-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ANXD6v2pTtw2sL1g0/gUqTVKjZDc4j/HMJNRfcRmBAg8vhaKA7hgaTyhTlGkjyzt 9B+5nCoH4iWo1CYRig3iig== 0000891618-98-004084.txt : 19980831 0000891618-98-004084.hdr.sgml : 19980831 ACCESSION NUMBER: 0000891618-98-004084 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980828 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SEPRAGEN CORP CENTRAL INDEX KEY: 0000794154 STANDARD INDUSTRIAL CLASSIFICATION: TOTALIZING FLUID METERS & COUNTING DEVICES [3824] IRS NUMBER: 680073366 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54537 FILM NUMBER: 98700345 BUSINESS ADDRESS: STREET 1: 30689 HUNTWOOD DRIVE CITY: HAYWARD STATE: CA ZIP: 94544 BUSINESS PHONE: 5106360707 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JANAC K CHARLES CENTRAL INDEX KEY: 0001068987 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 141583080 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O SMART MACHINES INC STREET 2: 651 RIVER OAKS PARKWAY CITY: SAN HOSE STATE: CA ZIP: 95135 BUSINESS PHONE: 4083241234 MAIL ADDRESS: STREET 1: C/O SMART MACHINES INC STREET 2: 651 RIVER OAKS PARKWAY CITY: SAN HOSE STATE: CA ZIP: 95135 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO SCHEDULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (AMENDMENT NO. ___)(1) SEPRAGEN CORPORATION ------------------------------ (Name of Issuer) Class A Common Stock ------------------------------ (Title of Class of Securities) 817316-110 ------------------------------ CUSIP Number Vinit Saxena K. Charles Janac With a copy to: President c/o Smart Machines Inc. Kyle Guse, Esq. Sepragen Corporation 651 River Oaks Parkway Heller Ehrman White & McAuliffe 30689 Huntwood Drive San Jose, CA 95134 2500 Sand Hill Road, Ste. 100 Hayward, CA 94544 (408) 324-1234 Menlo Park, CA 94025 (510) 476-0650 (650) 234-4215
- -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) August 18, 1998 ------------------------------ (Date of Event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-l(e), 13d-1(f) or 13d-1(g), check the following box: / / Note See Rule 13d-7(b) for other parties to whom copies are to be sent. (Page 1 of 6 Pages) - ------------- 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 Page 2 of 6 Pages Cusip No.: 817316-110 1) Name of Reporting Persons and S.S. or I.R.S. Identification No. K. CHARLES JANAC Social Security No.: ###-##-#### - -------------------------------------------------------------------------------- 2) Check the Appropriate Box if a Member of a Group* (a) / / -------------------------------------------------------------------- (b) / / -------------------------------------------------------------------- 3) SEC Use Only -------------------------------------------------------------- - -------------------------------------------------------------------------------- 4) Source of Funds: PF - -------------------------------------------------------------------------------- 5) / / Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) - -------------------------------------------------------------------------------- 6) Citizenship or Place of Organization: United States of America - -------------------------------------------------------------------------------- 7) Sole Voting Power Number of 1,445,816 shares of Class A Common Stock* Shares ----------------------------------------------------- Beneficially 8) Shared Voting Power Owned by None Each ----------------------------------------------------- Reporting 9) Sole Dispositive Power Person With 1,445,816 shares of Class A Common Stock* ----------------------------------------------------- 10) Shared Dispositive Power None - -------------------------------------------------------------------------------- 11) Aggregate Amount Beneficially Owned by Each Reporting Person: 1,445,816 shares of Class A Common Stock* - -------------------------------------------------------------------------------- 12) / / Check if the Aggregate Amount in Row (11) Excludes Certain Shares - -------------------------------------------------------------------------------- Percent of Class Represented by amount in Row (11): 40.1% of outstanding shares of Class A Common Stock, including for purposes of calculating such percentage the number of shares issuable to the reporting person. - -------------------------------------------------------------------------------- Type of Reporting Person IN - -------------------------------------------------------------------------------- * Consisting of 1,211,149 shares of Class A Common Stock issuable upon conversion of principal and interest upon maturity of a secured promissory note and 234,667 shares of Class A Common Stock issuable upon exercise of a warrant. 