<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, for the Quarter Ended December 31, 1996.
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, for the Transition Period from ________ to ________
Commission file number 1-9748
-------------------------------------------------------------
AMERICAN FILM TECHNOLOGIES, INC.
-------------------------------------------------------------
(Exact name of registrant as specified its charter)
Delaware 23-2359277
-------------------------------------------------------------
(State or other juridiction of (IRS Employer Identification
incorporation or organization) Number)
4105 Sorrento Valley Blvd., San Diego, CA 92121
-------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code
(619) 623-0830
-------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of February 4, 1997, there were 73,400,644 shares of common stock
outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
American Film Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ -----------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash $247,025 $338,669
Other current assets 236,256 106,254
---------- ----------
Total current assets 483,281 444,923
Equipment and software, at cost, net 397,606 444,459
Film library, net 262,500 337,500
Reorganization value in excess of identifiable assets, net 5,847,035 6,017,772
---------- ----------
$6,990,422 $7,244,654
========== ==========
Liabilities and stockholders' equity:
Current Liabilities:
Notes payable:
Current portion of long-term notes payable $405,307 $0
Other loans 173,176 31,357
Accounts payable and accrued expenses 449,868 480,471
Accrued compensation 150,204 220,058
---------- ----------
Total current liabilities 1,178,555 731,886
---------- ----------
Long-term notes payable 1,215,921 1,634,404
---------- ----------
Total liabilities 2,394,476 2,366,290
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares - 10,000,000 at December 31, 1996 and
June 30, 1996: issued and outstanding shares 0 at
December 31, 1996 and June 30, 1996 0 0
Common stock, $.002 par value:
Authorized shares - 90,000,000 at December 31, 1996 and
June 30, 1996: issued and outstanding shares 73,400,644
at December 31, 1996 and 69,567,310 at June 30, 1996 146,802 139,135
Capital in excess of par value 7,831,785 7,264,453
Deferred compensation (960,000) (1,080,000)
Accumulated deficit (2,422,641) (1,445,224)
---------- ----------
Total stockholders' equity 4,595,946 4,878,364
---------- ----------
$6,990,422 $7,244,654
========== ==========
</TABLE>
See accompanying notes.
1
<PAGE>
American Film Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three months ended December 31, 1996 and For the Six months ended December 31, 1996
December 31, 1995 and December 31, 1995
Successor Successor Predecessor Successor Successor Predecessor
Company Company Company Company Company Company
------------ ------------ ------------ ------------ ------------ -----------
October 17, October 1, October 17, July 1,
1995 to 1995 to 1995 to 1995 to
December 31, December 31, October 16, December 31, December 31, October 16,
1996 1995 1995 1996 1995 1995
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Distribution revenues $0 $0 $0 $0 $0 $0
------------ ------------ ------------ ------------ ------------ -----------
0 0 0 0 0 0
Expenses:
Compensation and benefits -
administrative and officers 100,818 37,133 229,670 200,418 37,133 263,829
General and administrative 219,076 253,213 20,280 435,838 253,213 97,108
Interest expense, net 30,774 14,137 6,353 61,748 14,137 33,132
Depreciation and amortization 139,707 113,447 0 279,414 113,447 238,273
Reorganization items:
Fresh start adjustments 0 0 (6,326,258) 0 0 (6,326,258)
Professional fees 0 0 16,500 0 0 65,430
U.S. Trustee fees 0 0 0 0 0 1,250
------------ ------------ ------------ ------------ ------------ -----------
490,375 417,930 (6,053,455) 977,418 417,930 (5,627,236)
------------ ------------ ------------ ------------ ------------ -----------
Net income/(loss) ($490,375) ($417,930) $6,053,455 ($977,418) ($417,930) $5,627,236
============ ============ ============ ============ ============ ===========
Net income/(loss) per share ($0.01) ($0.01) $0.19 ($0.01) ($0.01) $0.17
============ ============ ============ ============ ============ ===========
Shares used in per share computation 72,567,311 69,557,310 32,232,802 71,178,421 69,557,310 32,232,802
============ ============ ============ ============ ============ ===========
</TABLE>
See accompanying notes.
2
<PAGE>
American Film Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Successor Successor Predecessor
Company Company Company
------------ ------------ ------------
Six months October 17, July 1,
ended 1995 to 1995 to
December 31, December 31, October 16,
CASH FLOWS FROM OPERATION ACTIVITIES: 1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income/(loss) ($977,418) ($417,930) $5,627,236
Adjustments to reconcile net income (loss) to net cash
(used) by operating activities:
Depreciaiton and amortization 279,414 113,447 238,273
Amortization of deferred compensation 120,000
Fresh start adjustments (6,326,258)
Change in estimate to Liabilities subject to compromise
Changes in assets and liabilities:
Restricted cash 0 0 15,322
Other current assets (130,002) (109,764) 86,913
Accounts payable and accrued expenses (100,457) (1,039,757) 210,651
Adjustment to long-term notes payable 55,729
Adjustment to Reorganization value in excess of
identifable asset account (65,150)
------------ ------------ ------------
Net cash (used) by operating activities (808,463) (1,463,425) (147,863)
Cash Flows From Investing Activities:
- - -
Net cash provided (used) by investing activities 0 0 0
Cash Flows From Financing Activities:
Principal payments on notes payable - bank 0 (348,385) (250,000)
Principal payments on notes payable - other (65,025) (332,503)
Proceeds from notes payable - other 206,844 101,263 503,000
Proceeds from common stock subscriptions 2,960,200
Proceeds from sale of common stock 575,000
------------ ------------ ------------
Net cash provided (used) by financing activities 716,819 (579,625) 3,213,200
Net increase (decrease) in cash (91,644) (2,043,050) 3,065,337
Cash, beginning of period 338,669 3,075,921 10,584
------------ ------------ ------------
Cash, end of period $247,025 $1,032,871 $3,075,921
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $58,302 $143,200
Reduction of long-term notes payable written down against
Reorganization value in excess of identifiable asset $13,176
</TABLE>
See accompanying notes.
3
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
1. Reorganization Under Chapter 11
Bankruptcy Proceedings and Basis of Presentation
On October 15, 1993, the Company filed for protection from creditors under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was the
result of continuing defaults related to the Company's loans, recurring
operating losses and cash flow problems. Under Chapter 11, substantially all
pre-petition liabilities of debtors are subject to settlement under a plan of
reorganization. On October 6, 1995, the Company's Plan of Reorganization (the
"Plan") was approved by the bankruptcy court and became effective October 17,
1995. The accompanying consolidated financial statements have been prepared in
conformity with principles of accounting applicable to a going concern. As
discussed below (see H. J. Meyers Agreement), the Company completed a private
placement for $3,460,200 and management intends to raise additional funds to
finance its future operations. See the Management's Discussion and Analysis of
Financial Condition and Results of Operations section for additional fund
raising activities during and subsequent to the quarter ended December 31, 1996.
While management believes it will be successful in its efforts, there are no
assurances whether sufficient financing or equity will be available to fund the
operations through June 30, 1997. No adjustments have been made to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result if the Company is
unable to continue as a going concern.
Further, the accompanying consolidated financial statements do not reflect any
adjustments relating to settlement of the claims of any class of creditors that
are provided for in the Company's Plan of Reorganization. Any adjustments
relating to such settlements will be recorded at such time as the Bankruptcy
Court enters a final order relating to these settlements. See discussion under
"Fresh Start Reporting" below. The only effect of the bankruptcy proceedings
reflected in the accompanying financial statements is for the period July 1,
1995 to October 16, 1995. "Reorganization items" (including professional fees)
have been specifically identified on the Consolidated Statements of Operations.
Plan of Reorganization
Under the terms of the Plan, the following is a summary of the treatment of
each of the major classes of creditors and stockholders:
4
<PAGE>
<TABLE>
<CAPTION>
Estimated
Class of Amount of
claims claim Distribution under the Plan Status
- ------ ----- --------------------------- ------
<S> <C> <C> <C>
Class 1 - $86,000 Cash payment in full on effective Unimpaired
Employee date.
Priority claim
Class 2 - $80,000 Cash payment on Distribution Date or, at Unimpaired
Priority the Company's discretion, over six years
Claims plus interest
Class 3 - $623,000 Cash payment on the effective date plus Unimpaired
Comerica interest and reasonable legal fees
Claims
Class 4 - $500,000 Cash payment plus interest on the effective Unimpaired
Secured date
Claims
Class 5 - $122,000 $110,000 cash payment plus accrued interest Impaired
DIP on effective date and remainder in one year
Financing note.
Claims
Class 6 - $ 6,000 Cash payment in full on effective date Unimpaired
Convenience
Claims
Class 7 - $1,650,000 Unsecured five year notes in full amount of Impaired
Unsecured allowed claim, with interest at 7%.
Claims
Class 8 - N/A $10 cash on effective date. Unexercised Impaired
Preferred Series B and the Series C and D voting
Stock convertible preferred stock interests will
Interests be canceled
Class 9 - N/A Retained, subject to dilution Impaired
Common
Stock Interests
Class 10 - N/A Canceled Impaired
Other Equity
Interests
</TABLE>
5
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
The above Class 7 unsecured Claim does not include the Class 7 Claim of Joseph
Taritero which has been compromised pursuant to the provisions of a prior
Stipulation and Order (see Note 4).
A claim becomes impaired when the legal, contractual or equitable right of such
claim is altered, modified or changed by the proposed treatment under the Plan.
H. J. Meyers Agreement
On May 3, 1995, the Company executed an agreement with H. J. Meyers and Co.,
Inc. ("Meyers") pursuant to which Meyers purchased an exclusive 90 day option,
as of May 30, 1995, to purchase common stock from the Company for $3,000,000
which would provide Meyers up to 51% of the outstanding shares. Upon approval of
the agreement by the Bankruptcy Court, on May 30, 1995, Meyers paid the Company
a non-refundable fee of $150,000 for the option. The agreement required Meyers
to pay $3,000,000 to the Company upon the effective date of the Company's Plan.
Through a subsequent amendment to that agreement, Meyers agreed to use its best
efforts to increase the proceeds of the offering to $4,000,000 which would
result in net proceeds of $3,480,000 to the Company. In exchange for this
possible increase, the Company agreed to issue an additional 3,800,000 shares to
Meyers and its assignees. Meyers raised the money through a private placement of
the Company's common stock to "accredited investors", as that term is defined by
the Securities Act of 1933. The proceeds to the Company totaled $3,460,200,
including the conversion of a $300,000 bridge loan discussed below.
The Company agreed to grant a one-time demand and piggy back registration right.
For a period of two years from the effective date, (upon demand by at least 25%
of the new stockholders) the new stockholders can demand the Company file a
registration statement with the SEC covering the reoffer and resale of its
shares (up to 38,982,508). Notwithstanding the foregoing, if at any time prior
to exercise of the demand registration right the Company receives a Letter of
Intent from an underwriter for a public equity offering of at least $5,000,000
of the Company's securities, then the demand registration right shall terminate.
On March 28, 1996, the Company entered into a letter of intent with H. J. Meyers
(the "Meyers Letter of Intent") under which Meyers confirmed its interest in
underwriting on a firm commitment basis a public offering of shares of the
Company's common stock. The Meyers Letter of Intent contemplates the negotiation
and execution of formal agreements relating to the proposed offering and
provides, among other things, that the Company will apply for listing on the
NASDAQ Small Cap Market and use its best reasonable efforts to maintain such
listing for not less than five years; that the Company, if requested, obtain
"key man" life insurance on the lives of designated officers of the Company and
that the Company shall have entered into a joint venture, business alliance or
business combination with an owner of content on terms acceptable to Meyers.
6
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
The new stockholders also have a right to register their shares in any offering
of the Company stock (a "piggy-back" right). The amount of stock the new
shareholders may register and sell is subject to pro-rata reduction or
elimination at the sole discretion of the underwriter. The existence of these
rights could adversely impact the future price of the common stock or the
ability of the Company to raise additional equity capital.
To enable the Company to fund certain obligations prior to the effective date of
the Plan, on July 28, 1995 Meyers arranged a $500,000 bridge loan to the Company
with interest at 8% plus common stock at the rate of one half share for every
dollar of bridge loan. The loans were convertible into common stock at the same
rate as the private placement to the accredited investors. On the effective
date, $300,000 of the bridge loan was converted into the Company's common stock
and the remaining $200,000 was repaid. The $500,000 bridge loan is included in
Class 4 - Secured Claims mentioned above.
Fresh Start Reporting
Under the provision of Statement of Position (SOP) 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code," issued in November 1990
by the American Institute of Certified Public Accountants, the Company has
prepared the following balance sheet as of the effective date, October 17, 1995
on the basis of "fresh start" reporting since the reorganization value, as
defined, was less than the total of all post-petition liabilities and
prepetition claims, and holders of voting shares immediately before confirmation
of the Plan received less than fifty percent of the voting shares of the
emerging entity. Under this concept, all assets and liabilities are restated to
reflect the reorganization value of the reorganized entity, which approximates
its fair value at the date of reorganization. In addition, the accumulated
deficit of the Company was eliminated and its capital structure was recast in
conformity with the Plan. As such, the following consolidated balance sheet as
of October 17, 1995 represents that of a successor company which, in effect, is
a new entity with assets, liabilities and a capital structure having carrying
values not comparable with prior periods and with no beginning retained earnings
or deficit.
The Company estimated the fair value of the reorganized entity based on the
proceeds received from the private placement of 56% of its common stock which
was completed on the effective date. While the estimated reorganization value of
the Company has been primarily allocated to specific asset categories pursuant
to Fresh Start Reporting, the effects of such are subject to further refinement
or adjustment. Current assets have been recorded at their book value, which the
Company believes approximates fair value. Equipment, software and film library
have been recorded at their approximate fair value. Long-term debt consists of
pre-petition liabilities and will be paid out subject to the terms of the Plan.
7
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
The effect of the Plan on the Company's audited consolidated balance
sheet at October 17, 1995 (the Effective Date) was as follows:
<TABLE>
<CAPTION>
(1) (2)
H.J Meyers Fresh Reorganized
Prior to Private Start Balance
Assets Reorganization Placement Adjustments Sheet
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Current Assets:
Cash $115,721 $2,960,200 $0 $3,075,921
Restricted cash 2,960,200 (2,960,200) 0
Accounts receivables 0 0
Other current assets 36,493 36,493
-------------- -------------- -------------- --------------
Total current assets 3,112,414 0 0 3,112,414
Equipment and software, at cost, net 755,253 (305,253) 450,000
Leasehold improvement, net 64,740 64,740
Film library, net 55,380 394,620 450,000
-------------- -------------- -------------- --------------
Property and equipment, net 875,373 0 89,367 964,740
Reorganization value in excess of
identifiable assets 0 6,237,264 6,237,264
-------------- -------------- -------------- --------------
Total assets $3,987,787 $0 $6,326,631 $10,314,418
============== ============== ============== ==============
Liabilities and stockholders' equity/(deficit) Current Liabilities:
Notes payable:
Bank Loans - in default $348,385 $348,385
Other loans 622,300 (300,000) 322,300
Accounts payable and accrued expenses 1,470,705 350 1,471,055
Accrued compensation 729,376 729,376
-------------- -------------- -------------- --------------
Total current liabilities 3,170,766 (300,000) 350 2,871,116
Notes payable 0 1,642,234 1,642,234
Liabilities subject to compromise 1,642,211 (1,642,211) 0
Stockholders'equity/(deficit):
Preferred stock 695 (695) 0
Common stock 60,821 78,294 139,115
Capital in excess of par value 13,526,768 3,181,906 (11,046,721) 5,661,953
Accumulated deficit (17,373,674) 17,373,674 0
Subscription payable 2,960,200 (2,960,200) 0
-------------- -------------- -------------- --------------
Total liabilities and stockholders' equity/(de $3,987,787 $0 $6,326,631 $10,314,418
============== ============== ============== ==============
</TABLE>
(1) To record the effects of the H. J. Meyers Private Placement Plan. Subsequent
to October 17, 1995, the Company received an additional $200,000 from
subscriptions related to the Private Placement.
(2) To record assets, liabilities and capital at their fair value pursuant to
Fresh Start Reporting and eliminate any retained deficit.
8
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
2. Summary of Significant Accounting Policies
The Company's principal business is the production of color versions of motion
pictures and television programs originally produced in black-and-white. The
Company has produced colorized films for its own library and owns the copyrights
on eleven such films. These films are available for sale and or distribution.
Consolidation
The consolidated financial statements include the accounts of Midtech de Mexico,
S.A. de C.V., the Company's wholly-owned Mexican subsidiary. All intercompany
transactions have been eliminated in consolidation.
Depreciation and Amortization
Depreciation and amortization are provided over the estimated useful lives of
the underlying assets using primarily the straight line method over a five-year
period. Leasehold improvements are amortized over the life of the lease or the
estimated useful life of the assets. Reorganization value in excess of
identifiable assets is being amortized over twenty years.
Film Library
Costs incurred in creating the Film Library include direct salaries and related
benefits of production personnel charged to specific coloring projects, an
allocation of overhead and costs of materials used in the coloring process.
Costs are charged to Film Library using the same system the Company maintains
for calculating cost of coloring films for customers. The Film Library is being
amortized using the straight line method over a three year period.
Loss per Share
Loss per share has been calculated by dividing the net loss applicable to common
stock by the weighted average number of common stock outstanding for the periods
indicated. For the quarter ended December 31, 1996 and the period October 17,
1995 to December 31, 1995, no exercise of stock options was assumed because the
exercise of such equivalents would be anti-dilutive.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options.
9
<PAGE>
AMERICAN FILM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (UNAUDITED)
3. Reorganization value in excess of identifiable assets
In accordance with Statement of Position (SOP) 90-7, upon the effective date,
$6,237,264 of the reorganization value of the Company was not attributable to
specific tangible or identified intangible assets and has been classified as an
intangible asset. While the estimated reorganization value of the Company has
been preliminarily allocated to specific asset categories pursuant to Fresh
Start Reporting, the effects of such are subject to further refinement, which
will cause this "reorganization value" account to be adjusted accordingly.
Furthermore, any adjustment relating to the settlement of a disputed prepetition
claim by the Bankruptcy Court will also cause this "reorganization value"
account to be adjusted accordingly. Reorganization value in excess of
identifiable assets is as follows:
December 31, 1996
-----------------
Reorganization value in excess of identifiable assets $6,214,676
less accumulated amortization 367,641
----------
$5,847,035
==========
The related amortization for the quarter ended and six month period ended
December 31, 1996 was $78,780 and $157,560, respectively.
