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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 17, 1996
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American Film Technologies, Inc.
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(Exact Name of Registrant as Specified)
Delaware
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(State or other jurisdiction of incorporation)
1-9748 23-2359277
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(Commission File Number) (IRS Employer Identification No.)
4105 Sorrento Valley Boulevard, San Diego, California 92121
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 619-623-0830
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ITEM 5. OTHER EVENTS
On June 17, 1996, the Company entered into an agreement with
Gerald Wetzler, the President of the Company, pursuant to which Mr. Wetzler
purchased, for $200,000, an option to acquire common stock of the Company or, in
the alternative, preferred stock convertible into common stock of the Company.
The options give Mr. Wetzler the right to purchase up to 20,000,000 shares of
common stock of the Company at an exercise price of $0.12 per share. If the
Company does not, at the time of exercise, have sufficient shares of common
stock authorized for exercise of the option, Mr. Wetzler shall have the right to
purchase 10,000,000 shares of the Company's authorized but unissued preferred
stock at an exercise price of $0.24 per share. The shares of preferred stock
issued to Mr. Wetzler will vote with the Company's common stock on all matters,
and each preferred share shall entitle the holder to four votes on any matter
brought before the stockholders of the Company. In addition, the preferred stock
shall have a liquidation preference of $0.24 per share. The shares of preferred
stock, if any, issued to Mr. Wetzler pursuant to the option will automatically
be converted to shares of common stock at an exchange ratio of two shares of
common stock for each share of preferred stock at such time as sufficient shares
of common stock exist for such conversion, whether by amendment of the Company's
certificate of incorporation, by redemption or repurchase of outstanding shares,
or otherwise.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
4 - Proposed Certificate of Designation of Series A
Preferred Stock
28 - Option Agreement between American Film
Technologies, Inc. and Gerald M. Wetzler, dated
June 17, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
American Film Technologies,
Inc.
Date: By
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Title:
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CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS OF THE SERIES A CONVERTIBLE
PREFERRED STOCK
OF
AMERICAN FILM TECHNOLOGIES, INC.
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Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
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American Film Technologies, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby supplies notice that the Corporation has previously
designated four classes of Preferred Stock, all of which have been cancelled and
therefore do not affect the voting powers, designations, preferences, rights,
qualifications, limitations and restrictions of the Preferred Stock designated
below. The Corporation, in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, does hereby certify that the
following resolution was duly adopted by the Board of Directors of the
Corporation on June 17, 1996:
RESOLVED that pursuant to the authority expressly vested in
the Board of Directors of the Corporation by Article Four of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby designates
10,000,000 shares of the Preferred Stock to be Series A Convertible Preferred
Stock and fixes and determines the voting rights, designations, preferences,
qualifications, privileges, limitations, options and other rights of the
10,000,000 shares of Series A Convertible Preferred Stock, par value $.001 per
share (the "Series A Preferred Stock"), of the Corporation as follows:
1. Designation. Ten Million (10,000,000) authorized
shares of Preferred Stock, $.001 par value, none of which has been
issued, shall be issued as Series A Preferred Stock.
2. Dividends and Distribution. The holders of the Series A
Preferred Stock shall be entitled to receive dividends with the Common Stock of
the Corporation; provided, that the holders of the Series A Preferred Stock
shall be entitled to receive dividends equal to twice the dividends paid on
corresponding shares of Common Stock.
3. Liquidation and Dissolution. In the event of any
liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, then out of the
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assets of the Corporation available for distribution to the stockholders, before
any distribution or payment to the holders of the Common Stock, or any other
class or series of the Corporation's capital stock, the holders of the Series A
Preferred Stock shall be entitled to be paid a liquidation payment of $0.24 per
share. Upon the completion of the distributions required by this Paragraph 3,
the holders of Common Stock shall be entitled, by reason of their ownership
thereof, to receive any remaining assets and funds of the Corporation available
for distribution in connection with any such liquidation, dissolution or winding
up of the Corporation.
If the assets of the Corporation available for distribution to
its stockholders shall be insufficient to permit payment in full to the holders
of the Preferred Stock of the preferential sums which all such holders are
entitled to receive, then all of the assets available for distribution to the
stockholders shall be distributed among and paid to the holders of the Series A
Preferred Stock ratably in proportion to the respective preferential amounts
that would be payable per share if such assets were sufficient to permit payment
in full. The consolidation or merger of the Corporation with or into any other
corporation or corporations or the sale or transfer of all or substantially all
of the assets of the Corporations, shall not be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this Paragraph 3.
4. Voting Rights. The holders of the Series A Preferred Stock
shall have the right to vote, together with the holders of all the outstanding
shares of Common Stock ("Common Stock") and not by classes, except as otherwise
provided herein or as required by the Delaware General Corporation Law, on all
matters on which holders of Common Stock shall have the right to vote. The
holders of shares of the Series A Preferred Stock shall possess twice the voting
power they would possess if their shares of the Series A Preferred Stock were
converted into shares of Common Stock.