3 Page 3 of 6 Pages Cusip No.: 817316-110 Item 1. Security and Issuer. This Statement on Schedule 13D (this "Statement") relates to the Class A Common Stock of Sepragen Corporation, a California corporation (the "Issuer"). As of May 15, 1998 (the most recent practicable date), there were 2,155,254 shares of Class A Common Stock issued and outstanding. As of March 31, 1998 (the most recent practicable date), there were approximately 102 holders of record of the Common Stock. The address of the principal executive offices of the Issuer is 30689 Huntwood Ave., Hayward, CA 94544. Item 2. Identity and Background. This Statement is being filed by K. Charles Janac, whose business address is 651 River Oaks Parkway, San Jose, CA 95134. Mr. Janac is the Chief Executive Officer and President of Smart Machines, Inc., a developer of high technology equipment located at 651 River Oaks Parkway, San Jose, CA 95134. Mr. Janac has not, during the last 5 years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such law. Mr. Janac is a citizen of the United States of America. Item 3. Source and Amount of Funds or Other Consideration. The source of funds was the personal savings of Mr. Janac. Item 4. Purpose of Transaction. Securities of the Issuer were acquired for investment purposes. Except for the effect of conversion of the Note or exercise of the Warrant (as defined in Item 5), Mr. Janac has no plans or proposals that relate to or would result in: (a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Issuer or of any of its subsidiaries; 4 Page 4 of 6 Pages (d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Issuer; (f) Any other material change in the Issuer's business or corporate structure, including but not limited to, if the Issuer is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by Section 13 of the Investment Company Act of 1940; (g) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or (j) Any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. The aggregate number and percentage of the class of securities identified pursuant to Item 1 beneficially owned by K. Charles Janac is 1,445,816 shares of Class A Common Stock (or 40.1% of the outstanding shares of Class A Common Stock, including the shares issuable to Mr. Janac for purposes of calculating such percentage) consisting of (i) 1,211,149 shares issuable upon conversion of all outstanding principal and interest under the Secured Promissory Note issued by the Issuer on August 18, 1998 (the "Note") and (ii) 234,667 shares issuable upon exercise of the Warrant issued to Mr. Janac on August 18, 1998 (the "Warrant"). The principal and interest on Note are convertible any time on or before December 15, 1998 and the Warrant is exercisable any time on or before August 18, 2003. The number of shares as to which there is sole power to vote or to direct the vote, and sole power to dispose or to direct the disposition is 1,445,816 shares (or 40.1% of the outstanding shares). Mr. Janac does not share power to vote or to direct the vote or to dispose or direct the disposition of such shares, except with respect to the effect, if any, of community property laws. There are no transactions by K. Charles Janac in the class of securities reported or that are effected during the past 60 days or since the most recent filing on Schedule 13D. 5 Page 5 of 6 Pages Item 6. Contracts, Arrangements, Understanding or Relationships With Respect to Securities of the Issuer. There are no contracts, arrangements, understandings or relationships between Mr. Janac and any other person with respect to the securities of the Issuer. Item 7. Material to be filed as Exhibits. 1. Convertible Secured Promissory Note. 2. Warrant to Purchase Class A Common Stock. 6 Page 6 of 6 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: August 28, 1998 By: /s/ K. CHARLES JANAC ------------------------------------- K. Charles Janac 7 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 1 Convertible Secured Promissory Note 2 Warrant to Purchase Class A Common Stock EX-99.1 2 CONVERTIBLE SECURED PROMISSORY NOTE 1 EXHIBIT 1 THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED THE "ACT" SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (II) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE. SEPRAGEN CORPORATION NO. 1 $550,000 DATED: AUGUST 18, 1998 CONVERTIBLE SECURED PROMISSORY NOTE SEPRAGEN CORPORATION, a California corporation (the "Company"), for value received, hereby promises to pay to K. Charles Janac or registered assigns (the "Payee") on December 15, 1998 (the "Maturity Date") at the offices of the Company, 30689 Huntwood Avenue, Hayward, California 94544, the principal amount of Five Hundred Fifty Thousand Dollars ($550,000), including interest at the rate of nine point seventy-five percent (9.75%) per annum accrued through the Maturity Date, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, unless converted earlier into Class A Common Stock of the Company. This Note is issued pursuant to a Subscription Agreement dated as of August 18, 1998 between the Company and the Payee (the "Subscription Agreement"), a copy of which agreement is available for inspection at the Company's principal office. Notwithstanding any provision to the contrary contained herein, this Note is subject and entitled to certain terms, conditions, covenants and agreements contained in the Subscription Agreement. Any transferee or transferees of the Note, by their acceptance hereof, assume the obligations of the Payee in the Subscription Agreement with respect to 2 the conditions and procedures for transfer of the Note. Reference to the Subscription Agreement shall in no way impair the absolute and unconditional obligation of the Company to pay both principal and interest hereon as provided herein. On or before the Maturity Date, the Payee may elect to receive payment of the principal amount of this Note or any part thereof and accrued interest (the "Conversion Amount") in the form of Class A Common Stock (the "Equity Conversion"). In an Equity Conversion, the Payee shall receive such number of fully paid and non-assessable shares