SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
April 20, 2000
Date of Report
(date of earliest event reported)
DAUPHIN TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
Illinois 33-21537-D 87-0455038
(State or other jurisdiction of Commission File No. (IRS Employer
incorporation or organization) Identification Number)
800 E. Northwest Hwy, Suite 950, Palatine, IL 60067
(Address of principal executive offices) (Zip Code)
(847) 358-4406
Registrant's telephone number, including area code
Former name or address, if changed since last report
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Item 1. Change In Control of Registrant
Not applicable.
Item 2. Acquisition or Disposition of Assets
Not applicable.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrants Certifying Accountants
Not applicable.
Item 5. Other Events
On April 12, 2000, we entered into a $100,000,000 equity line agreement
with an institutional investor. The equity line is evidenced by a Common
Stock Purchase Agreement, Registration Rights Agreement, Escrow Agreement and
Form of a Stock Purchase Warrant. The equity line is conditioned on
registration of the shares and warrants to be issued to the investor under
the line. We may make up to eighteen draws of up to $10,000,000 per draw,
with a $100,000,000 aggregate draw limit. Upon each draw, we must issue
shares to the investor based upon the amount of the draw and a price
determined by reference to the 22-day average trading price and 45-day
average volume of our shares immidiately prior to the draw. Upon each draw,
we must issue to the investor warrants to purchase additional common shares
in the amount equal to 7% of the draw devided by the daily volume weighted
average of our shares on the trading day preceeding the draw.
Item 6. Registration of Registrant's Directors
Not applicable.
Item 7. Financial Statements and Exhibits
The following exhibits are filed as part of this report:
Exhibit
Number Title of Document
7a Common Stock Purchase Agreement
7b Registration Rights Agreement
7c Escrow Agreement
7d Stock Purchase Warrant
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Item 8. Change in Fiscal Year
Not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulations
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Dauphin Technology, Inc.
s/Andrew Kandalepas/
By: Andrew Kandalepas
President
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Exhibit 7a
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is dated as of April
9, 2000 by and between Dauphin Technology, Inc., an Illinois corporation (the
"Company"), and Techrich International Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of the
Company on the OTC Bulletin Board or, if the OTC Bulletin Board is not
the Principal Market, on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section 6.1
(a) hereof.
(c) "Draw Down Exercise Date" shall have the meaning assigned to such term in
Section 6.1(b) hereof.
(d) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days preceding a Draw Down Exercise Date.
(e) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared
effective.
(f) "Material Adverse Effect" shall mean any adverse effect on the business,
operations, properties or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates,
taken as a whole and/or any condition, circumstance, or situation that
would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement
or the Registration Rights Agreement or to perform its obligations under
any other material agreement.
(g) "Principal Market" shall mean initially the OTC Bulletin Board, and shall
include the Nasdaq National Market, Nasdaq SmallCap Market, the American
Stock Exchange or the New York Stock Exchange if the Company is listed
and trades on such market or exchange.
(h) "Registration Statement" shall mean the registration statement under the
Securities Act of 1933, as amended, to be filed with the Securities and
Exchange Commission for the registration of the Shares pursuant to the
Registration Rights Agreement attached hereto as Exhibit A.
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(i) "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of
the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter,
and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in
the Registration Rights Agreement.
(j) "Shares" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder and those shares of Common Stock
issuable to the Purchaser upon exercise of the Warrants.
(k) "Threshold Price" is the lowest Average Daily Price at which the Company
will sell its Common Stock with respect to this Agreement.
(l) "Trading Day" shall mean any day on which the Principal Market is open
for business.
(m) "VWAP" shall mean the daily volume weighted average price of the
Company's Common Stock on the OTC Bulletin Board or on any Principal
Market as reported by Bloomberg Financial using the AQR function.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock.
Subject to the terms and conditions of this Agreement, the Company may issue
and sell to the Purchaser and the Purchaser shall purchase from the Company
up to One Hundred Million Dollars ($100,000,000) of the Company's Common
Stock, $0.001 par value per share (the "Common Stock"), based on up to
eighteen (18) Draw Downs of up to Ten Million Dollars ($10,000,000) per Draw
Down.
Section 2.2 The Shares.
The Company has authorized and has reserved and covenants to continue to
reserve, free of preemptive rights and other similar contractual rights of
stockholders, a sufficient number of its authorized but unissued shares of
its Common Stock to cover the Shares to be issued in connection with all Draw
Downs requested under this Agreement. Anything in this Agreement to the
contrary notwithstanding, the Company may not make a Draw Down to the extent
that, after such purchase by the Purchaser, the sum of the number of shares
of Common Stock beneficially owned by the Purchaser and its affiliates would
result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities and Exchange Act of 1934,
as amended.
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Section 2.3 Purchase Price and Closing.
The Company agrees to issue and sell to the Purchaser and, in consideration
of and in express reliance upon the representation, warranties, covenants,
terms and conditions of this Agreement, the Purchaser agrees to purchase that
number of the Shares to be issued in connection with each Draw Down. The
closing under this Agreement shall take place at the offices of Epstein
Becker & Green, P.C., 250 Park Avenue, New York, New York 10177 (the
"Closing") at 10:00 a.m. E.S.T. on (i) April 9, 2000, or (ii) such other time
and place or on such date as the Purchaser and the Company may agree upon
(the "Closing Date"). Each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representation and Warranties of the Company.
The Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization, Good Standing and Power.
The Company is a corporation duly incorporated validly existing and in good
standing under the laws of the State of Illinois and has all requisite
corporate authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted. The Company does not have
any subsidiaries and does not own more that fifty percent (50%) of or control
any other business entity except as set forth in the SEC Documents. The
Company is duly qualified and is in good standing as a foreign corporation to
do business in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a Material
Adverse Effect on the Company's financial condition.
(b) Authorization, Enforcement.
(i) The Company has the requisite corporate power and corporate authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, the Escrow Agreement and to issue the Draw Down Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery
of this Agreement, the Registration Rights Agreement and the Escrow Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly executed and delivered by
the Company and at the initial Closing shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock
sufficient in number for the issuance of the Draw Down Shares.
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(c) Capitalization. As of March 28, 2000, the authorized capital stock of the
company consists of 100,000,000 shares of Common Stock, $0.001 par value per
share, of which 53,935,308 shares are issued and outstanding and 10,000,000
shares of preferred stock, of which none are issued and outstanding. All of
the outstanding shares of the Company's Common Stock have been duly and
validly authorized and are fully-paid and non-assessable. Except as set
forth in this Agreement and the Registration Rights Agreement and as set
forth in the SEC Documents, or on Schedule 3.1(c) hereto, no shares of
Common Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and as set forth in the
SEC Documents or on Schedule 3.1(c), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound
to issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
The Company is not a party to any agreement granting registration rights to
any person with respect to any of its equity or debt securities. The Company
is not a party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company. Except
as set forth in the SEC Documents or on Schedule 3.1(c) hereto, the offer and
sale of all capital stock, convertible securities, rights, warrants, or
options of the Company issued prior to the Closing complied with all
applicable federal and state securities laws, and no stockholder has a right
of rescission or damages with respect thereto which would have a Material
Adverse Effect on the Company's financial condition or operating results.
The Company has made available to the Purchaser true and correct copies of
the Company's Articles of Incorporation as in effect on the date hereof (the
"Articles"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws"). The Principal Market for the Common Stock in the United States is
the OTC Bulletin Board, and the Company has not received any notice from such
market questioning or threatening the continued inclusion of the Common Stock
on such market.