4. Lawsuit Settlement
In January 1993, a suit was instituted against the Company by Joseph M. Taritero
in the Superior Court of the State of California for the County of Los Angeles
alleging breach of contract and fraud and seeking damages of $892,000. The
Company has settled with Mr. Taritero for an amount totaling $275,000. In
accordance with the terms of the Plan, $125,000 was paid on the effective date,
$75,000 was paid in April 1996 and the remaining $75,000 was paid in October
1996.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------
This discussion should be read in conjunction with the consolidated
financial statements, related notes and management's discussion and analysis of
financial conditions and results of operations included in the Company's annual
report on Form 10-K for the year ended June 30, 1996.
Overview and Reorganization.
On October 15, 1993, the Company filed for protection under Chapter 11
of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware. On
October 6, 1995, the Company's Plan of Reorganization (the "Plan") was approved
by the Bankruptcy Court and became effective October 17, 1995 (the "Effective
Date"). In connection with the Plan, the Company raised $3.46 million in new
capital in exchange for the issuance of common stock representing approximately
56% if its total outstanding common stock. The Company emerged from bankruptcy
under Fresh Start Reporting as promulgated by Statement of Position No. 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code. For
a detailed discussion of the bankruptcy proceedings, see Note 1 in the Notes To
Condensed Consolidated Financial Statements.
Success of the Company will, among other things, depend upon the
resumption of production in Mexico. That will require reemployment of selected
former Mexican employees. Since the Mexican operation was suspended in October
1993, the Company believes most of the former employees have found other jobs.
If Midtech is unable to rehire certain former employees, it will have to recruit
and train a new work force. That would delay the resumption of production and
increase the cost of production. As such, it could have a materially adverse
effect on the Company. Although the Company expects to benefit from the
devaluation of the peso, there is no assurance of how long those expected
benefits will last.
Since emerging from bankruptcy, the Company has actively pursued new
product development and opportunities, as well as strategic alliances, partners
and other sources of financing. Related to those efforts, during the quarter
ended September 30, 1996 the Company issued 1,333,334 shares of its Common Stock
for an aggregate cash purchase price of $200,000. During the quarter ended
December 31, 1996, the Company issued 2,500,000 shares of its Common Stock for
an aggregate cash purchase price of $375,000.
The Company is in discussions with other potential investors regarding
the purchase of equity securities or other investments in the Company, however,
there can be no assurance that any transaction can be negotiated or, if
negotiated, that such a transaction can be consummated.
11
<PAGE>
On March 28, 1996, the Company entered into a letter of intent with
Meyers (the "Meyers Letter of Intent") under which Meyers confirmed its interest
in underwriting on a firm commitment basis a public offering of shares of the
Company's common stock. The Meyers Letter of Intent contemplates the negotiation
and execution of formal agreements relating to the proposed offering and
provides, among other things, that the Company will apply for listing on the
NASDAQ Small Cap Market and use its best reasonable efforts to maintain such
listing for not less than five years; that the Company, if requested, obtain
"key man" life insurance on the lives of designated executive officers of the
Company; and that the Company shall have entered into a joint venture, business
alliance or business combination with an owner of content on terms acceptable to
Meyers.
Results of Operations.
The operations of the Company for the period ended December 31, 1996
(Successor Company), for the period October 17, 1995 to December 31, 1995
(Successor Company) and for the period July 1, 1995 to October 16, 1995
(Predecessor Company) were significantly affected by the cessation of production
operations of the Company. As a result, the financial results of the Company for
each of the periods addressed by this report do not reflect the earnings
capacity of the Company. The financial data for the period ended December 31,
1996 and for the period October 17, 1995 to December 31, 1995 reflects the
adoption of Fresh Start Accounting. As such, the financial data is considered
that of a Successor Company and is not comparable to prior periods.
Since the filing under Chapter 11 in October, 1993, the Company has not
generated any income from film colorization, animation or fee for service
orders. For the quarter ended December 31, 1996 the Company recorded net
interest expense of approximately $31,000 as compared to $14,000 for the period
October 17, 1995 to December 31, 1995. Interest income for the quarter ended
December 31, 1996 was $3,000 as compared to $23,000 for the period October 17,
1995 to December 31, 1995. For the six month period ended December 31, 1996, the
Company recorded net interest expense of $62,000, including $5,000 of interest
income.
For the quarter ended December 31, 1996, the Company recorded
compensation and benefits for its administration and officers of approximately
$101,000 as compared to $37,000 for the period October 17, 1995 to December 31,
1995. The increase over the period October 17, 1995 to October 31, 1995 is due
to $60,000 of amortization expense related to the deferred compensation under
Gerald Wetzler's compensation agreement. For the six month period ended December
31, 1996, compensation and benefits for its administration and officers totaled
approximately $200,000, including $120,000 of amortization expense related to
the deferred compensation under Gerald Wetzler's compensation agreement.
12
<PAGE>
For the quarter ended December 31, 1996, the Company recorded selling,
general and administrative expenses of approximately $219,000 as compared to
$253,000 for the period October 17, 1995 to December 31, 1995. For the six month
period ended December 31, 1996, selling, general and administrative expenses
totaled approximately $436,000.
For the quarter ended December 31, 1996, the Company recorded
depreciation and amortization expense of approximately $140,000 as compared to
$113,000 for the period October 17, 1995 to December 31, 1995. For the six month
period ended December 31, 1996, depreciation and amortization expense totaled
approximately $279,000. Depreciation and amortization expense for these periods
is based on Fresh Start Accounting, which among other things, includes a
restatement of all assets and liabilities to approximate their fair value as of
the date of reorganization.
For the quarter ended December 31, 1996 the Company had a net loss of
approximately $490,000, or $0.01 per share, as compared to a net loss of
$418,000. or $0.01 per share for the period October 17, 1995 to December 31,
1995. For the six month period ended December 31, 1996, the Company had a net
loss of approximately $977,000, or $0.01 per share.
Liquidity and Capital Resources.
- --------------------------------
In connection with the Plan, the Company completed a private placement
of $3.46 million. During the fiscal year ended June 30, 1996, the Company
entered into a stock option agreement with Gerald Wetzler, its Chairman and CEO,
whereby Mr. Wetzler purchased for a fee of $200,000 (which was deemed fair
value) an option to acquire the Company's common stock, or in the alternative,
preferred stock convertible into common stock. Subsequent to the quarter ended
December 31, 1996, the Company entered into an additional stock option agreement
with Mr. Wetzler, whereby Mr. Wetzler purchased for a fee of $200,000 (which was
deemed fair value) an option to acquire up to 10 million shares of the Company's
common stock. This option would be exercisable upon shareholder approval for the
increase in the number of authorized shares and the filing of an amendment to
the Company's certificate of incorporation reflecting the foregoing.
During the quarter ended September 30, 1996, the Company issued
1,333,334 shares of its Common Stock for an aggregate cash purchase price of
$200,000. During the quarter ended December 31, 1996, the Company issued
2,500,000 shares of its Common Stock for an aggregate cash purchase price of
$375,000.
The Company believes the funds received during the quarter ended
December 31, 1996 from the stock issuance and the funds received from the
$200,000 stock option fee subsequent to the quarter ended December 31, 1996 will
be sufficient to last through May 1997.
13
<PAGE>
The funds raised in the private placements, as well as the additional
funds raised are essential for the Company to continue operations. As noted
above, the Company has entered into a Letter of Intent with H. J. Meyers & Co.,
Inc. for the purpose of raising additional capital through a public offering.
The Company will be required to raise additional financing to fund operations
past May 1997 and no assurances can be made that such additional financing will
occur.
PART II : OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- -------------------------
None.
Item 2. Changes In Securities
- ------- ---------------------
Sale of Unregistered Securities - In September 1996, the Company issued
1,333,334 shares of its Common Stock (the "Shares") in a private placement to
two investors for an aggregate purchase price of $200,000. The Shares were
issued without the benefit of an effective registration statement under the
Securities Act of 1933, as amended (the "Act") in reliance upon the private
placement exemptions under Section 4(2) of the Act. During the quarter ended
December 31, 1996, the Company issued in a private placement an additional
2,500,000 shares of Common Stock to two investors for an aggregate purchase
price of $375,000. These sales were also consummated without the benefit of an
effective registration statement under the Act based upon the private placement
exemptions issued under Section 4(2) of the Act.
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
None.
Item 5. Other Information
- ------- -----------------
As a result of the Plan, as of the Effective Date of the Plan, the
Company adopted "fresh start" accounting, which reflects the payment or
discharge of certain debts in accordance with the Plan. "Fresh start accounting"
allows a reorganized entity to reflect its reorganization value, which
approximates its fair value at the date of reorganization. In addition, the
accumulated deficit of the Company is eliminated and its capital structure is
recast in conformity with the Plan.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
10.21 Stock purchase agreement dated October 21, 1996 between the
Company and Porter Bibb.
10.22 Registration undertaking agreement dated October 21, 1996 between
the Company and Porter Bibb.
10.23 Stock purchase agreement dated October 28, 1996 between the
Company and AFT Investments, a California general partnership.
10.24 Registration undertaking agreement dated October 28, 1996 between
the Company and AFT Investments, a California general partnership.
10.25 Five year stock option agreement dated October 17, 1996 between
the Company and Ed Payne.
10.26 Five year stock option agreement dated October 17, 1996 between
the Company and Steven Lefkowitz.
10.27 Five year stock option agreement dated October 17, 1996 between
the Company and Porter Bibb.
10.28 Five year stock option agreement dated October 15, 1996 between
the Company and Milton Rich.
10.29 Five year stock option agreement dated October 15, 1996 between
the Company and Sheldon Jacobs.
10.30 Stock option agreement dated January 3, 1997 between the Company
and Gerald Wetzler.
10.31 Five year stock option agreement dated November 20, 1996 between
the Company and Porter Bibb.
10.32 Five year stock option agreement dated November 20, 1996 between
the Company and Harvey Finkel.
15
<PAGE>
Signatures
In accordance with 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, thereunto duly authorized.
AMERICAN FILM TECHNOLOGIES, INC.
Date: February 4, 1997 By: /s/ Gerald M. Wetzler //
------------------- -------------------------
Gerald M. Wetzler,
Chairman, Chief Executive Officer
Date: February 4, 1997 By: /s/ John J. Karl //
----------------- --------------------
John J. Karl,
Principal Accounting Officer
16
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
21st day of October, 1996 between American Film Technologies, Inc., 300 Park
Avenue, 17th Floor, New York, New York 10022 (the "Company"), and D. Porter
Bibb, c/o Ladenburg, Thalmann & Co., Inc., 540 Madison Avenue, New York, New
York 10022.
W I T N E S S E T H:
--------------------
WHEREAS, the Company is in need of additional capital to continue to
finance its operations and to continue its business; and
WHEREAS, Purchaser is willing to acquire from the Company Five Hundred
Thousand Shares (500,000) shares of $.002 par value per share common stock of
the Company (the "Common Stock") (the "Purchased Shares") for an aggregate
purchase price of Seventy Five Thousand Dollars ($75,000) (the "Purchase
Price");
WHEREAS, the Company is willing to sell to the Purchaser the Shares for
the Purchase Price and such other terms and conditions as set forth herein; and
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Purchaser agree as
follows:
1. Purchase and Sale of the Shares. On or before 6:00 Los Angeles time
on October 18, 1996, upon satisfaction of the conditions set forth in Section 2
below, the Company shall sell to Purchaser and Purchaser shall purchase from the
Company the Shares for the Purchase Price (the "Sale").
2. Conditions Precedent, Delivery of the Shares.
(a) The obligations of the Company hereunder shall be subject to
and conditioned upon the satisfaction of all of the following conditions:
(i) The execution of this Agreement by the parties hereto;
(ii) The completion, execution and delivery by the Purchaser to
the Company of the Purchaser's Questionnaire, attached hereto
as Exhibit "A";
(iii) The delivery by the Purchaser to the Company of the
Purchase Price;
<PAGE>
(iv) All of the representations and warranties of the Purchaser
contained herein remain true and correct; and
(v) The Execution of the Registration Undertaking, as attached
hereto as Exhibit A-1.
(b) Upon satisfaction of all of the conditions precedent set forth
in Section 2(a) above, the Company shall cause to be delivered to the Purchaser
at the address set forth in Section 7(b) below a stock certificate representing
the Shares. Said stock certificate shall contain a restrictive legend
substantially similar to that set forth in Section 7 below (the "Certificate").
3. Representations of the Company. The Company represents and warrants
that:
(a) the representations and warranties of the Company in this
Agreement shall have been true and correct in all material respects on the date
of this Agreement, and they shall be true and correct in all material respects
as of the Closing with the same force and effect as though made at the Closing.
(b) upon issuance, the Shares will be (i) validly issued, fully
paid and nonassessable; and (ii) free of any liens or encumbrances;
(c) the Sale has been duly authorized and approved;
(d) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to conduct its business as it is
presently being conducted. The Company is duly qualified to do business as a
foreign corporation in the State of California and is qualified to do business
as a foreign corporation in all other jurisdictions where the failure to qualify
would result in a material adverse effect on the Company's business and
operations taken as a whole;
(e) the Company has all necessary corporate power and authority and
has taken all corporate action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform the its
obligations hereunder. This Agreement, and all related agreements, has been duly
authorized, executed and delivered by the Company and is a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. No authorization, approval, consent, order, registration,
license or permit of any court or governmental agency or body is required for
the execution of this Agreement and the consummation of the transactions
contemplated hereby, including the valid authorization, issuance, sale,
delivery, of the Shares under the Agreement;
2
<PAGE>
(f) the execution, delivery and performance of this Agreement by
the Company, the consummation of the Company of the transactions contemplated
herein and the compliance of the Company with the terms of this Agreement, do
not, and will not, with or without the giving of notice or the lapse of time, or
both, (i) result in any violation of the Articles of Incorporation or By-Laws of
the Company, (ii) result in a breach or conflict with any of the terms or
provisions of any agreement or instrument to which the Company is a party, or
constitute a default under or result in the modification or termination of, any
agreement to which the Company is a party, except where such breach or conflict
would not have a material adverse effect on the business, operations or
finanacial condition of the Company taken as a whole, (iii) result in any
violation of any existing applicable law, rule, regulation, judgment, or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or any of its properties in business, except where the effect
of such violation would not have a material effect on the business, operations
or financial condition of the Company taken as a whole;
(g) the Company has 100,000,000 shares of capital stock as follows:
(i) 10,000,000 shares of preferred stock of which no shares are
outstanding and 10,000,000 preferred shares of are subject to outstanding
options; and
(ii) 90,000,000 shares of Common Stock of which 70,900,644 are
issued and outstanding and 16,278,00 of which are subject to outstanding options
and possible stock grants.
(h) the financial statements included in the Company's 10-K Report
for the year ended June 30, 1996 (the "Financial Statements"), were, except as
otherwise noted therein, prepared in accordance with generally accepted
accounting principles consistently applied and to the best of the Company's
knowledge are true and correct and fairly present the financial condition of the
Company as of such date and results of its operations for the fiscal year ending
on June 30, 1996;
3
<PAGE>
(i) except as set forth in Schedule 3(i), and except for (x)
expenses and obligations incurred in the ordinary course of the Company's
business as presently conducted, (y) in connection with professional fees, or
(z) with respect to pre-existing contracts or agreements, since the date of the
Financial Statements there has not been (i) any change in the business, results
of operations, assets, or financial condition or prospects or in the manner of
conducting the business of the Company which individually or in the aggregate
has had or may have a material adverse effect on the business, results of
operations, assets, financial condition or prospects of the Company and (ii) any
damage, destruction or loss, whether covered by insurance or not, which has had
or will have a material adverse effect on the business, results of operations,
assets, financial condition or prospects of the Company.
(j) except as set forth in the Financial Statements, the Company
does not have any outstanding loan obligations.
(k) to the best of the Company's knowlege there are no claims,
actions, suits, litigation, proceedings, governmental investigations or
arbitration proceedings pending or threatened in writing, against the Company
involving the business or properties of the Company which if determined
adversely to the Company, would have a material adverse effect on the business,
operations or financial condition of the Company taken as a whole.
(l) except as set forth in Schedule 3(l) to this Agreement, there
are no existing subsidiaries of the Company.
(m) except as set forth in Schedule 3(m) to this Agreement and
contained in the SEC Reports (hereinafter defined), attached as Exhibit B, the
Company is not a party to any material agreements. For the purposes hereof the
SEC Reports are defined as:
i. The Company's Form 10-K Report for its fiscal year ended
June 30, 1995;
ii. The Company's Form 10-Q Reports for the fiscal quarters
ended September 30, 1995, December 31, 1995 and March 31, 1996;
and
iii. The Company's Form 10-K Report for the fiscal year ended
June 30, 1996.
4
<PAGE>
(n) the Company currently has in effect directors' and officers'
liability insurance and such other liability and property insurance as the
Company deems appropriate.
(o) the Company has filed, caused to be filed or obtained
extensions to file all federal, state and local income tax returns which are
required to be filed by it, and has paid, or caused to be paid, or to the best
of the Company's knowledge has (i) made adequate provision on its books in
accordance with generally accepted accounting principles amounts sufficient for
the payment of, all taxes as shown on said returns or on any assessment received
by them, to the extent that the taxes have become due, and (ii) made all
estimated tax payments required to be made by it to avoid the imposition of
penalties, interest and other additions to tax;
(p) except as set forth in or scheduled as Exhibits to the SEC
Reports there are no existing labor and employment agreements;
(q) to the best of the Company's knowledge, the Company is not in
violation of any applicable law, rule regulation, judgment, order, or decree of
any governmental agency or court, domestic or foreign, having jurisdiction over
the Company or its properties or businesses where such violation would have a
material adverse effect on the Company's operations, business or financial
condition taken as a whole.
(r) to the best of the Company's knowledge, there is currently no
litigation pending or threatened in writing, seeking to enjoin or otherwise
prohibit the transactions contemplated hereby.
For the purposes hereof "To the best of the Company's knowledge" means the
actual current knowledge of Gerald Wetzler or John Karl without any duty to
investigate.
Except as expressly set forth above, the Company makes no representations or
warranties of any kind or nature to the Purchaser.
4. Representations of Purchaser.
Purchaser represents and warrants in favor of the Company that:
(a) it is acquiring the Shares for its own account, for investment
purposes only, and not with a view to or for the resale, distribution or
assignment thereof, in whole or in part;
(b) it understands that the offer and sale of the Shares is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Act"), and under the laws of any other jurisdiction; that the
Company does not intend and is under no obligation to so register the Shares;
that the Shares may not therefore be sold, assigned, pledged or otherwise
transferred unless subsequently registered under the Act or pursuant to an
exemption therefrom; and that legends to the foregoing effect will be placed on
the Certificate evidencing the Shares;
5
<PAGE>
(c) Purchaser has the financial ability to bear the economic risk
of its investment in the Company, including its possible loss, has adequate
means of providing for his current needs and personal contingencies and has no
need for liquidity with respect to its investment in the Company;
(d) Purchaser has the knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Shares;
(e) Purchaser is an "accredited investor" as such term is defined
in Rule 501(a) of Regulation D, promulgated under the Securities Act of 1933, as
amended;
(f) Purchaser has been given the opportunity to ask questions of
and receive answers from the representatives of the Company concerning the
Company, the Shares, the terms and conditions of the Sale and other matters
pertaining to this investment, and has been given the opportunity to obtain such
additional information as Purchaser deemed necessary to verify the accuracy of
the information provided in order for it to evaluate the merits and risks of an
investment in the Company and has not been furnished any offering literature or
prospectus except the SEC Reports;
(g) Purchaser is not acquiring the Shares as a result of or
subsequent to:
i. any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or
broadcast over television or radio; or
ii. any seminar or meeting whose attendees, including the
Purchaser, had been invited as result of, subsequent to or
pursuant to any of the foregoing.