5. Conversion.
(a) Each share of Series A Preferred Stock shall be
automatically converted into shares of Common Stock at the rate of two (2)
shares of the Corporation's Common Stock for each share of Series A Preferred
Stock at such time as sufficient shares of Common Stock exist for such
conversion, whether by amendment of the Corporation's Certificate of
Incorporation, by redemption or repurchase of outstanding shares, or otherwise.
(b) In the event that the Corporation shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares (whether by stock dividend, stock split or otherwise) before the
completion of the automatic conversion of all of the shares of Series A
Preferred Stock, the conversion rate in effect hereunder to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Corporation shall be combined into a smaller number of
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shares, the conversion rate in effect immediately prior to such combination
shall be proportionately increased.
(c) If any capital reorganization or reclassification
of the capital stock of the Corporation, or consolidation or merger of the
Corporation with another corporation, or the sale of all or substantially all of
its assets to another corporation shall be affected before the completion of the
automatic conversion of all of the shares of Series A Preferred Stock, then as a
condition of such reorganization, reclassification, consolidation, merger or
sale, lawful, equitable and adequate provision shall be made whereby the holders
of the Series A Preferred Stock shall thereafter have the right, upon conversion
hereunder, to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the Common Stock theretofore receivable upon such
conversion, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares with
respect to or in exchange for a number of shares of Common Stock therefore
receivable upon such conversion had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the holders
of the Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the conversion rate
and of the number of shares issuable upon conversion of the Series A Preferred
Stock) 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.
(d) The Corporation agrees that in the event that
there exist insufficient shares of Common Stock into which shares of the Series
A Preferred Stock can be converted, the Corporation will give absolute
precedence to converting the shares of the Series A Preferred Stock designated
in this Certificate when sufficient shares of Common Stock become available.
Under all circumstances where shares of Series A Preferred Stock designated in
this certificate remain unconverted, all shares of Common Stock which are
authorized and not outstanding shall immediately be exchanged for shares of
Series A Preferred Stock designated by this Certificate, with no other use of
such shares of Common Stock until every share of Series A Preferred Stock
designated by this Certificate has been exchanged. The Corporation agrees that
all shares of Common Stock which are received upon the conversion of the Series
A Preferred Stock shall be free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights. The Corporation agrees
that each share of Common Stock issued upon conversion of Series A Preferred
Stock shall, at the time of such issuance, be deemed to be validly issued and
outstanding, fully paid and non-assessable.
(e) In each case of an adjustment or readjustment of
the conversion rate, the Corporation will furnish each holder of Series A
Preferred Stock with a certificate showing such adjustment
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or readjustment and stating in detail the facts upon which such adjustment or
readjustment is based.
(f) Upon the conversion as provided in this Paragraph
5, a holder of Series A Preferred Stock shall surrender the certificate(s)
representing the shares being converted to the Corporation at its principal
office. The holder shall also provide the name(s) (with (address(es)) in which
the certificate(s) for shares of Common Stock issuable upon such conversion
shall be issued. The certificate(s) for shares of Series A Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date of surrender of the certificate shall be
the "Conversion Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the shares of Series
A Preferred Stock being converted certificate(s) as he may request for the
number of shares of Common Stock issuable upon the conversion of such shares of
Series A Preferred Stock in accordance with the provisions of this Paragraph
(5). Such conversion shall be deemed to have been effected as of the close of
business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series A Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the shares of Common Stock represented thereby.
(h) The period for exercise of any rights of
conversion as set forth above shall be extended by the duration of any voluntary
or involuntary proceeding under any Federal or state bankruptcy, insolvency or
similar laws in which the Company or creditors of the Company may seek relief or
enforcement of their rights.
6. No Redemption Rights. No holder of any shares of the Series
A Preferred Stock shall be subject to redemption of the Series A Preferred
Stock.
7. No Preemptive Rights. No holder of any shares of the Series
A Preferred Stock shall have any preemptive right to purchase or subscribe to
any issue of the same or any other stock of the Corporation.
8. Restriction on Issuance of Senior Stock. As long as any
shares of Series A Preferred Stock remain outstanding, the Corporation shall
not, without the vote or written consent of holders of at least a majority of
the then outstanding shares of the Preferred Stock, authorize or issue, or
obligate itself to issue, any class of equity security which is senior or equal
in ranking to the Series A Preferred Stock.
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The Corporation shall not amend, alter or repeal any of the
provisions of its Certificate of Incorporation or bylaws so as to affect
adversely the powers, preferences, qualifications, limitations or rights of the
holders of the Series A Preferred Stock.
AMERICAN FILM TECHNOLOGIES, INC.