(d) Issuance of Shares. The Shares to be issued under this Agreement have
been duly authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and non-assessable, and the Purchaser shall be
entitled to all rights accorded to a holder of Common Stock.
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(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the Company
is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of
any federal, state, local or other foreign statute, rule, regulation, order,
judgment or decree (including any federal and state or securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, termination,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under any federal,
state or local law, rule or regulation to obtain any consent, authorization
or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or issue and sell the Shares in accordance
with the terms hereof (other than any filings which may be required to be
made by the Company with the Securities and Exchange Commission (the
"Commission") or state securities administrators subsequent to the Closing
and any registration statement which may be filed pursuant hereto); provided
that, for purpose of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements.
The Common Stock of the Company is registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
except as disclosed in the SEC Documents or on Schedule 3.1(f) hereto, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant
to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 31, 1998. The Company has not provided to the
Purchaser any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has
not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such documents, and, as of their respective dates,
none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules
and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the Company and
its subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
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(g) Subsidiaries.
The SEC Documents or Schedule 3.1(g) hereto sets forth each subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interests having ordinary
voting power (absolutely or contingently) for the election of directors or
other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable. There
are no outstanding preemptive, conversion or other rights, options, warrants
or agreements granted or issued by or binding upon any subsidiary for the
purchase or acquisition of any shares of capital stock of any subsidiary or
any other securities convertible into, exchangeable for or evidencing the
rights to subscribe for any shares of such capital stock. Neither the
Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights,
warrants or options of the type described in the preceding sentence. Neither
the Company nor any subsidiary is a party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital
stock of any subsidiary.
(h) No Material Adverse Effect.
Since September 30, 1999, no Material Adverse Effect has occurred or exists
with respect to the Company, except as disclosed in the SEC Documents or on
Schedule 3.1(h) hereof.
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(i) No Undisclosed Liabilities.
Except as disclosed in the SEC Documents or on Schedule 3.1(i) hereto,
neither the Company nor any of its subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required
to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP which are not disclosed
in the Commission Documents, other than those incurred in the ordinary course
of the Company's or its subsidiaries respective businesses since such date
and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances.
Since September 30, 1999, no event or circumstance has occurred or exists
with respect to the Company or its businesses, properties, prospects,
operations or financial condition, that, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or
disclosed in the SEC Documents.
(k) Indebtedness.
The SEC Documents or Schedule 3.1(k) hereto sets forth as of the date hereof
all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For
the purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities
for borrowed money or amounts owed in excess of $250,000 (other than trade
accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $250,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.
(l) Title to Assets.
Each of the Company and the subsidiaries has good and marketable title to all
of its real and personal property reflected in the Commission Documents, free
of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated in the SEC Documents or on Schedule
3.1(1) hereto or such that do not cause a Material Adverse Effect on the
Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full
force and effect.
(m) Actions Pending.
There is no action, suit, claim, investigation or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any
subsidiary which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. Except as set forth in the SEC Documents or on Schedule 3.1(m)
hereto, there is no action, suit, claim, investigation or proceeding pending
or, to the knowledge of the Company, threatened, against or involving the
Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company
or any subsidiary.
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(n) Compliance with Law.
The business of the Company and the subsidiaries has been and is presently
being conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except as set forth in
the SEC Documents or on Schedule 3.1(n) hereto or such that do not cause a
Material Adverse Effect. The Company and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their respective
businesses as now being conducted by them unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(o) Taxes.
The Company and each subsidiary has filed all Tax Returns which it is
required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld
and paid over to the appropriate taxing authorities all Taxes which it is
required to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third parties; and since December 31, 1998, the charges,
accruals and reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the Company
are adequate to cover any Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where the
Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority; and, except as disclosed above, no
written notice indicating an intent to open an audit or other review has been
received by the Company or any subsidiary from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to sec 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to sec 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to
the business or operations of the Company. The Company has not been a United
States real property holding corporation within the meaning of Sec. 897(c)(2) of
the Internal Revenue Code during the applicable period specified in Sec. 897
(c)(1)(A)(ii) of the Internal Revenue Code.
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The Company has not made an election under Sec. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that
is not a subsidiary of the Company under (A) Treas. Reg. sec 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not
a party to any tax sharing agreement. The Company has not made any payments,
is obligated to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible under sec 280G of
the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real
or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
(p) Certain Fees. Except as set forth on Schedule 3.1(p) hereto, no brokers,
finders or financial advisory fees or commissions will be payable by the
Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns or
possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents and on Schedule
3.1(r) hereto, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any
conflict with the rights of others.
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(s) Regulatory Compliance. The Company has all necessary licenses,
registrations and permits to conduct its business as now being conducted in
all states where the Company conducts its business.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location
and collection of their assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company or any
subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or on
Schedule 3.1(u) hereto, neither the Company nor any subsidiary is a party to
any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-1 or other
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act of 1933, as
amended (the "Securities Act"). The Company and each of its subsidiaries has
in all material respects performed all the obligations required to be
performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in
default under any Material Agreement now in effect, the result of which could
cause a Material Adverse Effect. No written or oral contract, instruments,
agreement, commitment, obligation, plan or arrangement of the Company or of
any subsidiary limits or shall limit the payment of dividends on the
Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the SEC Documents
or on Schedule 3.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of
the Company, or any of its subsidiaries, or any person owning any capital
stock of the Company or any subsidiary or any member of the immediately
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply with
all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy the Shares or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than
the Purchaser), so as to bring the issuance and sale of the Shares and/or
Warrants under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of the Shares.
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(x) Governmental Approvals. Except as set forth in the SEC Documents or on
Schedule 3.1(x) hereto, and except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable federal or
state securities laws (which if required, shall be filed on a timely basis),
including the filing of a registration statement or statements pursuant to
this Agreement, no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the execution or delivery of the
Shares, or for the performance by the Company of its obligations under this
Agreement.
(y) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except
as set forth in the SEC Documents or on Schedule 3(y) hereto. Except as set
forth in the SEC Documents or on Schedule 3(y) hereto, neither the Company
nor any subsidiary is in breach of any employment contract, agreement
regarding proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary. Since
the date of the December 31, 1998, Form 10-K, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either
individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.
(z) Absence of Certain Developments. Except as provided in SEC Documents or
in Schedule 3.1(z) hereto, since September 30, 1999 neither the Company nor
any subsidiary has:
(i) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to
the current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the Company's or such
subsidiary's business;
<Page 11>
(iii) discharged or satisfied any lien or encumbrance or paid any obligation
or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other property
to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital
stock;
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of
business or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate in
excess of $ 500,000;
(x) entered into any other material transaction, whether or not in the
ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss, whether or
not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. Company
acknowledges and agrees that Purchaser is acting solely in the capacity
of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges
that the Purchaser is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereunder and any advice given by the
Purchaser or any of its representatives or agents in connection with
this Agreement and the transactions contemplated hereunder is merely
incidental to the Purchaser's purchase of the Shares. The Company
further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation
by the Company and its own representatives and counsel.
<Page 12>
Section 3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
corporation duly incorporated, validly existing and in good standing
under the laws of the British Virgin Islands.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Shares being sold to it hereunder. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action.
(c) No Conflicts. The execution, delivery and performance of this Agreement
and the consummation by the Purchaser of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation
of such Purchaser's charter documents or bylaws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Purchaser is a party, or result in a
violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to the Purchaser or
its properties (except for such conflicts, defaults and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect on Purchaser). The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to
purchase the Shares in accordance with the terms hereof, provided that
for purposes of the representation made in this sentence, the Purchaser
is assuming and relying upon the accuracy of the relevant representations
and agreements of the Company herein.