of the Class A Common Stock as is obtained by dividing the Conversion Amount by $0.46875 (the "Conversion Price"). Upon the conversion of all principal and interest hereunder, Payee shall have no further rights under this Note except to surrender the same for a certificate or certificates representing the securities into which this Note shall have automatically converted. As soon as practicable thereafter, the Company shall, at its expense, cause to be issued in the name of the Payee, a certificate or certificates for the number of shares of the securities to which Payee shall be entitled to receive (bearing such legends as may be required by applicable securities laws). No fractional shares shall be issued on conversion of this Note; if any fractional shares would result from such conversion, the Company shall pay the cash value thereof to Payee based on the Equity Conversion Price. 1. Prepayment. The principal amount of this Note may be prepaid by the Company in whole or in part, without penalty, at any time, unless the Holder elects an Equity Conversion. 2. Covenants of Company. The Company covenants and agrees that, so long as this Note shall be outstanding, it will: (a) Do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and comply with all laws applicable to the Company, except where the failure to comply would not have a material adverse effect on the Company. (b) At all times reasonably maintain, preserve, protect and keep its property used or useful in the conduct of its business in good repair, working order and condition, excluding normal wear and tear and Act of God, and from time to time make all needful and proper repairs, renewals, replacements, betterments and improvements thereto as shall be reasonably required in the conduct of its business. (c) To the extent necessary for the operation of its business, keep adequately insured by all financially sound reputable insurers, all property of a character usually insured by similar corporations and carry such other insurance as is usually carried by similar corporations. 2 3 (d) At all times keep true and correct books, records and accounts. 3. Events of Default. (a) If one or more of the events listed in this Section 3, herein called events of default, shall happen and be continuing, the holder of this Note may send a Notice of Default to Company. Company shall have thirty (30) days from the date of receipt of the Notice of Default to cure the default; provided however, if an event of default was caused by an Act of God, Company shall have sixty (60) days from the date of receipt of the Notice of Default to cure the default (the "Cure Period"). If Company fails to completely cure the default during the Cure Period, this Note shall become and be due and payable upon written demand made by the holder hereof. (1) Default in the payment of the principal and accrued interest on this Note or any of the Notes issued pursuant to 5(a) hereof when and as the same shall become due and payable, whether by acceleration or otherwise. (2) Application for, or consent to, the appointment of a receiver, trustee, or liquidator of the Company or of its property. (3) General assignment by the Company for the benefit of creditors. (4) Filing by the Company of a voluntary petition in bankruptcy or a petition or an answer seeking reorganization, or an arrangement with creditors or the failure by the Company generally to pay debts, as they become due. (5) Entering against the Company of a court order approving a petition filed against it under the Federal bankruptcy laws, which order shall not have been vacated or set aside or otherwise terminated within sixty (60) days. (6) Any representation or warranty of the Company contained in the Subscription Agreement, Security Agreement, Form UCC-1 related to the obligations hereunder, Patent Mortgage related to the obligations hereunder or any related documents (collectively, the "Loan Documents") is false or misleading in any material respect on the date made. (7) Default by the Company in any obligation under the Loan Documents the effect of which is reasonably likely to reduce the Company's ability to repay principal or interest under the Note when due. (8) The Company voluntarily or involuntarily dissolves or is dissolved. 3 4 (9) The Company is enjoined, restrained, or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business affairs the effect of which is reasonably likely to reduce the Company's ability to repay principal or interest under the Note when due. (10) The violation by the Company of any material order, regulation, writ, injunction, or decrees of any government, governmental instrumentality or court, domestic or foreign, the effect of which is reasonably likely to reduce the Company's ability to repay principal or interest under the Note when due. (b) The Company agrees that notice of the occurrence of any of event of default will be promptly given to the holder at his or her registered address by certified mail. (c) In case any one or more of the events of default specified above shall happen and be continuing, the holder of this Note may proceed to protect and enforce his rights by suit in the specific performance of any covenant or agreement contained in this Note or in aid of the exercise of any power granted in this Note or may proceed to enforce the payment of this Note or to enforce any other legal or equitable rights as such holder. 