By
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CHAIRMAN OF THE BOARD OF
DIRECTORS
ATTEST:
By
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SECRETARY
JMB1\147858 1
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===============================================================================
THE SECURITIES OFFERED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND ANY SALE OF SUCH SECURITIES IS SUBJECT TO COMPLIANCE WITH, OR THE
AVAILABILITY OF EXEMPTIONS FROM COMPLIANCE WITH, THE REGISTRATION AND
QUALIFICATION REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS INSTRUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
TRANSFER OF THIS INSTRUMENT AND THE SECURITIES OFFERED HEREBY IS RESTRICTED AS
PROVIDED IN SECTIONS 11, 12 AND 14 BELOW.
===============================================================================
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into,
effective as of June 17, 1996 (the "Effective Date"), by and between American
Film Technologies, Inc., a Delaware corporation (the "Company"), and Gerald M.
Wetzler (the "Holder").
R E C I T A L S
WHEREAS, the Company wishes to obtain additional financing to
fund its operations through the sale of equity securities and the Holder desires
to invest in the Company; and
WHEREAS, the Company has agreed to sell to the Holder for Two
Hundred Thousand Dollars ($200,000) an Option to purchase either (i) 10,000,000
shares of the Company's Class A Convertible Preferred Stock (the "Preferred
Stock") at an exercise price of Twenty Four Cents ($.24) per share or (ii) after
the occurrence of the Conversion Events, hereinafter defined, Twenty Million
(20,000,000) shares of the Company's, $.002 par value per share common stock
(the "Common Stock") at an exercise price of Twelve Cents ($.12) per share;
WHEREAS, the Company and the Holder have agreed that the
Preferred Stock shall carry a liquidation preference of Twenty Four Cents ($.24)
per share and will have four votes per share on all matters which come before
the shareholders;
WHEREAS, all issued and outstanding shares of Preferred Stock
will automatically convert into Common Stock upon shareholder approval of an
increase in the authorized Common Stock to no less than 125,000,000 shares
(prior to the effect of any reverse stock split) and the filing of an Amendment
to the Company's Certificate of Incorporation with respect to the aforementioned
increase in number of authorized shares of Common Stock (the "Conversion
Events");
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NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For the sum of Two Hundred Thousand
Dollars ($200,000)(the "Option Price"), the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the Option to acquire from
the Company, from time to time on the terms and conditions set forth herein, all
or any portion of an aggregate of either (a) Ten Million (10,000,000) shares of
Preferred Stock or (b) after the occurrence of the Conversion Events into Twenty
Million (20,000,000) shares of Common Stock (the Preferred Stock or the Common
Stock, as the case may be, hereinafter referred to as the "Option Shares").
2. Exercise Price. The exercise price of the Option Shares
shall be Twenty Four Cents ($.24) per share for the Preferred Stock and after
the occurrence of the Conversion Events Twelve Cents ($.12) per share for the
Common Stock (the "Exercise Price"). Each of the number of Option Shares into
which the Option Shares is exercisable and the Exercise Price of the Option
Shares is subject to adjustment as provided in Section 5 hereof.
3. Term of the Option. Subject to the provisions of Section 11
hereof, the Option will have a two year term (the "Option Term") commencing on
the date hereof and terminating as of 5:00 p.m. (New York time) on June 17, 1998
(the "Expiration Date").
4. Vesting; Exercise. Subject to the provisions of Section 11
hereof, during the Option Term the Holder shall have the right to exercise all
or any portion of the Option and receive the Option Shares represented thereby.
5. Adjustments Upon Changes in Capitalization or Other
Significant Events.
(a) In the event of any increase or decrease in the
number of the issued shares of Common Stock by reason of a stock dividend, stock
split, reverse stock split or consolidation or combination of shares and the
like at any time or from time to time throughout the term of the Option such
that the holders of outstanding Common Stock shall have had an adjustment made,
without payment therefor, in the number of shares of Common Stock owned by them
or shall have become entitled or required to have had an adjustment made in the
number of shares of Common Stock owned by them, without payment therefor, there
shall be a corresponding adjustment as to the number of shares of Common Stock
into which the Preferred Stock is convertible or upon the occurrence of the
Conversion Events, the Option is exercisable and to the Exercise Price, with the
result that the Holder's proportionate share of Common Stock which the Option
may convert into shall be maintained as before the occurrence of such event
without change in the aggregate exercise price applicable in the event the
Holder elected to exercise the Option in full (except
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for any change in the aggregate exercise price resulting from rounding-off of
share quantities or prices).