(d) Financial Risks. The Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Shares and that it
has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation. The Purchaser is capable of evaluating the risks and
merits of an investment in the Shares by virtue of its experience as an
investor and its knowledge, experience, and sophistication in financial
and business matters and the Purchaser is capable of bearing the entire
loss of its investment in the Shares.
<Page 13>
(e) Accredited Investor. The Purchaser is an "accredited investor" as defined
in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution activities
with respect to the Shares will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules
and regulations of the Principal Market.
(g) General. The Purchaser understands that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in
order to determine the suitability of the Purchaser to acquire the
Shares.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows:
Section 4.1 Securities Compliance. The Company shall notify The NASD, in
accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings
as may be required and permitted by applicable law, rule and regulation, for
the legal and valid issuance of the Shares and the Warrants to the Purchaser
or subsequent holders.
Section 4.2 Registration and Listing. The Company will cause its Common Stock
to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations
under the Exchange Act, will comply with all requirements related to any
registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities
Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of
its Common Stock on the OTC Bulletin Board or another Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and The Nasdaq Stock
Market.
<Page 14>
Section 4.3 Registration Statement. The Company shall cause to be filed the
Registration Statement, which Registration Statement shall provide for the
sale of the Shares to the Purchaser and resale by the Purchaser to the public
in accordance with this Agreement. The Company shall use its best efforts to
cause such Registration Statement to be declared effective by the Commission
as expeditiously as practicable. Before the Purchaser shall be obligated to
accept a Draw Down request from the Company, the Company shall have caused a
sufficient number of shares of Common Stock to be registered to cover the
Shares to be issued in connection with such Draw Down.
Section 4.4 Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangement with Epstein Becker & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery
of the Shares.
Section 4.5 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 4.6 Keeping of Records and Books of Account. The Company shall keep
and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
Section 4.7 Amendments. The Company shall not amend or waive any provision
the Articles of Incorporation, Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.8 Other Agreements. The Company shall not enter into any agreement
the terms of which such agreement would restrict or impair the right to
perform of the Company or any subsidiary under this Agreement or the Articles
of Incorporation of the Company.
Section 4.9 Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company will immediately notify the
Purchaser upon the occurrence of any of the following events in respect of
the Registration Statement or related prospectus in respect of the Shares:
(i) receipt of any request for additional information from the Commission or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would
require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the Commission or any other federal
or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any
of the Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; (iv) the happening of any event that
makes any statement made in the Registration Statement or related prospectus
or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-
effective amendment to the Registration Statement would be appropriate; and
the Company will promptly make available to the Purchaser any such supplement
or amendment to the related prospectus. The Company shall not deliver to the
Purchaser any Draw Down Notice during the continuation of any of the
foregoing events.
<Page 15>
Section 4.10 Consolidation; Merger. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company
to, another entity (a "Consolidation Event") unless the resulting successor
or acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to
this Agreement.
Section 4.11 Limitation on Future Financing. The Company agrees that, except
as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i)
eighteen (18) months from the effective date of the Registration Statement or
(ii) sixty (60) days after the entire $100,000,000 of Shares has been
purchased by Purchaser. The foregoing shall not prevent or limit the Company
from engaging in any sale of securities (i) in a registered public offering
by the Company which is underwritten by one or more established investment
banks, (ii) in one or more private placements where the purchasers do not
have registration rights, (iii) pursuant to any presently existing or future
employee benefit plan which plan has been or is approved by the Company's
stockholders, (iv) pursuant to any compensatory plan for a full-time employee
or key consultant, (v) in connection with a strategic partnership or other
business transaction, the principal purpose of which is not simply to raise
money, or (vi) to which Purchaser gives its written approval.
<Page 16>
ARTICLE V
Conditions to Closing and Draw Downs
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell the
Shares. The obligation hereunder of the Company to issue and sell the Shares
to the Purchaser is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing
and as of each Draw Down Exercise Date as though made at that time,
except for representations and warranties that speak as of a particular
date.
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all material
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to the
Closing and as of each Draw Down Exercise Date.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close.
The obligation hereunder of the Purchaser to enter this Agreement is subject
to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole
discretion.
<Page 17>
(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties
that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and
no investigation by any governmental authority shall have been
threatened, against the Purchaser or the Company or any subsidiary, or
any of the officers, directors or affiliates of the Company or any
subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with
such transactions.
(e) Opinion of Counsel, Etc. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit C hereto, and such other certificates and
documents as the Purchaser or its counsel shall reasonably require
incident to the Closing.
(f) Warrants. At the Closing of each Draw Down, the Purchaser shall receive a
warrant certificate to purchase up to a number of shares of Common Stock
as shall equal seven percent (7%) of the purchase price of the Draw Down
divided by the VWAP on the Trading Day immediately prior to the
applicable closing date. The Warrants will have a three (3) year term
from their date of issuance. The Warrant Strike Price shall be 120% of
the VWAP on the Trading Day immediately prior to the applicable closing
date. The Common Stock underlying the Warrants will be registered in the
Registration Statement referred to in Section 4.3 hereof. The Warrants
shall be in the form of Exhibit E hereto.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept
a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares
is subject to the satisfaction or waiver, at or before each Draw Down
Exercise Date, of each of the conditions set forth below. The conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any
time in its sole discretion.
(a) Satisfaction of Conditions to Closing. The Company shall have satisfied,
or the Purchaser shall have waived, the conditions set forth in Section 5.2
hereof
(b) Effective Registration Statement. The Registration Statement registering
the Shares shall have been declared effective by the Commission and shall
remain effective on each Draw Down Exercise Date.
(c) No Suspension. Trading in the Company's Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally as reported on
the OTC Bulletin Board shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported on the OTC Bulletin Board.
<Page 18>
(d) Material Adverse Effect. No Material Adverse Effect and no Consolidation
Event shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received a "down-to-date"
letter from the Company's counsel, confirming that there is no change from
the counsel's previously delivered opinion, or else specifying with
particularity the reason for any change.
ARTICLE VI
Draw Down Terms
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise a draw down
(a "Draw Down") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing Period. The
price per share paid by the Purchaser shall be based on the Average Daily
Price on each separate Trading Day during the Draw Down Pricing Period. The
number of shares of Common Stock purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled at the election of the Purchaser on a weekly basis
or on the Draw Down Exercise Date, which shall be the first Trading Day
following the end of the Draw Down Pricing Period. In connection with each
Draw Down Pricing Period, the Company may set an Average Daily Price below
which the Company will not sell any Shares (the "Threshold Price"). If the
Average Daily Price on any day within the Draw Down Pricing Period is less
than the Threshold Price, the Company shall not sell and the Purchaser shall
not be obligated to purchase the Shares otherwise to be purchased for such
day.
(c) There shall be a maximum of eighteen (18) Draw Downs during the terms of
this Agreement. The Company shall have the right to issue and exercise a
Draw Down of up to $10,000,000 of the Company's Common Stock per Draw Down,
subject to the limitations set forth immediately below. The minimum Draw
Down shall be $250,000, unless otherwise agreed by Purchaser.
