<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
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 Eliezer Sternheim, Ph.D. With a copy to:
President Avant! Corporation Lisa Goldman, Esq.
Sepragen Corporation 46871 Bayside Parkway Heller Ehrman White & McAuliffe
30689 Huntwood Drive Fremont, CA 94538 2500 Sand Hill Road
Hayward, CA 94544 (510) 413-8894 Menlo Park, CA 94025
(510) 476-0650 (650) 234-4218
- -------------------------------------------------------------------------------------------
(Name, address and telephone number
of person authorized to receive
notices and communications)
</TABLE>
November 27, 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-1(e), 13d-1(f) or 13d-1(g), check the following
box: [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of this schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
- -----------
(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).
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Page 2 of 6 Pages
1) Name of Reporting Persons and S.S. or I.R.S. Identification No.
ELIEZER STERNHEIM
Social Security No.: ###-##-####
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2) Check the Appropriate Box if a Member of a Group
(a) [ ] __________________________________________________________________
(b) [ ] __________________________________________________________________
- --------------------------------------------------------------------------------
3) SEC Use Only ______________________________________________________________
- --------------------------------------------------------------------------------
4) Source of Funds: PF
- --------------------------------------------------------------------------------
5) [ ] Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
- --------------------------------------------------------------------------------
6) Citizenship or Place of Organization: UNITED STATES OF AMERICA
- --------------------------------------------------------------------------------
Number of 7) Sole Voting Power
Shares 572,916 SHARES OF CLASS A COMMON STOCK*
Beneficially ------------------------------------------------------------
Owned by
Each 8) Shared Voting Power
Reporting NONE
Person With ------------------------------------------------------------
9) Sole Dispositive Power
572,916 SHARES OF CLASS A COMMON STOCK*
------------------------------------------------------------
10) Shared Dispositive Power
NONE
- --------------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person:
572,916 shares of Class A Common Stock*
- --------------------------------------------------------------------------------
12) [ ] Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
- --------------------------------------------------------------------------------
13) Percent of Class Represented by amount in Row (11): 16.3%
- --------------------------------------------------------------------------------
14) Type of Reporting Person IN
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- --------------
* Consisting of 520,833 shares of Class A Common Stock issued pursuant to a
subscription agreement and 52,083 shares of Class A Common Stock issuable upon
exercise of a warrant.
<PAGE> 3
Page 3 of 6 Pages
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 December 24, 1998 (the most recent practicable date), there were 3,457,544
shares of Class A Common Stock issued and outstanding (consisting of 2,155,254
as reported on Issuer's 10Q filed on November 13, 1998; 781,457 issued to K.
Charles Janac pursuant to his exercise of a convertible note on December 8,
1998; and 520,833 issued to Eliezer Sternheim pursuant to a subscription
agreement dated November 27, 1998). 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 Eliezer Sternheim, Ph.D., whose
business address is 46871 Bayside Parkway, Fremont, CA 94538. Mr. Sternheim
works for Avanti Corporation, a developer of electronic design automation tools
located at 46871 Bayside Parkway, Fremont, CA 94538.
Mr. Sternheim has not, during the last five years, convicted in a
criminal proceeding nor 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. Sternheim is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration.
The source of the funds, consisting of cash in the amount of
$250,000.00, was the personal savings of Mr. Sternheim.
Item 4. Purpose of Transaction.
Securities of the Issuer were acquired for investment purposes.
Except for the effect of exercise of the Warrant held by Mr. Sternheim to
purchase additional shares of Class A Common Stock of the Issuer (the
"Warrant"), Mr. Sternheim has no plans or proposals that relate 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 of liquidation, involving the Issuer or any of its subsidiaries;
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Page 4 of 6 Pages
(c) A sale or transfer of a material amount of assets of the Issuer or
of any of its subsidiaries;
(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 Eliezer Sternheim is 572,916
shares of Class A Common Stock (or 16.3% of the outstanding shares of Class A
Common Stock, including the shares issuable to Mr. Sternheim upon exercise of
the Warrant for purposes of calculating such percentage) consisting of (i)
520,833 issued pursuant to the Subscription Agreement executed by Mr. Sternheim
and the Issuer on November 27, 1998 (the "Subscription Agreement") and (ii)
52,083 shares issuable upon exercise of the Warrant issued to Mr. Sternheim on
November 27, 1998. The Warrant is exercisable any time on or before December 1,
2001. 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 572,916
shares (or 16.3% of the outstanding shares of Class A Common Stock). Mr.