(h) Any information which the Purchaser has heretofore furnished to
the Company with respect to its financial position and business experience,
including without limitation its Purchaser Questionnaire, attached hereto as
Exhibit "A", is complete and correct as of the date of this Agreement and if
there should be any material change in such information at any time prior to or
after acceptance of the Sale, the Purchaser will immediately furnish such
revised or corrected information to the Company.
6
<PAGE>
(i) Purchaser and/or Purchaser's investment advisors, if any, have
carefully read and reviewed this Agreement, Exhibit A hereto and the SEC
Documents and understand the risks of, and other considerations relating to, a
purchase of Sale, including, but not limited to, the risks set forth under "Risk
Factors" in the Company's draft 1996 Form 10-K Report, attached as Exhibit C. In
connection therewith, Purchaser is aware of the fact that the Company has
recently emerged from a Chapter 11 Bankruptcy proceeding, has not engaged in
ongoing business operations in over thirty (30) months and will need additional
financing in order to remain in business and significant additional financing
thereafter to implement its business plan.
5. Indemnification.
The Purchaser understands the meanings and legal consequences of the
representations and warranties contained in this Agreement and agrees to
indemnify and hold harmless the Company and its officers and directors from and
against any loss, damage, liability, claim and expense whatsoever, including but
not limited to any and all legal expenses, due to or arising out of a breach of
any representation or warranty of the Purchaser, whether contained in this
Agreement or the Purchaser's Questionnaire, or any failure by the undersigned
to fulfill any covenants or agreements set forth herein or therein or arising
out of the sale or distribution by the Purchaser of any Shares in violation of
the Act or any applicable state Securities laws. Notwithstanding any of the
representations, warranties, acknowledgments or agreements made herein by the
Purchaser, the Purchaser does not thereby or in any other manner waive any
rights granted to the Purchaser under Federal or state securities laws.
Notwithstanding the foregoing, the Company agrees that in no event shall the
liability of the Purchaser pursuant to Section 6 exceed $75,000.
6. Legends
Purchaser agrees that all Certificates representing the Shares shall
have endorsed thereon a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED
STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT LIMITED TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR APPROVED BY ANY FEDERAL
OR STATE REGULATORY AGENCY, INCLUDING BUT NOT LIMITED TO THE SECURITIES
AND EXCHANGE COMMISSION, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR
MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT
REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL
OR STATE SECURITIES LAWS, INCLUDING BUT NOT LIMITED TO THE ACT, OR
COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE
DISCRETION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO
VIOLATION OF SUCH REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRANSFER OR ASSIGNMENT."
7
<PAGE>
7. MISCELLANEOUS.
(a) Finders Fees. Wetzler and Purchaser each acknowledges that he
or it has not, directly or indirectly, dealt with anyone acting as a broker,
finder or in a similar capacity, or has incurred any obligation for any
brokerage, finders' or similar fee or commission in connection with this
Agreement or any of the transactions contemplated hereby.
(b) Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given
(i) upon delivery, if personally delivered, sent by commercial over night
courier (e.g. Federal Express or DHL), or telefaxed with confirmation copy sent
the same day by first class U.S. mail (postage prepaid); or (ii) upon the
expiration of the fifth (5th) business day after deposit, if mailed by
first-class, registered or certified U.S. mail, postage prepaid. All notices
shall be addressed to each party at the following address:
If to the Company:
Gerald M. Wetzler
Chief Executive Officer
300 Park Avenue
17th Floor
New York, New York 10022
Fax No. (212) 572-6460
With a copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, CA. 90067
Fax No. (310) 785-5384
8
<PAGE>
If to Purchaser:
D. Porter Bibb
c/o Ladenburg, Thalmann & Co., Inc.
540 Madison Avenue
New York, New York 10022
Fax No. (212) 644-6515
or to such other address as the addressee shall have furnished to the other
parties hereto in the manner prescribed by this section.
(c) Entire Agreement. This Agreement, together with any related
documents referred to in this Agreement, constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter. No amendment, change or modification of this Agreement be valid unless
in writing and signed by all of the parties hereto.
(d) Waiver. No reliance upon or waiver of one or more provisions of
this Agreement shall constitute a waiver of any other provisions hereof.
(e) Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal and enforceable to the maximum extent permitted by law.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Section Headings. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. Should there be any conflict between any such
heading and the section at the head of which it appears, the section and not
such heading shall control.
9
<PAGE>
(h) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York. The
parties hereby consent to the exclusive jurisdiction of the state or federal
courts located in the State of New York for the resolution of any disputes
arising out of this Agreement.
(i) Successors and Assigns. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, legal or personal representatives,
successors and assigns; provided however, except by operation of law, neither
party can assign their obligations under the Agreement, without consent of the
other.
(j) Further Assurances. Each of the parties hereto shall execute
and deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
(k) Attorney's Fees. If any legal action or any other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first set forth above.
AMERICAN FILM TECHNOLOGIES, INC.
By: _______________________________
Gerald M. Wetzler
Chief Executive Officer
-----------------------------------
D. Porter Bibb
10
<PAGE>
PURCHASER QUESTIONNAIRE
You are being requested to answer questions in connection with the
proposed offer and sale, pursuant to an exemption from the registration
provisions of the Securities Act of 1933, as amended (the "Act") and in
particular, Rule 505 of Regulation D, of shares of the Common Stock, $.002 par
value per share (the "Shares') of American Film Technologies, Inc,, a Delaware
corporation (the "Company"). The availability of the exemption depends, in part,
on a determination that each purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D.
The information supplied will be used in determining whether the sale
of the Shares meets such criteria. The information will be kept confidential and
will not be disclosed except to the Company, its counsel, and if required, to
governmental and regulatory authorities.
Please PRINT your response to each question; and, where the answer to
any question if "None" or "Not Applicable" please so state.
I, (we), __________________________________, understand the Shares are
being issued WITHOUT registration under the Act in reliance upon the private
offering exemption contained in Rule 505 of Regulation D promulgated under
Section 4(2) of the Securities Act, and that such reliance is based in part on
the information herein supplied. For the foregoing reasons, and to induce the
Company to issue and deliver the Shares to me, I represent and warrant that the
information stated herein is true, accurate and complete to the best of my
knowledge and belief, and I agree to notify and supply corrective information
promptly if, prior to the consummation of my purchase of the Shares, any of such
information becomes inaccurate and incomplete.
INDIVIDUAL AND JOINT PURCHASERS SHOULD COMPLETE SECTION A
CORPORATIONS, BUSINESS TRUSTS AND PARTNERSHIPS SHOULD COMPLETE SECTION B
11
<PAGE>
A. INDIVIDUAL AND JOINT PURCHASERS
1. Personal
a. Full Name: _____________________________
b. Social Security No.: _____________________________
c. Residence Address: _____________________________
-----------------------------
d. Occupation: _____________________________
e. Employer: _____________________________
f. Business Address: _____________________________
-----------------------------
g. Telephone: Business: _____________ Home: _________
h. Position or Title: _____________________________
i. Are You (Check One): Married:
______ Single _______
j. Do You File Joint
Tax Returns(Chock One): Yes
__________ No ___________
2. Bank References
a. Bank: _____________________________
b. Bank Address: _____________________________
-----------------------------
c. Bank Telephone No.: _____________________________
d. Name of Bank
Representative: _____________________________
3. Income, Net Worth and Financial Standing
a. Did your annual income during each of 1994 and 1995 exceed $200,000,
or, did your joint income together with your spouse exceed $300,000 during each
of 1994 and 1995, and do you reasonably expert your annual income during 1996 to
exceed $200,000, or your joint income together with your spouse to exceed
$300,000?
Yes _____________ No _______________
12
<PAGE>
b. Does your individual not worth, or your joint not worth together
with your spouse, exceed $1,000,000?
Yes _______ No _________ Not Applicable __________
c. Gross income for the most recently
ended tax year: $____________
d. Anticipated gross income for
the year 1996: $____________
e. Do you anticipate that your income over the next five
years will:
Increase _______ Decrease _______ Remain Same ________
f. Is your net worth, excluding home, furnishings and automobiles
(Check One):
Over $200,000 ___ Over $300,000 ___ Over $400,000 ___
Over $________ (State Amount)
g. What percentage of your net worth are liquid assets (cash or assets
readily convertible to cash) (Check One:)
over 15% _____ over 25% _____ over 35% _____ over 50% ____
h. Do you have any debts or other obligations, or are there any
reasonably foreseeable circumstances likely in the future to require you to
dispose of the Shares?
Yes ________ No ________ (If yes, please describe
briefly below)
---------------------------------------------------------
----------------------------------------------------------
4. Investment Experience
Describe briefly your prior investment experience in both marketable
and unmarketable securities. If none, please so state.
---------------------------------------------------------
---------------------------------------------------------
13
<PAGE>
5. Education
Describe your educational background (schools attended and degrees
obtained):
---------------------------------------------------------
---------------------------------------------------------
6. What is your profession, if any? _______________________
7. Investment Advice
a. In connection with your proposed purchase of Shares, will you or did you
seek advice from any lawyer, accountant, investment advisor or other person or
persons?
Yes _________ No ___________
If Yes, please set forth the name, profession or occupation
and business address of each such advisor or prospective advisor and, if more
than one, explain briefly the division of responsibilities between them:
---------------------------------------------------------
---------------------------------------------------------
b. Do you or any of your advisors, or any of your or their respective
affiliates, now have or contemplate having, or have they had, during the past
two years, any relationship with the Company and/or any of its officers,
directors, or their affiliates; or, any of your advisors or affiliates the
beneficial owner of 10% or more of any class of equity securities or 10% or more
of the equity interest in the Company or affiliates of the Company;
Yes ____________ No _____________
If Yes, please describe such relationship and/or ownership.
---------------------------------------------------------
B. CORPORATE PURCHASERS, BUSINESS TRUST OR PARTNERSHIP PURCHASERS
1. Name of Corporation, Business Trust or Partnership:
- ---------------------------------------------------------------
2. Name and Title of Executive Officer Executing Questionnaire:
- ---------------------------------------------------------------
14
<PAGE>
3. Business Address: ________________________________________
----------------------------------------
4. Telephone Number: ________________________________________
5. Representations and Warranties
The undersigned represents and warrants as follows:
a. The corporation, business trust or partnership, as the case
may be, has been duly incorporated if a corporation, formed if a business trust
or partnership, and is validly existing as a corporation, business trust or
partnership, in good standing under the laws of the jurisdiction of its
incorporation or formation, with full power and authority to enter into the
transactions contemplated by the offering documents.
b. (i) The officers or partners of the undersigned who, on
behalf of the undersigned, have considered the purchase of the Shares and the
advisors, if any, of the corporation, business trust or partnership, as the case
may be, in connection with such consideration are named below and such officers
and advisors or partners were duly authorized to act for the corporation,
business trust or the partnership in reviewing such investment;
(ii) The names and positions of the officers or partners of
the undersigned who, on its behalf, have reviewed the purchase of the Shares are
as follows:
---------------------------------------------------------
(iii) In evaluating the merits and risks of the purchase of
the Shares, the corporation, business trust or the partnership, as the case may
be, intends to rely upon, or has relied upon, the advice of, or will consult
with, or has consulted with, the following persons:
---------------------------------------------------------
c. The officers of the corporation, business trust or the
partners of the partnership who, on its behalf, have considered the purchase of
the Shares, and the advisors, if any, of the corporation or the corporation,
business trust or partnership in connection with such consideration, together
have such knowledge and experience in financial and business matters that such
officer(s), partner(s) and such advisor(s), if any, together are capable of
evaluating the merits and risks of purchase of the Shares and of making an
informed investment decision;
d. Together with any corporation or group of corporations with
which it files a consolidated federal income tax return, the undersigned (i)
expects to have adequate taxable income to realize the economic and potential
tax benefits from ownership of the Shares, and (ii) has reserves and/or net
worth adequate to permit it to satisfy any tax or other liabilities arising from
its personal liability with respect to the investment and operation thereof;
15
<PAGE>
e. The total assets of the corporation, business trust or
partnership are in excess of $_______________.
f. The net worth of the corporation. business trust or the
partnership is in excess of $_____________.
g. The corporation, business trust or the partnership has had,
during each of the past two tax years, gross income from all sources of
$_____________ and $_______________, respectively.
h. The undersigned expects the corporation, business trust or
the partnership to have during the current and next tax year, gross income from
all sources of at least $____________; and
i. The undersigned knows of no pending or threatened
litigation the outcome of which could adversely affect the answer to any
question hereunder.
j. Indicate the following if a partnership purchaser:
(i) The date the partnership was formed:
(ii) The names of each partner in the partnership. Please have
each individual partner execute a separate questionnaire or forward to the
Company a letter indicating whether or not each partner is sophisticated and has
a sufficient net worth or salary level to be deemed an "accredited investor"
under Rule __________ promulgated under the Securities Act.
---------------------------------------------------------
---------------------------------------------------------
The undersigned warrants and represents that the foregoing statements
are true and accurate to the best of the information and belief of the
undersigned and the undersigned will promptly notify the Company of any changes
in the foregoing answers.
FOR INDIVIDUALS
Purchaser
Dated:__________, 1996 ______________________________________
Signature
______________________________________
Signature (If Joint)
16
<PAGE>
FOR CORPORATIONS
Dated:____________, 1996 ______________________________________
Name of Company
______________________________________
Executive Officer
______________________________________
Signature of Officer
FOR BUSINESS TRUSTS
Dated:___________, 1996 _______________________________________
Name of Business Trust
_______________________________________
Name of Trustee Executing
Questionnaire
_______________________________________
Signature of Trustee
FOR PARTNERSHIPS
Dated:___________, 1996 _______________________________________
Name of Partnership
_______________________________________
Name of Partner Executing
Questionnaire
_______________________________________
Signature of Partner
17
<PAGE>
FOR PENNSYLVANIA RESIDENTS:
The undersigned hereby agrees not to sell any of the securities
acquired hereunder for a period of 12 months from the date he acquires such
securities.
By:
____________________________________
Signature
_______________________________________
Printed Name
_______________________________________
Date
_______________________________________
Street
_______________________________________
City, State Zip
_______________________________________
Social Security Number of Federal
ID No.
_______________________________________
Telephone No. of Subscriber
AGREED AND ACCEPTED BY:
AMERICAN FILM TECHNOLOGIES, INC.
By:___________________________________
Gerald M. Wetzler
Chief Executive Officer
Date:_________________________________
18
<PAGE>
REGISTRATION UNDERTAKING
This Registration Undertaking (this "Agreement") is made and
entered into as of September 18, 1996 by American Film Technologies, Inc., a
Delaware corporation (the "Company") for the benefit of D. Porter Bibb (the
"Holder") pursuant to Section 2 of that certain Stock Purchase Agreement dated
as of October 21, 1996 between the Company and the Holder (the "Purchase
Agreement").
NOW, THEREFORE, in consideration of the mutual
representations, covenants and agreements contained herein, the Company hereto
agrees and undertakes as follows:
1. Piggyback Registration.
(a) Registrable Securities: The term "Registrable
Securities" means each of the following:
(i) the Shares as such term is defined in the Purchase
Agreement; and
(ii) any other shares or securities or distributions
resulting from a reverse split, stock split, stock dividend, reclassification of
the capital stock of the Company, consolidation or reorganization of the
Company, and any shares or other securities of the Company or of any successor
company which the Holder may receive by virtue of their ownership of the Shares;
provided, however, that any of the securities described in the foregoing clauses
(i) and (ii) shall be treated as Registrable Securities only if and so long as
(x) they are held by the Holder, family members of the Holder or a personal or
family trust controlled by the Holder, (y) have not been sold or disposed of,
pursuant to a registration statement covering such Registrable Securities which
has been declared effective pursuant to the Securities Act of 1933, as amended
(the "Act") or if such securities have not been sold or disposed of such
registration statement including the Registrable Securities remains effective;
or (z) have not been sold or disposed of to the public pursuant to Rule 144 (or
any similar provision then in force) promulgated under the Act.
(b) Piggyback Registration Rights. Subject to the terms and
conditions contained in this Agreement, during the Piggyback Period, as
hereinafter defined, the Holder shall be entitled to include in any Piggyback
Registration Statement, as hereinafter defined, all Registrable Securities .
(c) Piggyback Period. Except as otherwise provided herein,
the Holder shall be entitled to include all or any portion of the Registrable
Securities held by Holder in a Piggyback Registration Statement, as such term is
hereinafter defined, during the "Piggyback Period" defined as the period
commencing as of the date hereof and ending on the first to occur of: (i)
October 18, 2006; (ii) all of the Registrable Securities which Holder desires to
sell can be sold in one sale pursuant to Rule 144(k) or any successor rule of
similar provision of the Act; OR (iii) the sale of the Registrable Securities
have been included in one or two Piggyback Registration Statements (as
hereinafter defined) which has been declared effective by the Securities and
<PAGE>
Exchange Commission (the "SEC") and if the Registrable Securities are included
therein, the effectiveness thereof is not terminated prior to the contemplated
distribution period ("Effective Piggyback Registration Statement") or if the
sale of all of the Registrable Securities have not be so included in such
Effective Piggyback Registration Statements, such failure is a result of
Holder's failure to timely deliver to the Company a Supplemental Notice with
respect thereto as set forth in Section 1(e) below.
(d) Notice of Registration. In the event that during the
Piggyback Period the Company proposes to file a registration statement to
register under the Act, the sale or other transfer of any class of its
securities of which the Registrable Securities are a part: (i) by the Company
(the "Company Securities"); or (ii) by any other present or future holder of the
Company's securities (the "Shareholder Securities") (the Company Securities and
Shareholder Securities hereinafter collectively referred to as the Registration
Securities), the Company shall deliver to the Holder, at least twenty (20) days
prior to the filing with the Commission of the registration statement covering
such Registration Securities (the "Piggyback Registration Statement"), a written
notice (a "Registration Notice") of its intention so to register such offering
of Registration Securities and the manner in which such Registration Securities
are proposed to be sold.