(d) The maximum dollar amount of each Draw Down during any Draw Down Pricing
Period shall be limited pursuant to the following formula: Average Stock
Price: Average of the Average Daily Prices for the 22 Trading Days prior to
the Draw Down Notice date. Average Trading Volume: Average daily trading
volume for the 45 Trading Days prior to the Draw Down Notice date. Maximum
dollar amount of each Draw Down: 20% of (Average Stock Price x (Average
Trading Volume x 22)) the number of Shares of Common Stock to be issued in
connection with each Draw Down shall be equal to the sum of the quotients
(for each trading day within the Draw Down Pricing Period) of (x) 1/22nd of
the Draw Down amount and (y) 93% of the Average Daily Price of the Common
Stock on each Trading Day within the Draw Down Pricing Period. If the
Average Daily Price on a given Trading Day is less than the Threshold Price,
then the Purchaser's Draw Down will be reduced by 1/22nd and that day shall
be withdrawn from the Draw Down Pricing Period.
<Page 19>
(e) The Company must inform the Purchaser by delivering a Draw Down Notice,
in the form of Exhibit D hereto, via facsimile transmission as to the amount
of the Draw Down the Company wishes to exercise before the first day of the
Draw Down Pricing Period (the "Draw Down Notice"). The Company may set the
Threshold Price, if any, prior to each Draw Down request. At no time shall
the Purchaser be required to purchase more than the scheduled Draw Down
amount for a given Draw Down Pricing Period so that if the Company chooses
not to exercise the maximum permitted Draw Down in a given Draw Down Pricing
Period the Purchaser is not obligated to purchase more than the scheduled
maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before three Trading Days after each Draw Down Exercise Date, the
Shares purchased by the Purchaser shall be delivered to The Depository Trust
Company ("DTC") on the Purchaser's behalf. The Shares shall be credited by
the Company to the DTC account designated by the Purchaser upon receipt by
the Escrow Agent of payment for the Draw Down into the Escrow Agent's trust
account as provided in the Escrow Agreement. The Escrow Agent shall be
directed to pay 97% of the purchase price to the Company, net of One Thousand
Five Hundred Dollars ($1,500) as escrow expenses to the Escrow Agent, and 3%
to the placement agent. The delivery of the Shares into the Purchaser's DTC
account in exchange for payment therefor shall be referred to herein as
"Settlement".
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement shall
be eighteen (18) months from the Effective Date. This Agreement may be
terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination.
(a) The Purchaser may terminate this Agreement upon one (1) Trading Day's
notice if (i) an event resulting in a Material Adverse Effect has
occurred, (ii) the Common Stock is de-listed from the OTC Bulletin Board
unless such de-listing is in connection with the listing of the Common
Stock on the Nasdaq National Market, Nasdaq SmallCap Market, the New York
Stock Exchange or American Stock Exchanges, (iii) the Company files for
protection from creditors under any applicable law, (iv) the Company
completes any financing prohibited by Section 4.11, or (v) the
Registration Statement is not effective by September 30, 2000.
<Page 20>
(b) The Company may terminate this Agreement upon one (1) Trading Day's
notice if the Purchaser shall fail to fund more than one properly noticed
Draw Down within three (3) Trading Days of the date payment for such Draw
Down is due.
Section 7.3 Effect of Termination. In the event of termination by the company
or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall
become void and of no further force and effect, except for Sections 9.1 and
9.2, and Article VIII herein. Nothing in this Section 7.3 shall be deemed to
release the Company or the Purchaser from any liability for any breach under
this Agreement, or to impair the rights to the Company and the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the
Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchaser agrees to
indemnify and hold harmless the Company and its directors, officers,
affiliates, agents, successors and assigns from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys fees, charges and disbursements)
incurred by the Company as result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Purchaser herein.
Notwithstanding anything to the contrary herein, the Purchaser shall be
liable under this Section 8.1 for only that amount as does not exceed the net
proceeds to such Purchaser as a result of the sale of Shares pursuant to the
Registration Statement.
<Page 21>
Section 8.2 Indemnification Procedure. Any party entitled to indemnification
under this Article VIII (an "indemnified party") will give written notice to
the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any action, proceeding or claim is brought against
an indemnified party in respect of which indemnification is sought hereunder,
the indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of
interest between it and the indemnifying party may exist with respect of such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of
its election to defend, settle or compromise, at its sole cost and expense,
any action, proceeding or claim (or discontinues its defense at any time
after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim.
In any event, unless and until the indemnifying party elects in writing to
assume and does so assume the defense of any such claim, proceeding or
action, the indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
settlement negotiations or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to
such action or claim. The indemnifying party shall keep the indemnified
party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall
be entitled to participate in such defense with counsel of its choice at its
sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent. Notwithstanding anything in this Article VIII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of
any judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the indemnified party
of a release from all liability in respect of such claim. The
indemnification required by this Article VIII shall be made by periodic
payments of the amount thereof during the course of investigation or defense,
as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the indemnified party irrevocably agrees to
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause
of action or similar rights of the indemnified party against the indemnifying
party or others, and (b) any liabilities the indemnifying party may be
subject to.
<Page 22>
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses. The Company shall pay all fees and expenses
related to the transactions contemplated by this Agreement; provided, that
each party shall pay its own legal fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereunder. In addition, the Company shall pay all reasonable
fees and expenses incurred by the Purchaser in connection with any
amendments, modifications or waivers of this Agreement or the Registration
Rights Agreement requested by the Company or incurred in connection with the
enforcement of this Agreement and the Registration Rights Agreement,
including, without limitation, all reasonable attorneys fees and expenses.
The Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
Section 9.2 Specific Enforcement. The Company and the Purchaser acknowledge
and agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3 Entire Agreement; Amendment. This Agreement, together with the
Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business
day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
<Page 23>
If to the Company:Dauphin Technology, Inc.
800 E. Northwest Hwy., Suite 950
Palatine, IL 60067
Telephone Number: (847) 358-4406
Fax: (847) 358-4407
Attention: Christopher L.Geier
Andrew Kandalepas
With copies to: Rieck and Crotty, P.C.
55 West Monroe Street, Suite 3390
Chicago, IL 60603
Telephone: 312-726-4646
Fax: 312-726-0647
Attention: Thomas W. Rieck and Ronald P. Duplack
If to Purchaser: Dr. Dr. Batliner & Partner
Aeulestrasse 74
FL-9490 Vaduz
Liechtenstein
Telephone Number: 011-075-236-0404
Fax: 011-075-236-0405
Attention: Hans Gassner
with copies to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Telephone Number: (212) 351-3771
Fax: (212) 661-0989
Attention: Robert Charron
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 9.5 Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of any party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
<Page 24>
Section 9.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 9.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser
to be affected by the amendment. After Closing, the assignment by a party to
this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
Section 9.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9 Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter referred to
as the "Board of Arbitration") selected as according to the rules governing
the AAA. The Board of Arbitration shall meet on consecutive business days in
New York City, New York, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of Arbitration) with
respect to the amount, if any, which the losing party is required to pay to
the other party in respect of a claim filed. In connection with rendering
its decisions, the Board of Arbitration shall adopt and follow the laws of
the State of New York. To the extent practical, decisions of the Board of
Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to
participate in the arbitration proceeding within thirty days of any deadline
for such participation. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period)
shall be final, binding and conclusive on the parties to the dispute, and
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part
of the arbitration award. Any party shall have the right to seek injunctive
relief from any court of competent jurisdiction in any case where such relief
is available. The prevailing party in such injunctive action shall be
awarded its costs, including attorney's fees, from the non-prevailing party.
<Page 25>
Section 9.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood
that all parties need not sign the same counterpart. Execution may be made
by delivery by facsimile.
Section 9.11 Publicity. Prior to the Closing, neither the Company nor the
Purchaser shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. After the Closing,
the Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided, that prior to issuing
any such press release, making any such public statement or announcement, the
Company obtains the prior consent of the Purchaser, which consent shall not
be unreasonably withheld or delayed.