Sternheim 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
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Page 5 of 6 Pages
by Mr. Sternheim in the class of securities reported or that were effected
during the past 60 days or since the most recent filing on Schedule 13D.
Item 6. Contracts, Arrangements, Understanding or Relationships With Respect to
Securities of the Issuer.
There are no contracts, arrangements, understandings, or relationships
between Mr. Sternheim and any other person with respect to the securities of
the Issuer.
Item 7. Material to be filed as Exhibits.
1. Subscription Agreement.
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: February 16, 1999
By: /s/ ELIEZER STERNHEIM
-------------------------
Eliezer Sternheim
<PAGE> 7
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 DECEMBER 1, 2001
WARRANT TO PURCHASE
CLASS A COMMON STOCK
SEPRAGEN CORPORATION, a California corporation (the "Company"), hereby
certifies that Eli Sternheim 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 Fifty-Two Thousand Eighty-Three (52,083) fully paid
and nonassessable shares of the Class A Common Stock of the Company (the
"Shares") at the purchase price of $0.48 per share (the "Exercise Price"). Both
the Exercise 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 December 1, 2001 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 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.
<PAGE> 8
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, 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.
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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 December 1, 2001; (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 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
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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 Exercise
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.
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 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
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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.
Dated: 11-27-98
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SEPRAGEN CORPORATION
By: /s/ VINIT SAXENA
----------------------------
Vinit Saxena, President
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ATTACHMENT 1
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 Exercise
Price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of Class A Common Stock in the name of the undersigned or in such other name as
is specified below:
------------------------
Name
--------------------------------------
Address
Dated:
-----------------
------------------------------------------
Name of Warrant Holder
By:
---------------------------------------
Title:
------------------------------------
(Name of Purchaser and title and signature
of authorized person)
------------------------------------------
Social Security Number of
Federal Employer ID Number
Page 6
<PAGE> 13
SEPRAGEN CORPORATION
SUBSCRIPTION AGREEMENT made as of this 27 day of November, 1998, between
Sepragen Corporation, a California corporation with its principal offices at
30689 Huntwood Avenue, Hayward, CA 94544 (the "Company") and the undersigned
(the "Subscriber").
WHEREAS, in exchange for cash in the amount of Two Hundred Fifty
Thousand Dollars ($250,000.00), the Company desires to issue to the Subscriber
520,833 shares of Class A Common Stock of the Company (the "Shares") and 52,083
common stock purchase warrants (the "Warrants") in the form included in the form
of Warrant to Purchase Class A Common Stock (the "Warrant Agreement") attached
hereto (collectively the "Shares and Warrants") on the terms and conditions
hereinafter set forth and the Subscriber agrees to acquire such Shares and
Warrants.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
1. SUBSCRIPTION FOR SHARES AND WARRANTS AND REPRESENTATIONS BY
SUBSCRIBER.
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from the Company the
Shares and Warrants at a price equal to $250,000 and the Company agrees to sell
such Shares and Warrants to the Subscriber for said purchase price. The purchase
price is payable by certified or bank check made payable to Sepragen
Corporation, or by wire transfer of funds, contemporaneously with the execution
and delivery of this Subscription Agreement. The Shares and Warrants will be
delivered by the Company within thirty (30) days following the execution of this
Agreement.
1.2 The Subscriber recognizes that the purchase of Shares and
Warrants involves a high degree of risk in that (i) the Company has incurred
losses since inception and requires substantial funds in addition to the
proceeds derived from this Offering; (ii) an investment in the Company is highly
speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Shares and Warrants;
(iii) he may not be able to liquidate his investment; (iv) near-term
transferability of the securities comprising the Shares and Warrants is
extremely limited; and (v) in the event of a disposition, an investor could
sustain the loss of all or a portion of his investment. Such risks are more
fully set forth in the Company's filings under the Securities Exchange Act of
1934, including the Company's Reports on Form 10-KSB for the 1997 fiscal year
and its Report on Form 10-KSB for the fiscal quarter ended September 30, 1998
(the "Reports").
1.3 The Subscriber represents that he is an "accredited
investor" as such term in defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by his
responses to the Confidential Purchaser Questionnaire, and that he is able to
bear the economic risk of an investment in the Shares and Warrants.
1.4 The Subscriber acknowledges that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney or accountant to
read all of the documents furnished or made
<PAGE> 14
available by the Company to him and to evaluate the merits and risks of such an
investment on his behalf, and that he recognizes the highly speculative nature
of this investment.