(e) Supplemental Notice. In the event that a Registration
Notice shall have been delivered, the Holder may elect to include in the
offering covered by the Piggyback Registration Statement all or a portion of the
Registrable Securities by delivering notice to the Company (the "Supplemental
Notice") on or before the tenth (10th) day after delivery of the Registration
Notice specifying the number of shares of Registrable Securities (the "Piggyback
Securities") proposed to be sold or otherwise transferred by the Holder. In the
event that during the Piggyback Period, Holder fails to timely deliver
Supplemental Notices including all Registrable Securities with respect to two
Effective Piggyback Registration Statements then and in such event all Piggyback
Registration Rights of the Holder shall automatically terminate without any
Further action on the party of the Company.
(f) Registration of Supplemental Registration Securities.
Subject to the terms, conditions, restrictions and limitations contained
elsewhere herein, from and after receipt of a Supplemental Notice, the Company
shall use its best efforts to cause the Piggyback Securities to be registered
under the Act pursuant to the Piggyback Registration Statement, subject to the
sale or other transfer thereof prior to the effectiveness of the Piggyback
Registration Statement, and to effect and to comply with all qualifications,
compliances and requirements necessary to permit the sale or other transfer of
the Piggyback Securities pursuant to the Piggyback Registration Statement,
including, without limitation, qualifications under the applicable blue sky or
other state securities laws.
(g) Priorities.
(i) Underwritten Offerings by the Company. If, in the
case of delivery of a Supplemental Notice relating to an underwritten offering
of securities proposed to be made by the Company, the managing underwriter shall
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<PAGE>
make a determination, in its sole discretion, in a writing delivered to the
Company and the Holder that inclusion of some or all of the Piggyback Securities
together with the Registration Securities, which are to be included in such
Piggyback Registration Statement would have an adverse effect on the proposed
distribution of the Company Securities ("Adverse Distribution Effect"), then the
Company shall, upon written notice to the Holder and to all holders of
Shareholder Securities included in such Piggyback Registration Statement only
the number of securities other than Company Securities which, in the sole
discretion of the managing underwriter, can be sold without any such Adverse
Distribution Effect, selected from the Holder and the holders of Shareholder
Securities seeking to exercise piggyback registration rights, on a pro rata
basis in proportion to the number of securities sought to be included in such
Piggyback Registration Statement.
(ii) Underwritten Offerings of Shareholder Securities.
If, in the case of delivery of a Supplemental Notice by the Holder relating to
an underwritten offering of Shareholder Securities in connection with a demand
registration right by such holders, where the managing underwriter shall make a
determination, in its sole discretion, in a writing delivered to the Company and
the Holder and holders of Shareholder Securities included in such Piggyback
Registration Statement that inclusion of some or all of the Registrable
Securities would have an Adverse Distribution Effect on the proposed sale of the
Shareholder Registration Securities then the Company shall, upon written notice
to the Holder and holders of such Shareholder Securities, include in such
registration only the number of Securities which, in the sole discretion of the
managing underwriter, can be sold without an Adverse Distribution Effect on the
proposed sale of the Shareholder Securities covered by the Demand Registration
Right, selected from the Holder and the holders of Shareholder Securities
seeking to exercise piggyback registration rights, on a pro rata basis in
proportion to the number of securities sought to be included in such Piggyback
Registration Statement.
(iii) Non-Underwritten Offerings. The Holder shall have
the right to include all Registrable Securities in a Piggyback Registration
Statements of non-underwritten offerings of securities of the Company.
(h) Underwriters. In the case of Piggyback Registration
Statements, the underwriter designated by the initiating party shall serve as
the managing underwriter for the entire offering. Holder shall be entitled to
utilize any other underwriter in connection with the sale of its securities
unless the managing underwriter reasonably determines participation by such
underwriter in the offering would materially delay or otherwise be materially
adverse to the transaction.
(i) Exceptions. The provisions of this Section shall not
apply to (i) any registration statement on Form S-8 or Form S-4, or any
successor form, or (ii) any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation.
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<PAGE>
2. Restrictions on Public Sale by the Holder. Notwithstanding
anything contained herein to the contrary, if the Holder has received a
Registration Notice during the Piggyback Period, for so long as the Holder holds
one percent (1%) or more, on a fully diluted basis of such Registrable
Securities, the Holder agrees not to effect any public sale or distribution of
any such securities during the fifteen (15) days prior to, and during the 90-day
period beginning on, the effective date of such registration statement (or until
its termination or abandonment, if earlier), except for a sale pursuant to such
registration statement, if permitted.
3. Registration Procedures.
(a) Whenever Piggyback Securities are included in a
Piggyback Registration Statement pursuant to Section 1 of this Agreement,
subject to the terms, conditions, restrictions and limitations contained
elsewhere herein, the Company agrees to:
(i) include in such Piggyback Registration Statement
the sale of the Piggyback Securities in accordance with the intended method of
distribution thereof, and use commercially reasonable efforts to cause such
Piggyback Registration Statement to become effective;
(ii) prepare and file with the SEC such amendments and
post-effective amendments to the Piggyback Registration Statement as may be
necessary to keep the Piggyback Registration Statement effective following the
effective date for such period as may be required to meet the prospectus
delivery and all other requirements under the Act, but not longer than one
hundred thirty-five (135) days; cause the prospectus to be supplemented by any
required prospectus supplement, and, as so supplemented, to be filed pursuant to
Rule 424 under the Act; and comply with the provisions of the Act applicable to
it with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition by sellers thereof set forth in such Piggyback
Registration Statement or supplement to the prospectus;
(iii) furnish to the Holder and the underwriter or
underwriters, if any, without charge, at least one signed copy of the Piggyback
Registration Statement and all post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference) as soon
as such documents become available to the Company, and such number of conformed
copies thereof and such number of copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplements thereto, and any
documents incorporated by reference therein, as the Holder or underwriter may
request, as soon as such documents become available to the Company, in order to
facilitate the disposition of the Piggyback Securities (it being understood that
the Company consents to the use of the prospectus and any amendment or
supplement thereto by the Holder and the underwriter or underwriters, if any, in
connection with the offering and sale of the Piggyback Securities);
(iv) on or prior to the date on which the Piggyback
Registration Statement is declared effective, use commercially reasonable
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<PAGE>
efforts to register or qualify the Piggyback Securities under such other
securities or blue sky laws of such jurisdictions as the managing underwriter,
if any, or the Holder, if there is no underwriter, reasonably requests, keep
each such registration or qualification effective during the period such
registration statement is required to be kept effective and do any and all other
acts and things which may be reasonably necessary or advisable to consummate the
disposition in such jurisdictions of the Piggyback Securities; provided that the
Company shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
clause (iv), (B) subject itself to general taxation in any such jurisdiction,
(C) consent to general service of process in any such jurisdiction, or (D)
undertake compliance with substantive requirements of the blue sky laws or
regulations of a jurisdiction which are unreasonably burdensome or onerous,
including escrow requirements;
(v) use commercially reasonable efforts to cause the
Piggyback Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to consummate the disposition of the
Piggyback Securities;
(vi) (A) notify the managing underwriter, if any, or
the Holder, if there is no underwriter, (and if requested by any such person,
confirm such advice in writing) when a prospectus relating to the sale of the
Piggyback Securities is required to be delivered under the Act or (B) notify the
managing underwriter, if any, or the Holder, if there is no underwriter (and if
requested by any such person, confirm such advice in writing) of the happening
of any event as a result of which the prospectus included in the Piggyback
Registration Statement relating to the sale of the Piggyback Securities contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the Piggyback Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(vii) enter into customary agreements (including, in
the case of an underwritten offering, an underwriting agreement in customary
form with customary indemnity provisions) and make such representations and
warranties to the underwriters or the Holder, if there is no underwriter, as in
form and substance and scope are customarily made by issuers to underwriters in
secondary underwritten offerings;
(viii) notify the managing underwriter, if any, or the
Holder, if there is no underwriter, of any stop order or other suspension of
effectiveness of the Piggyback Registration Statement;
(ix) make every commercially reasonable effort to
obtain the withdrawal of any order suspending the effectiveness of the Piggyback
Registration Statement at the earliest possible moment;
-5-
<PAGE>
(x) cooperate with the managing underwriter, if any,
and counsel for the underwriters, or the Holder, if there is no underwriter, and
their counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD");
(xii) if requested by the managing underwriter, if any,
or the Holder, if there is no underwriter, promptly incorporate in a prospectus
supplement or post-effective amendment such information relating to the
distribution of securities and the timing thereof as the managing underwriter,
if any, or the Holder, if there is no underwriter, reasonably requests to be
included therein, including, without limitation, the number of Piggyback
Securities being sold by the Holder to the underwriter or underwriters, and the
purchase price being paid therefor by such underwriter or underwriters and any
other terms of the underwritten offering of the Piggyback Securities; and make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(xiii) as promptly as practicable after filing with the
SEC of any document which is incorporated by reference into a Piggy-back
Registration Statement, deliver a copy of such document to the Holder;
(xiv) cooperate with the managing underwriter, if any,
or the Holder, if there is no underwriter, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends) representing
securities to be sold under the Piggyback Registration Statement and enable such
securities to be in such denominations or amounts, as the case may be, and
registered in such names as the managing underwriter, if any, or the Holder, if
there is no underwriter, may reasonably request;
(xv) notify the Holder, if there is no underwriter, or
the managing underwriter, if any, promptly (and if requested by any such person,
confirm such advice in writing) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Piggyback Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(xvi) cause the Piggyback Securities to be listed on
each securities exchange or quoted on the NASDAQ National Market on which
similar securities issued by the Company are then listed or quoted, and provide
that the applicable listing or quotation requirements are satisfied.
(b) The Holder shall provide to the Company such
information regarding the distribution of the Piggyback Securities and such
other information relating to the Holder and his or her ownership of securities
of the Company as the Company may from time to time reasonably request in
writing.
(c) Notwithstanding anything contained herein to the
contrary, the SEC may issue a "stop order" or refuse to allow the effectiveness
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<PAGE>
of any Piggyback Registration Statement or the Company, may in its sole
discretion terminate any Piggyback Registration Statement at any time prior to
or after the effectiveness thereof without liability to the Holder. In such
event, the Company shall promptly notify the Holder thereof.
(d) The Holder agrees, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(b)
hereof, he or she will forthwith discontinue distribution of Piggyback
Securities.
4. Registration Expenses
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 Registrable
Securities), rating agency fees, printing expenses (including expenses of
printing certificates for the Registrable Securities 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 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"), shall be paid by the Company, provided that in no
event shall Registration Expenses include (A) any underwriting discounts or
commissions attributable to the sale of the Registrable Securities, (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 Piggyback
Registration Statement, 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, the cost thereof shall be apportioned as set forth
above.
5. Indemnification; Contribution
(a) Indemnification by the Company. To the extent that any
Piggyback Securities are included in a Piggyback Registration Statement pursuant
to the terms hereof, the Company agrees to indemnify, to the full extent
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<PAGE>
permitted by law, the Holder, and any agent therefor against all losses, claims,
damages, liabilities and expenses (including reasonable legal fees and expenses)
arising out of or based upon any such untrue statement or alleged untrue
statement of a material fact contained in any registration statement, prospectus
or preliminary prospectus, or any amendment thereof or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus or preliminary prospectus, in light of the circumstances under which
they are made) not misleading, except insofar as such losses, claims, damages
arise out of or are based upon an untrue statement or omission so made in
reliance upon and in conformity with information with respect to the Holder
furnished in writing to the Company by the Holder or its representatives
expressly for use therein or any acts of negligence or misfeasance by Holder.
Nothing contained in Section 5(a) shall waive or effect any rights Holder may
otherwise have under law and equity.
(b) Indemnification by the Holder. In connection with any
Piggyback Registration Statement in which the Holder is a selling stockholder,
the Holder agrees to indemnify, to the extent permitted by law, the Company, its
directors, officers, employees and agents and each person who controls the
Company (within the meaning of applicable federal and state securities laws),
and any investment advisor thereof or agent therefor against any losses, claims,
damages, liabilities and expenses (including reasonable legal fees and expenses)
resulting from (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, prospectus or preliminary
prospectus, or any amendment thereof or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is made in reliance upon and in conformity with or failed
to be contained in any information with respect to the Holder furnished in
writing by the Holder or its representatives specifically for inclusion therein;
(ii) Holder's negligence; or (iii) Holder's misfeasance. In no event shall the
liability of the Holder hereunder be greater in amount than the dollar amount of
the proceeds received by the Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder agrees to give prompt written notice to
the indemnifying party after the receipt by such person of any written notice of
the commencement of any action, suit or proceeding against such person or
investigation thereof made in writing or for which such person will claim
indemnification or contribution pursuant to this Agreement, but the failure so
to give written notice to the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party hereunder except if and to
the extent such indemnifying party is materially prejudiced by such failure nor
shall it relieve the indemnifying party from any liability which it may have to
any indemnified party other than under this Agreement. The indemnified party
shall permit the indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be defenses available to it that are different from or additional
to those available to the indemnifying party or if the interests of the
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<PAGE>
indemnified party may reasonably be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to control the defense of such action, with the reasonable
fees and expenses of such separate counsel to be reimbursed by the indemnifying
party. If the indemnifying party is not entitled to, or does not, assume the
defense of a claim, it will not be obligated to pay the fees and expenses of
more than one counsel (and any required local counsel) with respect to such
claim. No indemnified party will be required to consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation. The
indemnifying party will not be subject to any liability for any settlement made
without its consent, which shall not be unreasonably withheld.
(d) Conflict with Underwriting Agreement. In the event that
any provision of any indemnification clause in the underwriting agreement to
which the Company and the Holder are parties in connection with the registration
statement or prospectus in question differs from a provision in this Section 5,
such provision in the underwriting agreement shall determine the Holder's rights
visa via the Underwriter in respect thereof. Notwithstanding the foregoing, the
provisions of Section 5 hereof shall control with respect to the rights of the
Company and the Holder with regards to this Agreement or the underwriting
agreement.
6. Participation in Underwritten Registrations
The Holder may not participate in any underwritten
registration hereunder unless it (a) agrees to sell the Piggyback Securities, as
the case may on be, the basis provided in the underwriting arrangements approved
by it, (b) completes and executes all questionnaires, powers of attorneys,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and (c) agrees to pay all
underwriting discounts and commissions on the Piggyback Securities sold under
such underwriting arrangements.
7. Miscellaneous
(a) Entire Agreement. This Agreement contains the entire
agreement among the parties hereto and except as set forth herein, supersedes
all prior oral or written agreements, promises, representations, commitments or
understandings with respect to the matters provided for herein.
(b) Amendment. This Agreement may be modified or amended
only by a writing duly executed by the parties hereto.
(c) Assignment and Binding Effect. This Agreement and the
rights and obligations of any party hereunder may not be assigned by any party
without the prior written consent of the other party hereto. Notwithstanding the
foregoing, the Company may merge or be acquired by another corporation without
the consent of the Holder so long as the surviving corporation shall agree to be
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<PAGE>
bound by the terms of this Agreement. All covenants, agreements, and indemnities
in this Agreement by and on behalf of any of the parties hereto shall be binding
on and inure to the benefit of their respective successors and permitted
assigns.
(d) Waivers. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver.
(e) Rule 144. The Company shall utilize its reasonable best
efforts to take such action as may be required of it so that sale of Shares by
the Holder may be effected through Rule 144 of the Act or any successor rule
under the Act.
(f) Notices. Unless applicable law requires a different
method of giving notice, any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing.
Assuming that the contents of a notice meet the requirements of the specific
Section of this Agreement which mandates the giving of that notice, a notice
shall be validly given or made to another party if served either personally or
if deposited in the United States mail, certified or registered, postage
prepaid, or if transmitted by telegraph, telecopy or other electronic written
transmission device or if sent by overnight courier service, and if addressed to
the applicable party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively given at the time of
confirmation of delivery. The addresses for the parties are as follows:
(i) If to the Holder:
D. Porter Bibb
c/o Ladenburg, Thalman & Co., Inc.
540 Madison Avenue
New York, New York 10022
Telecopier No.: (212) 644-6515
(ii) If to the Company:
American Film Technologies, Inc.
Attention: Gerald M. Wetzler
300 Park Avenue, 17th Floor
New York, New York 10022
Telecopier No.: (212) 572-6460
-10-
<PAGE>
with a copy (which shall not constitute notice) to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
Attention: Barry L. Burten, Esq.
Telecopier No.: (310) 203-0567
Any party hereto may change its address for the purpose of
receiving notices, demands and other communications as herein provided, by a
written notice given in the aforesaid manner to the other parties hereto.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflicts of law principles.
(h) Jurisdiction. The parties hereto agree to submit to the
exclusive jurisdiction of the Superior Court, Los Angeles County 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.
(i) Cost of Litigation. Should any party hereto institute
any action or proceeding at law or in equity to enforce any provision of this
Agreement, including an action for declaratory relief, or for damages by reason
of an alleged breach of any provision of this Agreement, or otherwise in
connection with this Agreement, or any provision hereof, the Court shall
apportion the costs and fees thereof (including all attorneys' fees between the
parties based on its determination of the merits of their respective positions
in the proceeding prevailing party shall be entitled to recover from the losing
party or parties reasonable attorneys' fees and costs for services rendered to
the prevailing party in such action or proceeding.
(j) Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(k) Severability. If any provisions of this Agreement shall
under any circumstances be deemed invalid or inoperative, this Agreement shall
be construed with the invalid or inoperative provision deleted and the rights
and obligations of the parties shall be construed and enforced accordingly.
(l) Neuter and Gender. Whenever in this Agreement the
context may require, the neuter shall be deemed to include the feminine or
masculine and vice versa.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf on the date first above written.
AMERICAN FILM TECHNOLOGIES, INC.
By
------------------------------------
Gerald M. Wetzler,
Chief Executive Officer
AGREED TO AND ACCEPTED
THIS ____ DAY OF October 1996
- -------------------------------
D. Porter Bibb
-12-
<PAGE>
Exhibit 10.23
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of this
28th day of October, 1996 between American Film Technologies, Inc., 300 Park
Avenue, 17th Floor, New York, New York 10022 (the "Company"), and AFT
Investments, a California general partnership, c/o Kay Salomon, 6697 Whitley
Terrace, Hollywood, CA. 90068("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company is in need of additional capital to continue to
finance its operations and to continue its business; and
WHEREAS, Purchaser is willing to acquire from the Company, Two Million
(2,000,000) Shares of $.002 par value per share common stock of the Company (the
"Common Stock") (the "Shares") for an aggregate purchase price of Three Hundred
Thousand Dollars ($300,000) (the "Purchase Price");
WHEREAS, the Company is willing to sell to the Purchaser the Shares for
the Purchase Price and such other terms and conditions as set forth herein; and
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Purchaser agree as
follows:
1. Purchase and Sale of the Shares. On or before 6:00 Los Angeles time
on November 1,1996, upon satisfaction of the conditions set forth in Section 2
below, the Company shall sell to Purchaser and Purchaser shall purchase from the
Company the Shares for the Purchase Price (the "Sale").
