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Ex-10.38
Form of the Warrant issued June 2000
EXHIBIT 10.38
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT
(i) AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, OR
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
TELEGEN CORPORATION
WARRANT FOR COMMON STOCK
VOID AFTER JUNE 30, 2003
Dated: June 30, 2000
Subject to the terms and conditions set forth herein, Pacific West Securities,
Inc. (the "Holder"), or registered assigns, is entitled to purchase from TELEGEN
CORPORATION, a California corporation (the "Company"), at any time from date
hereof and on or before the date of termination of this Warrant, up to 400,000
fully paid and non-assessable shares of the Company's Common Stock, without par
value, at the price of US$1.75 per share. The initial purchase price of US$1.75
per share, and the number of shares purchasable hereunder, are subject to
adjustment in certain events, all as more fully set forth under Section 4
herein.
1. DEFINITIONS
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency then administering the Securities Act and the Securities Exchange
Act of 1934.
"COMMON STOCK" means the Company's post reorganization Common Stock, any
stock into which such stock shall have been changed or any stock resulting from
any reclassification of such stock, and any other capital stock of the Company
of any class or series now or hereafter authorized having the right to share in
distributions either of earnings or assets of the Company without limit as to
amount or percentage.
"COMPANY" means Telegen Corporation, a California corporation, and any
successor corporation.
"EXERCISE PERIOD" means, subject to Section 5 herein, the period
commencing immediately from date hereof and terminating at the earliest to occur
of: (i) 5:00 p.m., Pacific Time, three (3) years from the date hereof, or (ii)
the time immediately prior to the closing of (x) a merger or consolidation of
the Company with or into another entity in which the shareholders of the Company
immediately before such merger or consolidation own less than a majority of the
surviving or resulting entity's outstanding voting stock immediately thereafter,
or (y) a sale of all or substantially all of the Company's assets.
"EXERCISE PRICE" means the price per share of Common Stock set forth in
the preamble paragraph to this Warrant, as such price may be adjusted pursuant
to Section 4 hereof.
"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 electronic bulletin board under the symbol TLGNQ or successor
symbol or as determined by the Company's Board of Directors in good faith, as
applicable.
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"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, government entities and authorities and other organizations, whether or
not legal entities.
"PRINCIPAL EXECUTIVE OFFICE" means the Company's office at 1840 Gateway
Drive, Suite 200, San Mateo, California, 94404, or such other office as
designated in writing to the Holder by the Company.
"RULE 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"SHAREHOLDER" means a holder of one or more Warrant Shares or shares of
Common Stock acquired upon conversion of Warrant Shares.
"WARRANT" means this Warrant and all warrants issued upon the partial
exercise, transfer or division of or in substitution for this Warrant or any
such warrant.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of this Warrant, provided that if under the terms hereof there shall be
a change such that the securities purchasable hereunder shall be issued by an
entity other than the Company or there shall be a change in the type or class of
securities purchasable hereunder, then the term shall mean the securities
issuable upon the exercise of the rights granted hereunder.
2. EXERCISE
2.1 EXERCISE RIGHT; MANNER OF EXERCISE. The purchase rights
represented by this Warrant may be exercised by the Holder, in whole or in part,
at any time and from time to time during the Exercise Period upon (i) surrender
of this Warrant, together with an executed Notice of Exercise, substantially in
the form of EXHIBIT A attached hereto, at the Principal Executive Office, and
(ii) payment to the Company of the aggregate Exercise Price for the number of
Warrant Shares specified in the Notice of Exercise (such aggregate Exercise
Price the "Total Exercise Price"). The Total Exercise Price shall be paid by
check or wire transfer. The Person or Person(s) in whose name(s) any
certificate(s) representing the Warrant Shares which are issuable upon exercise
of this Warrant shall be deemed to become the holder(s) of, and shall be treated
for all purposes as the record holder(s) of, such Warrant Shares, and such
Warrant Shares shall be deemed to have been issued, immediately prior to the
close of business on the date on which this Warrant and Notice of Exercise are
presented and payment made for such Warrant Shares, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to such
Person or Person(s). Certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time. If this Warrant is exercised
in part only, the Company shall, upon surrender of this Warrant for
cancellation, deliver the certificate(s) representing the Warrant Shares and a
new Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares which Holder is entitled to purchase hereunder. The issuance of
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issuance tax (as opposed to any income tax on the Holder with
respect to such issuance) with respect thereto or any other cost incurred by the
Company in connection with the exercise of this Warrant and the related issuance
of Warrant Shares.
