<PAGE>
Ex-10.40
Form of Warrant issued to Jessica L. Stevens on June 30, 2000
EXHIBIT 10.40
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR STATE SECURITIES OR BLUE SKY LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE,
DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF
THE CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES OR AN EXEMPTION FROM
SUCH REGISTRATION UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
Warrant No. N105
TELEGEN CORPORATION
COMMON STOCK PURCHASE WARRANT
VOID AFTER JUNE 30, 2005
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT. Subject to the
terms and conditions set forth herein, Jessica L. Stevens
("Holder") is entitled to purchase from TELEGEN CORPORATION, a
California corporation (the "Company"), at any time after July
1, 2000 and on or before the date of termination of this Warrant
provided for in Section 2 hereof, up to 1,000,000 shares of
fully paid and non-assessable Common Stock of the Company (the
"Warrant Stock"), for a per-share purchase price of $1.75 (the
"Warrant Price").
2. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate on June 30, 2005.
3. NO ADJUSTMENTS. No adjustment on account of dividends or
interest on Warrant Stock will be made upon the exercise hereof.
4. NO FRACTIONAL SHARES. No fractional shares of Warrant Stock will
be issued in connection with any subscription hereunder. In lieu
of any fractional shares which would otherwise be issuable, the
Company shall pay cash equal to the product of such fraction
multiplied by the fair market value of one share of Warrant
Stock on the date of exercise, as determined in good faith by
the Company's Board of Directors.
5. NO STOCKHOLDER. This Warrant shall not entitle its holder to any
of the rights of a stockholder of the Company.
6. RESERVATION OF STOCK. The Company covenants that during the
period this Warrant is exercisable, the Company will reserve
from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Warrant Stock
upon the exercise of this Warrant. The Company agrees 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
shares of Warrant Stock upon the exercise of this Warrant.
7. PROCEDURE FOR EXERCISE OF WARRANT. This Warrant may be exercised
by the registered holder or its registered assigns, in whole or
in part, by the surrender of this Warrant at the principal
office of the Company, accompanied by payment in full of the
Warrant Price in cash or by check. Upon partial exercise hereof,
a new warrant or warrants containing the same date and
provisions as this Warrant shall be issued by the Company to the
registered holder for the number of shares of Warrant Stock with
respect to which this Warrant shall not have been exercised. The
holder may also exercise this Warrant in whole or in part in a
"cashless" or "net-
-1-
<PAGE>
issue" exercise of this Warrant. In such event, the holder will
deliver this Warrant to the Company with a notice stating the
number of shares to be delivered to the holder and the number of
shares with respect to which the Warrant is being surrendered in
payment of the aggregate Warrant Exercise Price for the shares
to be delivered to the holder and for the shares as to which the
Warrant is being surrendered for exercise. For purposes of this
provision, all shares as to which the Warrant is surrendered
will be valued at the Current Market Price. The notice
accompanying the Warrant shall also set forth the number of
shares remaining subject to the Warrant. "Fair Market Value"
means the closing sale price or, if not available, then the
closing bid price on a given trading day of the Company's Common
Stock as reported on the Nasdaq SmallCap Market under the symbol
TEGN or other national exchange, including the electronic
bulletin board, the "pink sheets" or as determined by the
Company's Board of Directors in good faith, as applicable. A
Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such exercise shall be
treated for all purposes as the holder of such shares of record
as of the close of business on such date. As promptly as
practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full shares of
Warrant Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share as provided above.
8. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities issuable upon the exercise of this Warrant
shall be subject to adjustment from time to time and the Company
agrees to provide notice upon the happening of certain events as
follows:
(a) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In
case of any reclassification or change of the
outstanding Common Stock of the Company or of any
reorganization of the Company during the term of this
Warrant (other than a merger of the Company with and
into another corporation), then and in each such case
the Company shall give the holder of this Warrant at
least twenty (20) days notice of the proposed effective
date of such transaction, and the holder of this
Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change or
reorganization, shall be entitled to receive, in lieu of
the Warrant Stock receivable upon the exercise hereof
prior to such consummation, the stock or other
securities or property to which such holder would have
been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all
subject to further adjustment as provided in this
Section 8. The terms of this Section 8 shall similarly
apply to successive reclassifications, changes or
reorganizations.