2. Conditions Precedent, Delivery of the Shares.
(a) The obligations of the Company hereunder shall be subject to and
conditioned upon the satisfaction of all of the following conditions:
(i) The execution of this Agreement by the parties hereto;
(ii) The completion, execution and delivery by the Purchaser to
the Company of the Purchaser's Questionnaire, attached hereto as
Exhibit "A";
(iii) The delivery by the Purchaser to the Company of the
Purchase Price;
<PAGE>
(iv) All of the representations and warranties of the Purchaser
contained herein remain true and correct; and
(v) The execution by the Purchaser of the Registration
Undertaking, as attached hereto as Exhibit A-1.
(b) The obligations of the Purchaser hereunder shall be subject to
and conditioned upon the satisfaction of all of the following conditions:
(i) The execution of this Agreement by the parties hereto;
(ii) The execution of the Registration Undertaking, by the
Company; and
(iii) All of the representations and warranties of the Company
contained herein remain true and correct.
(c) Upon satisfaction of all of the conditions precedent set forth
in Section 2(a) above, the Company shall cause to be delivered to the Purchaser
at the address set forth in Section 7(b) below a stock certificate representing
the Shares. Said stock certificate shall contain a restrictive legend
substantially similar to that set forth in Section 7 below (the "Certificate").
3. Representations of the Company. The Company represents and warrants
that:
(a) the representations and warranties of the Company in this
Agreement shall have been true and correct in all material respects on the date
of this Agreement, and they shall be true and correct in all material respects
as of the Closing with the same force and effect as though made at the Closing.
(b) upon issuance, the Shares will be (i) validly issued, fully paid
and nonassessable; and (ii) free of any liens or encumbrances;
(c) the Sale has been duly authorized and approved;
(d) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to conduct its business as it is
presently being conducted. The Company is duly qualified to do business as a
foreign corporation in the State of California and is qualified to do business
as a foreign corporation in all other jurisdictions where the failure to qualify
would result in a material adverse effect on the Company's business and
operations taken as a whole;
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<PAGE>
(e) the Company has all necessary corporate power and authority and
has taken all corporate action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform the its
obligations hereunder. This Agreement, and all related agreements, has been duly
authorized, executed and delivered by the Company and is a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. No authorization, approval, consent, order, registration,
license or permit of any court or governmental agency or body is required for
the execution of this Agreement and the consummation of the transactions
contemplated hereby, including the valid authorization, issuance, sale,
delivery, of the Shares under the Agreement;
(f) the execution, delivery and performance of this Agreement by the
Company, the consummation of the Company of the transactions contemplated herein
and the compliance of the Company with the terms of this Agreement, do not, and
will not, with or without the giving of notice or the lapse of time, or both,
(i) result in any violation of the Articles of Incorporation or By-Laws of the
Company, (ii) result in a breach or conflict with any of the terms or provisions
of any agreement or instrument to which the Company is a party, or constitute a
default under or result in the modification or termination of, any agreement to
which the Company is a party, except where such breach or conflict would not
have a material adverse effect on the business, operations or finanacial
condition of the Company taken as a whole, (iii) result in any violation of any
existing applicable law, rule, regulation, judgment, or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties in business, except where the effect of such
violation would not have a material effect on the business, operations or
financial condition of the Company taken as a whole;
(g) the Company has 100,000,000 shares of capital stock as follows:
(i) 10,000,000 shares of preferred stock of which no shares are
outstanding and 10,000,000 preferred shares of are subject to outstanding
options; and
(ii) 90,000,000 shares of Common Stock of which 70,900,644 are
issued and outstanding and 16,278,00 of which are subject to outstanding options
and possible stock grants.
(h) the financial statements included in the Company's 10-K Report
for the year ended June 30, 1996 (the "Financial Statements"), were, except as
otherwise noted therein, prepared in accordance with generally accepted
accounting principles consistently applied and to the best of the Company's
3
<PAGE>
knowledge are true and correct and fairly present the financial condition of the
Company as of such date and results of its operations for the fiscal year
ending on June 30, 1996;
(i) except as set forth in Schedule 3(i), and except for (x)
expenses and obligations incurred in the ordinary course of the Company's
business as presently conducted, (y) in connection with professional fees, or
(z) with respect to pre-existing contracts or agreements, since the date of the
Financial Statements there has not been (i) any change in the business, results
of operations, assets, or financial condition or prospects or in the manner of
conducting the business of the Company which individually or in the aggregate
has had or may have a material adverse effect on the business, results of
operations, assets, financial condition or prospects of the Company and (ii) any
damage, destruction or loss, whether covered by insurance or not, which has had
or will have a material adverse effect on the business, results of operations,
assets, financial condition or prospects of the Company.
(j) except as set forth in the Financial Statements, the Company
does not have any outstanding loan obligations.
(k) to the best of the Company's knowlege there are no claims,
actions, suits, litigation, proceedings, governmental investigations or
arbitration proceedings pending or threatened in writing, against the Company
involving the business or properties of the Company which if determined
adversely to the Company, would have a material adverse effect on the business,
operations or financial condition of the Company taken as a whole.
(l) except as set forth in Schedule 3(l) to this Agreement, there
are no existing subsidiaries of the Company.
(m) except as set forth in Schedule 3(m) to this Agreement and
contained in the SEC Reports (hereinafter defined), attached as Exhibit B, the
Company is not a party to any material agreements. For the purposes hereof the
SEC Reports are defined as:
i. The Company's Form 10-K Report for its fiscal year ended June
30, 1995;
ii. The Company's Form 10-Q Reports for the fiscal quarters
ended September 30, 1995, December 31, 1995 and March 31, 1996;
and
iii. The Company's Form 10-K Report for the fiscal year ended
June 30, 1996.
4
<PAGE>
(n) the Company currently has in effect directors' and officers'
liability insurance and such other liability and property insurance as the
Company deems appropriate.
(o) the Company has filed, caused to be filed or obtained extensions
to file all federal, state and local income tax returns which are required to be
filed by it, and has paid, or caused to be paid, or to the best of the Company's
knowledge has (i) made adequate provision on its books in accordance with
generally accepted accounting principles amounts sufficient for the payment of,
all taxes as shown on said returns or on any assessment received by them, to the
extent that the taxes have become due, and (ii) made all estimated tax payments
required to be made by it to avoid the imposition of penalties, interest and
other additions to tax;
(p) except as set forth in or scheduled as Exhibits to the SEC
Reports there are no existing labor and employment agreements;
(q) to the best of the Company's knowledge, the Company is not in
violation of any applicable law, rule regulation, judgment, order, or decree of
any governmental agency or court, domestic or foreign, having jurisdiction over
the Company or its properties or businesses where such violation would have a
material adverse effect on the Company's operations, business or financial
condition taken as a whole.
(r) to the best of the Company's knowledge, there is currently no
litigation pending or threatened in writing, seeking to enjoin or otherwise
prohibit the transactions contemplated hereby.
For the purposes hereof "To the best of the Company's knowledge" means the
actual current knowledge of Gerald Wetzler or John Karl without any duty to
investigate.
Except as expressly set forth above, the Company makes no representations or
warranties of any kind or nature to the Purchaser.
4. Representations of Purchaser.
Purchaser represents and warrants in favor of the Company that:
(a) it is acquiring the Shares for its own account, for investment
purposes only, and not with a view to or for the resale, distribution or
assignment thereof, in whole or in part;
(b) it understands that the offer and sale of the Shares is intended
to be exempt from registration under the Securities Act of 1933, as amended (the
"Act"), and under the laws of any other jurisdiction; that the Company does not
intend and is under no obligation to so register the Shares; that the Shares may
not therefore be sold, assigned, pledged or otherwise transferred unless
subsequently registered under the Act or pursuant to an exemption therefrom; and
that legends to the foregoing effect will be placed on the Certificate
evidencing the Shares;
5
<PAGE>
(c) Purchaser has the financial ability to bear the economic risk of
its investment in the Company, including its possible loss, has adequate means
of providing for his current needs and personal contingencies and has no need
for liquidity with respect to its investment in the Company;
(d) Purchaser has the knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in the Shares;
(e) Purchaser is an "accredited investor" as such term is defined in
Rule 501(a) of Regulation D, promulgated under the Securities Act of 1933, as
amended;
(f) Purchaser has been given the opportunity to ask questions of and
receive answers from the representatives of the Company concerning the Company,
the Shares, the terms and conditions of the Sale and other matters pertaining to
this investment, and has been given the opportunity to obtain such additional
information as Purchaser deemed necessary to verify the accuracy of the
information provided in order for it to evaluate the merits and risks of an
investment in the Company and has not been furnished any offering literature or
prospectus except the SEC Reports;
(g) Purchaser is not acquiring the Shares as a result of or
subsequent to:
i. any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or
broadcast over television or radio; or
ii. any seminar or meeting whose attendees, including the
Purchaser, had been invited as result of, subsequent to or
pursuant to any of the foregoing.
(h) Any information which the Purchaser has heretofore furnished to
the Company with respect to its financial position and business experience,
including without limitation its Purchaser Questionnaire, attached hereto as
Exhibit "A", is complete and correct as of the date of this Agreement and if
there should be any material change in such information at any time prior to or
after acceptance of the Sale, the Purchaser will immediately furnish such
revised or corrected information to the Company.
6
<PAGE>
(i) Purchaser and/or Purchaser's investment advisors, if any, have
carefully read and reviewed this Agreement, Exhibit A hereto and the SEC
Documents and understand the risks of, and other considerations relating to, a
purchase of Sale, including, but not limited to, the risks set forth under "Risk
Factors" in the Company's draft 1996 Form 10-K Report, attached as Exhibit C. In
connection therewith, Purchaser is aware of the fact that the Company has
recently emerged from a Chapter 11 Bankruptcy proceeding, has not engaged in
ongoing business operations in over thirty (30) months and will need additional
financing in order to remain in business and significant additional financing
thereafter to implement its business plan.
5. Indemnification.
The Purchaser understands the meanings and legal consequences of the
representations and warranties contained in this Agreement and agrees to
indemnify and hold harmless the Company and its officers and directors from and
against any loss, damage, liability, claim and expense whatsoever, including but
not limited to any and all legal expenses, due to or arising out of a breach of
any representation or warranty of the Purchaser, whether contained in this
Agreement or the Purchaser's Questionnaire, or any failure by the undersigned
to fulfill any covenants or agreements set forth herein or therein or arising
out of the sale or distribution by the Purchaser of any Shares in violation of
the Act or any applicable state Securities laws. Notwithstanding any of the
representations, warranties, acknowledgments or agreements made herein by the
Purchaser, the Purchaser does not thereby or in any other manner waive any
rights granted to the Purchaser under Federal or state securities laws.
Notwithstanding the foregoing, the Company agrees that in no event shall the
liability of the Purchaser pursuant to Section 5 exceed $75,000.
6. Legends
Purchaser agrees that all Certificates representing the Shares shall
have endorsed thereon a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT
LIMITED TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR
APPROVED BY ANY FEDERAL OR STATE REGULATORY AGENCY, INCLUDING BUT NOT
LIMITED TO THE SECURITIES AND EXCHANGE COMMISSION, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
7
<PAGE>
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER
ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS,
INCLUDING BUT NOT LIMITED TO THE ACT, OR COMPLIANCE WITH AN APPLICABLE
EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE DISCRETION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT."
7. MISCELLANEOUS.
(a) Finders Fees. The Company and Purchaser each acknowledges that
he or it has not, directly or indirectly, dealt with anyone acting as a broker,
finder or in a similar capacity, or has incurred any obligation for any
brokerage, finders' or similar fee or commission in connection with this
Agreement or any of the transactions contemplated hereby.
(b) Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given
(i) upon delivery, if personally delivered, sent by commercial over night
courier (e.g. Federal Express or DHL), or telefaxed with confirmation copy sent
the same day by first class U.S. mail (postage prepaid); or (ii) upon the
expiration of the fifth (5th) business day after deposit, if mailed by
first-class, registered or certified U.S. mail, postage prepaid. All notices
shall be addressed to each party at the following address:
If to the Company:
Gerald M. Wetzler
Chief Executive Officer
300 Park Avenue
17th Floor
New York, New York 10022
Fax No. (212) 572-6460
With a copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, CA. 90067
Fax No. (310) 785-5384
8
<PAGE>
If to Purchaser:
AFT Investments
c/Kay Salomon
6697 Whitley Terrace
Hollywood, CA. 90068
Fax No. (213) 851-9926
With a copy to:
Daniel H. Wolff, Esq.
Weissmann, Wolff, Bergman, Coleman &
Silverman
9665 Wilshire Boulevard
Suite 99
Beverly Hills, CA. 90212
Fax No. (310) 550-7191
or to such other address as the addressee shall have furnished to the other
parties hereto in the manner prescribed by this section.
(c) Entire Agreement. This Agreement, together with any related
documents referred to in this Agreement, constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter. No amendment, change or modification of this Agreement be valid unless
in writing and signed by all of the parties hereto.
(d) Waiver. No reliance upon or waiver of one or more provisions of
this Agreement shall constitute a waiver of any other provisions hereof.
(e) Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal and enforceable to the maximum extent permitted by law.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Section Headings. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. Should there be any conflict between any such
heading and the section at the head of which it appears, the section and not
such heading shall control.
9
<PAGE>
(h) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California. The parties
hereby consent to the exclusive jurisdiction of the state or federal courts
located in the State of California for the resolution of any disputes arising
out of this Agreement.
(i) Successors and Assigns. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, legal or personal representatives,
successors and assigns; provided however, except by operation of law, neither
party can assign their obligations under the Agreement, without consent of the
other.
(j) Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
(k) Attorney's Fees. If any legal action or any other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first set forth above.
AMERICAN FILM TECHNOLOGIES, INC.
By:
------------------------------------
Gerald M. Wetzler
Chief Executive Officer
AFT INVESTMENTS
By:
------------------------------------
Kay Salomon
General Partner
By:
------------------------------------
Rene Daalder
General Partner
11
<PAGE>
PURCHASER QUESTIONNAIRE
You are being requested to answer questions in connection with the
proposed offer and sale, pursuant to an exemption from the registration
provisions of the Securities Act of 1933, as amended (the "Act") and in
particular, Rule 505 of Regulation D, of shares of the Common Stock, $.002 par
value per share (the "Shares') of American Film Technologies, Inc,, a Delaware
corporation (the "Company"). The availability of the exemption depends, in part,
on a determination that each purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D.
The information supplied will be used in determining whether the sale
of the Shares meets such criteria. The information will be kept confidential and
will not be disclosed except to the Company, its counsel, and if required, to
governmental and regulatory authorities.
Please PRINT your response to each question; and, where the answer to
any question if "None" or "Not Applicable" please so state.
I, (we), __________________________________, understand the Shares are
being issued WITHOUT registration under the Act in reliance upon the private
offering exemption contained in Rule 505 of Regulation D promulgated under
Section 4(2) of the Securities Act, and that such reliance is based in part on
the information herein supplied. For the foregoing reasons, and to induce the
Company to issue and deliver the Shares to me, I represent and warrant that the
information stated herein is true, accurate and complete to the best of my
knowledge and belief, and I agree to notify and supply corrective information
promptly if, prior to the consummation of my purchase of the Shares, any of such
information becomes inaccurate and incomplete.
INDIVIDUAL AND JOINT PURCHASERS SHOULD COMPLETE SECTION A
CORPORATIONS, BUSINESS TRUSTS AND PARTNERSHIPS SHOULD COMPLETE SECTION B
12
<PAGE>
A. INDIVIDUAL AND JOINT PURCHASERS
1. Personal
a. Full Name: _____________________________
b. Social Security No.: _____________________________
c. Residence Address: _____________________________
_____________________________
d. Occupation: _____________________________
e. Employer: _____________________________
f. Business Address: _____________________________
_____________________________
g. Telephone: Business: _____________ Home: _________
h. Position or Title: _____________________________
i. Are You (Check One): Married:
______ Single _______
j. Do You File Joint
Tax Returns(Chock One): Yes
__________ No ___________
2. Bank References
a. Bank: _____________________________
b. Bank Address: _____________________________
_____________________________
c. Bank Telephone No.: _____________________________
d. Name of Bank
Representative: _____________________________
3. Income, Net Worth and Financial Standing
a. Did your annual income during each of 1994 and 1995 exceed $200,000,
or, did your joint income together with your spouse exceed $300,000 during each
of 1994 and 1995, and do you reasonably expert your annual income during 1996 to
exceed $200,000, or your joint income together with your spouse to exceed
$300,000?
Yes _____________ No _______________
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<PAGE>
b. Does your individual not worth, or your joint not worth together
with your spouse, exceed $1,000,000?
Yes _______ No _________ Not Applicable __________
c. Gross income for the most recently
ended tax year: $___________
d. Anticipated gross income for
the year 1996: $____________
e. Do you anticipate that your income over the next five years will:
Increase _______ Decrease _______ Remain Same ________
f. Is your net worth, excluding home, furnishings and automobiles
(Check One):
Over $200,000 ___ Over $300,000 ___ Over $400,000 ___
Over $________ (State Amount)
g. What percentage of your net worth are liquid assets (cash or assets
readily convertible to cash) (Check One:)
over 15% _____ over 25% _____ over 35% _____ over 50% ____
h. Do you have any debts or other obligations, or are there any
reasonably foreseeable circumstances likely in the future to require you to
dispose of the Shares?
Yes ________ No ________ (If yes, please describe
briefly below)
_________________________________________________________
__________________________________________________________
4. Investment Experience
Describe briefly your prior investment experience in both marketable
and unmarketable securities. If none, please so state.
_________________________________________________________
_________________________________________________________
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<PAGE>
5. Education
Describe your educational background (schools attended and degrees
obtained):
_________________________________________________________
_________________________________________________________
6. What is your profession, if any? _______________________
7. Investment Advice
a. In connection with your proposed purchase of Shares, will you or did
you seek advice from any lawyer, accountant, investment advisor or other person
or persons?
Yes _________ No ___________
If Yes, please set forth the name, profession or occupation and
business address of each such advisor or prospective advisor and, if more than
one, explain briefly the division of responsibilities between them:
_________________________________________________________
_________________________________________________________
b. Do you or any of your advisors, or any of your or their respective
affiliates, now have or contemplate having, or have they had, during the past
two years, any relationship with the Company and/or any of its officers,
directors, or their affiliates; or, any of your advisors or affiliates the
beneficial owner of 10% or more of any class of equity securities or 10% or more
of the equity interest in the Company or affiliates of the Company;
Yes ____________ No _____________
If Yes, please describe such relationship and/or ownership.