2.2 FRACTIONAL SHARES. The Company shall not issue fractional shares
of Common Stock upon any exercise or conversion of this Warrant. As to any
fractional share of Common Stock which the Holder would otherwise be entitled to
purchase from the Company upon such exercise, the Company shall purchase from
the Holder such fractional share at a price equal to an amount calculated by
multiplying such fractional share (calculated to the nearest 1/100th of a share)
by the Fair Market Value of a share of Common Stock on the date of the Notice of
Exercise. Payment of such amount shall be made in cash or by check payable to
the order of the Holder at the time of delivery of any certificate or
certificates arising upon such exercise or conversion.
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2.3 RESERVATION OF SHARES; VALIDITY OF SHARES. The Company will
reserve and keep available for issuance upon exercise of this Warrant such
number of shares of Common Stock as shall be sufficient to permit the exercise
in whole or in part of this Warrant. Upon an exercise of this Warrant by the
Holder in compliance with Section 2.1 above, all of the shares issued upon
exercise of this Warrant shall be duly and validly issued, fully paid and
non-assessable, and free and clear of any liens.
3. WARRANT RECORDS AND TRANSFER
3.1 MAINTENANCE OF RECORD BOOKS. The Company shall keep at the
Principal Executive Office a record in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration and
transfer of this Warrant. The Company and any Company agent may treat the Person
in whose name this Warrant is registered as the owner of this Warrant for all
purposes whatsoever and neither the Company nor any Company agent shall be
affected by any notice to the contrary.
3.2 RESTRICTIONS ON TRANSFERS.
(a) COMPLIANCE WITH SECURITIES ACT. Upon exercise of this
Warrant, and unless a registration statement covering the issuance of the
underlying Common Stock is on file with the Commission and currently effective,
the Holder shall confirm in writing, by executing the form attached hereto as
EXHIBIT B, that the shares of Common Stock purchased thereby are being acquired
for investment, solely for the Holder's own account and not as a nominee for any
other Person, and not with a view toward distribution or resale.
(b) CERTIFICATE LEGENDS. This Warrant, all shares of Common
Stock issued upon exercise of this Warrant (unless registered under the
Securities Act), shall be stamped or imprinted with a legend in substantially
the following form (in addition to any legends required by applicable state
securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE OR DISPOSITION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT
(i) AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, OR
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED.
(c) DISPOSITION OF WARRANT OR SHARES. With respect to any
offer, sale or other disposition of this Warrant or any shares of Common Stock
issued upon exercise of this Warrant prior to registration under the Securities
Act of such shares, the Holder or the Shareholder, as the case may be, agrees to
give written notice to the Company prior thereto, describing briefly the
circumstances thereof, together with a written opinion of the Holder's or
Shareholder's counsel, to the effect that such offer, sale or other disposition
may be effected without registration under the Securities Act or qualification
under any applicable state securities laws of this Warrant or such shares, as
the case may be, and indicating whether or not under the Securities Act
certificates for this Warrant or such shares, as the case may be, to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the
Securities Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify the Holder or the Shareholder, as the case may be, that it may sell
or otherwise dispose of this Warrant or such shares, as the case may be, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 3.2(c) that the opinion of
counsel for the Holder or the Shareholder, as the case may be, is not reasonably
satisfactory to the Company, the Company shall so notify the Holder or the
Shareholder, as the case may be, promptly after such determination has been made
and shall specify the legal analysis supporting any such conclusion.
Notwithstanding the foregoing, this Warrant or such shares, as the case may be,
may be offered, sold or otherwise disposed of in accordance with Rule 144,
provided that the Company shall have been furnished with such information as the
Company may reasonable request to provide reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing this
Warrant or the shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act, unless in the aforesaid
reasonably satisfactory opinion of counsel for the Holder or the Shareholder, as
the case may be, such legend
<PAGE>
is not necessary in order to insure compliance with the Securities Act. The
Company may issue stop transfer instructions to its transfer agent in connection
with such restrictions.
(d) WARRANT TRANSFER PROCEDURE. Transfer of this Warrant to
a third party, following compliance with the preceding subsections of this
Section 3.2, shall be effected by execution of the Assignment Form attached
hereto as EXHIBIT C, and surrender of this Warrant at the Principal Executive
Office, together with funds sufficient to pay any applicable transfer tax. Upon
receipt of the duly executed Assignment Form and the necessary transfer tax
funds, if any, the Company, at its expense, shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Warrants
representing the right to purchase a like aggregate number of shares of Common
Stock.