1.5 The Subscriber acknowledges receipt and careful review of the
Reports and the attachments thereto and hereby represents that he has been
furnished by the Company during the course of this transaction with all
information regarding the Company which he had requested or desired to know;
that he has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering, and any additional
information which he had requested.
1.6 The Subscriber hereby acknowledges that this Offering has not
been reviewed by the United States Securities and Exchange Commission ("SEC")
because of the Company's representations that this is intended to be a
nonpublic offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber
represents that the Shares and Warrants are being purchased for his own account
for investment and not for distribution or resale to others. The Subscriber
agrees that he will not sell or otherwise transfer such securities unless they
are registered under the Act or unless an exemption from such registration is
available.
1.7 The Subscriber understands that the Shares and Warrants have not
been registered under the Act by reason of a claimed exemption under the
provisions of the Act which depends, in part, upon his investment intention. In
this connection, the Subscriber understands that it is the position of the SEC
that the statutory basis for such exemption would not be present if his
representation merely meant that his present intention was to hold such
securities for a short period prior to resale. The Subscriber realizes that, in
the view of the SEC, a purchase now with an intent resell would represent a
purchase with an intent inconsistent with his representation to the Company, and
the SEC might regard such a sale or disposition as a deferred sale to which such
exemptions are not available.
1.8 The Subscriber understands that there is no public market for
the securities comprising the Shares and Warrants. The Subscriber understands
that Rule 144 (the "Rule") promulgated under the Act requires, among other
conditions, a holding period prior to the resale (in limited amounts) of
securities acquired in a non-public offering without having to satisfy the
registration requirements under the Act. The Subscriber understands that while
the Company agrees to exercise its best efforts to fulfill any reporting
requirements under the Securities Exchange Act of 1934, as amended, or
disseminate to the public any current financial or other information concerning
the Company, as is required by the Rule as one of the conditions of its
availability there can be no assurance that it will be able to meet such
reporting requirements. The Subscriber understands and hereby acknowledges that
the Company is under no obligation to register the securities comprising the
Shares and Warrants under the Act, with the exception of certain registration
rights set forth in Article IV herein. The Subscriber consents that the Company
may, if it desires, permit the transfer of the securities comprising the Shares
and Warrants or issuable upon exercise thereof out of his name only when his
request for transfer is accompanied by an opinion of counsel reasonably
satisfactory to the Company that neither the sale nor the proposed transfer
results in a violation of the Act or any applicable state "blue sky"
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<PAGE> 15
laws (collectively "Securities Laws") and the Subscriber agrees to hold the
Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as
a result of any misrepresentation made by him contained herein or in the
Confidential Purchaser Questionnaire or any sale or distribution by the
undersigned Subscriber in violation of any Securities Laws.
1.9 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Shares and Warrants and the Class A
Common Stock issuable upon exercise of such Warrants stating that they have not
been registered under the Act and setting forth or referring to the restrictions
on transferability and sale thereof.
1.10 The Subscriber understands that the Company will review this
Subscription Agreement and is hereby given authority by the undersigned to call
his bank or place of employment or otherwise review the financial standing of
the Subscriber; and it is further agreed that the Company reserves the
unrestricted right to reject or limit any subscription and to close the offer
at any time.
1.11 The Subscriber hereby represents that the address of Subscriber
furnished by him at the end of this Subscription Agreement is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
1.12 The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Conduct Rules, receipt of which must be acknowledged by
such firm on the signature page hereof.
1.13 The Subscriber hereby represents that, except as set forth in
the Reports, no representations or warranties have been made to the Subscriber
by the Company or any agent, employee or affiliate of the Company and in
entering into this transaction, the Subscriber is not relying on any
information, other than that contained in the Reports and the results of
independent investigation by the Subscriber.
1.14 The Subscriber agrees that he will sell the Securities pursuant
to a registration statement (i) only for the purposes of raising funds or
diversifying his portfolio and (ii) only to or through broker dealers, from
time to time in negotiated transactions, or otherwise in compliance with
applicable laws.
2. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that:
2.1 The Company is a corporation duly organized, existing and in
good standing under the laws of the State of California and has the corporate
power to conduct the business which it conducts and proposes to conduct.
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2.2 The execution, delivery and performance of this Subscription
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Shares and Warrants and the securities contained therein will
have been duly taken and approved.