_________________________________________________________
B. CORPORATE PURCHASERS, BUSINESS TRUST OR PARTNERSHIP PURCHASERS
1. Name of Corporation, Business Trust or Partnership:
_____________________________________________________________________
2. Name and Title of Executive Officer Executing Questionnaire:
____________________________________________________________
15
<PAGE>
3. Business Address: ________________________________________
________________________________________
4. Telephone Number: ________________________________________
5. Representations and Warranties
The undersigned represents and warrants as follows:
a. The corporation, business trust or partnership, as the case may
be, has been duly incorporated if a corporation, formed if a business trust or
partnership, and is validly existing as a corporation, business trust or
partnership, in good standing under the laws of the jurisdiction of its
incorporation or formation, with full power and authority to enter into the
transactions contemplated by the offering documents.
b. (i) The officers or partners of the undersigned who, on behalf of
the undersigned, have considered the purchase of the Shares and the advisors, if
any, of the corporation, business trust or partnership, as the case may be, in
connection with such consideration are named below and such officers and
advisors or partners were duly authorized to act for the corporation, business
trust or the partnership in reviewing such investment;
(ii) The names and positions of the officers or partners of the
undersigned who, on its behalf, have reviewed the purchase of the Shares are as
follows:
_________________________________________________________
(iii) In evaluating the merits and risks of the purchase of the
Shares, the corporation, business trust or the partnership, as the case may be,
intends to rely upon, or has relied upon, the advice of, or will consult with,
or has consulted with, the following persons:
_________________________________________________________
c. The officers of the corporation, business trust or the partners
of the partnership who, on its behalf, have considered the purchase of the
Shares, and the advisors, if any, of the corporation or the corporation,
business trust or partnership in connection with such consideration, together
have such knowledge and experience in financial and business matters that such
officer(s), partner(s) and such advisor(s), if any, together are capable of
evaluating the merits and risks of purchase of the Shares and of making an
informed investment decision;
d. Together with any corporation or group of corporations with which
it files a consolidated federal income tax return, the undersigned (i) expects
to have adequate taxable income to realize the economic and potential tax
benefits from ownership of the Shares, and (ii) has reserves and/or net worth
adequate to permit it to satisfy any tax or other liabilities arising from its
personal liability with respect to the investment and operation thereof;
16
<PAGE>
e. The total assets of the corporation, business trust or
partnership are in excess of $_______________.
f. The net worth of the corporation. business trust or the
partnership is in excess of $_____________.
g. The corporation, business trust or the partnership has had,
during each of the past two tax years, gross income from all sources of
$_____________ and $_______________, respectively.
h. The undersigned expects the corporation, business trust or the
partnership to have during the current and next tax year, gross income from all
sources of at least $____________; and
i. The undersigned knows of no pending or threatened litigation the
outcome of which could adversely affect the answer to any question hereunder.
j. Indicate the following if a partnership purchaser:
(i) The date the partnership was formed:
(ii) The names of each partner in the partnership. Please have
each individual partner execute a separate questionnaire or
forward to the Company a letter indicating whether or not each
partner is sophisticated and has a sufficient net worth or
salary level to be deemed an "accredited investor" under Rule
__________ promulgated under the Securities Act.
_________________________________________________________
_________________________________________________________
The undersigned warrants and represents that the foregoing statements
are true and accurate to the best of the information and belief of the
undersigned and the undersigned will promptly notify the Company of any changes
in the foregoing answers.
FOR INDIVIDUALS
Purchaser
Dated: , 1996 --------------------------------------
---------- Signature
--------------------------------------
Signature (If Joint)
17
<PAGE>
FOR CORPORATIONS
Dated: , 1996 --------------------------------------
----------- Name of Company
--------------------------------------
Executive Officer
--------------------------------------
Signature of Officer
FOR BUSINESS TRUSTS
Dated: , 1996 --------------------------------------
----------- Name of Business Trust
--------------------------------------
Name of Trustee Executing
Questionnaire
--------------------------------------
Signature of Trustee
FOR PARTNERSHIPS
Dated: , 1996 ---------------------------------------
----------- Name of Partnership
---------------------------------------
Name of Partner Executing
Questionnaire
--------------------------------------
Signature of Partner
18
<PAGE>
FOR PENNSYLVANIA RESIDENTS:
The undersigned hereby agrees not to sell any of the securities
acquired hereunder for a period of 12 months from the date he acquires such
securities.
By:
------------------------------------
Signature
---------------------------------------
Printed Name
---------------------------------------
Date
---------------------------------------
Street
---------------------------------------
City, State Zip
---------------------------------------
Social Security Number of Federal
ID No.
---------------------------------------
Telephone No. of Subscriber
AGREED AND ACCEPTED BY:
AMERICAN FILM TECHNOLOGIES, INC.
By:
-----------------------------------
Gerald M. Wetzler
Chief Executive Officer
Date:
---------------------------------
19
<PAGE>
REGISTRATION UNDERTAKING
This Registration Undertaking (this "Agreement") is made and
entered into as of September 18, 1996 by American Film Technologies, Inc., a
Delaware corporation (the "Company") for the benefit of Kay Salomon (the
"Holder") pursuant to Section 2 of that certain Stock Purchase Agreement dated
as of October ___, 1996 between the Company and the Holder (the "Purchase
Agreement").
NOW, THEREFORE, in consideration of the mutual representations,
covenants and agreements contained herein, the Company hereto agrees and
undertakes as follows:
1. Piggyback Registration.
a. Registrable Securities: The term "Registrable Securities" means each
of the following:
(i) the Shares as such term is defined in the Purchase
Agreement; and
(ii) any other shares or securities or distributions resulting
from a reverse split, stock split, stock dividend,
reclassification of the capital stock of the Company,
consolidation or reorganization of the Company, and any
shares or other securities of the Company or of any
successor company which the Holder may receive by virtue of
their ownership of the Shares;
provided, however, that any of the securities described in the foregoing clauses
(i) and (ii) shall be treated as Registrable Securities only if and so long as
(x) they are held by the Holder , family members of the Holder or a personal or
family trust controlled by the Holder, (y) have not been sold or disposed of,
pursuant to a registration statement covering such Registrable Securities which
has been declared effective pursuant to the Securities Act of 1933, as amended
(the "Act") or if such securities have not been sold or disposed of such
registration statement including the Registrable Securities remains effective;
or (z) have not been sold or disposed of to the public pursuant to Rule 144 (or
any similar provision then in force) promulgated under the Act.
b. Piggyback Registration Rights. Subject to the terms and conditions
contained in this Agreement, during the Piggyback Period, as
hereinafter defined, the Holder shall be entitled
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to include in any Piggyback Registration Statement, as hereinafter
defined, all Registrable Securities.
c. Piggyback Period. Except as otherwise provided herein, the Holder
shall be entitled to include all or any portion of the Registrable
Securities held by Holder in a Piggyback Registration Statement, as
such term is hereinafter defined, during the "Piggyback Period"
defined as the period commencing as of the date hereof and ending on
the first to occur of: (i) October 18, 2006; (ii) all of the
Registrable Securities which Holder desires to sell can be sold in one
sale pursuant to Rule 144(k) or any successor rule of similar
provision of the Act; OR (iii) the sale of the Registrable Securities
have been included in one or two Piggyback Registration Statements (as
hereinafter defined) which has been declared effective by the
Securities and Exchange Commission (the "SEC") and if the Registrable
Securities are included therein, the effectiveness thereof is not
terminated prior to the contemplated distribution period ("Effective
Piggyback Registration Statement") or if the sale of all of the
Registrable Securities have not be so included in such Effective
Piggyback Registration Statements, such failure is a result of
Holder's failure to timely deliver to the Company a Supplemental
Notice with respect thereto as set forth in Section 1(e) below.
d. Notice of Registration. In the event that during the Piggyback Period
the Company proposes to file a registration statement to register
under the Act, the sale or other transfer of any class of its
securities of which the Registrable Securities are a part: (i) by the
Company (the "Company Securities"); or (ii) by any other present or
future holder of the Company's securities (the "Shareholder
Securities") (the Company Securities and Shareholder Securities
hereinafter collectively referred to as the Registration Securities),
the Company shall deliver to the Holder, at least twenty (20) days
prior to the filing with the Commission of the registration statement
covering such Registration Securities (the "Piggyback Registration
Statement"), a written notice (a "Registration Notice") of its
intention so to register such offering of Registration Securities and
the manner
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<PAGE>
in which such Registration Securities are proposed to be sold.
e. Supplemental Notice. In the event that a Registration Notice shall
have been delivered, the Holder may elect to include in the offering
covered by the Piggyback Registration Statement all or a portion of
the Registrable Securities by delivering notice to the Company (the
"Supplemental Notice") on or before the tenth (10th) day after
delivery of the Registration Notice specifying the number of shares of
Registrable Securities (the "Piggyback Securities") proposed to be
sold or otherwise transferred by the Holder. In the event that during
the Piggyback Period, Holder fails to timely deliver Supplemental
Notices including all Registrable Securities with respect to two
Effective Piggyback Registration Statements then and in such event all
Piggyback Registration Rights of the Holder shall automatically
terminate without any Further action on the party of the Company.
f Registration of Supplemental Registration Securities. Subject to the
terms, conditions, restrictions and limitations contained elsewhere
herein, from and after receipt of a Supplemental Notice, the Company
shall use its best efforts to cause the Piggyback Securities to be
registered under the Act pursuant to the Piggyback Registration
Statement, subject to the sale or other transfer thereof prior to the
effectiveness of the Piggyback Registration Statement, and to effect
and to comply with all qualifications, compliances and requirements
necessary to permit the sale or other transfer of the Piggyback
Securities pursuant to the Piggyback Registration Statement,
including, without limitation, qualifications under the applicable
blue sky or other state securities laws.
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<PAGE>
g. Priorities.
(i) Underwritten Offerings by the Company. If, in the case of
delivery of a Supplemental Notice relating to an underwritten
offering of securities proposed to be made by the Company, the
managing underwriter shall make a determination, in its sole
discretion, in a writing delivered to the Company and the
Holder that inclusion of some or all of the Piggyback
Securities together with the Registration Securities, which are
to be included in such Piggyback Registration Statement would
have an adverse effect on the proposed distribution of the
Company Securities ("Adverse Distribution Effect"), then the
Company shall, upon written notice to the Holder and to all
holders of Shareholder Securities included in such Piggyback
Registration Statement only the number of securities other than
Company Securities which, in the sole discretion of the
managing underwriter, can be sold without any such Adverse
Distribution Effect, selected from the Holder and the holders
of Shareholder Securities seeking to exercise piggyback
registration rights, on a pro rata basis in proportion to the
number of securities sought to be included in such Piggyback
Registration Statement.
(ii) Underwritten Offerings of Shareholder Securities. If, in the
case of delivery of a Supplemental Notice by the Holder
relating to an underwritten offering of Shareholder Securities
in connection with a demand registration right by such holders,
where the managing underwriter shall make a determination, in
its sole discretion, in a writing delivered to the Company and
the Holder and holders of Shareholder Securities included in
such Piggyback Registration Statement that inclusion of some or
all of the Registrable Securities would have an Adverse
Distribution Effect on the proposed sale of the Shareholder
Registration Securities then the Company shall, upon written
notice to the Holder and holders of such Shareholder
Securities, include in such registration only the number of
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<PAGE>
Securities which, in the sole discretion of the managing
underwriter, can be sold without an Adverse Distribution Effect
on the proposed sale of the Shareholder Securities covered by
the Demand Registration Right, selected from the Holder and the
holders of Shareholder Securities seeking to exercise piggyback
registration rights, on a pro rata basis in proportion to the
number of securities sought to be included in such Piggyback
Registration Statement.
(iii) Non-Underwritten Offerings. The Holder shall have the right to
include all Registrable Securities in a Piggyback Registration
Statements of non-underwritten offerings of securities of the
Company.
h. Underwriters. In the case of Piggyback Registration Statements, the
underwriter designated by the initiating party shall serve as the
managing underwriter for the entire offering. Holder shall be entitled
to utilize any other underwriter in connection with the sale of its
securities unless the managing underwriter reasonably determines
participation by such underwriter in the offering would materially
delay or otherwise be materially adverse to the transaction.
i. Exceptions. The provisions of this Section shall not apply to (i) any
registration statement on Form S-8 or Form S-4, or any successor form,
or (ii) any registration statement covering only securities proposed
to be issued in exchange for securities or assets of another
corporation.
2. Restrictions on Public Sale by the Holder. Notwithstanding anything
contained herein to the contrary, if the Holder has received a Registration
Notice during the Piggyback Period, for so long as the Holder holds one
percent (1%) or more, on a fully diluted basis of such Registrable
Securities, the Holder agrees not to effect any public sale or distribution
-5-
<PAGE>
of any such securities during the fifteen (15) days prior to, and during
the 90-day period beginning on, the effective date of such registration
statement (or until its termination or abandonment, if earlier), except for
a sale pursuant to such registration statement, if permitted.
3. Registration Procedures.
a. Whenever Piggyback Securities are included in a Piggyback Registration
Statement pursuant to Section 1 of this Agreement, subject to the
terms, conditions, restrictions and limitations contained elsewhere
herein, the Company agrees to:
(i) include in such Piggyback Registration Statement the sale of the
Piggyback Securities in accordance with the intended method of
distribution thereof, and use commercially reasonable efforts to
cause such Piggyback Registration Statement to become effective;
(ii) prepare and file with the SEC such amendments and post-effective
amendments to the Piggyback Registration Statement as may be
necessary to keep the Piggyback Registration Statement effective
following the effective date for such period as may be required
to meet the prospectus delivery and all other requirements under
the Act, but not longer than one hundred thirty-five (135) days;
cause the prospectus to be supplemented by any required
prospectus supplement, and, as so supplemented, to be filed
pursuant to Rule 424 under the Act; and comply with the
provisions of the Act applicable to it with respect to the
disposition of all securities covered by such registration
statement during the applicable period in accordance with the
intended methods of disposition by sellers thereof set forth in
such Piggyback Registration Statement or supplement to the
prospectus;
(iii) furnish to the Holder and the underwriter or underwriters, if
any, without charge, at least one signed copy of the Piggyback
Registration Statement and all post-effective amendments thereto,
including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including
those incorporated by reference) as soon as such documents become
available to the Company, and such number of conformed copies
thereof and such number of copies of the Prospectus (including
each preliminary prospectus) and any amendment or supplements
thereto, and any documents incorporated by reference therein, as
the Holder or underwriter may request, as soon as such documents
become available to the Company, in order to facilitate the
disposition of the Piggyback Securities (it being understood that
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<PAGE>
the Company consents to the use of the prospectus and any
amendment or supplement thereto by the Holder and the underwriter
or underwriters, if any, in connection with the offering and sale
of the Piggyback Securities);
(iv) on or prior to the date on which the Piggyback Registration
Statement is declared effective, use commercially reasonable
efforts to register or qualify the Piggyback Securities under
such other securities or blue sky laws of such jurisdictions as
the managing underwriter, if any, or the Holder, if there is no
underwriter, reasonably requests, keep each such registration or
qualification effective during the period such registration
statement is required to be kept effective and do any and all
other acts and things which may be reasonably necessary or
advisable to consummate the disposition in such jurisdictions of
the Piggyback Securities; provided that the Company shall not be
required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this clause (iv), (B) subject itself to general taxation
in any such jurisdiction, (C) consent to general service of
process in any such jurisdiction, or (D) undertake compliance
with substantive requirements of the blue sky laws or regulations
of a jurisdiction which are unreasonably burdensome or onerous,
including escrow requirements;
(v) use commercially reasonable efforts to cause the Piggyback
Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to
consummate the disposition of the Piggyback Securities;
(vi) (A) notify the managing underwriter, if any, or the Holder, if
there is no underwriter, (and if requested by any such person,
confirm such advice in writing) when a prospectus relating to the
sale of the Piggyback Securities is required to be delivered
under the Act or (B) notify the managing underwriter, if any, or
the Holder, if there is no underwriter (and if requested by any
such person, confirm such advice in writing) of the happening of
any event as a result of which the prospectus included in the
Piggyback Registration Statement relating to the sale of the
Piggyback Securities contains an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of
the Piggyback Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading;
(vii) enter into customary agreements (including, in the case of an
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<PAGE>
underwritten offering, an underwriting agreement in customary
form with customary indemnity provisions) and make such
representations and warranties to the underwriters or the Holder,
if there is no underwriter, as in form and substance and scope
are customarily made by issuers to underwriters in secondary
underwritten offerings;
(viii) notify the managing underwriter, if any, or the Holder, if
there is no underwriter, of any stop order or other suspension of
effectiveness of the Piggyback Registration Statement;
(ix) make every commercially reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Piggyback Registration Statement at the earliest possible moment;
(x) cooperate with the managing underwriter, if any, and counsel for
the underwriters, or the Holder, if there is no underwriter, and
their counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the
"NASD");
(xii) if requested by the managing underwriter, if any, or the
Holder, if there is no underwriter, promptly incorporate in a
prospectus supplement or post-effective amendment such
information relating to the distribution of securities and the
timing thereof as the managing underwriter, if any, or the
Holder, if there is no underwriter, reasonably requests to be
included therein, including, without limitation, the number of
Piggyback Securities being sold by the Holder to the underwriter
or underwriters, and the purchase price being paid therefor by
such underwriter or underwriters and any other terms of the
underwritten offering of the Piggyback Securities; and make all
required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment;
(xiii) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a Piggy-back
Registration Statement, deliver a copy of such document to the
Holder;
(xiv) cooperate with the managing underwriter, if any, or the Holder,
if there is no underwriter, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under the Piggyback
Registration Statement and enable such securities to be in such
denominations or amounts, as the case may be, and registered in
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<PAGE>
such names as the managing underwriter, if any, or the Holder, if
there is no underwriter, may reasonably request;
(xv) notify the Holder, if there is no underwriter, or the managing
underwriter, if any, promptly (and if requested by any such
person, confirm such advice in writing) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Piggyback Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purpose; and
(xvi) cause the Piggyback Securities to be listed on each securities
exchange or quoted on the NASDAQ National Market on which similar
securities issued by the Company are then listed or quoted, and
provide that the applicable listing or quotation requirements are
satisfied.
b. The Holder shall provide to the Company such information regarding the
distribution of the Piggyback Securities and such other information
relating to the Holder and his or her ownership of securities of the
Company as the Company may from time to time reasonably request in
writing.
c. Notwithstanding anything contained herein to the contrary, the SEC may
issue a "stop order" or refuse to allow the effectiveness of any
Piggyback Registration Statement or the Company, may in its sole
discretion terminate any Piggyback Registration Statement at any time
prior to or after the effectiveness thereof without liability to the
Holder. In such event, the Company shall promptly notify the Holder
thereof.
d. The Holder agrees, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(b) hereof,
he or she will forthwith discontinue distribution of Piggyback
Securities.