(b) In the event the Company (or any other
corporation, the securities of which are receivable at the time upon exercise of
the Option) shall effect a plan of reorganization, recapitalization,
reclassification or other like capital transaction or shall merge or consolidate
with or into another corporation or shall convey all or substantially all of its
assets to another corporation (collectively, any such event being referred to as
a "Material Alteration Event") at any time or from time to time throughout the
term of the Option, then in each such case the Holder, upon any exercise of the
Option at any time after the consummation of such a Material Alteration Event
shall be entitled to receive (in lieu of the securities or other property to
which the Holder would have been entitled to receive upon exercise prior to such
consummation) the securities or other property to which the Holder would have
been entitled to have received upon consummation of the Material Alteration
Event without adjustment to the aggregate exercise price applicable in the event
the Holder elected to exercise the Option in full (except for any change in the
aggregate exercise price resulting from rounding-off of share quantities or
prices), and all subject to further adjustment as provided in Section 5(a)
hereof; provided that prior to consummating any Material Alteration Event, the
Company shall have complied with its obligations in Section 6 hereof.
6. Obligation to Redeem Option.
(a) In the event that the Company intends to
consummate a Material Alteration Event at any time during the term of the
Option, in addition to any rights granted to the holder by Section 5(b) hereof,
it shall provide the Holder with written notice thereof no less than thirty (30)
days prior to the consummation thereof. The Holder shall thereafter have the
right, exercisable at any time prior to the third (3rd) business day immediately
preceding the consummation of the Material Alteration Event, to obligate the
Company to redeem the Option in its entirety (but not only a portion thereof) at
a price equivalent to (a) the average of the daily closing prices per share of
Common Stock for the five (5) consecutive business days immediately preceding
the Material Alteration Event on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not so listed or
admitted, on the National Market System, as reported by NASDAQ, or if not
admitted to trading thereon, the average of the closing bid and listed prices in
the over-the-counter market as reported by NASDAQ less (b) the Exercise Price at
such time (as adjusted in accordance with Section 5 hereof), such resulting
amount multiplied by the aggregate number of shares of Common Stock into which
the Option is exercisable (or would be exercisable upon the occurrence of the
Conversion Events) at the time of such redemption.
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(b) In the event that the Holder elects to have the
Option redeemed, it shall surrender the Option along with its notice of the
election to redeem the Option pursuant to 6(a) above. The Company shall pay to
Holder the payment calculated in Section 6(a) hereof, which payment shall be
made within five (5) days after the consummation of the Material Alteration
Event.
(c) If the Company fails to notify the Holder of the
intended consummation of a Material Alteration Event, the Holder's right to
obligate the Company to redeem the Option shall remain in full force and effect
until the earlier of (i) the tenth (10th) business day following the giving of
proper notice by the Company to the Holder as to the Material Alteration Event
or (ii) the expiration of the Option, in either case at the same price as would
have been applicable to such redemption if such notice had been duly delivered.
(d) If the Holder elects to have the Option redeemed
and if the Material Alteration Event is not consummated the Holder's redemption
of the Option shall be nullified, the Option shall be promptly returned to the
Holder and the Holder will continue to have all rights with respect to the
Option as set forth in this Agreement.
(e) If, as a result of any Material Alteration Event,
the Company ceases to exist, the Company shall have caused any successor
corporation thereto to assume the Option and the obligations under this
Agreement, and such successor corporation shall be bound by the provisions
hereunder, including, without limitation, this Section 6.
7. Exercise of the Option. To exercise all or any portion of
the Option, the Holder must do the following:
(a) deliver to the Company a written notice, in the
form of the attached Exhibit A, specifying the number of shares of Preferred
Stock or Common Stock for which the Option is being exercised;
(b) surrender the Agreement to the Company upon
complete exercise of the Option;
(c) tender payment, either in cash or in such other
manner as the Board of Directors of the Company (the "Board"), in its sole
discretion, shall approve, of the aggregate Exercise Price for the Option Shares
for which the Option is being exercised;
(d) pay, or make arrangements satisfactory to the
Board for payment to the Company of, all federal, state and local taxes, if any,
required to be withheld by the Company in connection with the exercise of the
Option or the relevant portion thereof; and
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(e) execute and deliver to the Company any other
documents required from time to time by the Company in order to promote
compliance with the Securities Act of 1933, as amended (the "1933 Act"),
applicable state securities laws, or any other applicable law, rule or
regulation.
8. Delivery of Share Certificate. As soon as practicable after
the Option or any portion thereof has been duly exercised, the Company will
deliver to the Holder a certificate representing the Option Share for which the
Option was exercised. Unless the Option has expired or been exercised in full,
the Company and the Holder agree that the Company may affix to this Agreement an
appropriate notation indicating the number and kind of Option Shares for which
the Option was exercised and return this Agreement to the Holder. If any law or
regulation of the Securities and Exchange Commission (the "SEC") or of any other
federal or state governmental body having jurisdiction shall require the Company
or the Holder to take any action prior to issuance to the Holder of the Option
Shares specified in the written notice of exercise, or if any listing agreement
between the Company and any national securities exchange requires such shares to
be listed prior to issuance, the date for the delivery of such shares shall be
adjourned until the completion of such action and/or such listing.
9. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
10. Shareholders Approval. The Company agrees to recommend to
its shareholders an increase in the amount of its authorized shares of Common
Stock to no less than 125,000,000 shares (before any reverse stock split) at its
1995 Annual Meeting of Shareholders (the "Annual Meeting"). The Company further
agrees to take such steps as may be necessary, including but not limited to the
filing of applicable proxy materials with the SEC and the mailing of such proxy
materials to its shareholders, in order to hold the Annual Meeting on or before
August 31, 1996. In the event the Company obtains the approval of the
shareholders for the increase in its authorized shares of Common Stock at the
Annual Meeting, it agrees to take such steps as may be necessary to consummate
all additional Conversion Events as soon thereafter as possible.
11. Piggy-back Registration Rights; Indemnification.
(a) After the occurrence of the Conversion Events,
subject to Section 11(i) below, and so long as Holder holds or has the right to
acquire any Option Share, in the event the Company decides to file a
registration statement ("Registration Statement") under the 1933 Act on SEC
Forms S-1 or S-3 or any other applicable form that covers the offer and sale by
the Company or any holders of Common Stock any of the Company's securities for
money (a "Company Registration"), the
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Company shall give written notice (a "Registration Notice") thereof to the
Holder. If the Company receives a written request to include in the Company
Registration all or a portion of the Holder's shares within thirty (30) days
after a Registration Notice is given, the Company shall include such shares in
the Company Registration. If the Company Registration is to cover an
underwritten offering, such shares shall be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters.
(b) If in the good faith judgment of the managing
underwriter of an offering related to a Company Registration, to include any or
all of the shares requested to be registered by the Holder would interfere with
the successful marketing of the Company's securities or any other holder's
securities, if such Company Registration of such holder's securities is pursuant
to a demand registration right, then the amount of shares to be included in such
public offering shall be reduced to the amount allowed by the managing
underwriter in its good faith judgment. If such reduction occurs it shall be on
a pro rata basis with all other selling stockholders in such Company
registration.
(c) The Company may decline to file a Registration
Statement after giving a Registration Notice, or withdraw a Registration
Statement after filing and after a Registration Notice, but prior to the
effectiveness thereof; provided (i) that the Company shall promptly notify the
Holder, in writing, of any such action; and (ii) that the Company shall bear all
expenses incurred by the Holder in connection with such withdrawn Registration
Statement.
(d) All expenses incident to the Company's
performance of or compliance with this Agreement including, without limitation
(i) all registration and filing fees, all fees and expenses associated with
filings required to be made with the NASD, as may be required by rules and
regulations of the NASD (other than fees required in excess of fees which would
otherwise pertain in the event that the Holder is a member of the NASD), fees
and expenses of compliance with securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky qualifications for the
Holder's shares), rating agency fees, printing expenses (including expenses of
printing certificates for the Holder's shares in a form eligible for deposit
with the Depository Trust Company and of printing prospectuses if the printing
of prospectuses is reasonably requested by the holders of a Majority Amount),
messenger and delivery expenses, (ii) internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal or accounting duties), securities acts liability insurance (if the Company
elects to obtain such insurance), (iii) fees and expenses of counsel for the
Company and its independent certified public accountants (including the expenses
of any special audit or "cold comfort" letters required by or incident to such
performance), (iv) fees and expenses of
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any special experts retained by the Company in connection with such
registration, and (v) fees and expenses of other persons retained by the
Company, (all such expenses being herein called "Registration Expenses"), will
be borne by the Company, provided that in no event shall Registration Expenses
include (A) any underwriting discounts or commissions attributable to the sale
of the Holder's shares, (B) any fees and expenses of counsel for the Holder if
such counsel is different than counsel for the Company or any accountant or
other professional engaged by the Holder, or (C) any direct out-of-pocket
expenses of the Holder.
In the event that following effectiveness of a
Company Registration, pursuant to which the Holder is a selling stockholder, it
becomes necessary for the Company to prepare and file a supplemental prospectus
or amended prospectus in order to maintain the effectiveness of such
registration statement during the period referred to in Section 9(e)(ii) hereof,
the Company shall pay all printing costs associated with the printing of such
supplemental or amended prospectus to be distributed in connection with sales of
securities pursuant thereto.
(e) If and whenever the Company elects to file a
Registration Statement and is hereby required in connection therewith to
register the Holder's shares, the Company will:
(i) Use its best efforts to effect such
registration to permit the sale of such shares in accordance with the intended
plan of distribution thereof, and pursuant thereto the Company will take the
actions set forth below as expeditiously as possible; provided, however, that in
all cases the Holder shall use its best efforts to cooperate with and assist the
Company in such registration.