Section 9.12 Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine
that any one or more of the provisions or part 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 or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 9.13 Further Assurances. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, each of the Company and the
Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
DAUPHIN TECHNOLOGY, INC.
By: s/Andrew Kandalepas/
Andrew Kandalepas, President & CEO
TECHRICH INTERNTIONAL LIMITED
By: s/Hans Gassner/
Name: Hans Gassner
Title: Authorized Signatory
<Page 26>
Exhibit 7b
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 9, 2000, between
Techrich International Limited ("Purchaser"), and Dauphin Technology, Inc.
(the "Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
pursuant to a Common Stock Purchase Agreement dated the date hereof (the
"Purchase Agreement") the Purchaser has committed to purchase up to
$100,000,000 worth of the Company's Common Stock (terms not defined herein
shall have the meanings ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Purchaser the registration
rights set forth herein with respect to the Shares and the Shares issuable
upon exercise of the Warrants from time to time (the "Warrant Shares")
(hereinafter referred to collectively as the "Stock" or "Securities" of the
Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means the Securities until (i) all Securities have been disposed of
pursuant to the Registration Statement, (ii) all Securities have been sold
under circumstances under which all of the applicable conditions of Rule 144
(or any similar provision then in force) under the Securities Act ("Rule
144") are met, (iii) all Securities have been otherwise transferred to
persons who may trade such Securities without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such Securities not bearing a restrictive legend or
(iv) such time as, in the opinion of counsel to the Company, all Securities
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
The term "Registrable Securities" means any and/or all of the securities
falling within the foregoing definition of a "Registrable Security." In the
event of any merger, reorganization, consolidation, recapitalization or other
change in corporate structure affecting the Common Stock, such adjustment
shall be deemed to be made in the definition of "Registrable Security" as is
appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Agreement.
Section 2. Restrictions on Transfer. The Purchaser acknowledges and
understands that in the absence of an effective Registration Statement
authorizing the resale of the Securities as provided herein, the Securities
are "restricted securities" as defined in Rule 144 promulgated under the Act.
The Purchaser understands that no disposition or transfer of the Securities
may be made by Purchaser in the absence of (i) an opinion of counsel to the
Purchaser, in form and substance reasonably satisfactory to the Company, that
such transfer may be made without registration under the Securities Act or
(ii) such registration.
<Page 1>
With a view to making available to the Purchaser the benefits of Rule 144
under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Purchaser to sell securities of
the Company to the public without registration ("Rule 144"), the Company
agrees to:
(a) comply with the provisions of paragraph (c)(1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it
will, upon the request of any Purchaser, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
Section 3. Registration Rights With Respect to the Securities.
(a) The Company agrees that it will prepare and file with the Securities and
Exchange Commission ("Commission"), within forty-five (45) days after the
date hereof, a registration statement (on Form S-3 and/or S-1, or other
appropriate form of registration statement) under the Securities Act (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), in respect of Purchaser, so as to permit a
public offering and resale of the Securities under the Act by Purchaser.
The Company shall use its best efforts to cause the Registration Statement to
become effective within five (5) days of SEC clearance and will within said
five (5) days request acceleration of effectiveness. If the Registration
Statement is not declared effective by September 30, 2000 this Agreement and
the Purchase Agreement shall terminate. The Company will notify Purchaser of
the effectiveness of the Registration Statement within one Trading Day of
such event.
(b) The Company will maintain the Registration Statement or post-effective
amendment filed under this Section 3 hereof effective under the Securities
Act until the earlier of (i) the date that none of the Securities are or may
become issued and outstanding, (ii) the date that all of the Securities have
been sold pursuant to the Registration Statement, (iii) the date the holders
thereof receive an opinion of counsel to the Company, which counsel shall be
reasonably acceptable to the Purchaser, that the Securities may be sold under
the provisions of Rule 144 without limitation as to volume, (iv) all
Securities have been otherwise transferred to persons who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (v) all Securities may be
sold without any time, volume or manner limitations pursuant to Rule 144(k)
or any similar provision then in effect under the Securities Act in the
opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Purchaser (the "Effectiveness Period").
<Page 2>
(c) All fees, disbursements and out-of-pocket expenses and costs incurred by
the Company in connection with the preparation and filing of the Registration
Statement under subparagraph 3(a) and in complying with applicable securities
and Blue Sky laws (including, without limitation, all attorneys' fees of the
Company) shall be borne by the Company. The Purchaser shall bear the cost of
underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Securities being registered and the fees and expenses of
its counsel. The Purchaser and its counsel shall have a reasonable period,
not to exceed seven (7) Trading Days, to review the proposed Registration
Statement or any amendment thereto, prior to filing with the Commission, and
the Company shall provide each Purchaser with copies of any comment letters
received from the Commission with respect thereto within two (2) Trading Days
of receipt thereof. The Company shall make reasonably available for
inspection by Purchaser, any underwriter participating in any disposition
pursuant to the Registration Statement, and any attorney, accountant or other
agent retained by such Purchaser or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries, and cause the Company's officers, directors
and employees to supply all information reasonably requested by such
Purchaser or any such underwriter, attorney, accountant or agent in
connection with the Registration Statement, in each case, as is customary for
similar due diligence examinations; provided, however, that all records,
information and documents that are designated in writing by the Company, in
good faith, as confidential, proprietary or containing any material non-
public information shall be kept confidential by such Purchaser and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such Purchaser or agent), unless
such disclosure is made pursuant to judicial process in a court proceeding
(after first giving the Company an opportunity promptly to seek a protective
order or otherwise limit the scope of the information sought to be disclosed)
or is required by law, or such records, information or documents become
available to the public generally or through a third party not in violation
of an accompanying obligation of confidentiality; and provided further that,
if the foregoing inspection and information gathering would otherwise disrupt
the Company's conduct of its business, such inspection and information
gathering shall, to the maximum extent possible, be coordinated on behalf of
the Purchaser and the other parties entitled thereto by one firm of counsel
designed by and on behalf of the majority in interest of Purchaser and other
parties. The Company shall qualify any of the securities for sale in such
states as such Purchaser reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the
Company shall not be required to qualify in any state which will require an
escrow or other restriction relating to the Company and/or the sellers, or
which will require the Company to qualify to do business in such state or
require the Company to file therein any general consent to service of
process. The Company at its expense will supply the Purchaser with copies of
the Registration Statement and the prospectus included therein and other
related documents in such quantities as may be reasonably requested by the
Purchaser.
<Page 3>
(d) The Company shall not be required by this Section 3 to include a
Purchaser's Securities in any Registration Statement which is to be filed if,
in the opinion of counsel for both the Purchaser and the Company (or, should
they not agree, in the opinion of another counsel experienced in securities
law matters acceptable to counsel for the Purchaser and the Company) the
proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and
would result in all purchasers or transferees obtaining securities which are
not "restricted securities", as defined in Rule 144 under the Securities Act.
(e) If at any time or from time to time after the effective date of the
Registration Statement, the Company notifies the Purchaser in writing of the
existence of a Potential Material Event (as defined in Section 3(f) below),
the Purchaser shall not offer or sell any Securities or engage in any other
transaction involving or relating to Securities, from the time of the giving
of notice with respect to a Potential Material Event until such Purchaser
receives written notice from the Company that such Potential Material Event
either has been disclosed to the public or no longer constitutes a Potential
Material Event; provided, however, that if the Company so suspends the right
to such holders of Securities for more than twenty (20) days in the aggregate
during any twelve month period, during the periods the Registration Statement
is required to be in effect then the Company must compensate the Purchaser
for any decline in market value of the Securities held by Purchaser at the
beginning of such suspension through the end of such suspension. If a
Potential Material Event shall occur prior to the date the Registration
Statement is filed, then the Company's obligation to file the Registration
Statement shall be delayed without penalty for not more than thirty (30) days
(and the September 30, 2000 deadline shall be commensurately extended). The
Company must give Purchaser notice in writing at least two (2) Trading Days
prior to the first day of the blackout period, if lawful to do so.