4. Registration Expenses
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
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<PAGE>
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 Registrable
Securities), rating agency fees, printing expenses (including expenses of
printing certificates for the Registrable Securities 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 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"), shall be paid by the Company, provided that in no
event shall Registration Expenses include (A) any underwriting discounts or
commissions attributable to the sale of the Registrable Securities, (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 Piggyback
Registration Statement, 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, the cost thereof shall be apportioned as set forth
above.
5. Indemnification; Contribution
a. Indemnification by the Company. To the extent that any Piggyback
Securities are included in a Piggyback Registration Statement pursuant
to the terms hereof, the Company agrees to indemnify, to the full
extent permitted by law, the Holder, and any agent therefor against
all losses, claims, damages, liabilities and expenses (including
reasonable legal fees and expenses) arising out of or based upon any
such untrue statement or alleged untrue statement of a material fact
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contained in any registration statement, prospectus or preliminary
prospectus, or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in
the case of a prospectus or preliminary prospectus, in light of the
circumstances under which they are made) not misleading, except
insofar as such losses, claims, damages arise out of or are based upon
an untrue statement or omission so made in reliance upon and in
conformity with information with respect to the Holder furnished in
writing to the Company by the Holder or its representatives expressly
for use therein or any acts of negligence or misfeasance by Holder.
Nothing contained in Section 5(a) shall waive or effect any rights
Holder may otherwise have under law and equity.
b. Indemnification by the Holder. In connection with any Piggyback
Registration Statement in which the Holder is a selling stockholder,
the Holder agrees to indemnify, to the extent permitted by law, the
Company, its directors, officers, employees and agents and each person
who controls the Company (within the meaning of applicable federal and
state securities laws), and any investment advisor thereof or agent
therefor against any losses, claims, damages, liabilities and expenses
(including reasonable legal fees and expenses) resulting from (i) any
untrue statement or alleged untrue statement of a material fact
contained in the registration statement, prospectus or preliminary
prospectus, or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in
the
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<PAGE>
case of a prospectus or prelimi nary prospectus, in the light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission
is made in reliance upon and in conformity with or failed to be
contained in any information with respect to the Holder furnished in
writing by the Holder or its representatives specifically for
inclusion therein; (ii) Holder's negligence; or (iii) Holder's
misfeasance. In no event shall the liability of the Holder hereunder
be greater in amount than the dollar amount of the proceeds received
by the Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
c. Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written
notice of the commencement of any action, suit or proceeding against
such person or investigation thereof made in writing or for which such
person will claim indemnification or contribution pursuant to this
Agreement, but the failure so to give written notice to the
indemnifying party shall not relieve it from any liability which it
may have to any indemnified party hereunder except if and to the
extent such indemnifying party is materially prejudiced by such
failure nor shall it relieve the indemnifying party from any liability
which it may have to any indemnified party other than under this
Agreement. The indemnified party shall permit the indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be defenses available to it that are
different from or additional to those available to the indemnifying
party or if the interests of the indemnified party may reasonably be
deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel
and to control the defense of such action, with the reasonable fees
and expenses of such separate counsel to be reimbursed by the
indemnifying
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<PAGE>
party. If the indemnifying party is not entitled to, or does not,
assume the defense of a claim, it will not be obligated to pay the
fees and expenses of more than one counsel (and any required local
counsel) with respect to such claim. No indemnified party will be
required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation. The
indemnifying party will not be subject to any liability for any
settlement made without its consent, which shall not be unreasonably
withheld.
d. Conflict with Underwriting Agreement. In the event that any provision
of any indemnification clause in the underwriting agreement to which
the Company and the Holder are parties in connection with the
registration statement or prospectus in question differs from a
provision in this Section 5, such provision in the underwriting
agreement shall determine the Holder's rights visa via the Underwriter
in respect thereof. Notwithstanding the foregoing, the provisions of
Section 5 hereof shall control with respect to the rights of the
Company and the Holder with regards to this Agreement or the
underwriting agreement.
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<PAGE>
6. Participation in Underwritten Registrations
The Holder may not participate in any underwritten
registration hereunder unless it (a) agrees to sell the Piggyback Securities, as
the case may on be, the basis provided in the underwriting arrangements approved
by it, (b) completes and executes all questionnaires, powers of attorneys,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and (c) agrees to pay all
underwriting discounts and commissions on the Piggyback Securities sold under
such underwriting arrangements.
7. Miscellaneous
a. Entire Agreement. This Agreement contains the entire agreement among
the parties hereto and except as set forth herein, supersedes all
prior oral or written agreements, promises, representations,
commitments or understandings with respect to the matters provided for
herein.
b. Amendment. This Agreement may be modified or amended only by a writing
duly executed by the parties hereto.
c. Assignment and Binding Effect. This Agreement and the rights and
obligations of any party hereunder may not be assigned by any party
without the prior written consent of the other party hereto.
Notwithstanding the foregoing, the Company may merge or be acquired by
another corporation without the consent of the Holder so long as the
surviving corporation shall agree to be bound by the terms of this
Agreement. All covenants, agreements, and indemnities in this
Agreement by and on behalf of any of the parties hereto shall be
binding on and inure to the benefit of their respective successors and
permitted assigns.
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<PAGE>
d. Waivers. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a
continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
e. Rule 144. The Company shall utilize its reasonable best efforts to
take such action as may be required of it so that sale of Shares by
the Holder may be effected through Rule 144 of the Act or any
successor rule under the Act.
f. Notices. Unless applicable law requires a different method of giving
notice, any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing.
Assuming that the contents of a notice meet the requirements of the
specific Section of this Agreement which mandates the giving of that
notice, a notice shall be validly given or made to another party if
served either personally or if deposited in the United States mail,
certified or registered, postage prepaid, or if transmitted by
telegraph, telecopy or other electronic written transmission device or
if sent by overnight courier service, and if addressed to the
applicable party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively
deemed given at the time of such personal service. If such notice,
demand or other communication is given by mail, service shall be
conclusively deemed given seventy-two (72) hours after the deposit
thereof in the United States mail. If such notice, demand or other
communication is given by overnight courier, or electronic
transmission, service shall be conclusively given at the time of
confirmation of delivery. The addresses for the parties are as
follows:
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<PAGE>
(i) If to the Holder:
Kay Salomon
Leveque Beaubien Inc.,
1155 Netcalf, 5th Floor
Montreal, Quebec, Canada H3B-4S9
Telecopier No.: (514) 879-5260
(ii) If to the Company:
American Film Technologies, Inc.
Attention: Gerald M. Wetzler
300 Park Avenue, 17th Floor
New York, New York 10022
Telecopier No.: (212) 572-6460
with a copy (which shall not constitute notice) to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
Attention: Barry L. Burten, Esq.
Telecopier No.: (310) 203-0567
Any party hereto may change its address for the purpose of
receiving notices, demands and other communications as herein provided, by a
written notice given in the aforesaid manner to the other parties hereto.
g. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
conflicts of law principles.
h. Jurisdiction. The parties hereto agree to submit to the exclusive
jurisdiction of the Superior Court, Los Angeles County 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.
i. Cost of Litigation. Should any party hereto institute any action or
proceeding at law or in equity to enforce any provision of this
Agreement, including an action for declaratory relief, or for damages
by reason of an alleged breach of any provision of this Agreement, or
otherwise in connection with this Agreement, or any provision hereof,
the Court shall apportion the costs and fees thereof (including all
attorneys' fees between the parties based on its determination of the
merits of their respective positions in the proceeding prevailing
party shall be entitled to recover from the losing party or parties
reasonable attorneys' fees and costs for services rendered to
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<PAGE>
the prevailing party in such action or proceeding.
j. Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
k. Severability. If any provisions of this Agreement shall under any
circumstances be deemed invalid or inoperative, this Agreement shall
be construed with the invalid or inoperative provision deleted and the
rights and obligations of the parties shall be construed and enforced
accordingly.
l. Neuter and Gender. Whenever in this Agreement the context may require,
the neuter shall be deemed to include the feminine or masculine and
vice versa.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf on the date first above written.
AMERICAN FILM TECHNOLOGIES, INC.
By________________________________
Gerald M. Wetzler,
Chief Executive Officer
AGREED TO AND ACCEPTED
THIS ____ DAY OF October 1996
_________________________________________
Kay Salomon
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<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into,
effective as of October 17, 1996, by and between American Film Technologies,
Inc., a Delaware corporation (the "Company"), and Edward A. Payne (the
"Holder").
R E C I T A L S
WHEREAS, the Holder has rendered valuable services to the Company as a
member of its Board of Directors;
WHEREAS, the Company wishes to retain the Holder's services as an
ongoing member of the Board of Directors;
WHEREAS, as the sole and exclusive consideration to be paid to the
Holder for Holder's ongoing services as a director of the Company, the Company
has agreed to grant the stock option provided for herein to the Holder; and
NOW, THEREFORE, the Company and the Holder covenant and agree as
follows:
1. Grant of the Option. For good and valuable consideration, the
receipt of which is hereby acknowledged, the Company hereby grants to the Holder
a stock option (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
Fifty Thousand (50,000) shares of the Company's $.002 par value common stock
(the "Common Stock"), at the price of $.15 per share (the "Exercise Price").
Each of the number of shares of Common Stock into which the Common Stock is
exercisable and the Exercise Price is subject to adjustment as provided in
Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result
that the Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from rounding-
off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or certified
check of the aggregate exercise price for the shares of Common Stock 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
(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.
6. 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 for the shares of Common Stock 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 of 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
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<PAGE>
issuance to the Holder of the shares of Common Stock 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.
7. Fractional Shares. In no event shall the Company be required
to issue fractional shares upon the exercise of any portion of the Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and any
shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be acquired upon
exercise of the Option or any portion thereof unless (i) there is an effective
registration statement
-3-
<PAGE>
under the 1933 Act covering the proposed disposition and com pliance 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, an opinion of counsel 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.
(e) The Holder acknowledges and consents to the appearance of
a restrictive legend, in substantially the following form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT
LIMITED TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR
APPROVED BY ANY FEDERAL OR STATE REGULATORY AGENCY, INCLUDING BUT NOT
LIMITED TO THE SECURITIES AND EXCHANGE COMMISSION, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER
ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS,
INCLUDING BUT NOT LIMITED TO THE ACT, OR COMPLIANCE WITH AN APPLICABLE
EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE DISCRETION OF THE
CORPORATION, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION THAT NO VIOLATION OF SUCH
REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE SECURITIES
WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE WRONGFUL AND WILL NOT
ENTITLE THE TRANSFEREE TO REGISTER THE OWNERSHIP OF THE SECURITIES WITH
THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The grant of the Option to the Holder has been duly
authorized by all requisite corporate action on the
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<PAGE>
part of the Company and the shares of Common Stock represented by the Option
have been properly reserved for issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all 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 Common Stock currently
authorized for issuance by the Company's Certificate of Incorporation (the
"Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer. Before any sale, transfer
or other disposition of any of the shares of Common Stock 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 9(d) 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 9(d) 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 9(e) 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.
12. 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 Common Stock to the Holder.
-5-
<PAGE>
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and delivered by telex,
facsimile, personal delivery or if sent by mail, certified or registered mail,
return receipt requested deposited so addressed, postage prepaid. If sent by
mail notices
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<PAGE>
shall be deemed delivered five (5) business days after deposit in the mail. The
addresses to which any such notices shall be given are the following:
To Holder:
Edward A. Payne
C. Melchers Consulting, Inc.
126 East 56th Street, Tower 56
New York, New York 10022
Facsimile No. (212) 715-0734
With copy to:
--------------------------
--------------------------
--------------------------
--------------------------
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the parties
in one or more counterparts, all of which taken together shall constitute one
instrument.
21. 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.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"Company" American Film Technologies, Inc.
By:__________________________
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" _____________________________
Edward A. Payne
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<PAGE>
EXHIBIT A
Form of Exercise of Option
--------------------------
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by a Stock
Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: ______________ __, ____.
-------------------------------------
<PAGE>
EXHIBIT 10.26
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of October 17, 1996, by and between American Film
Technologies, Inc., a Delaware corporation (the "Company"), and Steven
Leftkowitz (the "Holder").
R E C I T A L S
WHEREAS, Holder has rendered valuable services to the
Company as a member of its Board of Directors;
WHEREAS, the Company wishes to retain Holder's services
as an ongoing member of the Board of Directors;
WHEREAS, as the sole and exclusive consideration to be paid to
the Holder for Holder's ongoing services as a director of the Company, the
Company has agreed to grant the stock option provided for herein to the Holder;
and
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 Fifty Thousand (50,000) shares of the Company's $.002 par value
common stock (the "Common Stock"), at the price of $.15 per share (the "Exercise
Price"). Each of the number of shares of Common Stock into which the Common
Stock is exercisable and the Exercise Price is subject to adjustment as provided
in Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result
that the Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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
(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.
6. 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 for the shares of Common Stock 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 of 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
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<PAGE>
Holder to take any action prior to issuance to the Holder of the shares of
Common Stock 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.
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and
any shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be acquired upon
exercise of the Option or any portion thereof unless (i) there is an effective
-3-
<PAGE>
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, an opinion of counsel 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.
(e) The Holder acknowledges and consents to the appearance
of a restrictive legend, in substantially the follow ing form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS,
INCLUDING BUT NOT LIMITED TO THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR APPROVED BY ANY FEDERAL OR STATE
REGULATORY AGENCY, INCLUDING BUT NOT LIMITED TO THE SECURITIES
AND EXCHANGE COMMISSION, AND MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS
OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES
UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES
LAWS, INCLUDING BUT NOT LIMITED TO THE ACT, OR COMPLIANCE WITH
AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE
DISCRETION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION
OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION THAT NO VIOLATION OF SUCH REGISTRATION OR
QUALIFICATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE
SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER THE
OWNERSHIP OF THE SECURITIES WITH THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
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<PAGE>
(b) The grant of the Option to the Holder has been duly
authorized by all requisite corporate action on the part of the Company and the
shares of Common Stock represented by the Option have been properly reserved for
issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all 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 Common Stock currently
authorized for issuance by the Company's Certificate of Incorporation (the
"Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer of Shares. Before any
sale, transfer or other disposition of any of the shares of Common Stock
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 9(d) 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 9(d) 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 9(e) 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.
12. 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 Common Stock to the
Holder.
-5-
<PAGE>
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
-6-
<PAGE>
prepaid. If sent by mail notices shall be deemed delivered five (5) business
days after deposit in the mail. The addresses to which any such notices shall be
given are the following:
To Holder:
Steven Leftkowtiz
President
Wade Capital Corporation
405 Lexington Avenue
54th Floor
New York, New York 10174
Facsimile No. (212) 949-8294
With copy to:
--------------------------
--------------------------
--------------------------
--------------------------
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
21. Jurisdiction. The parties hereto agree to submit to the
exclusive jurisdiction of the Superior Court of the State of California, County
-7-
<PAGE>
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:
-------------------------------
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" -------------------------------
Steven Leftkowitz
-8-
<PAGE>
EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: ______________ __, ____.
-------------------------------------
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of October 17, by and between American Film Technologies,
Inc., a Delaware corporation (the "Company"), and D. Porter Bibb (the "Holder").
R E C I T A L S
WHEREAS, the Holder has rendered especially valuable
services to the Company as a member of its Board of Directors;
WHEREAS, the Company desires that wishes that o retain
Holder's services and to as an ongoing member of the Board of Directors;
WHEREAS, as the sole and exclusive consideration to be paid to
the Holder for Holder's ongoing services as a director of the Company, the
Company has agreed to grant the stock option provided for herein to the Holder;
and
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 Fifty Thousand (50,000) shares of the Company's $.002 par value
common stock (the "Common Stock"), at the price of $.15 per share (the "Exercise
Price"). Each of the number of shares of Common Stock into which the Common
Stock is exercisable and the Exercise Price is subject to adjustment as provided
in Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result that the
Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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 connec tion with the exercise of the Option or
the relevant portion thereof; and
(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.
6. 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 for the shares of Common Stock for which the
Option was exer cised. 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 of 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
-2-
<PAGE>
Holder to take any action prior to issuance to the Holder of the shares of
Common Stock 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.
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and
any shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be acquired upon
exercise of the Option or any portion thereof unless (i) there is an effective
-3-
<PAGE>
registration statement under the 1933 Act covering the proposed disposition and
com pliance 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, an opinion of counsel 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.
(e) The Holder acknowledges and consents to the appearance
of a restrictive legend, in substantially the follow ing form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES
LAWS, INCLUDING BUT NOT LIMITED TO THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") NOR APPROVED BY ANY FEDERAL OR
STATE REGULATORY AGENCY, INCLUDING BUT NOT LIMITED TO THE
SECURITIES AND EXCHANGE COMMISSION, AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR
VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE
TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT
REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED
STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT
LIMITED TO THE ACT, OR COMPLIANCE WITH AN APPLICABLE
EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE DISCRETION OF
THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION THAT NO VIOLATION OF SUCH REGISTRATION OR
QUALIFICATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE
SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER
THE OWNERSHIP OF THE SECURITIES WITH THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
-4-
<PAGE>
(b) The grant of the Option to the Holder has been duly
authorized by all requisite corporate action on the part of the Company and the
shares of Common Stock represented by the Option have been properly reserved for
issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all 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 Common Stock currently
authorized for issuance by the Company's Certificate of Incorporation (the
"Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of the shares of Common Stock 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 9(d) 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 9(d) 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 9(e) 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.
12. 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 Common Stock to the
Holder.
-5-
<PAGE>
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
prepaid. If sent by mail notices shall be deemed delivered five (5) business
days after deposit in the mail. The addresses to which any such notices shall be
given are the following:
-6-
<PAGE>
To Holder:
D. Porter Bibb
c/o Ladenburg, Thalmann & Co., Inc.
540 Madison Avenue
New York, New York 10022
Facsimile No. (212) 644-6515
With copy to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
21. 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.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Company" American Film Technologies, Inc.
By:
----------------------------------------
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" --------------------------------------------
D. Porter Bibb
-8-
<PAGE>
EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: , .
-------------------- -- -----
-------------------------------
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of October 15, 1996, by and between American Film
Technologies, Inc., a Delaware corporation (the "Company"), and Milton Rich (the
"Holder").
R E C I T A L S
WHEREAS, Holder has rendered valuable public relations
services to the Company;
WHEREAS, the Company wishes to retain Holder's services
for public relations;
WHEREAS, as consideration for Holder's ongoing public
relations services on behalf of the Company, the Company has agreed to grant the
stock option provided for herein to the Holder; and
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 One-Hundred Thousand (100,000) shares of the Company's $.002 par
value common stock (the "Common Stock"), at the price of $.62 per share (the
"Exercise Price"). Each of the number of shares of Common Stock into which the
Common Stock is exercisable and the Exercise Price is subject to adjustment as
provided in Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result
that the Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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 connec tion with the exercise of the Option or
the relevant portion thereof; and
(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.