(ii) Prepare and file with the SEC as soon
as practicable a Registration Statement with respect to such shares and use its
best efforts to cause such Registration Statement to become effective and remain
effective until the shares covered by such Registration Statement have been
sold;
(iii) Prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement, and such
supplements to the prospectus, as may be requested by the Holder or any
underwriter or as may be required by the rules, regulations or instructions
applicable to the registration form used by the Company or by the 1933 Act or
rules and regulations thereunder to keep the Registration Statement effective
until all shares covered by such Registration Statement are sold in accordance
with the intended plan of distribution set forth in such Registration Statement
or supplement to the prospectus.
(iv) With respect to the following, promptly
notify the Holder and the managing underwriter, if any, and (if requested by any
such person) confirm such notice in writing:
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A. when any prospectus or any
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective;
B. of any request by the SEC for
amendments or supplements to the Registration Statement or the prospectus or for
additional information;
C. of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
D. of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
E. of the existence of any fact
which results in the Registration Statement, any prospectus or any document
incorporated therein by reference containing a misstatement.
(v) Make every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible time.
(vi) If requested by the managing under-
writer, if any, immediately incorporate in a supplement or post-effective
amendment such information as the managing underwriter agrees should be included
therein relating to the sale of the shares including, without limitation,
information with respect to the number of shares being sold to any underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten offering of the shares to be sold in such
offering; and make all required filings of such supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
supplement or post-effective amendment.
(vii) Furnish to the Holder and the managing
underwriter, if any, without charge, at least one signed copy of the
Registration Statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference).
(viii) Deliver to the Holder and any
underwriters, without charge, as many copies of each prospectus (and each
preliminary prospectus) as such persons may reasonably request (the Company
hereby consenting to the use of each such prospectus (or preliminary prospectus)
by the Holder and any underwriters in connection with the offering and sale of
the shares covered by such prospectus (or preliminary prospectus)).
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(ix) Prior to any public offering of shares,
register or qualify or cooperate with any underwriters and their respective
counsel in connection with the registration or qualification of such shares for
offer and sale under the securities or blue sky laws of such jurisdictions and
do anything else necessary or advisable to enable the disposition of the shares
covered by the Registration Statement in such jurisdictions; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process in any such jurisdiction where it
is not then so subject.
(x) Cooperate with the managing underwriter,
if any, to facilitate the timely preparation and delivery of certificates that
do not bear any restrictive legends and that represent the shares to be sold and
cause such shares to be in such denominations and registered in such names as
the managing underwriter may request at least three business days prior to any
sale of shares to the underwriters.
(xi) Use its best efforts to cause the
shares covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such shares.
(xii) If the Registration Statement or any
prospectus contains a misstatement, prepare a supplement or post-effective
amendment to the Registration Statement or the related prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the shares, the prospectus
will not contain a misstatement.
(xiii) Enter into such agreements (including
an underwriting agreement) and do anything else necessary or advisable in order
to expedite or facilitate the disposition of such shares and:
A. make such representations and
warranties to the underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten offerings;
B. obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriter, if any)
addressed to the underwriter, if any, covering the matters customarily covered
in opinions delivered to underwriters in primary underwritten offerings and such
other matters as may be reasonably requested by such underwriters;
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C. obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the underwriters, if any; such letters shall be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
by underwriters in connection with primary underwritten offerings; and
D. deliver such documents and
certificates as may be requested by the managing underwriter, if any, to
evidence compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company.
(f) The Company agrees to indemnify and hold harmless
the Holder from and against all claims arising out of or based upon any
misstatement or alleged misstatement, except insofar as such misstatement or
alleged misstatement was based upon information furnished in writing to the
Company by the Holder for use in the document containing such misstatement or
alleged misstatement.
(g) If any action or proceeding (including any
governmental investigation or inquiry) shall be brought or asserted against the
Holder in respect of which indemnity may be sought from the Company, the Holder
shall promptly notify the Company in writing, and the Company shall assume the
defense thereof, including the employment of counsel satisfactory to the Holder
and the payment of all expenses.
The Holder shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such separate counsel shall be the expense of the Holder
unless (i) the Company has agreed to pay such fees and expenses, (ii) the
Company has failed to assume the defense of such action or proceeding or has
failed to employ counsel satisfactory to the Holder in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Holder and the Company, and
the Holder shall have been advised by counsel that there may be one or more
legal defenses available to the Holder that are different from or additional to
those available to the Company.
If the Holder notifies the Company in writing that it
elects to employ separate counsel at the Company's expense as permitted by the
provisions of the preceding paragraph, the Company shall not have the right to
assume the defense of such action or proceeding on behalf of the Holder. The
foregoing notwithstanding, the Company shall not be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
the Holder in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances.
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(h) The Holder agrees to indemnify and hold harmless
the Company, its directors, officers, employees, agents and attorneys and each
person, if any, who controls the Company within the meaning of either Section 15
of the 1933 Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "1934 Act") to the same extent as the foregoing indemnity from the Company
to the Holder, with respect to information relating to the Holder furnished in
writing by the Holder for use in any Registration Statement, prospectus or
preliminary prospectus.
