchase of any such securities or the expiration
or termination of the right to convert into, exchange for, or exercise with
respect to, common stock, the Exercise Price will be readjusted to such price as
would have been obtained had the adjustment made upon their issuance been made
upon the basis of the issuance of only the number of such securities as were
actually converted into, exchanged for, or exercised with respect to, common
stock. If the purchase price or conversion or exchange rate provided for in any
such security changes at any time, then, upon such change becoming effective,
the Exercise Price then in effect will be readjusted forthwith to such price as
would have been obtained had the adjustment made upon the issuance of such
securities been made upon the basis of (1) the issuance of only the number of
shares of common stock theretofore actually delivered upon the conversion,
exchange or exercise of such securities, and the total consideration received
therefor, and (2) the granting or issuance, at the time of such change, of any
such securities then still outstanding for the consideration, if any, received
by the Company therefor and to be received on the basis of such changed price or
rate.
5
<PAGE> 6
3.4 NOTICE OF ADJUSTMENT. Upon any adjustment of the Exercise Price
or any increase or decrease in the number of Warrant Shares, the Company shall
give written notice thereof, by first class mail postage prepaid, addressed to
the registered Holder of this Warrant at the address of such Holder as shown on
the books of the Company. The notice shall be prepared and signed by the
Company's Chief Financial Officer and shall state the Exercise Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
4. NOTICES OF RECORD DATE, ETC. In the event of any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution (the "Distribution") the Company will
mail or cause to be mailed to the Holder of the Warrant a notice specifying the
date of any such Distribution and stating the amount and character of such
Distribution. Such notice shall be mailed at least ten (10) days prior to the
date therein specified.
5. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company or, in the case of such mutilation, upon surrender and cancellation
of this Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new warrant of like tenor.
6. NEGOTIABILITY, ETC. This Warrant may be transferred in whole or in
part by the Holder to any person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrant or the Shares may
be legally transferred without registration and without the delivery of a
current prospectus under the Securities
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Act of 1933, as amended (the "Act"), as well as applicable State Securities laws
with respect thereto, and then only against receipt of an agreement of such
person to comply with the provisions of this section with respect to any resale
or disposition of such securities unless, in the opinion of counsel to the
Company, such agreement is not required. The terms hereof shall be binding upon
the executors, administrators, heirs and assigns of the Holder.
7. NOTICES, ETC. All notices and other communication shall be mailed by
first class mail, postage prepaid, at such address as may have been furnished in
writing by the receiving party.
8. GOVERNING LAW HEADINGS. This Warrant is being delivered in the State
of California and shall be construed and enforced in accordance with and
governed by the laws of such state. The headings of this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
9. CONVERSION OF WARRANT.
9.1 RIGHT TO CONVERT. In addition to, and without limiting the other
rights of the Holder hereunder, the Holder shall have the right (the "Conversion
Right") to convert this Warrant or any part hereof into Shares at any time and
from time to time during the term hereof. Upon exercise of the Conversion Right
with respect to a particular number of Shares (the "Converted Shares"), the
Company shall deliver to the Holder, without payment by the Holder, or any
Purchase Price or any cash or other consideration, that number of Shares
computed using the following formula:
X = B-A
---
Y
Where: X = The number of Shares to be issued to the Holder.
Y = The fair Market Value of one Share as of the Conversion
Date. If the Company's Common Stock is publicly
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traded at the time of exercise of this Warrant, the Fair
Market Value shall be the average closing price of the
Company's Common Stock on the five trading days prior to
the Conversion Date. If the Company's Common Stock is not
publicly traded at the time of exercise of this Warrant,
the Fair Market Value of one Share as of the Conversion
Date shall be determined in good faith by the Board of
Directors of the Company.
B = The Aggregate Fair Market Value (i.e., Fair Market Value
x Converted Shares)
A = The Aggregate Purchase Price (i.e., Purchase Price x
Converted Shares)
9.2 METHOD OF EXERCISE. The Conversion Right may be exercised by the
Holder by the surrender of this Warrant at the Company's principal office,
together with a written statement (the "Conversion Statement") specifying that
the Holder intends to exercise the Conversion Right and indicating the number of
Shares to be acquired upon exercise of the Conversion Right. Such conversion
shall be effective upon the Company's receipt of this Warrant, together with the
Conversion Statement, or on such later date as is specified in the Conversion
Statement (the "Conversion Date"). Certificates for the Shares so acquired shall
be delivered to the Holder within a reasonable time, not exceeding thirty (30)
days after the Conversion Date. If applicable, the Company shall, upon surrender
of this Warrant for cancellation, deliver a new Warrant evidencing the rights of
the Holder to purchase the balance of the Shares which Holder is entitled to
purchase hereunder. The issuance of Shares upon exercise of this Warrant shall
be made without charge to the Holder for any issuance tax with respect thereto
or any other cost incurred by the Company in connection with the conversion of
this Warrant and the related issuance of Shares.
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Date: August 18, 1998 SEPRAGEN CORPORATION
By: /s/ VINIT SAXENA
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Its: President
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ATTACHMENT I
NOTICE OF EXERCISE
TO: SEPRAGEN CORPORATION
30689 HUNTWOOD AVENUE
HAYWARD, CA 94544
1. The undersigned hereby elects to acquire _________________ shares of
Class A Common Stock of SEPRAGEN CORPORATION pursuant to the terms of the
attached Warrant, by exercise or conversion of _________________ shares and
tenders herewith payment of the Purchase Price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other name as
is specified below:
----------------------------------------
NAME
----------------------------------------
ADDRESS
--------------------------------------
DATE
(Name of Warrant Holder)
By:
----------------------------------
Title:
-------------------------------
(Name of purchaser, and title and signature
of authorized person)
Social Security Number or Federal
Employer ID Number:
--------------------------------------