6. 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 for the shares of Common Stock for which the
Option was exer cised. 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 of 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
-2-
<PAGE>
issuance to the Holder of the shares of Common Stock 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.
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and
any shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be acquired upon
exercise of the Option or any portion thereof unless (i) there is an effective
registration statement
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under the 1933 Act covering the proposed disposition and com pliance 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, an opinion of counsel 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.
(e) The Holder acknowledges and consents to the appearance
of a restrictive legend, in substantially the follow ing form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING
BUT NOT LIMITED TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") NOR APPROVED BY ANY FEDERAL OR STATE REGULATORY AGENCY,
INCLUDING BUT NOT LIMITED TO THE SECURITIES AND EXCHANGE
COMMISSION, AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY
THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT
LIMITED TO THE ACT, OR COMPLIANCE WITH AN APPLICABLE EXEMPTION
THEREFROM, SUCH COMPLIANCE, AT THE DISCRETION OF THE CORPORATION,
TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM
ACCEPTABLE TO THE CORPORATION THAT NO VIOLATION OF SUCH
REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT FROM ANY
PROPOSED TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE
SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER THE
OWNERSHIP OF THE SECURITIES WITH THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The grant of the Option to the Holder has been duly
authorized by all requisite corporate action on the
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<PAGE>
part of the Company and the shares of Common Stock represented by the Option
have been properly reserved for issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all 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 Common Stock currently
authorized for issuance by the Company's Certificate of Incorporation (the
"Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of the shares of Common Stock 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 9(d) 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 9(d) 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 9(e) 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.
12. 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 Common Stock to the
Holder.
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<PAGE>
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
prepaid. If sent by mail notices shall be deemed delivered five (5) business
days after deposit in the mail. The addresses to which any such notices shall be
given are the following:
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<PAGE>
To Holder:
Milton Rich
200 Rector Place Apt. # 42B
New York, New York 10280
Facsimile No. (212) 898-4810
With copy to:
____________________________
____________________________
____________________________
____________________________
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
21. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Company" American Film Technologies, Inc.
By:__________________________
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" _____________________________
Milton Rich
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<PAGE>
EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: ______________ __, ____.
-------------------------------------
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of October 15, 1996, by and between American Film
Technologies, Inc., a Delaware corporation (the "Company"), and Sheldon Jacobs
(the "Holder").
R E C I T A L S
WHEREAS, Holder has rendered valuable consulting
services to the Company;
WHEREAS, the Company wishes to retain Holder's services
as a consultant;
WHEREAS, as consideration for Holder's ongoing consulting
services on behalf of the Company, the Company has agreed to grant the stock
option provided for herein to the Holder; and
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 One-Hundred Thousand (100,000) shares of the Company's $.002 par
value common stock (the "Common Stock"), at the price of $.62 per share (the
"Exercise Price"). Each of the number of shares of Common Stock into which the
Common Stock is exercisable and the Exercise Price is subject to adjustment as
provided in Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
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<PAGE>
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 Option is exercisable and to the Exercise Price, with the result
that the Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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 Exhibit "A" attached hereto and made a part hereof, specifying the
number of shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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 connec tion with the exercise of the
Option or the relevant portion thereof; and
(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.
6. 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 for the shares of Common Stock for which the
Option was exer cised. 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 of 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
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<PAGE>
issuance to the Holder of the shares of Common Stock 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.
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be
acquired upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the
Option and any shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or
otherwise voluntarily dispose of any shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof unless (i) there is an
effective registration statement
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<PAGE>
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, an opinion of counsel 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.
(e) The Holder acknowledges and consents to the
appearance of a restrictive legend, in substantially the follow ing form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES
LAWS, INCLUDING BUT NOT LIMITED TO THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") NOR APPROVED BY ANY FEDERAL OR STATE
REGULATORY AGENCY, INCLUDING BUT NOT LIMITED TO THE SECURITIES
AND EXCHANGE COMMISSION, AND MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS
OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES
UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES
LAWS, INCLUDING BUT NOT LIMITED TO THE ACT, OR COMPLIANCE WITH
AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE
DISCRETION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION
OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION THAT NO VIOLATION OF SUCH REGISTRATION OR
QUALIFICATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE
SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER THE
OWNERSHIP OF THE SECURITIES WITH THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) The grant of the Option to the Holder has been
duly authorized by all requisite corporate action on the
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<PAGE>
part of the Company and the shares of Common Stock represented by the Option
have been properly reserved for issuance.
(c) The number of shares of Common Stock represented
by the Option (when coupled with all shares currently outstanding and all 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 Common Stock
currently authorized for issuance by the Company's Certificate of Incorporation
(the "Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required
to be obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of the shares of Common Stock 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 9(d) 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 9(d) 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 9(e) 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.
12. 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 Common Stock to the
Holder.
-5-
<PAGE>
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
prepaid. If sent by mail notices shall be deemed delivered five (5) business
days after deposit in the mail. The addresses to which any such notices shall be
given are the following:
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To Holder:
Sheldon Jacobs
Managing Director
Media Creations
207 E 74th St., Suite 3A
New York, New York 10021
Facsimile No. (212) 472-5844
With copy to:
------------------------------
------------------------------
------------------------------
------------------------------
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
21. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Company" American Film Technologies, Inc.
By:__________________________
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" _____________________________
Sheldon Jacobs
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<PAGE>
EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: ______________ __, ____.
____________________________________
<PAGE>
================================================================================
THE SECURITIES OFFERED BY THIS INSTRUMENT HAVE NOT BEEN REGIS TERED 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 January 3, 1997 (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 made available to the Board of
Directors an Option to purchase Ten Million (10,000,000) shares of the Company's
$.002 par value per share common stock (the "Common Stock") at an exercise price
of Seven Cents ($.07) per share for an aggregate price of Two Hundred Thousand
Dollars ($200,000) for the Option (the "Option Price"); and
WHEREAS, Gerald M. Wetzler (the "Holder") has agreed to
purchase, and the Company has agreed to sell to the Holder the Option in its
entirety for the Option Price.
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For the sum of the Option Price or Two
Hundred Thousand Dollars ($200,000), the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the Option to acquire from
the Company, from time to time on the terms and conditions set forth herein, all
or any portion of an aggregate of Common Stock (hereinafter referred to as the
"Option Shares").
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2. Exercise Price. The exercise price of the Option Shares
shall be Seven Cents ($.07) 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 three year term (the "Option Term") commencing on
the date hereof and terminating as of 5:00 p.m. (New York time) on January 3,
2000 (the "Expiration Date").
4. Vesting; Exercise. Subject to the provisions of Section 11
hereof, during the Option Term the Holder shall not have the right to exercise
all or any portion of the Option and receive the Option Shares represented
thereby until the occurrence of both of the following: (a) the filing of an
amendment to the Company's Certificate of Incorporation authorizing an increase
in the number of shares of Common Stock sufficient in amount to cover on the
date of filing the aggregate of all shares of Common Stock (i) currently
outstanding; (ii) issuable upon the exercise of all outstanding options and
warrants; and (iii) issuable upon the conversion of all outstanding shares of
convertible preferred stock or notes (the "Authorized Shares Amendment"); and
(b) six months from the date hereof.
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.
(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
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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 at the time of such redemption.
(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.
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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 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
(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. Piggy-back Registration Rights; Indemnification.
(a) Subject to Section 10(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
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any of the Company's securities for money (a "Company Registration"), the
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 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
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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 posteffective 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:
A. when any prospectus or any
supplement or posteffective 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;
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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
underwriter, 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)).
(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.
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<PAGE>
(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;
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
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<PAGE>
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 substan tially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances.
(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
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by Holder pursuant to Rule 144 promulgated under the 1933 Act or any successor
rule or regulation.
11. 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.
12. 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:
(a) 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.
(b) 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.
(c) The Holder agrees not to sell, transfer or
otherwise voluntarily dispose of any Option Shares that may be 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.
(d) 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
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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.
(e) 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.
(f) The Holder agrees that until the filing of the
Authorized Share Amendment, Holder will not exercise any other option held by
Holder to the extent that the amount of shares issuable upon such exercise when
added to all shares of Common Stock (i) currently outstanding; (ii) issuable
upon the exercise of options or warrants other than those held by Holder; and
(iii) issuable upon the conversion of all outstanding notes and/or shares of
convertible preferred stock.
13. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) 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 shares of Common Stock represented by the Option will have been properly
reserved for issuance.
(c) The number of shares of Common Stock represented
by the Option (when coupled with all shares of Common Stock currently
outstanding and all 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 Common Stock, as the case may be, currently authorized for issuance
by the Company's Certificate of Incorporation, as amended (the "Certificate").
(d) 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.
(e) No Registration Statement involving the Common
Stock is currently on file with the SEC.
14. 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
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<PAGE>
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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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
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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 21. 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
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
22. 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.
23. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
24. 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.
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<PAGE>
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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<PAGE>
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 January 3, 1997. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase___________ shares of Common 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 Common Stock x $.07 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 10 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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<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of November 20,1996, by and between American Film
Technologies, Inc., a Delaware corporation (the "Company"), and D. Porter Bibb
(the "Holder").
R E C I T A L S
WHEREAS, the Holder has rendered especially valuable
services to the Company as a member of its Board of Directors;
WHEREAS, the Company desires that wishes that o retain
Holder's services and to as an ongoing member of the Board of Directors;
WHEREAS, as the sole and exclusive consideration to be paid to
the Holder for Holder's ongoing services as a director of the Company, the
Company has agreed to grant the stock option provided for herein to the Holder;
and
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 Fifty Thousand (50,000) shares of the Company's $.002 par value
common stock (the "Common Stock"), at the price of $.15 per share (the "Exercise
Price"). Each of the number of shares of Common Stock into which the Common
Stock is exercisable and the Exercise Price is subject to adjustment as provided
in Section 4 hereof.
2. Term of the Option. The Option will commence on the date
hereof and will terminate on October 15, 2001 (the "Effective Date").
3. Vesting; Exercise. Subject to the provisions of Section 8
below, the Holder's right to exercise all or any portion of the Option and
receive the shares of Common Stock represented thereby shall become immediately
exercisable upon the Effective Date.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result that the
Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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
(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.
6. 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 for the shares of Common Stock for which the
Option was exer cised. 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 of 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
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<PAGE>
require the Company or the Holder to take any action prior to issuance to the
Holder of the shares of Common Stock 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.
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. 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 or her
court-appointed legal representative.
9. 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:
(a) 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 AGREEMENT 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 AGREEMENT AND THE SECURITIES OFFERED HEREBY IS
RESTRICTED AS PROVIDED IN SECTIONS 9 AND 11 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and
any shares of Common Stock 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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be acquired upon
exercise of the Option or any portion
-3-
<PAGE>
thereof unless (i) there is an effective registration statement under the 1933
Act covering the proposed disposition and com pliance 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, an opinion of
counsel 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.
(e) The Holder acknowledges and consents to the appearance
of a restrictive legend, in substantially the follow ing form:
NOTICE: RESTRICTIONS ON TRANSFER
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING
BUT NOT LIMITED TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") NOR APPROVED BY ANY FEDERAL OR STATE REGULATORY AGENCY,
INCLUDING BUT NOT LIMITED TO THE SECURITIES AND EXCHANGE
COMMISSION, AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY
THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT
LIMITED TO THE ACT, OR COMPLIANCE WITH AN APPLICABLE EXEMPTION
THEREFROM, SUCH COMPLIANCE, AT THE DISCRETION OF THE CORPORATION,
TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM
ACCEPTABLE TO THE CORPORATION THAT NO VIOLATION OF SUCH
REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT FROM ANY
PROPOSED TRANSFER OR ASSIGNMENT. ANY OFFER OR DISPOSITION OF THESE
SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS WILL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER THE
OWNERSHIP OF THE SECURITIES WITH THE CORPORATION.
(f) 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.
10. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
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<PAGE>
(b) The grant of the Option to the Holder has been duly
authorized by all requisite corporate action on the part of the Company and the
shares of Common Stock represented by the Option have been properly reserved for
issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all 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 Common Stock currently
authorized for issuance by the Company's Certificate of Incorporation (the
"Certificate").
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
11. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of the shares of Common Stock 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 9(d) 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 9(d) 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 9(e) 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.
12. 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,
-5-
<PAGE>
regardless of when the Company actually delivers certificates representing
Common Stock to the Holder.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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 18. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
prepaid. If sent by mail notices
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<PAGE>
shall be deemed delivered five (5) business days after deposit in the mail. The
addresses to which any such notices shall be given are the following:
To Holder:
D. Porter Bibb
c/o Ladenburg, Thalmann & Co., Inc.
540 Madison Avenue
New York, New York 10022
Facsimile No. (212) 644-6515
With copy to:
__________________________________
__________________________________
__________________________________
__________________________________
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
19. 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.
20. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
21. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Company" American Film Technologies, Inc.
By:__________________________
Gerald M. Wetzler
Its: Chief Executive Officer
"Holder" _____________________________
D. Porter Bibb
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<PAGE>
EXHIBIT A
Form of Exercise of Option
To: American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
The undersigned holds an option (the "Option") represented by
a Stock Option Agreement (the "Agreement") effective as of June 30, 1995. The
undersigned hereby exercises [the Option] [a portion of the Option] and elects
to purchase ____________ shares of Common 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 5(c) of the Agreement.
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. 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 10(e) 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: ______________ __, ____.
-------------------------------------
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into, effective as of November 20, 1996 (the "Effective Date"), by and between
American Film Technologies, Inc., a Delaware corporation (the "Company"), and
Harvey Finkel (the "Holder").
R E C I T A L S
WHEREAS, the Company has elected Holder to serve on its Board
of Directors and the Holder has concurrently herewith agreed to serve as a
Director of the Company; and
WHEREAS, as the sole and exclusive consideration to be paid to
the Holder for agreeing to be so served as a director of the Company, the
Company has agreed to grant the stock option provided for herein to the Holder.
NOW, THEREFORE, the Company and the Holder covenant and agree
as follows:
1. Grant of the Option. For good and valuable consideration,
the receipt of which is hereby acknowledged, the Company hereby grants to the
Holder a stock option (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 Fifty Thousand (50,000) shares of the Company's $.002 par value
common stock (the "Common Stock"), at the price equal to the $.15 per share (the
"Exercise Price"). Each of the number of shares of Common Stock into which the
Common Stock is exercisable and the Exercise Price is subject to adjustment as
provided in Section 4 hereof.
2. Term of the Option. Subject to the provisions of Section 8
hereof, the Option will commence on the date hereof and will terminate on
November 20, 2001 (the "Expiration Date").
3. Vesting; Exercise. The Holder's right to exercise all or
any portion of the Option and receive the shares of Common Stock represented
thereby shall become exercisable immediately as of the date hereof.
4. Adjustments Upon Changes in Capitalization or Other
Significant Events. 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
1
<PAGE>
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 Option is exercisable and to the Exercise Price, with the result
that the Holder's proportionate share of Common Stock 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 for any change in the aggregate exercise price resulting from
rounding-off of share quantities or prices).
5. 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
Exhibit "A" attached hereto and made a part hereof, specifying the number of
shares of 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 by cashiers or
certified check of the aggregate exercise price for the shares of Common Stock
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
(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.
6. 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 for the shares of Common Stock 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 of 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 shares of
Common Stock 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.
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<PAGE>
7. Fractional Shares. In no event shall the Company be
required to issue fractional shares upon the exercise of any portion of the
Option.
8. Termination, Adjustments to Term and Exercisability of the
Option. The Holder may not exercise all or any portion of the Option which is
not then exercisable and the term of the Option shall expire upon occurrence of
the following events;
(a) Except as set forth in (b) below, the expiration of
thirty (30) days from the time that Holder's ceases to serve as a director of
the Company.
(b) In the event the Holder ceases to serve as a director
of the Company as a result of Holder's death, the expiration of one (1) year
from the date of Holder's death.
9. 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 or her
court-appointed legal representative.
10. 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:
(a) 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 9 AND 12 HEREOF.
(b) 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 shares of Common Stock that may be acquired
upon exercise of the Option or any portion thereof.
(c) The Holder warrants and represents that the Option and
any shares of Common Stock acquired upon exercise of the Option or any portion
thereof will be acquired and held by the Holder for the Holder's own account,
3
<PAGE>
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.
(d) The Holder agrees not to sell, transfer or otherwise
voluntarily dispose of any shares of Common Stock that may be 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, an opinion of counsel 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.
(e) 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.
(f) 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.
11. Warranties and Representations of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) 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 shares of Common Stock represented by the Option have been properly reserved
for issuance.
(c) The number of shares of Common Stock represented by the
Option (when coupled with all shares currently outstanding and all shares to be
issued upon the exercise of all other currently outstanding options granted by
the Company which may be exercised absent an increase in the number of
authorized shares of common stock) does not exceed the number of shares of
Common Stock currently authorized for issuance by the Company's Certificate of
Incorporation (the "Certificate").
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<PAGE>
(d) 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.
(e) No consents, approvals, nor permits are required to be
obtained from any third person, other those which may be required under
applicable securities laws, before the issuance of Common Stock upon the
exercise of all or any portion of the Option.
12. Procedures Upon Permitted Transfer. Before any sale,
transfer or other disposition of any of the shares of Common Stock 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 10(d) 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 10(d) 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 10(e) 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.
13. 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 Common Stock to the
Holder.
14. 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.
15. 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.
5
<PAGE>
16. 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.
17. 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.
18. 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.
19. 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 19. All such notices shall be in writing and
delivered by telex, facsimile, personal delivery or if sent by mail, certified
or registered mail, return receipt requested deposited so addressed, postage
prepaid. If sent by mail notices shall be deemed delivered five (5) business
days after deposit in the mail. The addresses to which any such notices shall be
given are the following:
To Holder:
Mr. Harvey Finkel
Senior Vice President and Chief Financial Officer
New World Entertainment
1440 South Sepulveda Boulevard
Los Angeles, CA 90025
6
<PAGE>
To the Company:
Gerald M. Wetzler
c/o American Film Technologies, Inc.
300 Park Avenue, 17th Floor
New York, New York 10022
Facsimile No. (212) 572-6460
With copy to:
Barry L. Burten, Esq.
Jeffery, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
20. 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.
21. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which taken together shall
constitute one instrument.
22. 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:
-----------------------------------------
Gerald M. Wetzler
Chief Executive Officer
"Holder" ---------------------------------------------
Harvey Finkel
7
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<FISCAL-YEAR-END> JUN-30-1997
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