(e) TERMINATION OF RESTRICTIONS. The restrictions imposed
under this Section 3.2 upon the transferability of the Warrant and the shares of
Common Stock acquired upon the exercise of this Warrant shall cease (i) with
respect to the Common Shares acquired pursuant to the exercise of this Warrant
only, if a registration statement covering the shares of Common Stock to be
issued effective under the Securities Act at the time of such exercise, or (ii)
if the Company is presented with an opinion of counsel reasonably satisfactory
to the Company that such restrictions are no longer required in order to insure
compliance with the Securities Act, or (iii) if such securities may be
transferred in accordance with Rule 144(k). When such restrictions terminate,
the Company shall, or shall instruct its transfer agent to, promptly and without
expense to the Holder or the Shareholder, as the case may be, issue new
securities in the name of the Holder and/or the Shareholder, as the case may be,
not bearing the legends required under Section 3.2(b). In addition, new
securities shall be issued without such legends if such legends may be properly
removed under the terms of Rule 144(k).
4. ANTIDILUTION PROVISIONS
4.1 SPLITS AND COMBINATIONS. If the Company at any time subdivides
any of its outstanding shares of Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased. Upon
any adjustment of the Exercise Price under this Section 4.2, the number of
shares of Common Stock issuable upon exercise of this Warrant shall equal the
number of shares determined by dividing (i) the aggregate Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Exercise Price per share in
effect immediately after such adjustment.
4.2 RECLASSIFICATIONS. If the Company changes any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted.
4.3 LIQUIDATION; DISSOLUTION. If the Company shall dissolve,
liquidate or wind up its affairs, the Holder shall have the right, but not the
obligation, to exercise this Warrant effective as of the date of such
dissolution, liquidation or winding up. If any such dissolution, liquidation or
winding up results in any cash distribution to the Holder in excess of the
aggregate Exercise Price for the shares of Common Stock for which this Warrant
is exercised, then the Holder may, at its option, exercise this Warrant without
making payment of such aggregate Exercise Price and, in such case, the Company
shall, upon distribution to the Holder, consider such aggregate Exercise Price
to have been paid in full, and in making such settlement to the Holder, shall
deduct an amount equal to such aggregate Exercise Price from the amount payable
to the Holder.
5. MISCELLANEOUS
5.1 HOLDER NOT A SHAREHOLDER. Prior to the exercise of this Warrant
as hereinbefore provided, the Holder shall not be entitled to any of the rights
of a shareholder of the Company including, without limitation, the right as a
shareholder (i) to vote on or consent to any proposed action of the Company or
(ii) to receive (x) dividends or any other
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distributions made to shareholders, (y) notice of or attend any meetings of
shareholders of the Company, or (z) notice of any other proceedings of the
Company.
5.2 ENFORCEMENT COSTS. If any party to, or beneficiary of, this
Warrant seeks to enforce its rights hereunder by legal proceedings or otherwise,
then the non-prevailing party shall pay all reasonable costs and expenses
incurred by the prevailing party, including, without limitation, all reasonable
attorneys' fees (including the allocable costs of in-house counsel).
5.3 NONWAIVER; CUMULATIVE REMEDIES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of the Holder
and/or any Shareholder shall operate as a waiver of such right or otherwise
prejudice the rights, powers or remedies of the Holder or such Shareholder. No
single or partial waiver by the Holder and/or any Shareholder of any provision
of this Warrant or of any breach or default hereunder or of any right or remedy
shall operate as a waiver of any other provision, breach, default right or
remedy or of the same provision, breach, default, right or remedy on a future
occasion. The rights and remedies provided in this Warrant are cumulative and
are in addition to all rights and remedies which the Holder and each Shareholder
may have in law or in equity or by statute or otherwise.
5.4 NOTICES. Any notice, request, or other communications required
or permitted hereunder shall be in writing and shall deemed to have been duly
given if sent by facsimile, or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery, addressed (a)
if to the Holder or a Shareholder, to it at the last known address appearing on
the books of the Company maintained for such purpose, or (b) if to the Company,
to it at 1840 Gateway Drive, Suite 200, San Mateo, California 94404, attention:
Chief Executive Officer, telephone (650) 261-9400, facsimile (650) 261-9468,
with a copy (which will not constitute notice) to David L. Kagel, Esq., 1801
Century Park East, 25th Floor, Los Angeles, California 90067, telephone (310)
553-9009, facsimile (310) 553-9693. Any party hereto may by notice so given
change its address for future notice hereunder. All such notices will be deemed
to have been given (i) upon confirmation of delivery, if sent by facsimile, or
(ii) upon delivery, if sent by courier or personal delivery.
5.5 SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon, the
Company and any Person succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company with respect to the shares of Common Stock issuable
upon exercise of this Warrant, shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the Holder, each Shareholder and their
respective successors and assigns.
5.6 SEVERABILITY.
(a) If, in any action before any court or agency legally
empowered to enforce any term, any term is found to be unenforceable, then such
term shall be deemed modified to the extent necessary to make it enforceable by
such court or agency.