(f) "Potential Material Event" means any of the following: (a) the possession
by the Company of material information that is not ripe for disclosure in a
\registration statement, as determined in good faith by the Chief Executive
Officer or the Board of Directors of the Company or that disclosure of such
information in the Registration Statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Chief Executive Officer or the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Chief Executive Officer or the Board of Directors of the Company that the
Registration Statement would be materially misleading absent the inclusion of
such information.
Section 4. Cooperation with Company. Purchaser will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Purchaser and proposed manner of sale
of the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting
agreement, if the offering is an underwritten offering, in usual and
customary form, with the managing underwriter or underwriters of such
underwritten offering. The Purchaser shall consent to be named as an
underwriter in the Registration Statement. Purchaser acknowledges that in
accordance with current Commission policy, the Purchaser will be named as the
underwriter of the Securities in the Registration Statement.
<Page 4>
Section 5. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any
of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible, subject
to the Purchaser's assistance and cooperation as reasonably required:
(a) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Act with respect to the sale or other disposition
of all securities covered by such registration statement whenever the
Purchaser of such Registrable Securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the
sales of securities from time to time in connection with a registration
statement pursuant to Rule 415 promulgated under the Act) and (ii) take all
lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) prior to the filing with the Commission of any Registration Statement
(including any amendments thereto) and the distribution or delivery of any
prospectus (including any supplements thereto), provide draft copies thereof
to the Purchasers and reflect in such documents all such comments as the
Purchasers (and their counsel) reasonably may propose and (ii) furnish to
each Purchaser such numbers of copies of a prospectus including a preliminary
prospectus or any amendment or supplement to any prospectus, as applicable,
in conformity with the requirements of the Act, and such other documents, as
such Purchaser may reasonably request in order to facilitate the public sale
or other disposition of the securities owned by such Purchaser;
(c) register and qualify the Registrable Securities covered by the
Registration Statement under New York blue sky laws (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts
and things which may be reasonably necessary or advisable to enable each
Purchaser to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Purchaser, except that the
Company shall not for any such purpose be required to qualify to do business
as a foreign corporation in any jurisdiction wherein it is not so qualified
or to file therein any general consent to service of process;
<Page 5>
(d) list such Registrable Securities on the Principal Market, and any other
exchange on which the Common Stock of the Company is then listed, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or the Nasdaq Stock Market;
(e) notify each Purchaser at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company shall prepare and file a curative amendment under
Section 5(a) as quickly as commercially possible;
(f) as promptly as practicable after becoming aware of such event, notify
each Purchaser who holds Registrable Securities being sold (or, in the event
of an underwritten offering, the managing underwriters) of the issuance by
the Commission or any state authority of any stop order or other suspension
of the effectiveness of the Registration Statement at the earliest possible
time and take all lawful action to effect the withdrawal, recession or
removal of such stop order or other suspension;
(g) cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the case
may be, as the Purchasers reasonably may request and registered in such names
as the Purchaser may request; and, within three (3) Trading Days after a
Registration Statement which includes Registrable Securities is declared
effective by the Commission, deliver and cause legal counsel selected by the
Company to deliver to the transfer agent for the Registrable Securities (with
copies to the Purchasers whose Registrable Securities are included in such
Registration Statement) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(h) take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Purchasers of their Registrable Securities
in accordance with the intended methods therefor provided in the prospectus
which are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to the Registration
Statement such information as the managers reasonably agree should be
included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after it is notified of the matters to be
included or incorporated in such Prospectus supplement or post-effective
amendment; and
<Page 6>
(j) maintain a transfer agent for its Common Stock.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser and each
person, if any, who controls the Purchaser within the meaning of the
Securities Act ("Distributing Purchaser") against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all reasonable attorneys' fees), to which the
Distributing Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, or any related preliminary prospectus, final prospectus or
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Purchaser, specifically for use in the preparation thereof. This
Section 6(a) shall not inure to the benefit of any Distributing Purchaser
with respect to any person asserting such loss, claim, damage or liability
who purchased the Registrable Securities which are the subject thereof if the
Distributing Purchaser failed to send or give (in violation of the Securities
Act or the rules and regulations promulgated thereunder) a copy of the
prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such
Registrable Securities, where the Distributing Purchaser was obligated to do
so under the Securities Act or the rules and regulations promulgated
thereunder. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Distributing Purchaser agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) to
which the Company or any such officer, director or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Purchaser, specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which the
Distributing Purchaser may otherwise have. Notwithstanding anything to the
contrary herein, the Distributing Investor shall not be liable under this
Section 6(b) for any amount in excess of the net proceeds to such
Distributing Investor as a result of the sale of Registrable Securities
pursuant to the Registration Statement.
<Page 7>
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified
party except to the extent of actual prejudice demonstrated by the
indemnifying party. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party 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 counsel shall not be
at the expense of the indemnifying party if the indemnifying party has
assumed the defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is the Distributing
Purchaser, the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the
named parties to any such action (including any impleaded parties) include
both the Distributing Purchaser and the indemnifying party and the
Distributing Purchaser shall have been advised by such counsel that there may
be one or more legal defenses available to the indemnifying party different
from or in conflict with any legal defenses which may be available to the
Distributing Purchaser (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the Distributing
Purchaser, it being understood, however, that the indemnifying party shall,
in connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the Distributing Purchaser,
which firm shall be designated in writing by the Distributing Purchaser). No
settlement of any action against an indemnified party shall be made without
the prior written consent of the indemnified party, which consent shall not
be unreasonably withheld.
All fees and expenses of the indemnified party (including reasonable costs of
defense and investigation in a manner not inconsistent with this Section and
all reasonable attorneys' fees and expenses) shall be paid to the indemnified
party, as incurred, within ten (10) Trading Days of written notice thereof to
the indemnifying party (regardless of whether it is ultimately determined
that an indemnified party is not entitled to indemnification hereunder;
provided, that the indemnifying party may require such indemnified party to
undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that such indemnified party is not entitled to
indemnification hereunder).
<Page 8>
Section 7. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6
hereof but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that the express
provisions of Section 6 hereof provide for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
indemnified party, then the Company and the applicable Distributing Purchaser
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Purchaser on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Distributing
Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in this Section 7. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Notwithstanding any other provision of this Section 7, in no event shall any
(i) Purchaser be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the net proceeds
to be received by such Purchaser from the sale of such Purchaser's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any person hereunder for
any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it and distributed pursuant to the Registration
Statement.
Section 8. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be delivered as set forth in
the Purchase Agreement.
<Page 9>
Section 9. Assignment. Neither this Agreement nor any rights of the
Purchaser or the Company hereunder may be assigned by either party to any
other person. Notwithstanding the foregoing, (a) the provisions of this
Agreement shall inure to the benefit of, and be enforceable by, any
transferee of any of the Common Stock purchased by the Purchaser pursuant to
the Purchase Agreement other than through open-market sales, and (b) upon the
prior written consent of the Company, which consent shall not be unreasonably
withheld or delayed in the case of an assignment to an affiliate of the
Purchaser, the Purchaser's interest in this Agreement may be assigned at any
time, in whole or in part, to any other person or entity (including any
affiliate of the Purchaser) who agrees to be bound hereby.