2.3 The Shares and Warrants have been duly and validly authorized and
when issued and paid for in accordance with the terms hereof, will be valid and
binding obligations of the Company enforceable in accordance with their
respective terms.
2.4 The Company will at all times during the term of the Warrants
have authorized and reserved a sufficient number of shares of Class A Common
Stock no par value, to provide for exercise of the Warrants.
2.5 The Company has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to the conduct
of its business; such licenses, permits and other governmental authorizations
obtained are in full force and effect; and the Company is in all material
respects complying therewith.
2.6 The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations of
the Company.
2.7 The Company is not in violation of or default under, nor will the
execution and delivery of this Subscription Agreement, the issuance of the
Shares and Warrants and the incurrence of the obligations herein and therein set
forth and the consummation of the transactions herein or therein contemplated,
result in a violation of, or constitute a default under, the certificate of
incorporation or by-laws, in the performance or observance of any material
obligations, agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any material contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement or instrument
to which the Company is a party or by which it or any of its properties may be
bound or in violation of any material order, regulation, writ, injunction, or
decree of any government, governmental instrumentally or court, domestic or
foreign.
2.8 The financial information contained in the Reports previously
furnished by the Company to the Subscriber presents fairly the financial
condition of the Company as of the date and for the periods indicated.
3. DELIVERY OF SHARES AND WARRANTS AND QUALIFIED SMALL BUSINESS
CORPORATION.
3.1 The Subscriber hereby authorizes and directs the Company to
deliver the securities to be issued to such Subscriber pursuant to this
Subscription Agreement either to the residential or business address indicated
in the Confidential Purchaser Questionnaire.
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3.2 The Company agrees to submit such Reports to the Shareholders of
the Company and the Secretary of the Treasury as the Internal Revenue Service
and the Secretary of the Treasury may require to carry out the purposes of
Section 1202 of the Internal Revenue Code and to have the Company classified
as a "qualified small business corporation".
4. REGISTRATION RIGHTS
4.1 General. The Company hereby agrees with the holders of the
Shares and Warrants or their transferees (collectively, the "Holder") to use its
best efforts to ensure that the Shares and Warrants (as defined in the Warrant
Agreement) and the shares of Class A Common Stock issuable upon exercise of the
Warrants (the "Registrable Securities") shall have the registration rights set
forth in this Section 4.
4.2 "Piggyback" Registration Rights. If the Company shall determine
to proceed with the actual preparation and filing of a registration statement
under the Act in connection with the proposed offer and sale of any of its
securities by it or any of its security holders (other than a registration
statement on Form S-4, S-8 or other limited purpose form), the Company will give
written notice of its determination to all record holders of the Registrable
Securities. Upon the written request from the Holders of a majority of the
Registrable Securities within twenty (20) days after receipt of any such notice
from the Company, the Company will, except as herein provided, cause all
Registrable Securities to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Registrable Securities to be so registered; provided,
further, that nothing herein shall prevent the Company from, at any time,
abandoning or delaying any registration. If any registration pursuant to this
Section 4.2 shall be underwritten in whole or in part, the Company may require
that the Registrable Securities requested for inclusion pursuant to this Section
4.2 be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that the
Registrable Securities requested for inclusion pursuant to this Section 4.2
together with any other shares which have similar piggyback registration rights
(such shares and the Registrable Securities being collectively referred to as
the "Requested Stock") would constitute more than 15% of the total number of
shares to be included in a proposed underwritten public offering, or if in the
good faith judgment of the managing underwriter of such public offering the
inclusion of all of the Requested Stock offered by the Company or interfere with
the successful marketing of the shares of stock offered by the Company, the
number of shares of Requested Stock otherwise to be included in the underwritten
public offering may be reduced pro rata (by number of shares) among the holders
thereof requesting such registration or excluded in their entirety if so
required by the underwriter. To the extent only a portion of the Requested Stock
is included in the underwritten public offering, those shares of Requested Stock
which are thus excluded from the underwritten public offering shall be withheld
from the market by the holders thereof for a period, not to exceed 120 days,
which the managing underwriter reasonably determines is necessary in order to
effect the underwritten public offering.
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The obligation of the Company under this Section 4.2 shall be limited to
two registration statements.