(b) If any term is not curable as set forth in subsection
(a) above, the unenforceability of such term shall not affect the other
provisions of this Warrant but this Warrant shall be construed as if such
unenforceable term had never been contained herein.
5.7 WAIVER AND AMENDMENT. Any provision of this Warrant may be
amended, waived, modified or verified, including by way of settlements or
otherwise, upon the written consent of the Company and the holders of at least a
majority-in-interest of all outstanding Warrants issued pursuant to the Note
Agreement with the same terms hereof.
5.8 GOVERNING LAW. This Warrant shall be governed by, and construed
in accordance with, the laws of the State of California applicable to contracts
entered into and to be performed wholly within California by California
residents.
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5.9 EXPRESS NOTICE OF EXERCISE PERIOD. To the extent the Exercise
Period shall be determined under subsection (ii) of such definition hereof, the
Company will provide the Holder 15 days prior written notice, and thereafter the
Holder's right to exercise this Warrant shall continue until the termination of
the Exercise Period.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer on June 30, 2000.
TELEGEN CORPORATION
By: /s/ JESSICA L. STEVENS
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Jessica L. Stevens
Chief Executive Officer
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SCHEDULE OF EXHIBITS
EXHIBIT A - Notice of Exercise (Section 2.1)
EXHIBIT B - Investment Representation Certificate (Section 3.2(a))
EXHIBIT C - Assignment Form (Section 3.2(d))
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EXHIBIT A
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the attached Warrant)
The undersigned registered Holder of the attached Warrant hereby
irrevocably exercises the attached Warrant for and purchases shares of Common
Stock of Telegen Corporation and herewith makes payment therefore in the
amount of US$____________ , all at the price and on the terms and conditions
specified in the attached Warrant.
The undersigned requests that a certificate (or ______ certificates
in denominations of ______ shares) for the shares of Common Stock of Telegen
Corporation hereby purchased be issued in the name of and delivered to
(circle one) (a) the undersigned or (b) ___________________, whose address
is____________________________________ and, if such shares of Common Stock
shall not include all the shares of Common Stock issuable as provided in the
attached Warrant, that a new Warrant of like tenor for the number of shares
of Common Stock of Telegen Corporation not being purchased hereunder be
issued in the name of and delivered to (circle one) (a) the undersigned or
(b) ________________________, whose address is _______________.
Dated:
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Signature Guaranteed
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By:
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(Signature of Registered Holder)
Title:
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NOTICE: The signature to this Notice of Exercise must correspond with
the name as written upon the face of the attached Warrant in
every particular, without alteration or enlargement or any
change whatever.
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EXHIBIT B
INVESTMENT REPRESENTATION CERTIFICATE
Holder:
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Company: Telegen Corporation, a California corporation
Security: Common Stock
Amount:
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Date:
------------------
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Holder") represents to the Company as
follows:
(a) The Holder is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Holder is purchasing the Securities for its own account for investment purposes
only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act");
(b) The Holder understands that the Securities may have not been
registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of the Holder's investment intent as expressed herein. In this connection, the
Holder understands that, in the view of the Securities and Exchange Commission
(the "Commission"), the statutory basis for such exemption may be unavailable if
the Holder's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future;
(c) The Holder further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the Holder
understands that the certificate evidencing the Securities will be imprinted
with the legend referred to in the Warrant under which the Securities are being
purchased unless there exists an effective registration statement for such
securities;
(d) The Holder is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; (iii) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein;
(e) The Holder further understands that at the time it wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market upon which to make such a sale then
exists, the Company may not be satisfying the current public information
requirements of Rule 144, and that, in such event, the Holder may be precluded
from selling the Securities under Rule 144 even if the one-year minimum holding
period had been satisfied; and
(f) The Holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Date:
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HOLDER:
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EXHIBIT C
ASSIGNMENT FORM
(To be executed only upon the assignment of the attached Warrant)
FOR VALUE RECEIVED, the undersigned registered Holder of the attached
Warrant hereby sells, assigns and transfers unto ______________, whose
address is _______________ all of the rights of the undersigned under the
attached Warrant, with respect to _________________ shares of Common Stock of
Telegen Corporation and, if such shares of Common Stock shall not include all
the shares of Common Stock issuable as provided in the attached Warrant, then
a new Warrant of like tenor for the number of shares of Common Stock of
Telegen Corporation not being transferred hereunder be issued in the name of
and delivered to the undersigned, and does hereby irrevocably constitute and
appoint ___________________ attorney to register such transfer on the books
of Telegen Corporation maintained for the purpose, with full power of
substitution in the premises.
Dated:
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Signature Guaranteed
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By:
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(Signature of Registered Holder)
Title:
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NOTICE: The signature to this Assignment must correspond with the name
upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatever.