Section 10. Counterparts/Facsimile. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when together shall constitute but one and the same instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. In lieu of the original, a
facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
Section 11. Remedies. The remedies provided in this Agreement are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
<Page 10>
Section 12. Conflicting Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.
Section 13. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made in New York by persons domiciled in New York City and without regard to
its principles of conflicts of laws. Any action may be brought as set forth
in the Purchase Agreement. Any party shall have the right to seek injunctive
relief from any court of competent jurisdiction in any case where such relief
is available. Any dispute under this Agreement shall be submitted to
arbitration under the American Arbitration Association (the "AAA") in New
York City, New York, and shall be finally and conclusively determined by the
decision of a board of arbitration consisting of three (3) members
(hereinafter referred to as the "Board of Arbitration") selected as according
to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and
render a decision in writing (concurred in by a majority of the members of
the Board of Arbitration) with respect to the amount, if any, which the
losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more
than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to
be delivered to all parties involved in the dispute. The Board of Arbitration
shall be authorized and is directed to enter a default judgment against any
party refusing to participate in the arbitration proceeding with thirty days
of any deadline for such participation. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by
law and entered in any court of competent jurisdiction. The prevailing party
shall be awarded its costs, including attorneys' fees, from the non-
prevailing party as part of the arbitration award. Any party shall have the
right to seek injunctive relief from any court of competent jurisdiction in
any case where such relief is available. The prevailing party in such
injunctive action shall be awarded its costs, including attorney's fees, from
the non-prevailing party.
Section 15. Severability. If any provision of this Agreement shall for any
reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been
contained herein. Terms not otherwise defined herein shall be defined in
accordance with the Purchase Agreement.
<Page 11>
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on the day and year first above written.
DAUPHIN TECHNOLOGY, INC.
By: s/Andrew Kandalepas/
Andrew Kandalepas, President & CEO
TECHRICH INTERNATIONAL LIMITED
By: s/Hans Gassner/
Name: Hans Gassner
Title: Authorized Signatory
<Page 12>
Exhibit 7c
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of April 9, 2000, by and
among Dauphin Technology, Inc., a corporation incorporated under the laws of
Illinois, (the "Company"), Techrich International Limited ("Purchaser"), and
Epstein Becker & Green, P.C., having an address at 250 Park Avenue, New York,
NY 10177 (the "Escrow Agent"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Common Stock Purchase Agreement
referred to in the first recital.
WHEREAS, the Purchaser will from time to time as requested by the Company,
purchase shares of the Company's Common Stock from the Company as set forth
in that certain Common Stock Purchase Agreement (the "Purchase Agreement")
dated the date hereof between the Purchaser and the Company, which will be
issued as per the terms and conditions contained herein and in the Purchase
Agreement; and
WHEREAS, the Company and the Purchaser have requested that the Escrow Agent
hold in escrow and then distribute the initial documents and certain funds
which are conditions precedent to the effectiveness of the Purchase
Agreement, and have further requested that upon each exercise of a Draw Down,
the Escrow Agent hold the relevant documents and the applicable purchase
price pending receipt by Purchaser of certificates representing the
securities issuable upon such Draw Down;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
1.1. The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the funds and documents which are
referenced in Section 5.2 of the Purchase Agreement.
1.2. At the Closing, the Company shall deliver to the Escrow Agent:
(i) the original executed Registration Rights Agreement in the form of
Exhibit A to the Purchase Agreement;
(ii) the original executed opinion of Rieck and Crotty, P.C., in the form of
Exhibit C to the Purchase Agreement;
<Page 1>
(iii) the sum of $20,000 for the non-accountable expenses of Ladenburg
Thalmann & Co. Inc.;
(iv) the original executed Company counterpart of this Escrow Agreement;
(v) the original executed Company counterpart of the Purchase Agreement;
and
(vi) a warrant certificate to purchase up to 250,000 shares of the Company's
Common Stock with a three (3) year term from their date of issuance at
an exercise price equal to the average of the five (5) lowest closing
bid prices of the Company's Common Stock during the 22 Trading Days
most recently preceding the initial closing date on which the trading
volume exceeds one million (1,000,000) shares, issued to Ladenburg
Thalmann & Co. Inc. (the "LT Warrants").
1.3. Upon receipt of the foregoing, and receipt of executed counterparts
from Purchaser of the Purchase Agreement, the Registration Rights Agreement
and this Escrow Agreement, the Escrow Agent shall calculate and enter the
exercise price, the issuance date and termination date on the face of the LT
Warrant and immediately transfer the sum of Twenty Thousand Dollars
($20,000), as a non-accountable expense allowance and the LT Warrant to
Ladenburg Thalmann & Co. Inc. and the Escrow Agent shall then arrange to have
the Purchase Agreement, this Escrow Agreement, the Registration Rights
Agreement and the opinion of counsel delivered to the appropriate parties.
Such calculation of the Warrant exercise price shall be provided to the
Company for its concurrence at the Closing.
ARTICLE 2
TERMS OF THE ESCROW FOR EACH DRAW DOWN
2.1. Each time the Company shall send a Draw Down Notice to the Purchaser as
provided in the Purchase Agreement, it shall send a copy, by facsimile, to
the Escrow Agent.
2.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down,
the Purchaser shall send the applicable purchase price of the Draw Down
Shares to the Escrow Agent, which shall advise the Company in writing that it
has received the purchase price for such Draw Down Shares. The Company shall
promptly, but no later than three (3) Trading Days after receipt of such
funding notice from the Escrow Agent, cause its transfer agent to issue the
Draw Down Shares to the Purchaser via DTC deposit to the account specified by
the Purchaser from time to time and deliver to the Escrow Agent the Warrants.
Upon receipt of written confirmation from the transfer agent or from the
Purchaser that such Draw Down Shares have been so deposited and the Warrants
have been so delivered, the Escrow Agent shall enter the calculate and enter
the number, the exercise price, the Issuance Date and the Termination Date on
the face of the Warrant and shall within one (1) Trading Day wire 97% of the
purchase price per the written instructions of the Company, net of One
Thousand Five Hundred Dollars ($1,500) as escrow expenses to the Escrow
Agent, and the remaining 3% of the purchase price as directed by Ladenburg
Thalmann & Co. Inc. Such calculation of the Warrant exercise price shall be
provided to the Company for its concurrence at the applicable Closing.
<Page 2>
ARTICLE 3
MISCELLANEOUS
3.1. No waiver or any breach of any covenant or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof, or of
any other covenant or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed an extension of the time
for performance of any other obligation or act.
3.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered
or certified mail, postage prepaid, return receipt requested, and shall be
deemed received upon receipt thereof, as set forth in the Purchase Agreement.
3.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties
hereto.
3.4. This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
Escrow Agreement may not be modified, changed, supplemented or terminated,
nor may any obligations hereunder be waived, except by written instrument
signed by the parties to be charged or by their respective agents duly
authorized in writing or as otherwise expressly permitted herein.
3.5. Whenever required by the context of this Escrow Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of
the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.
3.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with
the laws of the State of New York. Except as expressly set forth herein, any
action to enforce, arising out of, or relating in any way to, any provisions
of this Escrow Agreement shall brought in the Federal or state courts of New
York, New York as is more fully set forth in the Purchase Agreement.
3.7. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, Purchaser and the Escrow
Agent.