4. Amendments. This Note may only be amended with the written consent of the holder. 5. Miscellaneous. (a) This Note has been issued by the Company pursuant to authorization of the Board of Directors of the Company. (b) The Company may consider and treat the person in whose name this Note shall be registered as the absolute owner thereof for all purposes whatsoever (whether or not this Note shall be overdue) and the Company shall not be affected by any notice to the contrary. The registered owner of this Note shall have the right to transfer it by assignment (subject to the limitations on transfer contained in the Subscription Agreement) and the transferee thereof shall upon his registration as owner of this Note, become vested with all the powers and rights of the transferor. Registration of any new owner shall take place upon presentation of this Note to the Company at its offices, 30689 Huntwood Avenue, Hayward, California 94544, together with a duly authenticated assignment. In case of transfer by operation of law, the transferee agrees to notify the Company of such transfer and of his address and to submit appropriate evidence regarding the transfer so that this Note may be registered in the name of the transferee. This Note is transferable only on the books of the Company by the holder hereof, in person or by attorney, on the surrender hereof, duly endorsed. Communications sent to any registered owner shall be effective as against all holders or transferees of the Note not registered at the time of sending the Communication. 4 5 (c) Payments of interest shall be made as specified above to the registered owner of this Note. Payment of principal and interest shall be made to the registered owner of this Note upon presentation of this Note upon or after maturity. (d) This Note shall be construed and enforced in accordance with the laws of the State of California. IN WITNESS WHEREOF the Company has caused this Note to be signed in its name by its President. SEPRAGEN CORPORATION By: /s/ VINIT SAXENA ------------------------------------- Title: President ---------------------------------- 5 EX-99.2 3 WARRANT TO PURCHASE CLASS A COMMON STOCK 1 EXHIBIT 2 THE SECURITY EVIDENCED BY THIS WARRANT OR THE SECURITIES TO BE PURCHASED UNDER THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES. THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENT UNDER SUCH ACT. VOID AFTER 5 P.M., CALIFORNIA TIME ON AUGUST 18, 2003 WARRANT TO PURCHASE CLASS A COMMON STOCK SEPRAGEN CORPORATION, a California corporation (the "Company"), hereby certifies that K. CHARLES JANAC or his registered assign(s) (collectively referred to as the "Holder") is entitled, subject to the terms set forth below, to purchase from the Company Two Hundred Thirty Four Thousand Six Hundred and Sixty Seven (234,667) fully paid and nonassessable shares of the Class A Common Stock of the Company (the "Shares") at the purchase price of $0.46875 per share (the "Purchase Price"). Both the Purchase Price and such number of Shares are subject to adjustments as described below. 1. EXERCISE OF WARRANT; RESERVATION OF SHARES. Subject to the restrictions herein, this warrant may be exercised in whole or in part by the Holder at any time before 5 p.m., California local time, on August 18, 2003 by the surrender of this Warrant, together with the Notice of Exercise attached hereto as Attachment 1, duly completed and executed, at the principal office of the Company, accompanied by payment in cash or by check in full with respect to the Shares being purchased. This 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. The Company shall at all times after the date of this Warrant and until expiration of this Warrant reserve for issuance and delivery upon 2 issuance of this Warrant the number of Shares of Common Stock required for exercise of this Warrant. 2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as practicable after the exercise of this Warrant, and in any event within thirty (30) days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of, and delivered to, the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, (i) a certificate or certificates for the number of Shares to which such Holder shall be entitled upon such exercise and (ii) if this Warrant is not exercised in full, a warrant containing terms identical to herein, provided the number of Shares subject to this Warrant shall be reduced by the number of Shares exercised by delivery of the Notice of Exercise pursuant to Section 1. 3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price and the total number of Warrant Shares shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3. Upon each adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment. 3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any time subdivide its outstanding shares of any class of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares issuable hereunder proportionately increased, and conversely, in case the outstanding shares of any class of the Common Stock of the Company shall be combined into a smaller number of shares, 2 3 the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable hereunder proportionately decreased. 