(b) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time
during the term of this Warrant the Company shall
subdivide its outstanding shares of Common Stock into a
greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be
proportionately reduced and the number of shares
receivable upon exercise of the Warrant shall thereby be
proportionately increased; and, conversely, if at any
time on or after the date hereof the outstanding number
of shares of Common Stock shall be combined into a
smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall thereby be
proportionately increased and the number of shares
receivable upon exercise of this Warrant shall thereby
be proportionately decreased.
9. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or the
number or type of securities issuable upon exercise of this
Warrant is adjusted, as herein provided, the Company shall
promptly deliver to the record holder of this Warrant a
certificate of an officer of the Company setting forth the
nature of such adjustment and a brief statement of the facts
requiring such adjustment.
10. NO DILUTION OR IMPAIRMENT. The Company covenants that it shall
not, by amendment of its Articles of Incorporation or through
any reorganization, consolidation, merger, transfer of assets,
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 shall at all times in good
faith assist in carrying out all those terms and in taking all
actions necessary or appropriate to protect the rights of the
holder of this Warrant against dilution or other impairment.
Without limiting the generality of the above provision, the
Company will take all necessary or
-2-
<PAGE>
appropriate action in order that the Company may validly and
legally issue fully paid and nonassessable shares upon the
exercise of this Warrant.
11. TRANSFER OF WARRANT. This Warrant may not be transferred or
assigned without the consent of the Company. The Warrant Stock
may not be transferred or assigned, in whole or in part, by the
holder hereof without compliance with applicable federal and
state securities laws. The rights and obligations of the Company
and the holders of this Warrant shall be binding upon and
benefit the successors, assignors, heirs, administrators and
transferees of the parties. Any transferee hereof agrees to be
bound by the restrictions set forth herein.
12. COMPLIANCE WITH SECURITIES LAWS.
(a) The Holder represents and agrees that this Warrant (and
the Warrant Stock, if the Warrant is exercised), are
purchased only for investment, for the Holder's own
account, and without any present intention to sell or
distribute the Warrant or the Warrant Stock.
(b) The Holder of this Warrant acknowledges and agrees that
this Warrant and the Warrant Stock issuable upon
exercise of the Warrant (the "Securities") have not been
registered under the Securities Act and accordingly will
not be transferable except as permitted under the
various exemptions contained in the Securities Act, or
upon satisfaction of the registration requirements of
the Securities Act. Therefore, the Securities must be
held pursuant to Rule 144 of the Securities Act unless
they are subsequently registered under the Securities
Act or an exemption from such registration is available.
Holder understands that the certificate evidencing the
Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are
registered or unless the Company receives an opinion of
counsel reasonably satisfactory to the Company that such
registration is not required. Holder is aware of the
provisions of Rule 144 under the Securities Act. Holder
understands that a stop transfer instruction will be in
effect with respect to transfer of Securities consistent
with the requirements of the securities laws.
13. PIGGYBACK REGISTRATION. The Warrant Stock will, at the request
of the holder be included in any registration statement filed by
the Company in connection with a public offering of common stock
of the Company, subject to such reasonable limitations on the
resale of the Warrant Stock as may be imposed by any underwriter
engaged by the Company to conduct such public offering.
14. CONSIDERATION. This Warrant is being issued in consideration for
the transfer by Holder of certain technology known as "Level 5"
as follows:
(a) As set forth in the Plan of Reorganization of the
Company as confirmed by the U.S. Bankruptcy Court for
the Northern District of California on June 28, 2000;
(b) The agreement with respect to such assignment and
transfer including the transfer of any improvements in
such technology; and
(c) In accordance with resolutions of the Board of Directors
of the Company, duly adopted on June 30, 2000.
15. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for
purposes of convenience and reference only, and shall not be
deemed to constitute a part hereof. Neither this Warrant nor any
term hereof may be changed, waived, discharged or terminated
orally but only by an instrument in writing signed by the
Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant
shall be mailed by first-class registered or certified mail,
postage prepaid, to the address furnished to the Company in
writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing.
ISSUED this 1st day of July, 2000.
TELEGEN CORPORATION
By: /S/ WILLIAM M. SWAYNE
------------------------------------
William M. Swayne II
President
-3-