3.8. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder
as the Escrow Agent while acting in good faith, excepting only its own gross
negligence or willful misconduct, and any act done or omitted by the Escrow
Agent pursuant to the advice of the Escrow Agent's attorneys-at-law (other
than Escrow Agent itself) shall be conclusive evidence of such good faith.
<Page 3>
3.9. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
3.10. The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder or hereunder.
3.11. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from
time to time, notwithstanding its duties as the Escrow Agent hereunder. The
Company consents to the Escrow Agent in such capacity as legal counsel for
the Purchaser and waives any claim that such representation represents a
conflict of interest on the part of the Escrow Agent. The Company
understands that the Purchaser and the Escrow Agent are relying explicitly on
the foregoing provision in entering into this Escrow Agreement.
3.12. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company
and the Purchaser. In the event of any such resignation, the Purchaser and
the Company shall appoint a successor Escrow Agent.
3.13. If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto,
the necessary parties hereto shall join in furnishing such instruments.
3.14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the documents or
the escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain
in the Escrow Agent's possession without liability to anyone all or any part
of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a
final order, decree or judgment or a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but the
Escrow Agent shall be under no duty whatsoever to institute or defend any
such proceedings or (2) to deliver the escrow funds and any other property
and documents held by the Escrow Agent hereunder to a state or Federal court
having competent subject matter jurisdiction and located in the State and
City of New York in accordance with the applicable procedure therefor.
<Page 4>
3.15. The Company and the Purchaser agree jointly and severally to indemnify
and hold harmless the Escrow Agent and its partners, employees, agents and
representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of the date set forth above.
DAUPHIN TECHNOLOGY, INC.
By: s/Andrew Kandalepas/
Andrew Kandalepas, President & CEO
PURCHASER:
Techrich International Limited
By: s/Hans Gassner/
Name: Hans Gassner
Title: Authorized Signatory
ESCROW AGENT:
Epstein Becker & Green, P.C.
By: s//
Authorized Signatory
<Page 5>
Exhibit 7d
EXHIBIT E
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE
HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT.
STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
DAUPHIN TECHNOLOGY, INC.
THIS CERTIFIES that, for value received, [HOLDER] (the "Holder"), is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after _________ __, 2000 (the "Issuance Date") and on or
prior to the close of business on ________ __, 2003 (the "Termination Date")
but not thereafter, to subscribe for and purchase from Dauphin Technology,
Inc., an Illinois corporation (the "Company"), up to _____________________
(_______) shares (the "Warrant Shares") of Common Stock, $0.001 par value, of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $______. The
Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. In the event of any
conflict between the terms of this Warrant and the Common Stock Purchase
Agreement dated April 9, 2000 pursuant to which this Warrant has been issued
(the "Purchase Agreement"), the Purchase Agreement shall control. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
for such terms in the Purchase Agreement.
1. Title to Warrant. Prior to the Termination Date hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously with such
issue).
<Page 1>
3. Exercise of Warrant. Except as provided in Section 4 herein, exercise of
the purchase rights represented by this Warrant may be made at any time or
times on or after the Issuance Date hereof, and before the close of business
on the Termination Date hereof. Exercise of this Warrant or any part hereof
shall be effected by the surrender of this Warrant and the Notice of Exercise
Form annexed hereto duly executed, at the office of the Company (or such
other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder
appearing on the books of the Company) and upon payment of the Exercise Price
of the shares thereby purchased by wire transfer or cashier's check drawn on
a United States bank, the holder of this Warrant shall be entitled to receive
a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the holder
hereof within three (3) Trading Days after the date on which this Warrant
shall have been exercised as aforesaid. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by Holder, if
any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant. If no registration statement permitting the resale of the shares
issuable upon exercise of this Warrant is in effect at any time from and
after one year from the date hereof, this Warrant may also be exercised by
means of a "cashless exercise" in which the holder shall be entitled to
receive a certificate for the number of shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common
Stock on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
(X) = the number of shares issuable upon exercise of the Warrants in
accordance with the terms of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to
any fraction of a share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of
such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes
and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names as
may be directed by the holder of this Warrant; provided, however, that in the
event certificates for shares of Common Stock are to be issued in a name
other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof; and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
<page 2>
6. Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with any
applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by
Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denomination
or denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of
shares of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so
purchased shall be and be deemed to be issued to such holder as the record
owner of such shares as of the close of business on the later of the date of
such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant certificate or any
stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it (which
shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and
dated as of such cancellation, in lieu of such Warrant or stock certificate.
<Page 3>
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may
be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
(a) Stock Splits, etc. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time upon the happening of any of the following. In
case the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue
any shares of its capital stock in a reclassification of the Common Stock,
then the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this
Warrant shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been
entitled to receive had such Warrant been exercised in advance thereof. Upon
each such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the holder of this
Warrant shall thereafter be entitled to purchase the number of Warrant Shares
or other securities resulting from such adjustment at an Exercise Price per
Warrant Share or other security obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
by the number of Warrant Shares or other securities of the Company resulting
from such adjustment. An adjustment made pursuant to this paragraph shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell,
transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Other Property receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. In case
of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than
the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined in good faith by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes
of this Section 11, "common stock of the successor or acquiring corporation"
shall include stock of such corporation of any class which is not preferred
as to dividends or assets over any other class of stock of such corporation
and which is not subject to redemption and shall also include any evidences
of indebtedness, shares of stock or other securities which are convertible
into or exchangeable for any such stock, either immediately or upon the
arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
<Page 4>
12. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of
Directors of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such notice, in the absence of manifest error, shall be conclusive
evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
<Page 5>
then, in any one or more of such cases, the Company shall give to Holder (i)
at least 30 days' prior written notice of the date on which a record date
shall be selected for such dividend, distribution or right or for determining
rights to vote in respect of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation
or winding up, at least 30 days' prior written notice of the date when the
same shall take place. Such notice in accordance with the foregoing clause
also shall specify (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, the date on which the
holders of Common Stock shall be entitled to any such dividend, distribution
or right, and the amount and character thereof, and (ii) the date on which
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take
place and the time, if any such time is to be fixed, as of which the holders
of Common Stock shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with
Section 16(d).
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements
of the Principal Market upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the rights of
Holder against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(b) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use all commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Warrant.
<Page 6>
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the current
Exercise Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock
at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the number of
shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under
the laws of New York without regard to its conflict of law principles or
rules, and be subject to arbitration pursuant to the terms set forth in
the Purchase Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the
Termination Date hereof. If the Company willfully fails to comply with
any material provision of this Warrant, the Company shall pay to Holder
such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Purchase
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall
give rise to any liability of Holder for the purchase price of any Common
Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
<Page 7>
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant and shall be enforceable by any such Holder or
holder of Warrant Shares.
(h) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon,
incurred by or asserted against Holder in any manner relating to or
arising out of any failure by the Company to perform or observe in any
material respect any of its covenants, agreements, undertakings or
obligations set forth in this Warrant; provided, however, that the
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a
final non-appealable judgment by a court to have resulted from Holder's
negligence, bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
<Page 8>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized.
Dated: __________ __, 200__
DAUPHIN TECHNOLOGY, INC.
By: s/Andrew Kandalepas/
Andrew Kandalepas, President & CEO
<Page 9>
NOTICE OF EXERCISE
To: Dauphin Technology, Inc.
(1) The undersigned hereby elects to purchase ________ shares of Common Stock
(the "Common Stock"), of Dauphin Technology, Inc. pursuant to the terms
of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
(Name)
(Address)
Dated:
Signature
<Page 10>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
<Page 11>