In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person,
in respect of which indemnity may be sought against the Holder, the Company or
its directors or officers or such controlling person shall have the rights and
duties given to the Holder by Sections 10(f) and 10(g) above.
(i) Holder's rights hereunder shall terminate at such
time as Holder may within any three-month period sell in the public marketplace
all of the Option Shares owned by Holder pursuant to Rule 144 promulgated under
the 1933 Act or any successor rule or regulation.
12. Nontransferability. The Option is not transferable other
than (a) by operation of law, (b) to one or more trusts of which the Holder is a
trustor, or (c) by will or the laws of descent and distribution. The Option may
be exercised during the lifetime of the Holder only by the Holder or his
court-appointed legal representative.
13. Warranties and Representations of the Holder. By executing
this Agreement, the Holder accepts the Option and represents and warrants to the
Company and covenants and agrees with the Company as follows:
(i) The Holder acknowledges that no registration
statement under the 1933 Act or under any state securities law has been filed
and that the Company has no obligation to file such a registration statement in
the future with respect to the Option or any Option Shares that may be acquired
upon exercise of the Option or any portion thereof, except as otherwise provided
by Section 10 hereof.
(j) The Holder warrants and represents that the
Option and any Option Shares acquired upon exercise of the Option or any portion
thereof will be acquired and held by the Holder for the Holder's own account,
for investment purposes only, and not with a view towards the distribution or
public offering thereof or with any present intention of reselling or
distributing the same at any particular future time.
(k) The Holder agrees not to sell, transfer or
otherwise voluntarily dispose of any Option Shares that may be
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<PAGE>
acquired upon exercise of the Option or any portion thereof unless (i) there is
an effective registration statement under the 1933 Act covering the proposed
disposition and compliance with governing state securities laws, (ii) the Holder
delivers to the Company, at the Holder's expense, a "no-action" letter or
similar interpretative opinion, satisfactory in form and substance to the
Company, from the staff of each appropriate securities agency, to the effect
that such shares may be disposed of by the Holder in the manner proposed, or
(iii) the Holder delivers to the Company, or legal counsel designated by the
Holder and reasonably satisfactory to the Company, to the effect that the
proposed disposition is exempt from registration under the 1933 Act and
governing state securities laws.
(l) The Holder acknowledges and consents to the
appearance of a restrictive legend, in substantially the following form:
NOTICE: RESTRICTIONS ON TRANSFER
The securities represented by this
certificate have not been registered under the
Securities Act of 1933, or any state securities laws,
and may not be offered, sold, transferred,
encumbered, or otherwise disposed of except upon
satisfaction of certain conditions. Information
concerning these restrictions may be obtained from
the corporation. Any offer or disposition of these
securities without satisfaction of said conditions
will be wrongful and will not entitle the transferee
to register ownership of the securities with the
corporation.
(m) The Holder agrees not to sell, transfer or
otherwise dispose of the Option, except as specifically permitted by this
Agreement and any applicable securities laws.
14. Warranties and Representations of the Company.
(n) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(o) The grant of the Option to the Holder has been
duly authorized by all requisite corporation action on the part of the Company
and the Preferred Stock and upon the occurrence of the Conversion Events the
shares of Common Stock represented by the Option will have been properly
reserved for issuance.
(p) The number of shares of Preferred Stock and upon
the occurrence of the Conversion Events the shares of Common Stock represented
by the Option (when coupled with all shares of Preferred Stock or Common Stock
currently outstanding and all
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Option Shares to be issued upon the exercise of all other currently outstanding
options granted by the Company) does not exceed the number of shares of
Preferred Stock or Common Stock, as the case may be, currently authorized for
issuance by the Company's Certificate of Incorporation, as amended (the
"Certificate").
(q) No consents, approvals or permits are required to
be obtained from any third person, including, without limitation, any securities
commission, before the grant of the Option, nor do any conditions precedent
exist (other than those specifically identified herein) that would impair the
Company's ability to grant the Option hereunder or issue the Option Shares upon
the exercise of all or any portion of the Option.
(r) No Registration Statement involving the Preferred
Stock or Common Stock is currently on file with the SEC.
15. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of Option Shares acquired upon exercise of
the Option, the Holder agrees to give written notice to the Company of his or
her intention to effect such disposition. The notice must describe the
circumstances of the proposed transfer in reasonable detail and must specify the
manner in which the requirements of Section 12(c) above will be satisfied in
connection with the proposed disposition. After (a) legal counsel to the Company
has determined in good faith that the requirements of Section 12(c) above will
be satisfied and (b) the Holder has executed such documentation as may be
necessary to effect the proposed disposition, the Company will, as soon as
practicable, transfer such shares in accordance with the terms of the notice.