3.2 RECLASSIFICATION. If any reclassification of the capital stock of the Company or any reorganization, consolidation, merger, or any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the business and/or assets of the Company (the "Reclassification Events") shall be effected in such a way that holders of any class of Common Stock shall be entitled to receive stock, securities, or other assets or property, then, as a condition of such Reclassification Event lawful and adequate provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities, or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any Reclassification Event, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, or assets thereafter deliverable upon the exercise hereof. 3.3 ADJUSTMENTS UPON ISSUANCE OF ADDITIONAL STOCK. If the Company shall issue "Additional Stock" (as defined below) for a consideration per share less than the Exercise Price then in effect on the date and immediately prior to such issue, then and in such event, such Exercise Price shall be reduced concurrently with such issue, to a price equal to the price per share for such Additional Stock. 3 4 For purposes of this subsection "Additional Stock" shall mean all common stock issued by the Corporation after the date hereof other than common stock issued or issuable at any time (1) upon conversion of any preferred stock; (2) upon exercise of options issued to officers, directors, and employees of, and consultants to, the Company after the date hereof and approved by the Board of Directors pursuant to an employee stock option plan; or (3) upon exercise of Warrants outstanding on the date hereof; (4) after August 18 1999; (5) provided, however, that the company shall not be deemed to have issued additional stock until after the Company has issued securities with aggregate proceeds to the Company of $500,000. For the purpose of making any adjustment in the Exercise Price as provided above, the consideration received by the Company for any issue or sale of Additional Stock will be computed: (a) to the extent it consists of cash, as the amount of cash received by the Company before deduction of any offering expenses payable by the Company and any underwriting or similar commissions, compensation, or concessions paid or allowed by the Company in connection with such issue or sale; (b) to the extent it consists of property other than cash, at the fair market value of that property as determined in good faith by the Company's Board of Directors; and (c) if common stock is issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such common stock. If the Company (1) grants any rights or options to subscribe for, purchase, or otherwise acquires common stock, or (2) issues or sells any security convertible into common stock, then, in each case, the price per share of common stock issuable on the 4 5 exercise of the rights or options or the conversion of the securities will be determined by dividing the total amount, if any, received or receivable by the Company as consideration for the granting of the rights or options or the issue or sale of the convertible securities, plus the minimum aggregate amount of additional consideration payable to the Company on exercise or conversion of the securities, by the maximum number of shares of common stock issuable on the exercise of conversion. Such granting or issue or sale will be considered to be an issue or sale for cash of the maximum number of shares of common stock issuable on exercise or conversion at the price per share determined under this subsection, and the Exercise Price will be adjusted as above provided to reflect (on the basis of that determination) the issue or sale. No further adjustment of the Exercise Price will be made as a result of the actual issuance of common stock on the exercise of any such rights or options or the conversion of any such convertible securities. Upon the redemption or repurchase of any such securities or the expiration or termination of the right to convert into, exchange for, or exercise with respect to, common stock, the Exercise Price will be readjusted to such price as would have been obtained had the adjustment made upon their issuance been made upon the basis of the issuance of only the number of such securities as were actually converted into, exchanged for, or exercised with respect to, common stock. If the purchase price or conversion or exchange rate provided for in any such security changes at any time, then, upon such change becoming effective, the Exercise Price then in effect will be readjusted forthwith to such price as would have been obtained had the adjustment made upon the issuance of such securities been made upon the basis of (1) the issuance of only the number of shares of common stock theretofore actually delivered upon the conversion, exchange or exercise of such securities, and the total consideration received therefor, and (2) the granting or issuance, at the time of such change, of any such securities then still outstanding for the consideration, if any, received by the Company therefor and to be received on the basis of such changed price or rate. 5 6 3.4 NOTICE OF ADJUSTMENT. Upon any adjustment of the Exercise Price or any increase or decrease in the number of Warrant Shares, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be prepared and signed by the Company's Chief Financial Officer and shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4. NOTICES OF RECORD DATE, ETC. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend at the same rate as the rate of the last cash dividend theretofore paid) or other distribution (the "Distribution") the Company will mail or cause to be mailed to the Holder of the Warrant a notice specifying the date of any such Distribution and stating the amount and character of such Distribution. Such notice shall be mailed at least ten (10) days prior to the date therein specified. 5. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of such mutilation, upon surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new warrant of like tenor. 6. NEGOTIABILITY, ETC. This Warrant may be transferred in whole or in part by the Holder to any person who, in the opinion of counsel reasonably satisfactory to the Company, is a person to whom this Warrant or the Shares may be legally transferred without registration and without the delivery of a current prospectus under the Securities 6 7 Act of 1933, as amended (the "Act"), as well as applicable State Securities laws with respect thereto, and then only against receipt of an agreement of such person to comply with the provisions of this section with respect to any resale or disposition of such securities unless, in the opinion of counsel to the Company, such agreement is not required. The terms hereof shall be binding upon the executors, administrators, heirs and assigns of the Holder. 7. NOTICES, ETC. All notices and other communication shall be mailed by first class mail, postage prepaid, at such address as may have been furnished in writing by the receiving party. 8. GOVERNING LAW HEADINGS. This Warrant is being delivered in the State of California and shall be construed and enforced in accordance with and governed by the laws of such state. The headings of this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. 9. CONVERSION OF WARRANT. 9.1 RIGHT TO CONVERT. In addition to, and without limiting the other rights of the Holder hereunder, the Holder shall have the right (the "Conversion Right") to convert this Warrant or any part hereof into Shares at any time and from time to time during the term hereof. Upon exercise of the Conversion Right with respect to a particular number of Shares (the "Converted Shares"), the Company shall deliver to the Holder, without payment by the Holder, or any Purchase Price or any cash or other consideration, that number of Shares computed using the following formula: X = B-A --- Y Where: X = The number of Shares to be issued to the Holder. Y = The fair Market Value of one Share as of the Conversion Date. If the Company's Common Stock is publicly 7 8 traded at the time of exercise of this Warrant, the Fair Market Value shall be the average closing price of the Company's Common Stock on the five trading days prior to the Conversion Date. If the Company's Common Stock is not publicly traded at the time of exercise of this Warrant, the Fair Market Value of one Share as of the Conversion Date shall be determined in good faith by the Board of Directors of the Company. B = The Aggregate Fair Market Value (i.e., Fair Market Value x Converted Shares) A = The Aggregate Purchase Price (i.e., Purchase Price x Converted Shares) 9.2 METHOD OF EXERCISE. The Conversion Right may be exercised by the Holder by the surrender of this Warrant at the Company's principal office, together with a written statement (the "Conversion Statement") specifying that the Holder intends to exercise the Conversion Right and indicating the number of Shares to be acquired upon exercise of the Conversion Right. Such conversion shall be effective upon the Company's receipt of this Warrant, together with the Conversion Statement, or on such later date as is specified in the Conversion Statement (the "Conversion Date"). Certificates for the Shares so acquired shall be delivered to the Holder within a reasonable time, not exceeding thirty (30) days after the Conversion Date. If applicable, the Company shall, upon surrender of this Warrant for cancellation, deliver a new Warrant evidencing the rights of the Holder to purchase the balance of the Shares which Holder is entitled to purchase hereunder. The issuance of Shares upon exercise of this Warrant shall be made without charge to the Holder for any issuance tax with respect thereto or any other cost incurred by the Company in connection with the conversion of this Warrant and the related issuance of Shares. 8 9 Date: August 18, 1998 SEPRAGEN CORPORATION By: /s/ VINIT SAXENA ------------------------------------- Its: President ------------------------------------- 9 10 ATTACHMENT I NOTICE OF EXERCISE TO: SEPRAGEN CORPORATION 30689 HUNTWOOD AVENUE HAYWARD, CA 94544 1. The undersigned hereby elects to acquire _________________ shares of Class A Common Stock of SEPRAGEN CORPORATION pursuant to the terms of the attached Warrant, by exercise or conversion of _________________ shares and tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any. 2. Please issue a certificate or certificates representing said shares of Series C Preferred Stock in the name of the undersigned or in such other name as is specified below: ---------------------------------------- NAME ---------------------------------------- ADDRESS -------------------------------------- DATE (Name of Warrant Holder) By: ---------------------------------- Title: ------------------------------- (Name of purchaser, and title and signature of authorized person) Social Security Number or Federal Employer ID Number: -------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----