4.3 Registration Procedures. If and whenever the Company is required by
the provisions of Section 4.2 to effect the registration of Registrable
Securities under the Act, the Company will:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective until the Registrable Securities are
freely saleable without the volume limitations under Rule 144;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective until the
Registrable Securities are freely saleable without the volume limitations under
Rule 144;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating holders may reasonably request
in writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the SEC for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(g) prepare and file with the SEC, promptly upon the request of
any such holders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such holders (and concurred
in by counsel for the Company), is required under the Act or the rules and
regulations thereunder in connection with the distribution of Common Stock by
such holder;
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(h) prepare and promptly file with the SEC and promptly notify
such holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise such holder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation
or threatening of any proceeding for that purpose and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal
if such stop order should be issued.
4.4 Expenses.
(a) With respect to each inclusion of Registrable Securities in a
registration statement pursuant to Section 4.2 hereof, all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
(as specified in paragraph (b) below) in connection therewith shall be borne by
the Company, provided, however, that any security holders participating in such
registration shall bear their pro rata share of the underwriting discount and
commissions, underwriter's expense allowances and reimbursements and transfer
taxes.
(b) The fees, costs and expenses of registration to be borne by
the Company as provided in paragraph (a) above shall include, without
limitation, all registration, filing, and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered and qualified (except as provided in 4.4(a) above). Fees and
disbursements of counsel and accountants for the selling security holders and
any other expenses incurred by the selling security holders not expressly
included above shall be borne by the selling security holders.
4.5 Indemnification.
(a) The Company will indemnify and hold harmless each holder of
Registrable Securities or Warrant Shares which are included in a registration
statement pursuant to the provisions of Section 4.2 hereof, its directors and
officers, and any underwriter (as defined in the Act) for such holder and each
person, if any, who controls such holder or such underwriter within the meaning
of the Act, from and against, and will reimburse such holder and each such
underwriter and controlling person with respect to, any and all loss, which
such holder or any such person may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of
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any material fact contained in such registration statement, any prospectus
contained therein 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,
in light of the circumstances in which they was made, not misleading, provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, damage, liability, cost or expenses arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by such
holder, such underwriter or such controlling person in writing specifically for
use in the preparation thereof.
(b) Each holder of Registrable Securities or Warrant Shares included
in a registration pursuant to the provisions of Section 4.2 hereof will
indemnify and hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will reimburse the
Company, its directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense to which
the Company or any controlling person and/or any underwriter may become subject
under the Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged untrue statement of
any material fact contained in such registration statement, any prospectus
contained therein 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,
in light of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished by or
on behalf of such holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 4.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified
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party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the provisions of said
paragraph (a) or (b) for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall have
employed counsel in accordance with the provisions of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
5. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail return
receipt requested addressed to the Company, at its registered office, 30689
Huntwood Avenue, Hayward, CA 94544, Attention: President and to the Subscriber
at his address indicated on the last page of this Subscription Agreement.
Notices shall be deemed to have been given on the date of mailing, except
notices of change of address, which shall be deemed to have been given when
received.
5.2 This Subscription Agreement shall not be changed, modified
or amended except by a writing signed by the parties to be charged, and this
Subscription Agreement may not be discharged except by performance in accordance
with its terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription Agreement
may be executed by any of the parties hereto, the parties expressly agree that
all the terms and provisions hereof shall be construed in accordance with and
governed by the laws of the State of California. The parties hereby agree that
any dispute which may arise between them arising out of or in connection with
this Subscription Agreement shall be adjudicated before a court located in the
County of Alameda, State of California and they hereby submit to the exclusive
jurisdiction of the courts of the State of California located in Alameda County,
California and of the federal courts in the Northern District of California with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Subscription Agreement or any acts or omissions relating to the sale of the
securities hereunder, and consent.
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5.5 to the service of process in any such action or legal proceeding
by means of registered or certified mail, return receipt requested, in care of
the address set forth below or such other address as the undersigned shall
furnish in writing to the other.
5.6 This Subscription Agreement may be executed in counterparts.
Upon the execution and delivery of this Subscription Agreement by the
Subscriber, this Subscription Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Shares and Warrants as herein
provided.
5.7 The holding of any provision of this Subscription Agreement to
be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Subscription Agreement, which shall remain
in full force and effect.
5.8 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
5.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement
as of the day and year first written above.
/s/ ELI STERNHEIM
- -------------------------------------
Eli Sternheim, Subscriber
SS####-##-####
Subscription Accepted.
SEPRAGEN CORPORATION
By: /s/ VINIT SAXENA
---------------------------------
Vinit Saxena, President
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