Any stock certificate issued upon such transfer will bear a restrictive legend,
in the form set forth in Section 12(d) of this Agreement, unless in the opinion
of the Company's legal counsel such legend is not required. Compliance with the
foregoing procedures is in addition to compliance with any separate requirements
applicable to the Holder under the Certificate or otherwise.
16. Rights as Stockholder. The Option, in and of itself, does
not create rights in the Holder as a stockholder of the Company; provided that
upon any such exercise of the Option or any portion thereof that complies with
the requirements of this Agreement, the Holder shall immediately be vested with
all the rights afforded to other stockholders of the Company, regardless of when
the Company actually delivers certificates representing Option Shares to the
Holder.
17. Further Assurances. The Holder and the Company agree, from
time to time, to execute such additional documents as the other party hereto may
reasonably require to effectuate the purposes of this Agreement.
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18. Binding Effect. This Agreement shall be binding upon the
Holder, the Company, the Holder's heirs, successors and assigns, and any
corporation or other entity that succeeds to the rights and liabilities of the
Company.
19. Cost of Litigation. In any action at law or in equity or
any arbitration to enforce any of the provisions or rights under this Agreement,
the unsuccessful party to such litigation, as determined by the court or
arbitrator in a final judgment or decree, shall pay the successful party or
parties all costs, expenses and reasonable attorneys' fees incurred by the
successful party or parties (including without limitation costs, expenses and
fees on any appeals), and if the successful party recovers judgment in any such
action or proceeding, such costs, expenses and attorneys' fees shall be included
as part of the judgment.
20. Entire Agreement; Modifications. This Agreement
constitutes the entire agreement and understanding between the Company and the
Holder regarding the subject matter hereof. No modification of the Option or
this Agreement, or waiver of any provision of this Agreement, shall be valid
unless in writing and duly executed by the Company and the Holder. The failure
of any party to enforce any of that party's rights against the other party for
breach of any of the terms of this Agreement shall not be construed as a waiver
of such rights as to any continued or subsequent breach.
21. Governing Law. This Agreement shall be governed by and
interpreted under the law of the State of California applicable to agreements
wholly negotiated, executed and to be performed in that state.
22. Notices. Any notices that either party to this Agreement
is required or may desire to give to the other shall be given by sending the
same to the other at the address below, or at such other address as may be
designated in writing by any party in a notice to the other given in the manner
prescribed in this Section 22. All such notices shall be sufficiently given when
deposited so addressed, postage prepaid, in the United States mail. The
addresses to which any such notices shall be given are the following:
To Holder:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
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<PAGE>
With copy to:
Lee Mermelstein, Esq.
Jacobson & Mermelstein
52 Vanderbuilt Avenue
New York, New York 10017
To the Company:
4105 Sorrento Valley Boulevard
San Diego, California 92121
Attention: Chief Financial Officer
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
23. Severability. Whenever possible, each provision of this
Agreement shall be interpreted so as to be effective and valid under applicable
law. If any provision of this Agreement is prohibited or deemed invalid under
any applicable law, however, such provision shall be ineffective only to the
extent of such prohibition or invalidity, and neither the remainder of such
provision nor this Agreement shall be invalidated as a result.
24. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
25. Jurisdiction. The parties hereto agree to submit to the
exclusive jurisdiction of the Superior Court of the State of California, County
of Los Angeles, any controversy, claim or dispute arising out of or relating to
this Agreement or the method and manner of performance thereof or the breach
thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Company" American Film Technologies, Inc.
By:
--------------------------------------
John Karl
Its: Chief Financial Officer
"Holder" -----------------------------------------
Gerald M. Wetzler
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EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
4105 Sorrento Valley Boulevard
San Diego, California 92121
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 17, 1996. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of {Common Stock}{Preferred Stock} (as defined
in the Agreement) of American Film Technologies, Inc. pursuant to the Option.
This notice is accompanied by full payment of the Exercise Price for the shares
pursuant to Section 4 of the Agreement computed as follows:
__________ shares of Preferred Stock x $.24 per share = $________
__________ shares of Common Stock x $.12 per share = $________
The undersigned acknowledges that no registration statement
under the Securities Act of 1933, as amended, or under any state securities law
has been filed and that the Company has no obligation to file such a
registration statement in the future with respect to the Shares, except as
provided in Section 9 of the Agreement. The undersigned warrants and represents
that the undersigned is acquiring and will hold the shares for the undersigned's
own account, for investment purposes only, and not with a view towards the
distribution or public offering of the shares or with any present intention of
reselling or distributing the shares at any particular future time. The
undersigned consents to the appearance of a restrictive legend, in the form
required by Section 12(d) of the Agreement, on the certificate for the shares.
The undersigned agrees not to sell, transfer or otherwise dispose of the shares
except as specifically permitted by the Agreement or any applicable securities
law expressly permitting such a disposition.
Date: ______________ __, ____.
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